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Why such little manager ownership at Grandeur Peak?
It looks like the only manager that has over a $1 million in any fund is Gardiner. He's also the only one to have more than $500,000. Everyone else has $100,000-$500,000 or less. The Global Micro cap only has two people with anything in it (per SAI).
I'm assuming this has to do with the fact that some of Grandeur Peak's strategies are offered in Limited Partnership vehicles - not true for Global Micro, however. LPs are cheaper than MFs (sometimes the GPs' fees are waived entirely) so it doesn't make much sense for them to pile their money into the MF.
I don't always get why people care so much about manager ownership. I get the whole "eat your own cooking story," but if they are truly intelligent and prudent investors, they shouldn't be tying up a bunch of their liquid net worth in the products they're managing - that is not diversifying at all (compensation and investments all tied together... IMO, this is synonymous to employees putting their 401(k) money in employer stock.
You really think investing in a diversified mutual fund where you make the decisions is synonymous to employees putting money into company stock that they have very decision making in?
If you know anything about the investment industry, their compensation is very closely tied to the performance of their funds (bonuses are the majority of comp and is often heavily weighted toward performance). So why would they have a huge of chunk their comp be tied to performance via bonus as well as their liquid net worth by investing in the fund? Doesn't seem prudent to me....
At least when you invest in the single stock of your employer, your bonus likely isn't tied directly to the performance of the stock. There is, obviously, the idiosyncratic risk of putting your 401(k) in a single investment, which is no doubt stupid. I don't think you entirely understand the point...
@JoJo26 , in thinking about the managers investment into their own funds I agree with you. I don't think it matters much about "skin in the game". I may even argue it to be a detriment if the manager applies the portfolio to return what they need from the portfolio. There needs could be very different than yours. Also agree with the 401k analogy in buying company stock.
There is plenty of research that shows that manger who has large amounts invested in his/her own fund tend to outperform those that don't. My experience, or lack thereof, does not invalidate my thoughts (for the record, I probably have more experience than most since I actually work in the industry). I understand the point incredibly well. I just don't agree with it. Either your best ideas are in the fund or not. If they're not, you're not serving shareholders first. If they are and you're not invested heavily, you're not maximizing your own wealth.
@JoJo26, I am sorry but when some manager comes out of nowhere and wants to manage my money, he better be prepared to lose his shirt like me. It's one thing blindly investing into GP funds knowing well before that they had a stellar record of managing and stewardship at Wasatch.
I will never invest in a funds without manager ownership. When I made a mistake I have sold. When others have pointed out no manager investment I have sold. And I don't even ask any questions later. It's not a matter of returns, it is a matter of principle. It is irrelevant to me what research says about manager fund ownership. If research showed companies like Wells Fargo who screw customers become the best of companies in the aftermath, does not mean I'm going to open an account with them or even consider doing so. They are dead to me until they are the last bank on earth (since I'm not a hypocrite, but they freakin' better be the last bank on earth). There is a clear choice between who you chose to invest and do business with, and when you have that choice I think we take it. THAT is the only control we have.
And ownership debate has to be relative. It is one thing staying invested in FAIRX when manager has no investment and another when you know he has $46 MM + (last time I checked fews years back). It does make a difference. One reason I never invested with Bill Miller who said he had $1MM investment and was buying a $70MM yacht.
It would be good to know a manager who has $500K invested in his fund, what his net liquid worth is. If is net liquid worth is less than $2MM (say) and he has $500K (for instance) invested that's commendable. We don't know. If I see GP managers start buying yachts for $70 MM I will sell.
There is plenty of research that shows that manger who has large amounts invested in his/her own fund tend to outperform those that don't. My experience, or lack thereof, does not invalidate my thoughts (for the record, I probably have more experience than most since I actually work in the industry). I understand the point incredibly well. I just don't agree with it. Either your best ideas are in the fund or not. If they're not, you're not serving shareholders first. If they are and you're not invested heavily, you're not maximizing your own wealth.
There is plenty of research that shows that manger who has large amounts invested in his/her own fund tend to outperform those that don't. My experience, or lack thereof, does not invalidate my thoughts (for the record, I probably have more experience than most since I actually work in the industry). I understand the point incredibly well. I just don't agree with it. Either your best ideas are in the fund or not. If they're not, you're not serving shareholders first. If they are and you're not invested heavily, you're not maximizing your own wealth.
Confirmation bias at its best...
Like I said, why do you need research? I'll give you research. Searcrh on Google once. Search on google twice. RE-search. You just do what feels right. Sometimes when things smell, it is really the brown stuff.
Just like anyone else, you may have 4 things you look for when you buy a fund. Some of us have 5. Not sure why 1 more is so bad.
There is plenty of research that shows that manger who has large amounts invested in his/her own fund tend to outperform those that don't. My experience, or lack thereof, does not invalidate my thoughts (for the record, I probably have more experience than most since I actually work in the industry). I understand the point incredibly well. I just don't agree with it. Either your best ideas are in the fund or not. If they're not, you're not serving shareholders first. If they are and you're not invested heavily, you're not maximizing your own wealth.
There is also plenty of research that shows active management doesn't add any value, net of fees, particularly in U.S. equities. I know that doesn't necessarily relate to GP, but one can always find research out there that supports his/her thoughts. You do whatever is comfortable for you at the end of the day.
I spoke with Eric Huefner, GP COO, with whom I've had previous conversations in the past, about the subject of this thread. Here's a summary of what he said.
The table in the SAI only shows ownership in the funds managed by the PMs. If it included their investments in all of the GP funds, given the collaborative effort at the firm, then one would see meaningful investments across the board and one that is a sizeable percentage of their investable assets. Because GP doesn't approve much trading in personal accounts, the focus of the managers' investments is alongside the shareholders.
He also added another point: The GP business model, if it goes as planned, will allow its team to have a "nice living" but not with the compensation that many others in the financial industry are looking for or planning to receive. The company has developed a team primarily focused on building a special relationship for themselves and their clients. That relationship includes voting to give a significant amount of their revenue to local and global charities rather than taking it themselves.
The less I know about something, the more I make decisions based on what I do know -- and for me, there's a lesson in that. In this case -- I'm glad I reached out.
Comments
I will never invest in a funds without manager ownership. When I made a mistake I have sold. When others have pointed out no manager investment I have sold. And I don't even ask any questions later. It's not a matter of returns, it is a matter of principle. It is irrelevant to me what research says about manager fund ownership. If research showed companies like Wells Fargo who screw customers become the best of companies in the aftermath, does not mean I'm going to open an account with them or even consider doing so. They are dead to me until they are the last bank on earth (since I'm not a hypocrite, but they freakin' better be the last bank on earth). There is a clear choice between who you chose to invest and do business with, and when you have that choice I think we take it. THAT is the only control we have.
And ownership debate has to be relative. It is one thing staying invested in FAIRX when manager has no investment and another when you know he has $46 MM + (last time I checked fews years back). It does make a difference. One reason I never invested with Bill Miller who said he had $1MM investment and was buying a $70MM yacht.
It would be good to know a manager who has $500K invested in his fund, what his net liquid worth is. If is net liquid worth is less than $2MM (say) and he has $500K (for instance) invested that's commendable. We don't know. If I see GP managers start buying yachts for $70 MM I will sell.
Just like anyone else, you may have 4 things you look for when you buy a fund. Some of us have 5. Not sure why 1 more is so bad.
The table in the SAI only shows ownership in the funds managed by the PMs. If it included their investments in all of the GP funds, given the collaborative effort at the firm, then one would see meaningful investments across the board and one that is a sizeable percentage of their investable assets. Because GP doesn't approve much trading in personal accounts, the focus of the managers' investments is alongside the shareholders.
He also added another point: The GP business model, if it goes as planned, will allow its team to have a "nice living" but not with the compensation that many others in the financial industry are looking for or planning to receive. The company has developed a team primarily focused on building a special relationship for themselves and their clients. That relationship includes voting to give a significant amount of their revenue to local and global charities rather than taking it themselves.
The less I know about something, the more I make decisions based on what I do know -- and for me, there's a lesson in that. In this case -- I'm glad I reached out.
Derf