This fund has really got my interest. I really like focused value funds...especially an all cap "go anywhere" fund. I currently have one of each in Roth IRA's (OAKWX & GOODX). I've been a big fan of AUXFX and Jeff Auxier but I've always wished the fund was more concentrated. BMPEX is similar in my opinon, just more concentrated.
In Mr. Snowball's profile of the fund he writes-
Strategy capacity and closure
The strategy can accommodate about $1.5 billion in assets. The plan is to return capital once assets grow beyond the optimal size and limit investment to existing investors prior to that time. Mr. Wydra feels strongly that this is a compounding strategy, not an asset aggregation strategy and that ballooning AUM will reduce the probability of generating exceptional investment results. Between the fund and separate accounts using the strategy, assets were approaching $500 million in August 2013.
What exactly does that mean "return capital". If I were to invest 10K today and the fund assets grew to 1.6 billion. Then what? I understand closing a fund to new investors. I'm assuming closing a fund for good at 1.5 billion means I can no longer add new money, but returning capital?
Can someone please explain.
Thanks,
Clem
Comments
In general, that would imply that the fund might soft close, then hard close and if the size was still unmanageable, they might begin returning parts of their shareholders' investments in cash. They might, for example, redeem 2% of the shares in each account and send the money (and an explanation) back to the investors.
I know of only a couple instances where managers have done anything like that including, if I recall correctly, Sequoia (SEQUX) at one point.
I'd likely direct the question to Matt Shaver @ Lyndhurst Partners, who has been representing the fund and working to keep us informed of what's up with it, but that's the general answer.
David
It doesnt sound like its something I need to worry about for a while, but in theory it could happen very quickly if the fund becomes popular. As a long term investor accumulating money in a Roth IRA having some of my accululations returned to me might not be what I want. I guess its something I have to think about.
Side note- I listened to the conference call and was very impressed with Zach. He reminds me of Jeff Auxier. They both align their personal investments with their shareholders and practice what they preach.
Clem
I just wanted you to know- Zac Wydra emailed me personally with answer's to my question and cc'd Matt Shaver (as you mentioned above). That meant a lot to me!
Clem