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I must be naïve, but I thought my three GP holdings held "stalwarts." The word means little to me in the investing context and raises my suspicions about loss of focus. Clarity in language reflects clarity of thought. Obscure language, well, George Orwell had a thing to say about that.
My guess is they think they have sufficient capacity to beef up those market cap and geographic segments of their portfolio without significantly impacting the performance of their existing funds. They had talked about starting a Fallen Angels fund. But, I guess there aren't enough of those critters in the market place these days to justify that one. I will just stick to GPROX and hope its performance doesn't get dinged.
The "stalwarts" funds appear to be more for mid- and large-cap stocks (> $1.5 billion). I suppose that's the reason they figure they have adequate capacity for new funds and can't afford to remove the hard close on the others.
The Stalwarts funds were written about in their Q4 commentary and the idea is to take the larger cap companies from GPROX and provide additional capacity to clients, hence the prospectus mentions that these will be companies with market caps greater than $1.5 billion. This seems like a bad business decision to me. Its an unnatural/arbitrary slice of GPROX I think and if the other funds are the best of the international/emerging markets/global ideas, then these should end up being some of the best and some of the not so best. These guys had their Ferrari going with very restricted supply and too much demand. These funds seem a little like a joint venture with Ford.
The language in Investment Strategies for all three of these funds seems to address the Fallen Angels situations and like @davfor I'd guess there's not enough of them currently for a separate fund.
I'm a little confused by the Micro Cap fund because the market cap description (less than $1 billion) doesn't seem much different than GPGOX. Maybe the implementation will be a bit different, but I was really expecting the smallest of the small.
there would be very little effect by taking the larger cap companies out of the fund unless their definition of "larger cap" is different than what we perceive.
@JohnChisum, sorry, my use of the term larger cap wasn't very good. I didn't mean "large cap" because as you rightly pointed out there's almost no large cap stocks in GPROX. It's still a good chunk of small caps plus the mid and large cap pieces of GPROX that will be the stocks to choose from, anything with a market cap greater than $1.5 billion.
I agree. Using a before and after snapshot of the holdings will show what they mean by large cap. As you mentioned above, their definition of micro cap seems high.
@Charles, I hadn't noticed it myself, but as @LLJB noted, its at the bottom of page 12/top of page 13 in their 4Q2014 Commentary They say "We’re exploring the idea of a portfolio that would be a carve-out of the Stalwarts piece of Global Reach."
"...Those strategies are: •Global Reach, their 300-500 stock flagship fund •Global Opportunities, a more concentrated version of Global Reach •International Opportunities, the non-U.S. sub-set of Global Reach •Emerging Markets Opportunities, the emerging and frontier markets subset of International Opportunities •US Opportunities, the U.S.-only subset of Global Opportunities •Global Value, the “Fallen Angels” sub-set of Global Reach •Global Microcap, the micro-cap subset of Global Reach..."
@Roy I think that the expense ratio has yet to be determined. I'm pretty sure that number comes from the early redemption expense plus the 12b costs. I made the same mistake myself at first
@jlev I see that now that you mention it. But, if you check out the paragraph directly beneath that box you will see information explaining what the beginning expense ratio will be for both investor and institutional share classes through August 31, 2016. 2.25% & 2% respectfully.
I'd be curious to hear what they are thinking about as far as capacity goes for each of the strategies... The previous target was $3 billion for the firm (currently around $2.4). Obviously, we have seen significant capital appreciation since...
@TheShadow, thanks for the article, that must be one of the earliest about GP and one of the only times they've actually done public interviews. We have to give @LewisBraham some credit for getting that interview!
It's interesting that he was pretty strong in his statement that they would close the whole firm at $1.5 - $2.0 billion because I'm sure it was no more than 6 months later when I was aware of them that they were pretty clear about $3.0 billion.
I assume these "Stalwarts" funds have to be on top of their $3 billion and potentially significantly on top since these are the bigger companies in their collection.
Maybe they have some good explanations for why this all makes sense but right now I'm doubting the whole story they've been telling since the beginning.
I work at an RIA firm and could give some insight and my interpretation...They accumulated 2.4 billion and wanted to slow down inflows. At their investor conference this year they had a number of institutional clients that weren't happy with how quickly they closed and at such a small asset size. Therefore, they are opening the Stalwarts funds so that they can take in some addition assets from institutional clients who want more exposure to Rob and his team. I think the Micro Cap will be fun. It says under 1 billion in market cap, but the focus will be companies between 30MM and 300MM if I'm not mistaken.
@andiel049, thanks for the insight! This is actually part of my concern. I sort of assume, but maybe you can confirm, with, in round terms, $3 billion in capacity and a propensity to hard close funds, they can't be particularly attractive to most institutional money other than the 401(K) plans that are allowed to continue buying shares. I gather that investment advisors, in particular, love funds that are closed but are still available to them to offer to new clients, and they also like the ability to make adjustments to asset allocations to help justify their fees. But the problem doesn't go away by offering these Stalwarts funds. They're either going to hard close those at some higher level of assets or they're going to do exactly what they said they weren't going to do, which is to end up being forced to move up the market cap ladder because they have too many assets. After all, these are all supposed to be overlapping portfolios and small cap stocks. The "Stalwarts" may be the bigger of the small cap names in the portfolio but they're still small cap or small mid cap stocks.
The other thing that bothers me is that they started out saying their capacity was $1.5-$2.0 billion. By the time I was aware of them, roughly 9 months after launch I think, the limit was $3 billion. Now, apparently it's more than that. I thought they were principled and so much so that they were hard closing funds at low levels, which isn't an easy thing to do in this business. But for a relatively small individual shareholder, those are the kinds of things that scream outperformance even considering the above average expense ratios.
Now maybe $1.5-$2.0 billion or $3 billion weren't the right numbers. Maybe $5 billion or $10 billion is really just fine. I don't know. But these guys aren't inexperienced fund managers guessing at capacity. They haven't increased their fund offerings to address different styles or market caps or anything else. This is one small cap global portfolio split up into a bunch of different groupings. I have nothing against institutional investors for sure, but in this case I think their taking value away from me, away from they're existing clients who are invested in the existing funds and I think they've demonstrated that Rob and his team aren't as principled as I thought/hoped they were.
I am not going to be surprised at all if global micro-cap gets hard closed very quickly at a small asset base...say $100-150 million or so. For those of us who may be interested in the fund, we better have our money ready to go when the fund becomes available.
Roy might be right here. As andieI049 mentioned, if this was to let some clients in who were left out in the beginning, the doors could close very fast.
I'm not sure but I wonder if institutional money isn't so interested in micro-cap funds but if that's true it might give the fund a little longer before it closes. I will be knocking on the doors where I have accounts even before the registration statement is effective, and I was thinking about just starting an automatic investment plan directly with GP that has historically allowed you to keep adding even after they close. I've never owned a micro-cap fund so I'm not really that interested in building a big position, but at least I'd have the flexibility to rebalance and know that money keeps getting added every month. Unfortunately the tax consequences might not be so good, but there's still time to decide that.
Anyone heard what GP is thinking as far as capacity now? $3 billion for the firm was extremely conservative, IMO, so I'm not overly concerned about them raising more assets. However, I definitely would like to see them stay under $10 billion, preferably hard closing everything (and no new funds) at no more than $6-7 billion...
What is everybody else thinking? What would y'all be comfortable with as far as assets go?
I will remain a shareholder if I think the increases in assets do not detract from the performance of the "original" GP funds. At this point I think GPGOX and GPIOX are treading water. For the GP approach to work the managers need to be on the road (abroad) looking for the next good small company, not at home dreaming up strategies for some new funds that will "satisfy" new shareholders. No opinion I offer is humble, BTW.
Rumor has it the Micro Cap might only be open for a day to keep the assets at under $50MM...I may have misunderstood, but I was under the impression these funds would likely only be opening to current shareholders. At the very least there would be no advertising with the new funds. They are concerned more about satisfying tenured shareholders than new shareholders.
Given that the stalwart funds will be more SMid-Large Cap offerings, the capacity won't be much of a concern here. I think $4 billion will be the likely mark where all funds are closed.
I traveled to Salt Lake City last year and had the opportunity to sit in on a few meetings they had with companies they were considering investing in...I am very impressed with their due diligence and process. Hope their funds reward all of you who have positions. The micro cap should be a fun high risk high reward fund. His micro cap at Wasatch was one of the best funds of all time while Robert ran it through the late 90s/early 2000s.
@LLJB I think GP is a real winner in terms of small cap stock picking! The firm was hoping to reach the asset base they are currently at 10 years after launch. Money just flooded in so rapidly given the Blake and Robert's track records that they were put in a tough spot. I think they are nimble enough to be a winning shop for long term investors. I love the fact that Rob and his team have over $10,000,000 invested directly in the funds...that should make you feel better about trusting them with some of your dollars.
Comments
The language in Investment Strategies for all three of these funds seems to address the Fallen Angels situations and like @davfor I'd guess there's not enough of them currently for a separate fund.
I'm a little confused by the Micro Cap fund because the market cap description (less than $1 billion) doesn't seem much different than GPGOX. Maybe the implementation will be a bit different, but I was really expecting the smallest of the small.
there would be very little effect by taking the larger cap companies out of the fund unless their definition of "larger cap" is different than what we perceive.
Still, it is a change worth observing.
Can you please provide reference where they went on record with intention to start new funds?
STOP STARTING MORE FUNDS!!!
http://www.mutualfundobserver.com/2013/08/august-1-2013/
"...Those strategies are:
•Global Reach, their 300-500 stock flagship fund
•Global Opportunities, a more concentrated version of Global Reach
•International Opportunities, the non-U.S. sub-set of Global Reach
•Emerging Markets Opportunities, the emerging and frontier markets subset of International Opportunities
•US Opportunities, the U.S.-only subset of Global Opportunities
•Global Value, the “Fallen Angels” sub-set of Global Reach
•Global Microcap, the micro-cap subset of Global Reach..."
http://www.bloomberg.com/news/articles/2012-05-16/scouring-the-world-for-the-best-small-cap-stocks
It's interesting that he was pretty strong in his statement that they would close the whole firm at $1.5 - $2.0 billion because I'm sure it was no more than 6 months later when I was aware of them that they were pretty clear about $3.0 billion.
I assume these "Stalwarts" funds have to be on top of their $3 billion and potentially significantly on top since these are the bigger companies in their collection.
Maybe they have some good explanations for why this all makes sense but right now I'm doubting the whole story they've been telling since the beginning.
The other thing that bothers me is that they started out saying their capacity was $1.5-$2.0 billion. By the time I was aware of them, roughly 9 months after launch I think, the limit was $3 billion. Now, apparently it's more than that. I thought they were principled and so much so that they were hard closing funds at low levels, which isn't an easy thing to do in this business. But for a relatively small individual shareholder, those are the kinds of things that scream outperformance even considering the above average expense ratios.
Now maybe $1.5-$2.0 billion or $3 billion weren't the right numbers. Maybe $5 billion or $10 billion is really just fine. I don't know. But these guys aren't inexperienced fund managers guessing at capacity. They haven't increased their fund offerings to address different styles or market caps or anything else. This is one small cap global portfolio split up into a bunch of different groupings. I have nothing against institutional investors for sure, but in this case I think their taking value away from me, away from they're existing clients who are invested in the existing funds and I think they've demonstrated that Rob and his team aren't as principled as I thought/hoped they were.
I really hope they'll convince me otherwise.
What is everybody else thinking? What would y'all be comfortable with as far as assets go?
Given that the stalwart funds will be more SMid-Large Cap offerings, the capacity won't be much of a concern here. I think $4 billion will be the likely mark where all funds are closed.
I traveled to Salt Lake City last year and had the opportunity to sit in on a few meetings they had with companies they were considering investing in...I am very impressed with their due diligence and process. Hope their funds reward all of you who have positions. The micro cap should be a fun high risk high reward fund. His micro cap at Wasatch was one of the best funds of all time while Robert ran it through the late 90s/early 2000s.
@LLJB I think GP is a real winner in terms of small cap stock picking! The firm was hoping to reach the asset base they are currently at 10 years after launch. Money just flooded in so rapidly given the Blake and Robert's track records that they were put in a tough spot. I think they are nimble enough to be a winning shop for long term investors. I love the fact that Rob and his team have over $10,000,000 invested directly in the funds...that should make you feel better about trusting them with some of your dollars.