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GQEPX question

GQG Partners gets a lot of comments here. Them seem favorable. The institutional version of GQEPX frequently turns up in my screens at MFO Premium as a "Great Owl." I have it on a watch list. The expense ratio is reasonable. It's available at Fido; I could add it to my IRA.

So? What's my problem? With GQEPX, that is . . .

The turnover. M* says it's 211%. That's a lot of turnover. So I look at the investment strategy in the prospectus:
the Adviser typically pursues a “growth style” of investing as it seeks to capture market inefficiencies which the Adviser believes are driven by investors’ propensity to be short-sighted and overly focused on quarter-to-quarter price movements rather than on a company’s fundamentals over a longer time horizon (5 years or more). The Adviser believes that this market inefficiency tends to lead investors to underappreciate (sic) the compounding potential of quality, growing companies. To identify this subset of companies, the Adviser generates investment ideas from a variety of sources, ranging from institutional knowledge and industry contacts, to the Adviser’s proprietary screening process that seeks to identify suitable companies based on several quality factors such as rates of return on equity and total capital, margin stability and profitability. Ideas are then subject to rigorous fundamental analysis as the Adviser seeks to identify and invest in companies that it believes reflect higher quality opportunities on a forward-looking basis. Specifically, the Adviser seeks to buy companies that it believes are reasonably priced and have strong fundamental business characteristics and sustainable and durable earnings growth. The Adviser seeks to outperform peers over a full market cycle by seeking to capture market upside while limiting downside risk. For these purposes, a full market cycle can be measured from a point in the market cycle (e.g., a peak or trough) to the corresponding point in the next market cycle
That doesn't read to me like "And the only way we can do all that good stuff is to turn this sucker completely over twice a durn burn year! Yeehaw!"

The strategy reads more like an argument for a sedate rate of turnover to enjoy those "sustainable and durable earnings" over "a full market cycle" with tea and biscuits in an old, well-upholstered leather chair, on a Persian rug, by a crackling fire.

Am I missing something with this? Are we just hoping the team is that good at selling and buying stocks at that pace? And can keep it up over some period of time?

Comments

  • edited March 25
    Buy a small amount and test it out. No short term redemption fees.

    I looked at this a while ago and my recollection is it loads up on the momentum factor but definitely has had good risk control. It is more volatile than how the strategy reads but I just assume words mean different things to different people and so will not quibble about the strategy language. I have no issue recommending this to you, @WABAC, knowing what else you own. May be I should have sent this as a message.

    P.S.: we recently exchanged ideas about dividend ETFs on another thread. If I were looking for an OEF, GQHIX would be a worthy consideration. Note that both these have some international stocks in them, notwithstanding "US" in the fund name. Similarly, their international fund has US stocks. Also, know that GQG may take contrary bets like going long on stocks that are targeted by shorts. If you want an active fund, you will get one!
  • Rajiv Jain of GQG uses value conscious growth approach. But unlike the traditional GARP, he combines value portion with momentum portion. Firm only has a handful of funds. Its other funds seems to have reasonable turnovers, but the high turnover for GQEPX may be due to where the US market is now. It may be useful to look at its turnover history.
    https://www.morningstar.com/asset-management-companies/gqg-partners-BN00000J55/funds
  • It seems to me that turnover should be expected if a fund is actively managed. I think the question is: Do I want a passive fund or not? If not, is this fund a good candidate?

    I tend to be active, but do hold some funds long term. For the ones I hold, I want an active (but successful) management of the assets. So far, GQEPX has been that.
  • @BaluBalu. You gave me a good laugh. I'll keep it on the watch list for now.

    I'll need some cooperation from Mr. Market before I have more cash to sink into equities for the IRA. And then I'll have to think about whether I want more of the equity sleeve in the larger, and growthier cap boxes. At this point its main competition would be AMAGX if I go larger and growthier or GTSGX if I want to keep the current spread. Or I could just stick with the funds I have already condensed into, as described on the buy, sell, why thread

    @yogibearbull, I'm not seeing the turnover history at that link. I see a condensed M* summary of all their share classes.

    I have looked at the history of its weight in the M* boxes on the portfolio page.

    @raqueteer, AUSF has 245% yearly turnover because of a specific sector rotation type of strategy that makes sense to me for the purpose I bought it for. So I own it for now.

    When it comes down to humans saying this stock is something I need to buy, or sell, right this minute, there's Charlie Munger turnover, and then there's Rajiv Jain turnover.

    Seems to me that the more often a manager is selling and buying stocks, the more often he has to be right.
  • edited March 26
    Not sure how one can load up on momentum and not have higher turnover. To some extent subscribing to active management requires faith on the manager that they get more right than wrong. I have learned that if I am inclined to be active, it has to be with passive funds. With active managers, I can not micro manage them - take it or leave it approach works better with active funds. Not sure if I added any value to what YBB and Raq said.
  • I looked at four GQG funds and they all have high turnover ratios, although not as high as 200%. Jain seems to be able to make active management work, whereas others cannot. In global growth a few years ago, Kristian Heugh could do no wrong; unfortunately results for MGGIX in 2021 and 2022 put him at the bottom of the heap during a time when Jain's GQRPX shone.
  • edited March 26
    WABAC said:

    [snip]
    @yogibearbull, I'm not seeing the turnover history at that link. I see a condensed M* summary of all their share classes.
    [snip]

    @WABAC,

    According to the M* GQEPX One Page Report, here are the fund's annual turnover rates:
    2019 - 155%
    2020 - 163%
    2021 - 143%
    2022 - 125%
    2023 - 211%
  • @Observant1, Thank you. Much appreciated.

    I remember when M* used to have a one page report, but I don't remember seeing one lately.. Is it a subscription feature?
  • New M* Investor has them - not free.
  • @yogibearbull, Thank you. Much appreciated.
  • @WABAC,

    My local library system offers Morningstar Investing Center (MIC).
    I can access a fund's One Page Report (and full report) via MIC.
    MIC also provides access to the M* StockInvestor, FundInvestor, and ETFInvestor newsletters.
  • Thanks again @Observant1. I always forget about the library option. I'll have to see if ours participates. M* used to have a fund similarity tool that was useful.
  • Are StockInvestor, FundInvestor, and ETFInvestor newsletters free now if you have M* premium membership? If so, could you please provide the links to them - I was not able to search for them in M* investor
  • Hardly much is free at M* now. There are subscription screens for everything.
    M* Investor https://investor.morningstar.com/mm/
    M* Newsletters https://newsletters.morningstar.com/
  • They cost $145 to $199 a year

    I assume you do not have to also have a M* premium membership but I am just guessing

    I have subscribed to most of them of andon over the years but never found them particularly useful

    They did have model portfolios that were reasonable but I don't remember being super excited about their results
  • edited March 27
    BaluBalu said:

    Are StockInvestor, FundInvestor, and ETFInvestor newsletters free now if you have M* premium membership? If so, could you please provide the links to them - I was not able to search for them in M* investor

    If your library system offers Morningstar Investing Center,
    these newsletters should be available via PDF download for free.
  • Two days of price action shows the momentum load of this fund. If risk is properly managed, the fund should not experience a complete momentum unwind. Let us observe.
  • Interview in Bloomberg today. Active stockpickers. The first one profiled has a holding period of at least ten years, preferably forever!

    https://www.bloomberg.com/news/articles/2024-03-27/some-stock-pickers-show-active-can-still-beat-passive-investing?srnd=homepage-americas&sref=OzMbRRMQ

    "Rajiv Jain, co-founder of GQG Partners in Florida, has taken a similar approach, making concentrated bets on just a handful of stocks. His biggest fund, a $42 billion vehicle distributed by Goldman Sachs that includes old-guard energy companies such as TotalEnergies SE and tech superstar Nvidia, has returned 13% annually since its inception in 2016, double the gain of its benchmark.

    Last year, Jain scooped up shares of Adani Group companies as others fled amid a short seller’s accusation of accounting fraud. The contrarian bet paid off, with the value of his investment growing fivefold when Adani weathered the crisis. “We are a business of taking risks,” Jain says. “You have to be uncomfortable sometimes. If you look like an index all the time, guess what? You get indexlike returns.”

    Jain, who moved to the US in 1990 from India, makes outsize bets on companies with strong balance sheets and decent earnings growth. Unlike Rizk, though, he is liable to change his mind quickly when market conditions shift, and he has no qualms about liquidating his position if he sours on a company’s prospects. “Our job is to make money for our clients,” Jain says. “It’s not an ideological exercise. We are not trying to change the world.”
  • @sma3, Good snippet. Pretty reflective of what we experience.
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