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A Money Manager Apologizes and Admits Mistakes

edited August 2022 in Fund Discussions
Though it's painful to see this kind of performance, it's refreshing to see a manager admit mistakes were made, describe those mistakes in detail and then say what actions have been taken to ensure they won't happen again: https://vulcanvaluepartners.com/core/uploads/2022/08/VVP-Quarterly-Letter-22.06.30.pdf
I've spoken to a tremendous number of money managers and they so rarerly are willing to do this, and to me it's a sign of managerial strength, not weakness, to acknowledge what went wrong and seek to correct it. I think there is a tremendous amount of overconfidence in the financial services industry in general, and that leads to errors, and a refusal to admit them.

Comments

  • edited August 2022
    I bought into the small cap fund in August of last year (it is closed to new investors, but I had an existing position in a retirement account) not realizing that the size of year-end distributions. The fund has never recovered from the 2021 distributions and the downturn in the market.
  • @TheShadow @LewisBraham I also have a small stake in LC. Will either of you be added to or holding steady ?

    Trying to enjoy the ride, Derf
  • Holding steady...
  • edited August 2022
    I don't own either fund, but I admire the manager's honesty and willingness to address mistakes. My issue remains the level of concentration in the two funds, yet I don't think this is something they will address as they don't see it as a mistake, and for someone who is patient, it wouldn't necessarily be one.
  • +1. True. But I'm not going near that stuff.
  • Thanks for your replies. I'll hold for the time being.
  • “Our short-term performance has had a significant impact on our long-term returns.”

    A point often overlooked by many investors.
  • Andrew Foster (Seafarer) is known to be candid about missteps. I gave the benefit of the doubt and stuck with SFGIX, until I just didn't, anymore.
  • edited August 2022
    Sadly VVPSX was one of the top funds cited in the October 3, 2021 WSJ article, "Big Hasn’t Been the Best for Fund Investors." VVPSX was second for the quarterly ranking for twelve months.
  • edited August 2022
    @Crash SFGIX has done really well lately, beating 92% of its peers in the last three years. Still, that is a relative game. Emerging markets in general can be a stressful game for investors who can’t stomach volatility. I feel similarly about these Vulcan funds. They are concentrated and that courts volatility and idiosyncratic stock selection risk, so when the manager makes a mistake, it’s painful. But acknowledging that mistake and seeking to avoid a similar one in the future is essential. It’s a stark comparison to me between this response and others I’ve seen where the manager refuses to acknowledge any problems or change anything. The ARK ETF comes to mind. Still, those who can’t take volatility should generally steer clear of concentrated funds. This is especially so in the small-cap arena where idiosyncratic stock risk is the greatest. The long-term returns may prove great, but when the fund is down 40% one year and the markets are down 20%, psychologically many investors can’t handle it and will sell at the bottom.
  • +1. I'm still holding TRAMX. Africa/Middle East. Still underwater this year, but not by much....Yesterday was a nice bump-up, but investing is a marathon, not a sprint.
  • edited August 2022
    @Crash, do you know that TRAMX has significant holdings in Saudi Arabia, mostly in the financial sector? From a pure investment approach that is not a problem of course. But I know you are a strong-on-ethics guy, so I thought I'd mention it in case you were unaware. I have no idea how to make geographical sector bets so personally I wouldn't use any non-diversified EM fund myself, especially as a buy and hold fund.
  • edited August 2022
    MikeM said:

    I have no idea how to make geographical sector bets so personally I wouldn't use any non-diversified EM fund myself, especially as a buy and hold fund.

    Yeah, That’s a tough nut to crack. I have a little diversified EM at Dodge & Cox. Blind faith I guess in their stewardship. And a very small hold in ENOR (Norway) which is actually in my Real Assets sleeve due to its economy’s heavy dependence on energy exports. Neither of the aforementioned funds, however, is “shooting the lights out.” In fact I’d liken it more to shooting myself in the foot.

    As far as going “off the reservation” is concerned with non diversified EMs, I always think back to hearing Sir John Templeton remark that it’s very rare for any country’s market to fall more than 50% and stay down that far for long. (In specific he was addressing a rout in the Asian EMs back than.) In that day Sir John would have found an economy down that far a lucrative investment target. However, a lot has changed in the 25-35 years since he made that remark. May not hold water today.

    Kudos to @Crash for sticking to his guns.

    Great insights from @LewisBraham. Much appreciated.
  • MikeM said:

    @Crash, do you know that TRAMX has significant holdings in Saudi Arabia, mostly in the financial sector? From a pure investment approach that is not a problem of course. But I know you are a strong-on-ethics guy, so I thought I'd mention it in case you were unaware. I have no idea how to make geographical sector bets so personally I wouldn't use any non-diversified EM fund myself, especially as a buy and hold fund.

    @MikeM

    I'm glad for your message.
    You're correct. Saudi Arabia = 38.67% of the portfolio in TRAMX. It's the biggest single-country bet in that fund. Saudi National Bank = 8.08% of its portfolio.
    Prince M.B.S. is a filthy skunk. A murderer, in fact.
    https://en.wikipedia.org/wiki/Mohammed_bin_Salman
    https://en.wikipedia.org/wiki/Assassination_of_Jamal_Khashoggi

    And do women in that country still possess the right to even drive a car? The Saudi ethical record is dreadful. I do feel besieged, trying to invest ethically. It almost can't be done, even domestically. Wifey is just back from The Philippines. The voters in that country are at least as stupid as voters everywhere else: they elected Ferdinand Marcos' son as President. And now there is a move afoot to change the name of Manila's airport. It is known as the "Ninoy" Aquino International Airport. You may recall that the elder Marcos personally arranged the assassination of Ninoy as he walked off the airplane which brought him to Manila, back in August, 1983. And Israel is running an apartheid state, and still occupying Palestinian land in the West Bank--- doing all they can to see that a viable Palestinian State never happens. Between the Palestinians themselves, there is a huge credibility problem in the leadership. And Burma? "Fugg-ed-about-it." Africa is a mess, too. I try to be ethical. But if I wanted to remain pure, I'd never be able to invest a dime, anywhere. The Human Condition.

  • Thanks for that link, @LewisBraham. I read the managers' reports and I was struck by the overlap in their funds. The fact that the bad apples were held in more than one fund strikes me as concentration squared or trebled. Wayfair and Upstart did big damage to more than one of their funds, for example. Same is true for AMZN and NVDA.
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