Global "Stalwarts"

sfnative

From M*: "For Grandeur Peak Global Stalwarts GGSYX, First Republic Bank was its largest holding as of Oct. 31, 2022, the most recently available portfolio data. The stock was 4.5% of the $210 million fund. The fund also held 1.9% In Silicon Valley Bank. Over the past five trading days the fund has fallen 9.5%." For a fund company describing its methodologies as "world class" they've made -- IMHO -- quite a few missteps over the recent past.

LewisBraham

I feel many fund companies including this one would benefit from having a CPA specializing in forensic accounting and detecting problematic balance sheets on staff. But very few fund companies have such employees, choosing the CFA or MBA manager/analyst route, and those folks mostly are just looking for growth, not fraud or balance sheet problems. It's a different skillset: https://barrons.com/articles/why-your-fund-manager-isnt-looking-for-fraud-51599250358

sma3

@LewisBraham

When I read your comment, even before your link, I immediately thought of Olstein and his funds. I stumbled across him in 2004 and thought his approach made a lot of sense. Unfortunately I sold it several years later as since then it has generally outperformed the SP500 and value indices, although with larger draw downs.

Most people don't think about this type of analysis until after they needed it. But I can see why it is a hard pitch to make as he doesn't fit into a nice little box.

LewisBraham

RYSEX also has a CPA accountant manager: Charles Dreifus. I also think the more concentrated a fund with fewer holdings is, the more such forensic balance sheet analysis is necessary. The manager with 100 stocks can worry less about a single problem balance sheet. The one with 20 stocks really should be focused on every aspect of each company, especially their balance sheets.

sma3

Interesting you say that because OFAFX has almost 100 positions, none more than 2%.

His other fund Olstein Strategic Opportunities OFSAX is much more concentrated, 18 positions including four regional banks, 8% of assets.

First Hawaiian, Citizens, Home BancShares, and Prosperity BancShares

LewisBraham

I think Olstein and Dreifus can afford to be concentrated from a balance sheet perspective, but there are of course other risks concentration brings. The regional banks Olstein owns probably won't go bankrupt. That doesn't mean, however, regional banks in general might be out of favor for a long while, so the fund ends up with dead money, or losses merely from the optics in the sector, the belief that all regionals are now bad.

BaluBalu

Grandeur Peak's negligent behavior has been discussed many times before in this forum. Just repeatedly issuing mea culpa via fund manager commentary is not good enough. There is no change in Grandeur Peak's behavior. Fool me once shame on you and all that.

I have not looked at First Republic's asset mix but Silicon Valley Bank? Silicon Valley Bank has the highest percentage of long term securities in its assets of all the banks in the country. Every individual investor (incl those in this forum) has been worried about Duration risk for the past 10 years but not Silicon Valley Bank. Hopefully, we get to see someday the Duration risk (or the lack of) in the non-equity portion of its CEO's personal portfolio. Interestingly, even Signature bank ranked 45 places higher than Silicon Valley Bank for Duration risk ( Signature Bank allegedly was playing games with the info it was providing NY regulators, leading to its demise). But back to Grandeur Peak. There is no alleged material fraud in Silicon Valley Bank for a forensic accountant to unearth - its demise is from sheer incompetence (or moral hazard at worst) in plain sight. Incompetent (negligent) fund manager picking incompetent portfolio company management, that is all we have here.

Grandeur Peak US Stalwarts fund has 4.6% in First Republic and 2.3% in Silicon Valley Bank- as of Oct 31, per their website.

I am sorry for coming out strong on this fund company - I will go to temple and seek forgiveness. Every time we make excuses for active fund managers' repeated failings we are failing innocent investors who visit this forum. I will go back to holding my silence and not posting here.

Derf

@BaluBalu : thanks for posting your thoughts. I don't hold GGSYX , but other GP funds are in my portfolio , so will check to see if they have any of the troubled Banks.

Crash

@BaluBalu
"Every time we make excuses for active fund managers' repeated failings we are failing innocent investors who visit this forum. I will go back to holding my silence and not posting here."
At long last, that's why I finally left Seafarer, Andrew Foster's fund. His candor became too much de rigueur. Expected. Normalized.

LewisBraham

@Crash I'm not sure what more you could expect from Seafarer. The fund's beaten 91% of its emerging market fund peers in the past five years and 88% in the past ten with less volatility and downside risk. That's a strong record. It sounds like you have more of a problem with emerging market funds as a fund category than you have with Seafarer specifically. You can't expect Seafarer to behave like the S&P 500 or Treasury bonds if it isn't designed to do that.

Devo

+1

sfnative

I dunno, trailing five-year returns of about 1% per year are objectively awful, let alone sub-optimal. You can't eat relative performance. I wouldn't think the fund is "designed" to achieve such returns. Pretty darn sure that's not what management envisaged.

LewisBraham

Most funds unless they have a flexible go-anywhere investment objective are evaluated based on performance relative to their fund category peers. If a manager runs a tech sector fund and tech stocks are down 20% in the past year but the fund is only down 10%, that’s considered a success, even though fund shareholders may be unhappy. Given the narrow range of the strategy, outperforming on the downside when there’s a limited amount of tech stocks to choose from is impressive.

Crash

He was almost a superhero at Matthews. I found performance to be mediocre. SFGIX. 10 years, as of tonight: +3.47%. Ya, it just was not worth it to keep my money in there.

sma3

Every dog has it's day!

The signal for the start of a dramatic comeback for EM, beating all other indices etc, will be when I finally dump all my EM funds! Guaranteed.

Devo

Please let us know when you do that. For Public service.