Ann: Forager March 2020 Quarterly Report, page-7

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23/04/20

07:14

Post #: 44201764
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Originally posted by Xx123xX ↑

Have been a long term investor in Forager products too. Still a big fan but performance has been extremely disappointing with both funds tracking significantly behind their respective benchmarks since inception. Given both funds have been around for more than seven years there is plenty of evidence here to at least start questioning their skills.

Still, I do like the guys and perhaps foolishly I feel that I can accept some underperformance. But some doubts about the firm are starting to surface.Their Australian fund (FOR) listed just ahead of a prolonged period of massive underperformance. Now investors are locked in this vehicle and cannot sell out unless they are prepared to accept a steep discount to NAV. Forager has recently announced a buyback to try to close this discount but given the illiquidity of the units it’s unlikely they will ever be able to buy many shares. Their statement that some “350,000 units traded on that peak-panic Monday” in their recent report is laughable. Furthermore the fund holds only 1-2% cash… and good luck liquidating some of their positions to finance the buyback... that would just hurt investors more.

Moving on to the International Fund, last year they introduced a performance fee just ahead of the first ever semester of outperformance over the seven years of history of the fund. They cashed in on this fee and now are back to underperforming. Nobody is going to complain about their inability to time the market well – who can after all? But they seem to be doing an outstanding job at extracting as much value from their investor base as they possibly can. The base fee has come down only slightly as part of the performance fee introduction.

I have been to one of their events a few years back where they were describing their investment strategy as trying to be “the smartest people in an empty room” which I took it to mean that they were going to focus on under researched parts of the market where competition from other funds is less. According to the latest quarterly report, half of the International fund is invested in companies with a market capitalisation of more than $5bn. It’s hard to believe that these stocks are under researched.

Staff turnover has been extremely high in recent years. Looking at their website, Jeffrey Tse has been removed from their team (he was an analyst in their Australian Fund I believe)… he must have moved on or worse. As far as I can see, no mentioning though from Forager about this, which is curious given the fund is listed and it is run by a team of only three, now presumably two people. Evidently this doesn’t require regulatory disclosure but Forager has usually been quite upfront about communicating staff changes in the past.

Did you or anyone else picked up on any of these issues too?

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Good point re staff turnover.... any mention of Alex Shevelev? He has not been a part of any of the FOR webinars.... it’s just been Steve, Gareth and Chloe

FOR Price at posting: 75.0¢ Sentiment: Hold Disclosure: Not Held
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0 Great analysis

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