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Contrarian Fund Grandeur Peaks

ONE year anniversary.

Returns as of 09/17/2020
1 yr Since Inception*
Global Contrarian, (GPGCX) 0.82% 10.50% 10.50%
MSCI All-Country World Small Cap Value Indexi -14.43% -7.26% -7.26%
MSCI All-Country World Small Cap Indexii -3.95% 4.07% 4.07%

Stay Safe, Derf


  • You needed to have a stout stomach to earn your 10% in GPGCX as it experienced a precipitous fall when COVID spooked the markets.
  • Looks to have limited downside protection. -2.09 today
  • There's always a risk in putting too much stock (no pun intended) in short term results.

    Like most funds in this category, GPGCX's portfolio is currently growth leaning. Much less so than its better performing siblings in this category (GPMCX, GPGIX, GPRIX, GGSYX), but growth nonetheless. Whether that's because of market conditions or because the family is inherently growth oriented remains to be seen. We can't guess based on its long term history because it has no long term history.

    Nevertheless, based on what we do know, a value index hardly seems a proper benchmark. (You can see how much more poorly value has performed than blend, let alone growth, simply by looking at the two indexes above).

    While Grandeur Peak is a good family of funds, their choice of benchmarks in general bears scrutiny. (This is the first time I've looked at this for Grandeur Peak.) Though GPGCX is only somewhat growth-oriented, the peers above are off-the-scale growth leaning. Yet no Grandeur Peak fund is benchmarked against a growth index.

    The choice of benchmarks and of peers is important because it can lead to very different conclusions. Compared with its Morningstar peers (World small/mid cap funds), this fund ranks at the 48th percentile (including all share classes) over the past year.

    I am making no comment about the fundamental quality of this fund. Rather, I am commenting on the figures against which the performance is compared and on the still uncertain nature of this relatively new fund.
  • BenWP said:

    You needed to have a stout stomach to earn your 10% in GPGCX as it experienced a precipitous fall when COVID spooked the markets.

    That's what I thought when I got the Grandeur Peak email today.
  • Derf said:

    Looks to have limited downside protection. -2.09 today

    Right in line with MSCI AC Small Cap Growth, down 2.10% today.
    (Market is all country, size is small cap, and style is none, growth, or value)

    AC Small Cap was down 2.67%, and Small Cap Value was down 3.28%.
  • edited September 2020
    From the man: One of the Global Contrarian Fund’s investment strategies is to go to the most out‐of‐favor places in the market and find the best companies there.
    Are a lot of (SCG) using this strategy ?
    -2.09 is better than -2.67 & -3.28
    + Aum (app. 11 million )
  • msf
    edited September 2020
    Different doesn't mean better, though it can provide diversification. On the day, GPGCX underperformed every other Grandeur Peak fund, peer or not. Again, this is why one doesn't look at short term performance.

    [ Edit: my error, GPMCX did worse, -2.17% vs. -2.09% ]

    One of the fund's four stated strategies is indeed finding out of favor growth. Also from the man, the other three involve finding "broken growth, underappreciated growth and undiscovered growth."

    This is like reading an old description of Legg Mason Value Trust and suggesting that BIll Miller should have been benchmarked against a value index.
    The adviser follows a value discipline in selecting securities. ... Value stocks as a group may be out of favor ...
    2004 Prospectus
    The veteran value investor buys traditional "value" fare like financial stocks, but also "growth" stocks prone to nosebleed valuations and jarring volatility like Nextel Communications, Inc., IAC/InterActiveCorp, eBay Inc. and, most recently, Google Inc. These picks occasionally have drawn critics, but they were also key drivers of a more than 15% jump for the fund in the fourth quarter. ...

    Mr. Miller: ... Now people look at the market and are concerned about valuation, but we aren't.
    WSJ, Jan 6, 2005

    Watch what I do, not what I say.

    To find SCG funds that purport to be value funds (i.e. ones saying that they buy out of favor stocks), look for boutique growth families marketing value funds, or conversely, boutique value families with a fund classified as SCG.

    For example, and hardly coincidentally, WAMVX. Its principal strategies include "us[ing] a 'bottom-up' process of fundamental analysis to look for individual companies [it] believe[s] are temporarily undervalued." Sounds like "out of favor" to me. Summary Prospectus.

  • M* shows 41 distinct world small/mid funds. Their returns Monday, grouped by current portfolio style:

    SCG (5): GPRIX -1.68%, GPGCX -2.09%, GPMCX -2.17%, EKGAX -2.67%, -SGSCX -3.1%

    SCBl(3):  IZSYX -2.69%, DGLIX -2.92%, EVGIX -3.01%

    MCG (17): WAGOX -1.04%, OBEGX -1.26%, WWWEX -1.24%, GGSYX -1.63%, GLNIX -1.65%,
                      GPGIX -1.63%, OWSMX -1.65%, SMCWX -1.69%, HGXVX -1.74%, DGSCX -2.06%,
                      AGCTX -2.08%, OPGIX -2.11%, GEOSX -2.37%, FHSIX -2.41%, ESVAX -2.42%,
                      TSYIX -2.43%, GNXIX -2.85%

    MCBl(6):    NALFX -1.61%, FHESX -2.35%, LPEIX -2.36%,
                      CAEIX -2.49%, TEMGX -2.49%, CSMOX -2.64%

    SCV (2): YASLX -2.43%, GGMMX -2.76%

    LCG (1): FEUIX -1.21%

    MCV (4): RAILX -1.35%, GCCHX -2.54%, GCHPX -2.56%, MOWIX -4.20%

    LCBl(3): VMNVX -0.91%, HEOYX -1.92%, DGBEX -2.14%

    The six italicized funds are ones that seem to be environmentally focused (e.g. "climate", or "environmental" or energy in an SRI sense). There are also ESG funds, DGBEX, FHESX, and HGXVX, but an ESG focus may not fundamentally alter the pool of companies they are fishing in. (One can debate whether sustainable development goals funds should be grouped with environmental funds.)

    This exercise helps to illustrate a few things. Peers matter, how one groups funds matter. 15% of these funds are environmental. That means they aren't looking at the same companies, any more than, say, a financial sector fund is looking at the same companies as a value fund.

    Styles matter, but grouping by style here leaves one with too few funds for meaningful comparisons. If you like the investing approach of a fund, and it is executing that approach well, it doesn't matter how its figures look relative to other funds with different approaches.

    Time frames matter. These one day returns, even grouped by style, are all over the map. I suspect one would find at best only modest correlation between star ratings and these one day performance figures. Too much noise in a day to be meaningful.

    Worth a mention is VMNVX. On a one day basis, it certainly looks like it is meeting its goal of lower volatility. But what I want to highlight is its overall performance. Out of the gate, it was the darling of many investors. The fund is now about 6½ years old. For its first couple of years its performance was great relative to its peers (for whatever that's worth). However, over the past five years, it has turned in a 69th percentile performance. Time frames matter.

    Also worth a mention is NALFX. Possibly the granddaddy of clean energy funds (nearly 40 years old), it did miserably for many years (1 or 2 stars). IMHO waaay ahead of its time. Look at it now. Top 3% over the past five years. Being in the right place at the right time matters. With a fund that's only been around for a year, one can't tell whether that's luck or skill. But with this fund, after decades one has a pretty good idea of where it is heading.
  • msf said:

    On a one day basis

    This is precisely the problem for most investors.
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