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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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  • edited October 2022
    From the letter:
    Pain + Reflection = Progress
    Ah, that old Judeo-Christian notion of the redemptive nature of suffering. Sometimes Pain just = Pain. Or worse, permanent scarring and fear. The Nietzchian notion that "That which does not kill me only makes me stronger" is disproved by all of those victims of PTSD and trauma which eat away at them for the rest of their lives.

    In this particular case relating to fund performance, Dialo's cliche seems like, well, an excuse. "Sure you lost a third of your money, but heck, didn't we all learn something?" It's almost like a parent or nun/priest wacking one of their children/students and saying "this hurts me more than it hurts you." The other sad fact of the matter given the incentives in the active management investment business, I'm not sure progress will be made, in almost every fund. If for instance, the strategies here became much more conservative as a result, they would underperform on the upside instead of the down, and assets would decrease, reducing management fees. So, in all likelihood, the same thing will keep happening again and again at most fund shops. It might make more sense if every fund shop also offered a fund with different goals, a low risk absolute return fund, that openly stated, look we're going to underperform in a bull market but outperform in bear. That way investors expectations would be managed.

    None of this is meant to pick on Grandeur Peak specifically. I actually like the shop overall. I think these results are part of the nature of the money management business in general. A less soothing and less diplomatic but more honest letter would recount the also cliche tale of the scorpion and the frog. if you're going to invest in microcap growth stocks to win long-term, you are going to get stung in a downturn.
  • I may be misremembering but I believe some of their past literature expressed the notion that they should compare favorably in a sell-off. Many "growthy" oriented fund managers seem to lack "sell" discipline, i.e., the sky's the limit when it comes to their investments. ARKK would be the poster child for that, but GP also forgot about valuations.
  • That is fore sure. Smaller cap growth funds are lagging badly this year. Probably will see many of them reopen after investors flee.
  • I agree with @sfnative on his recollection. I have just a small stake at GP, but I do read their shareholder letters. ISTM that a few months ago they promised a thorough reexamination of what had gone wrong in order to "derisk" the portfolios. However this time around, I see that the only fund at GP that came close to beating the firm's self-selected bogey was Global Contrarian while some of the former high flyers are lagging their benchmarks by significant percentages. They seem to be telling us that they've recently discovered "value," but there is scant statistical evidence of the effectiveness of a style shift, if in fact any such shift took place.

    I realize that the last year has been brutal for most equity investors and I don't mean to demonize the folks at GP. They do seem to be honest and forthright.
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