Ann: Weekly NTA 21 June 2019, page-9

Interesting how we rely on fund managers to have more financial management knowledge than us, yet they still manage to be misinformed, hoodwinked, misguided or any one of a plethora of other terms that by investing in a company that may not be completely transparent, effectively means that they lose our money. CDM at one stage had a % holding of ARQ in the high teens, before some ‘not so good news’ last time which saw the CDM holding pared down to approx 10%. Given that the first piece of bad news is rarely the last, I thought that Karl and CDM may be in possession of a higher level of information than us, which then justified continuing to hold approx 10% of the fund in ARQ.
Quite obviously this was not the case. The role of an LIC Manager is to glean financial information, to analyse and assess it, look at the fundamentals, liaise with the company, look at the financial details like ROE, ROAs etc etc etc and then make a logical, responsible and economically accretive decision which will add value to the fund, it’s investors and if they have a vested interest in the fund, the fund manager as well.
@dinero IMHO has a very valid point to make about “where is the risk management”

Karl has a significant holding in CDM and this must be hurting, but the question must be asked, are the CDM analysts really up to the job ? Did ARQ “pull the wool over” CDMs eyes ? Was there an unacceptable level of risk taken by CDM in having so much of the fund in a second ranking stock, or was that decision based on overly optimistic information supplied by ARQ ?

The CDM SP has been going down significantly over the recent past, signifying a lack of confidence in CDM by investors and if recent history is any indication, well justified.

After all, ask yourself, would you as an individual have been a buyer of ARQ in your own right ? or were you relying on the expertise of Karl and his team to make that judgement call on your behalf ?

If you would not have been an individual buyer, then we have been let down by our fund manager, not only with ARQ, but judging by the declining SP of CDM, through either their investment style or their analysis of the suitability of the stocks selected for the CDM portfolio.
Yep, the NTA may be significantly higher than the SP, but when you go to sell the stock, it’s only the SP that counts, not the NTA.
One wonders if Karl needs to look at his investment style and the stocks still remaining in the portfolio and assess the risk/reward characteristics of those remaining. After all, don’t forget that Karl is still “clipping the ticket” and charging fees, whilst our losses are real and non compensable.