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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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  • Received an email from GP with an explanation.


    July 3, 2023

    Dear Fellow Investors,

    After a decade of diligent service at Grandeur Peak, Stuart Rigby has decided to leave the firm to pursue a new path in his career and launch a global technology hedge fund. Stuart has been a valuable contributor to our investment process over the years and a great colleague. We wish him the best of luck as he embarks on his new endeavor and look forward to continuing our friendship and sharing investment ideas with him for years to come.

    Effective July 1st, Stuart will no longer co-manage the Grandeur Peak Emerging Markets Opportunities Fund. Blake Walker, Grandeur Peak's CEO, who has been a portfolio manager for the Fund since its inception in 2013, will continue to serve in that capacity. Tyler Glauser will also continue as lead analyst.

    In addition, Stuart will no longer serve as one of the nine listed portfolio managers for the Grandeur Peak Global Reach Fund, focusing on the technology sector. Phil Naylor, who has been a Grandeur Peak technology analyst since 2014 and has been co-managing the technology portfolio in Global Reach with Stuart since 2021, will continue in that role. Phil will also replace Stuart as guardian portfolio manager on the Grandeur Peak US Stalwarts Fund.

    Please be assured that while we will miss working with Stuart and miss his contributions, the prudence employed in running our investment process will not be compromised as a result of his departure. One of Grandeur Peak's most distinguishing features and strengths is that our team structure enables us to utilize our entire research team to manage each of our portfolios. This allows us to fully leverage our "multiple minds" investment philosophy and mitigate key person risk.

    If you have any questions related to this news, please reach out to me or a member of our Client Relations team.

    Best Regards,

  • "One of Grandeur Peak's most distinguishing features and strengths is that our team structure enables us to utilize our entire research team to manage each of our portfolios. This allows us to fully leverage our 'multiple minds' investment philosophy and mitigate key person risk."

    Team-managed active funds usually help mitigate key-person risk.
    It can be very disruptive when a "star" fund manager leaves a fund.
  • Grandeur Peak fund’s did not do so well in 2022. One of their fund, Global Stalwart, GGSOX, had two bank failures in their top 10 holdings: Silicon Valley Bank and First Republic Bank. So much for their management.
  • edited July 2023
    Probably the same two banks and probably in a bigger proportion were also in GUSYX - US Stalwart fund. GISYX (Intl Stalwart) was no prize either.
  • Something to watch for in small mutual fund shops. @LewisBranham mentioned that if they would hired an accountant to review all their bank’s asset, it would reveal the vulnerabilities to various scenarios. Pretty much textbook failure of holding so much long bonds as the interest rate rose quickly.
  • Thanks for comments. Is it time to leave or is this strike one ? Not so much the departure, but holding two banks with to much long bond & to large of a percentage.
  • Think Grandeur Peak was careless with respect how they handle the risk on the stock and their fund levels. The worst part was they did not even apologize for this mistake. I found this data from their 2022 annual report. If you look up these two banks, Grandeur Peak was one their largest investor. My question for GP is how can they concentrate the risk by holding two similar banks. I invested with them awhile back and sold the entire position in mid 2021. They were just too volatile for my taste.

    Queen Road Small Cap fund I have did not hold the same kind of bank stock as Grandeur Peak funds did. The annual report even pointed out why a bank it invested in stands out differently from SVB. Clearly, the fund manager knows their financial holdings well.
  • My thinking is the more concentrated a fund is in a few stocks, the more managers need a forensic accountant to go over the financial documents of their companies with a fine tooth comb looking for fraud or problematic areas. But for funds with 100 or 200 stocks as many Grandeur funds are, it seems less necessary. There is less individual company risk in a 1% position than a 5% one.

    That said, Silicon Valley Bank wasn’t a case of fraud or hidden funny numbers like Enron or Worldcom. These were risks on the balance sheet in plain sight. Maybe managers just didn’t believe rates would rise as quickly as they did and instead thought that SVB would have time to adjust and reduce its rate exposure.
  • edited July 2023
    Many (most?) of us get seduced by good story telling - after all that is one of the seductions of generative AI.

    Fool me once . . ., fool me twice . . . and all that. I thought there was plenty of time between SVB collapse and First Republic collapse for a manager to react and preserve whatever capital could have been preserved, even if one were to think SVB collapse came from the left field. Cutting losers short (and letting winner run) is the basic investing lesson that was drilled into me early on after I watched an investment go to zero. It is more troubling to me if a manager did not employ proper risk management than if they lost an opportunity to make money.

    Multiple insider sellings within a short period of time is a red flag for any of my holdings.

    GP probably have too many funds for a small shop to pay attention to each fund holdings! I think we previously discussed about this risk at GP.

    IMO, GP executives are a much better story tellers than risk managers.

  • "IMO, GP executives are a much better story tellers than risk managers"

    Bingo , I do recall many tales of the trips the managers & associates took & reported in their semi & annual reports.
  • I have seen Laura Getitz’s Rondure funda did better than Grandeur funds during the downturn. I have kept GPMCX and sold other GP funds. Kept RNWOX as well.
  • @rmt : Did you own Contrarian fund ?
  • In late 2022, GGSOX held SVB (1.9%) and First Republic Band (4.9%), and that is a lot for a medium cap global fund. SVB failed in March 2023 and FRB got bought out by JP Morgan a month later. Wonder how much Stuart Rigby contributed to GP company culture since he was a “guardian” portfolio manager for several funds?

    In light of that, who are your favorite fund managers?
  • edited July 2023
    Agree that GP had a great start as a splintering off from Wasatch, but went downhill. As recently as 18 months ago, Mutual Fund Observer gave 4 GP funds "Great Owls" and wrote:

    "In general, your portfolio would really benefit from holding one Grandeur Peak fund."
    ● "We've pulled the record since inception for every Grandeur Peak fund from the MFO Premium screener. On both an absolute return and risk-adjusted return basis, every Grandeur Peak fund beats its peers … by a lot."
    ● "Top-notch team."
    ● "Clear, coherent discipline."
    ● "If you're a long-term investor with a reasonable tolerance for short-term volatility and you don't already own a Grandeur Peak fund, Global Explorer should go on your due diligence list."
  • edited July 2023
    Surprisingly, GP's version of events concerning First Republic doesn't contain so much a shred of admission that they made any kind of error.

    "Our very selective approach to investing in Banks led us to own First Republic at portfolio weights that expressed a high degree of conviction in the company’s risk-adjusted return profile. As you are likely aware, over the past month, First Republic experienced a significant crisis, as collateral damage from the Silicon Valley Bank (SIVB US) collapse, which resulted in a severe de-rating of the FRC share price. A fair question for anyone to ask is how to reconcile our very selective approach to investing in banks with a large position in a bank that has experienced a significant crisis. At a very high level, our investment thesis on First Republic was based in its application of a world-class client service model to arguably the world’s most attractive banking client markets (specifically, the high net worth and high-end professional services markets in urban coastal population centers across the United States). That strategy for First Republic had enabled the company to structurally grow earnings while preserving exceptionally conservative underwriting standards. In other words, while First Republic is a bank, we observed that its unique model and exposure profile largely neutralized most of the quality attributes that generally make banks less attractive and more risky. Put another way, an attribute-by-attribute analysis of First Republic, reinforced over its long successful track record, made us comfortable treating First Republic as we would treat best-in-class growth companies we discover in other industries.

    "However, after SVB Financial shared its post-close announcement on Wednesday, March 8th, highlighting elevated deposit attrition, the sale of available-for-sale securities at a material loss, and an equity capital raise, we spoke with First Republic’s CFO in order to confirm our knowledge of the company’s exposure to deposits from early-stage companies, net unrealized losses in available-for-sale securities, and other aspects of its capacity to avoid the negative feedback loop that SVB was beginning to experience. We left that balance sheet review confident enough to continue holding our positions. What destabilized our confidence was Friday’s announcement that SVB Financial would enter receivership and the recoverability of uninsured deposit balances at SVB was in question. As these revelations became clear, we concluded that the probability of contagion extending to First Republic depositors had become too high to justify continuing to hold our positions. In other words, we concluded that First Republic had ceased to be an investment opportunity and had instead transitioned to more of a pure gamble on which wagering our clients’ funds was unacceptable. We proceeded to exit our entire investment position in First Republic at the next opportunity (the Monday morning pre-market) as efficiently as we could without further pressuring the share price."

    If they can't find any mistake in their investment process, then what's to prevent them from making the same mistake again?
  • @chang Welcome aboard, & thanks for the post.
  • Derf said:

    @rmt : Did you own Contrarian fund ?

    No, I do not hold contrarian fund. I hold Pimco CEFs and POAGX, GQG and Wasatch in OEFs

  • Ok, here's a question. I've owned GPGOX since inception, close to 12 years. The last few years are not stellar, but over all I've always thought of it as a buy-and-hold fund and no need to be concerned. The M* ratings don't really agree with my view. The fund is 5* for 10 years, 4* for 5 and 3* over the past 3 years, indicating maybe the best years are behind it.

    So, my question, is there a better global small-mid cap management house or specific S/M global fund than Gradeur Peak? Wasatch maybe? I've been loyal to this team from the start, but I don't want to be married through thick and thin. The last few years have been rocky.
  • @MikeM : We're on the same page I gather. Have you gone online to re-register for access to your account. If so , did it go smoothly. Anyone else care to reply to that question ?
    Thank you, Derf
  • @Derf : Yes. It went smoothly. As I recall, I could use my old password.
    Have been fretting over Grandeur Peak funds for a while.
    I echo @MikeM 's question.
  • @MikeM and @InformalEconomist: Wasatch does have WAGOX, a global SCG fund, but it's really volatile and holds 57% US stocks. I also left GP, so obviously no suggestions for that firm. As for a more measured approach to global SC, I prefer either Pear Tree Polaris or Artisan. QUSOX, a foreign SCV, with 4% in US, mostly developed countries, <1% in China. My preference is for the new, thus untested over a complete market cycle, ARDBX, Artisan International Explorer. It has 8% in the US, quite a bit in Canada and Mexico, as well as large allocations to developed markets. It's slotted as a foreign SMID blend. Artisan is a really solid firm with a strong commitment to global investing. To say that they do not hire analysts right out of the nearby colleges and universities would be a polite way stating that they don't have the same culture as Grandeur Peak. Take a look at how long Artisan spent hiring the seasoned managers for ARDBX and getting the team acclimated before launching the new fund. There is ample documentation available on their professional website. From my experience, Artisan Partners do not regularly find themselves explaining why a disaster beset one or more of their funds.
  • edited July 2023
    ARDBX holds a lot of promise.
    Artisan funds tend to perform well compared to their respective categories.
    Both co-portfolio managers have extensive experience and were previously analysts
    for the Artisan International Value and Global Value strategies.
    The managing director for ARDBX is N. David Samra who is largely responsible for
    the stellar performance of ARTKX.
  • edited July 2023
    @BenWP and @Observant1 : Thank you for ideas. I appreciate it.
    I am in the process of unwinding my (rather small, especially after 2022) position in GGSYX. Have been with Artisan from the get-go.
  • I don't follow Artisan funds but I do recall that their last venture into global small caps (ARTWX) flopped and was liquidated.
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