http://www.sec.gov/Archives/edgar/data/1096344/000091957413000409/d1350636_497.htm497 1 d1350636_497.htm
FAIRHOLME FUNDS, INC.
The Fairholme Fund
The Fairholme Focused Income Fund
The Fairholme Allocation Fund
Supplement dated January 29, 2013
to the Prospectus dated March 29, 2012
The Fairholme Fund
The Fairholme Focused Income Fund
The Fairholme Allocation Fund
The following is added as the first paragraph under "Purchase and Sale of The Fairholme Fund Shares", "Purchase and Sale of The Income Fund Shares" and "Purchase and Sale of The Allocation Fund Shares" in the summary sections of the Prospectus for The Fairholme Fund, The Income Fund and The Allocation Fund, respectively:
The Board of Directors has authorized the Manager, in its discretion, to determine that, at any time, shares of the Fund will no longer be offered and sold (including in connection with reinvestment of Fund distributions) to any or all investors, including existing shareholders. The Manager has determined, pursuant to this authority, to suspend the sale of shares of the Fund to new investors, effective as of the close of business on February 28, 2013.
Effective as of the close of business on February 28, 2013, the Fund will suspend the sale of shares to new investors, including new investors seeking to purchase Fund shares directly from the Fund or indirectly through financial intermediaries. Subject to the rights of the Fund to reject any order to purchase shares or to withdraw the offering of shares at any time, shares will remain available for purchase to existing shareholders.
The following is added directly under the title of the section "BUYING AND SELLING SHARES OF THE FUNDS; INVESTING IN THE FUNDS" in the Prospectus:
Effective as of the close of business on February 28, 2013, the Funds will suspend the sale of shares to new investors, including new investors seeking to purchase Fund shares directly from the Funds or indirectly through financial intermediaries. Shares of the Funds will remain available for purchase to existing Fund shareholders. Each Fund retains the right to make exceptions to the suspension of the sale of its shares to new investors, and reserves the right to subsequently commence selling its shares to new investors. Investors may request information by calling Shareholder Services at 1-866-202-2263.
* * *
YOU SHOULD RETAIN THIS SUPPLEMENT WITH YOUR PROSPECTUS
FOR FUTURE REFERENCE.
Comments
I'm always dubious about these fund closings that are announced with substantial lead times. I say if you're going to close the fund supposedly to protect existing shareholders then just close it.
The trouble is I don't know if at present he has a stable base of dedicated shareholders or a pile of hangar-ons hoping to get back what they lost in the big crush.
Thanks. Everyone's contribution to this Board makes it interesting to existing and new posters!
Makes a shareholder wonder...
I didn't even notice that.
Charles, yes, I see that. I was surprised that after the tremendous bloat at FAIRX not so long ago, that Bruce would decide that he would now want the flexibility to go so far as to suspend all purchases, even reinvested divvies, etc. I did not mean to imply that Bruce is taking advantage of this flexibility now. Apologies.
http://news.morningstar.com/articlenet/article.aspx?id=582938
He's comp-lete-ly wrong if he thinks people won't bolt again.
The idea that he'll manage to find a shareholder base where the majority of his audience will stay loyal if he has another down year is ridiculous and makes me think there may be a considerable ego at work.
Throughout history, there have been many great managers who are stunned, just stunned (wasn't it an issue with Marty Whitman a couple of years back?) when shareholders flee if things turn South. The AUM under Cramer's former #1 mutual fund CGM Focus are now a fraction of what they were. Paulson, etc - there are tons of examples.
The only way that mutual fund managers like Berkowitz are going to find a loyal audience that won't flee is if they ever crate "enhanced" mutual funds that are kind of a bridge product between mutual funds and hedge funds, and require similar lock-up periods - and that's highly unlikely to ever happen (and would only delay fleeing if a fund went South.)
If this is an instance of Berkowitz not finding anything to invest in, okay, but the fact that this was even partly an attempt to find a "more loyal base of shareholders" is silly.
Additionally, interesting mix of comments in the comments section of the M* article.
In principle, I like the idea of a lock-up period.
I"m a FAIRX holder; my position is fairly small, I have no idea what I'd do if I wasn't allowed to reinvest, say, my < $100 in cap gains.
I'm starting to think Bruce is a bit of a nut. I think of the folks at Artio in some ways too: pretty decent fund managers, who were less-decent fund company managers. When you read the stories about Fernandez, you'd wonder how Bruce could have ever been taken in hook, line, and sinker (going so far as to by Fernandez a house next to Bruce's).
I'd like the idea of a lock-up period if a fund had greater flexibility/tools than a mutual fund - if not, no.
http://www.valuewalk.com/2013/01/pershing-square-capitalizes-new-hedge-fund-with-over-1b-ahead-of-ipo/
Third Point (Dan Loeb) is another large hedge fund that has a London listing, although the shares have traded at enormous discounts to NAV at times.
Greenlight, Third Point and SAC have started up reinsurance companies whose floats are invested in the same manner as the hedge funds in order to get permanent capital, but only one - Greenlight - is public, and the reinsurance side of it continues to lag.
Cheers.
D.S.
I don't know - there's a hundred possibilities, but if it's just the current mutual fund structure and now there's a lock-up of a year or more, then no. If something beyond the current structure can be brought to the table, I'd be more than happy to consider a fund with a lock-up period. As for current mutual fund managers, there's fewer and fewer highlights as a number of them have went to hedge funds.
Edited to add: now I really don't think this will happen lol
http://www.marketwatch.com/story/sec-panel-seeks-stock-exchange-only-for-the-rich-2013-02-01?link=MW_home_latest_news
"Berkowitz Adds Junk Debt on Top of BofA ‘Priced to Die’":
berkowitz-expects-watershed-2013
Another book I'd definitely recommend is "Street Freak", which - to me - is sort of like the Wall Street version of Anthony Bourdain's "Kitchen Confidential". It's a really interesting look at the life of a trader, but it's a darker book, as the author has emotional problems and literally goes through a breakdown in the book while working at Lehman. Both a really interesting look at the day-to-day life of a trader and someone whose emotional difficulties gradually got worse - at one point he winds up in a psych ward. It also illustrates what things were like in Lehman leading up to 2008.
David Einhorn's book, "Fooling Some People All Of the Time" is also well worth a read, as is Ackman's "Confidence Game".