Seafarer viability as a business

VintageFreak

I have a penchant for selecting funds that go out of business for various reasons. One reason I have held back investing in SFGIX. In this case, the inability of the fund to garner assets. Which is SO strange given the pedigree of the manager, it is almost baffling.

Does anyone have any insight into whether Seafarer at least has considerable assets in private accounts? That might let manager offset the costs of running a fund with low assets. Another year or two of this and I worry SFGIX will either dissappear and Seafarer with it and manager will go take up a job managing money with large corporation.

Kenster1_GlobalValue

That's why I'm not jumping over to it and getting rid of the Matthews Asia fund but holding all 3 of MACSX, MAPIX and Seafarer Fund.

Let me send an email/message to Andrew Foster and see if he responds. I'll ask about that issue of lack of assets and survivability.

ARTGX had low assets for a long time. It wasn't until recently that it hit over the $100M mark but the Managers are also managing billions in a similar institutional global fund.

Assets for the Seafarer fund is still under $8M.

I doubt the Seafarer fund has much in private/institutional assets right now. Let's see what he says.

perpetual_Bull

This situation is very different than Eric Cinnamond and Douglas Rao leaving for greener grass. Mutual fund gurus understood that Mr. Cinnamond was the player that made the team better. Much the same can be said about Mr. Rao. And when those two found greener fields it was at established farms.

Andrew foster is fighting a very different battle. Many investors believe that he was a good manager on a great team. In doing so many don't give him credit for his time as lead manager. If fact, many ignore his success all together. Personally, I believe his detractors are wrong. Joe Montana also played on a great team..but, nobody discredited his ability.

AndyJ

Reply to @Kenster1_GlobalValue: Good idea, Ken. Thanks, and let us know what you hear back.

STB65

If you believe actively managed funds offer an advantage, and lack the $25M to follow Rao into Chautauqua (and Cinnamond's fund is now closed), it seems that supporting a potential winner, as Foster may be, is a risk one might take with a portion of one's investment funds. It's not really likely that he will lose more than others in his areas of knowledge, so the downside is probably manageable.
If you require others to place millions before you invest with someone who is at least competent and perhaps superior, how are these funds expected to survive? Industry Leaders is gone, after doing OK, as is Pennsylvania Avenue. I thought the idea of MFO was to find these funds while they are small and agile so we could invest in them? I don't think MFO readers alone will support a new fund to make it a success, but, if you trust Snowball's competence, and your due diligence finds no warning signs, why not dip in?

scott

Reply to @STB65: Pennsylvania Avenue Event Driven = Quaker Event Arbitrage (and I agree w/your post.)

claimui

Reply to @STB65: While I agree with the spirit of your post, investing is not charity and nobody should be basing their decisions on their desire to "support a new fund." Folks need to consider both the unique advantages that a new fund offers vs. the risks of investing in a new fund. The fund's ability to attract sufficient assets is definitely a factor because too low an asset base means high expenses, difficulties attracting talented analysts and staff, and the risk that the fund may close altogether.

This is not a knock against Mr. Foster. SFGIX seems like a very interesting fund and I will keep it on my watch list. But at least for the time being, it is still a new fund with a small asset base and has some extra risks inherent to that. If you are want to be an early investor, you need to be convinced that SFGIX has enough unique advantages to outweigh those extra risks.

scott

Reply to @claimui: I think it's a matter of evaluating the risks and pros/cons, but I think there are a number of smaller funds that offer opportunities to access talented managers that, for whatever reason, have not found an audience. Seafarer being one, and the Whitebox fund I've mentioned being another. Investing is certainly not charity, but I do think there is space to speculate and get in on the ground floor with talented management with the hope that performance continues, AUM improves and hopefully other benefits (lowered expenses, improved/larger analyst teams) come in time. Not every small fund is worth investing in, but I think there seems like a number of smaller funds these days that offer strong management teams and are just not seeing AUM rise for any number of reasons, primary of which is probably the general move out of equity funds.

PRESSmUP

Hi folks...new poster here.

Similar to Kenster, I hold several Matthews funds including MACSX and MAPTX. I swapped MAPIX for SFGIX a short time ago. I hope to find Mr. Foster's comments illuminating relative to the original question as to viability, as this has been a personal concern for a few weeks.

Two points:

A comment was made comparing SFGIX with Eric Cinnamond's fund, ARIVX. Given the fact that Mr. Cinnamond joined a fairly well established asset management firm, I believe a more apt comparison might be to the Grandeur Peak funds...a new firm created by a few Wasatch boys. I hold the Global option, GPGOX.

They opened 2 funds in October of last year, as readers of this forum would certainly know.

New firm...new funds...but now with almost $240M under management.

Secondly, and unfortunately for Mr. Foster, I think that fund flows may be light for the remainder of the year given my interpretation of investor behavior.

If someone wants a foothold in the foreign/EM space off the beaten track and doesn't read all available materials, I do believe that the average investor would consider Matthews over Seafarer for this role if comparing the funds side by side...for the overly simplistic reason that they would do a YTD comparison of the funds.

SFGIX launched in the latter part of February of this year....when the lion's share of Matthew's gains were already made when looking at the month by month returns.

msf

I regard the record of managers who have gone off and formed their own fund/fund families as mixed. For example, there's Yacktman, who underperformed the fund he left in 1992 for the rest of that decade, but has done great since. His problems in the 90s culminated with the distraction of an ouster attempt by the board of directors (1998). Inverting that pattern, we have tom Marsico, who did much better than Janus 20, but after selling out to BofA, botched the buying back of the fund family (defaulting on the leveraged buyout), and currently the family seems to be imploding. I tend to regard Winters (wintergreen, from Mutual Series) as someone who has done okay, not a clear winner. Others have had more clear success records.

Regarding SFGIX's performance - there is no YTD figure that potential buyers can look at. And if they look at monthly comparisons with MACSX, they'll see that of all five full months of performance for SFIGX (March - July), MACSX outperformed in four, and overall as well.

Month	SFGIX	MACSX
July	0.20	3.13
June	6.05	4.85
May	-7.17	-6.75
April	-1.07	0.90
March	0.68	0.90

Supporting articles:

Marsico CFO: Worth it to surrender half of the company Crain's Nov 16, 2010
Checking Up on Past Managers of the Year M* Nov 15, 2005
Great Funds Go Head-to-Head M* July 25, 2005

VintageFreak

Reply to @STB65: This has nothing to do with Sir Snowball's competence. This is about one's bad luck being excellent.

UTGRX, NARFX....how many more examples you want me to give?

Shostakovich

Reply to @msf: Can you really compare MACSX with SFGIX? I thought SFGIX had broader geographic mandate than MACSX.

David_Snowball

Reply to @Shostakovich: I think that's a valid and relevant observation. Three quick notes:

1. MACSX was, is and likely will continue to be one of your two prime Asia options, along with MAPIX.

2. SFGIX is a very different creature. It currently is 80% Asia, 10% Latin America, 10% other stuff. Within Asia, it offers a balanced exposure between developed and developing markets. MACSX is 4:3 developed over developing. For the portfolio as a whole, SFGIX is 1:1 developed to developing, MACSX is 2:1, and most of their peers are about 3:2.

3. SFGIX has been very successful in its own right. I track it against a variety of indexes (represented by ETFs, mostly) and it has substantially outperformed emerging Asia, Latin America and diversified e.m. benchmarks since launch.

For what it's worth,

David

msf

Reply to @Shostakovich:
That's a question for PRESS, who speculated that " the average investor would consider Matthews over Seafarer ...for the overly simplistic reason that they would do a YTD comparison of the funds." But that they'd be wrong because Matthews' performance was due primarily to market performance Jan/Feb before Seafarer started.

Regardless of whether "the average investor" is making a valid comparison, I just pointed out that a month by month comparison (as opposed to an "overly simplistic" YTD comparison) still shows Matthews outperforming (albeit by less).

BobC

We talked with Andrew shortly after he left Matthews, while he was working to set up a new company. One of the things I mentioned was the importance of capturing assets in the first year of operations and how that might make or break a new fund. Unless there is some bottomless pit of money available to Seafarer, it could be a short-lived opportunity. I have no doubt of his talents and abilities as a fund manager (the fund is up more than 10% in the last 3 months), but those are secondary when a fund cannot raise assets. That is why we have remained with MAPIX, which continues to do well. If he keeps putting up good numbers, and if he can survive financially for three years (the magic number for many investors and fiduciaries), the fund will probably do fine.

Kenster1_GlobalValue

Got email back from Andrew Foster:
======================

Greetings from São Paulo. Thanks for your email.

Regarding the firm's assets under management: at present, Seafarer manages only one public fund. The firm is not registered with the SEC to manage any other type of financial product.

Regarding "survivability": I am not certain I can address the entirety of your question, because it has several facets to it -- but I'll try. From my perspective, the firm has only recently started; it’s growing nicely, especially relative to our own (conservative) forecasts; and we are excited about the future.

We are fortunate to enjoy the freedom to build our business carefully, over time. Meanwhile, we have structured the firm so that it is flexible, efficient, and so that has the resources we need to get our job done.

Unlike the ETF situation you cited, I don't have any financial "pressures" weighing on me -- i.e., I don't have to struggle with an institutional shareholder that might push the firm to grow to a particular scale, achieve certain margins, or face closure.

We look forward to a day when the firm's assets achieve greater scale, so that we can pass on some of the resulting economies to clients. But right now, we are pleased with what we have achieved. I chose to launch the firm, rather than pursue a career at an established entity, because I love what I do: I wanted to build something new, from scratch, and guide its steady progress. I plan to be here, with Seafarer, for a long time to come.

I hope this addresses your question?

Thanks again for your interest, and best regards,

Andrew

Charles

Outstanding Kenster1. Class act response. Honestly, I think Mr. Foster is top-rate. And his young firm is extremely shareholder friendly. I opened two accounts early. Their folks are easy to reach, responsive. They care about their shareholders. Great, simple website linking both my accounts. Hey, at the end of the day, if his fund performs well, it will grow. If it does not, it won't. You can be part of the adventure, or not. I choose to be part of it. I invest with Seafarer. Thanks again Kenster1 for bringing this question to the source.

Old_Joe

Reply to @VintageFreak: I had no idea anyone else out there shared my gift for buying stuff at exactly the wrong time. When we owned individual stocks I suggested to my wife that we try blackmailing various companies by threatening to buy their stock unless they paid us up front not to.

Old_Joe

Reply to @Charles: You know, it's guys like you two who make this such a great site. Thanks to both of you for taking the time to share your thoughts and experiences.

BobC

Reply to @Kenster1_GlobalValue: A great thanks to you. Andrew's response is thoughtful and honest. As Charles notes, a "class act" response. We certainly expect him and his fund to do well. Now let's hope the assets do come in as the performance moves ahead.

AndyJ

Reply to @Charles: Class act, amen. For anyone who's interested in the fund at all and hasn't caught the conference call of July 12, it's a great window into the fund and the strategy, and AF's approach: organized, succinct, thematic, straightforward; all the things that make people successful, in whatever walk of life.

The conference call is here: http://www.seafarerfunds.com/shareholders/call/

MaxBialystock

Reading this thread is reassuring, interesting. I suppose I'm not surprised, but the straightforward reply from AF is heartening, giving encouragement rather than doubt. Of course, there are no guarantees, either.

VintageFreak

Reply to @Old_Joe: LOL. I do that all the time. The worse thing is it WORKS every time. There some "young" people who think they are wizards and keep gambling with penny stocks. Sometimes they make money. I tell them "stop, or I will buy that stock and you will suffer". At least thrice that I can remember, I made good on my threat to young arrogant yuppies and they got the idea to not mess with me again.

Anyone want me to buy $0.001 priced stocks to sock it to someone or make them come to their senses, just let me know.

STB65

To Vintagefreak
NARFX sounded interesting. Fortunately, I had no available funds. (3 marriageable daughters may protect one at times). I think the emerging world represents the long-term future and I lack the time and expertise to research the companies.
Foster's email sounds encouraging. He apparently has enough personal resources to wait until the fund is "discovered." I am willing to avoid your investment choices, if you choose to share.
G'day