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How did I miss that? Anyone using this product or have any opinions on it (I hold FESGX in a taxable account, and may be contributing more as I roll out of some financial stocks). Cheers. D. shostakovich
Shame on M*: they list the inception date of FEHIX as 11/19/2007, which is actually the inception date of ODHYX. FEHIX also adopts the performance of ODHYX, with no asterisk or qualifying statement by M*.
The only class of this fund that would interest me would be FEHIX, but it is not available for less than a $1M minimum at Wellstrade, Fidelity, or Scottrade. Other classes are too expensive.
Shame on M*: they list the inception date of FEHIX as 11/19/2007, which is actually the inception date of ODHYX. FEHIX also adopts the performance of ODHYX, with no asterisk or qualifying statement by M*.
I realize that slamming M* is all the rage here, but what exactly is the problem?
Funds reorganize all the time. How many ballots have you (or others here) seen in the past several years reorganizing funds as Delaware companies, where the assets of the old company are taken over by the new one, and a new management agreement is approved for the new company. For example, that's going on as we speak with several Oppenheimer Funds. To compare, here are the comparable proxy materials for the Old Mutual/First Eagle reorganization.
It's a fair question to ask why this transaction was effected as a reorganization rather than keeping the fund intact, as I believe was done with the Ameriprise acquisition of Columbia. I don't know the answer to that, but I suspect it to be more a business/legal issue than one of how the fund is run. In either case, the shareholders must approve the continuation of the management.
What I consider deceptive, and is not happening here, is the adoption of a record that does not represent the past history of the fund. When two funds merge, only one history survives, and fund complexes often choose to use the smaller fund's history when it is significantly better than that of the larger fund.
Regarding M* not making any note, that is not correct. Under management, M* states that the managers joined First Eagle Investment Management, LLC in 201, having previously served at Dwight Asset Management where they managed the Predecessor Fund since its inception 11/19/07.
Finally, when there is a substantial change in the fund, M* does note that. See, e.g. BMPEX. There, M* draws a dividing line, at the transition point, and adds boilerplate language: "The fund's investment structure or legal structure substantially changed as of 12/01/2009. Prior to that date, the fund followed a significantly different investment strategy, or it operated under a different legal structure subject to different regulatory requirements." In the case of BMPEX, it was the latter (different legal structure, different regs). I don't see any part of this boilerplate applying to FEHIX.
"Shame on M*: they list the inception date of FEHIX as 11/19/2007, which is actually the inception date of ODHYX. FEHIX also adopts the performance of ODHYX, with no asterisk or qualifying statement by M*."
Fact: the inception date of FEHIX was not 11/19/2007. One could not have purchased FEHIX on 11/19/2007.
Fact: M* made no qualifying statement regarding when the performance of ODHYX stopped and FEHIX. They could have and should have, but they didn't.
Fact: I did not state that M* made no note about the change of ownership of the fund. But the note they did offer was understated, consisting of less than a full sentence. Obviously, this is in the best interest of FE, which I understand.
@kevindow -- the inception date of the fund has nothing to do with the fact when one could purchase the fund. many funds start with the firm's seed capital and first build a performance record before opening to the outside investors. of course, some 'star' managers, such as gross or gundlach, would be the exception to the rule.
Reply to @kevindow: The Bard said it best: What's in a name? That which we call a rose by any other name would smell as sweet.
"One could not have purchased FEHIX on 11/19/2007." Literally true, as a fund by that name (ticker) did not exist on that date. What's in a name? In 2007, you could not have purchased a company with the ticker "L", yet that company (Loews - LTR) did exist, and now trades under that symbol. Tickers change. The company didn't.
Perhaps your point is that the legal entity did not exist in 2007, because the "new" company was created last month. That's the way reorganizations work. When a company wants to operate under Delaware laws, it forms a shell company in Delaware, that shell company acquires the real company, and then the real company dissolves. Nothing else need change. (I am rather familiar with this process, as I worked with our company lawyers in reorganizing our company as a Delaware corp last year.) Shareholder of the old company get shares of the new company , but no one can buy shares of the new company until this transaction completes.
I gave you the example of Oppenheimer funds that are reorganizing as Delaware corps. Same management company, same fund family, same owners (shareholders). But you cannot buy shares in those Delaware-based funds (yet - the reorg has not completed).
You assert as a "fact" that M* should have noted when one legal entity terminated and another began. That's an "opinion", and one that you have yet to substantiate. Same management, same objective, same way of running the portfolio. Just a different legal entity.
Compare and contrast:
a)Oppenheimer funds (same family, same management, same objective, same ticker, but you could not buy the new investment company (fund) prior to reorganization)
b)Wells Fargo Advantage Ultra Short Term Income Fund (STADX) -was Strong Ultra Short Term Income Fund until Wells Fargo acquired Strong in 2004-5 (different family, same manager to this day(!) - Thomas Price - as with Strong (but different management company), same objective, same ticker, but you could not buy the new investment company(fund) prior to reorganization)
c) Wells Fargo Advantage Capital Growth Fund (SLGIX), formerly Strong Endeavor (SENDX) (different family, same manager to this day(!) - Thomas Pence - as with Strong (but with a different management company), same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization).
d) Perkins Mid Cap Value (JMCVX), was Berger Mid Cap Value (BEMVX) until Janus acquired Berger funds in 2003 (different family, same manager from the Berger inception to this day(!) - Thomas Perkins (with the same management company Berger used, same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization). Here's an extra twist - when Janus acquired the Berger funds, it also acquired a minority stake in the management company; it has since taken over a majority (80%) of Perkins, Wolf, McDonnell and Co, and renamed the company.
It appears that your opinion is that for each of these funds (and many more), the funds began anew when they were acquired. So all the violations of the Strong funds were washed clean when they were reorganized - they're not the same funds, often with changed tickers, so not the same track record and not the same shady history.
Reply to @fundalarm: In fact this is a common practice. If the seed money is not successful, the fund never sees sunlight. If successful, the fund assumes the track record of the seed even though it is a new entity.
My memory is fuzzy but I think it was Auxier fund that assumed the track record of the manager's IRA. It cannot get worse than that.
The shame is on the regulatory bodies that allows such practice to continue.
Interesting history on Perkins. I do like their funds and think they are one of the few positives on Janus. I own a little of the new Perkins Select Value.
Additionally, the much written about Nakoma Absolute Return (NARFX) recently was taken over and became Schooner Global Absolute Return (SARIX) with different management.
Reply to @scott: Management changes are a whole 'nuther beast. Even within the same family, there's a question of how meaningful a performance history is. For example, T. Rowe Price is very meticulous in grooming successor managers, in effecting smooth transitions, and in preserving the style of the fund. On the other hand, when Fidelity changes managers, watch out. Complete portfolio overhauls are possible, style box shifts, etc.
With respect to SARIX, its prospectus notes: "The performance of the Predecessor Fund is not relevant because the Predecessor Fund was managed by the Predecessor Advisor. The Advisor does not and has never controlled Predecessor Advisor. ..."
The investment strategies of the former and current fund are quite different, the former investing "principally in common stocks traded in U.S. markets [long and short] ... principally ... in mid- to large-cap U.S. traded companies." The latter "provid[ing] the Fund with exposure to global equity, bond, currency and commodities markets." (All quotes from respective prospectuses.)
Quite a difference, and why NARFX and SARIX are indeed two different funds.
Reply to @Investor: not quite... the standard practice to have a prospectus and everything like a real fund -- mutual fund often. and manage internally until you have a track record -- usually 3 year number is what consultants and erisa managers are looking for. then you open THE SAME fund to outside investors. you just add a ticker, but it is the same fund. i don't think it is legal to use performance record of someone's IRA in the official documents. It wouldn't go through the smell test of the first most junior internal compliance officer.
I'll let you parse the meaning of this sentence in the NYTimes article(2004):
Even while circumventing regulations prohibiting use of incubator performance figures, "fund companies can choose not to mention their incubator funds in any prospectus."
The paper mentioned in the article is no longer at that URL, but can be found here. Quoting from that paper: "Private incubation is the conversion of the best-performing private accounts managed by an advisor into public mutual fund offerings. ... These privately managed assets are typically not governed by the Investment Co. Act of 1940, and as a result, the advisor does not file ... prospectuses... The adivsor can, however, include the performance of the unregistered private account in the prospectus, advertising the mutual fund under certain conditions ...."
It appears (from Sec 1C of that paper) that so long as the purpose of the funds is not "for the purpose of generating track records", their track records can be used. The paper suggests that if a company incubates funds with different objectives, then it meets this requirement of not incubating for the purpose of generating a track record." (Personally, I'd think the emphasis would be more on actually making money for the private investors, since setting up multiple funds without that goal would seem to be precisely for generating track records.)
Whatever. The point is that incubator funds do not have to file with the SEC. A couple of the main requirements to keep the track record is that the management and the strategy remains the same. Same reasoning applies to this whole thread, which is why the Absolute Return fund couldn't use the same track record across owners, but all the other funds I named could.
Comments
http://firsteagleinstitutional.com/news/details/0
http://www.pionline.com/article/20111005/DAILYREG/111009957
Here is the manager's old fund:
http://www.fundmojo.com/mutualfund/fund_report/mutualfund/ODHYX
An article mentioning one of the co-managers:
http://www.reuters.com/article/2011/03/24/us-lipperawards-oldmutual-dwight-idUSTRE72N11S20110324
Shame on M*: they list the inception date of FEHIX as 11/19/2007, which is actually the inception date of ODHYX. FEHIX also adopts the performance of ODHYX, with no asterisk or qualifying statement by M*.
The only class of this fund that would interest me would be FEHIX, but it is not available for less than a $1M minimum at Wellstrade, Fidelity, or Scottrade. Other classes are too expensive.
Kevin
Funds reorganize all the time. How many ballots have you (or others here) seen in the past several years reorganizing funds as Delaware companies, where the assets of the old company are taken over by the new one, and a new management agreement is approved for the new company. For example, that's going on as we speak with several Oppenheimer Funds. To compare, here are the comparable proxy materials for the Old Mutual/First Eagle reorganization.
It's a fair question to ask why this transaction was effected as a reorganization rather than keeping the fund intact, as I believe was done with the Ameriprise acquisition of Columbia. I don't know the answer to that, but I suspect it to be more a business/legal issue than one of how the fund is run. In either case, the shareholders must approve the continuation of the management.
What I consider deceptive, and is not happening here, is the adoption of a record that does not represent the past history of the fund. When two funds merge, only one history survives, and fund complexes often choose to use the smaller fund's history when it is significantly better than that of the larger fund.
Regarding M* not making any note, that is not correct. Under management, M* states that the managers joined First Eagle Investment Management, LLC in 201, having previously served at Dwight Asset Management where they managed the Predecessor Fund since its inception 11/19/07.
Finally, when there is a substantial change in the fund, M* does note that. See, e.g.
BMPEX. There, M* draws a dividing line, at the transition point, and adds boilerplate language: "The fund's investment structure or legal structure substantially changed as of 12/01/2009. Prior to that date, the fund followed a significantly different investment strategy, or it operated under a different legal structure subject to different regulatory requirements." In the case of BMPEX, it was the latter (different legal structure, different regs). I don't see any part of this boilerplate applying to FEHIX.
Fact: the inception date of FEHIX was not 11/19/2007. One could not have purchased FEHIX on 11/19/2007.
Fact: M* made no qualifying statement regarding when the performance of ODHYX stopped and FEHIX. They could have and should have, but they didn't.
Fact: I did not state that M* made no note about the change of ownership of the fund. But the note they did offer was understated, consisting of less than a full sentence. Obviously, this is in the best interest of FE, which I understand.
Kevin
The Bard said it best: What's in a name? That which we call a rose by any other name would smell as sweet.
"One could not have purchased FEHIX on 11/19/2007." Literally true, as a fund by that name (ticker) did not exist on that date. What's in a name? In 2007, you could not have purchased a company with the ticker "L", yet that company (Loews - LTR) did exist, and now trades under that symbol. Tickers change. The company didn't.
Perhaps your point is that the legal entity did not exist in 2007, because the "new" company was created last month. That's the way reorganizations work. When a company wants to operate under Delaware laws, it forms a shell company in Delaware, that shell company acquires the real company, and then the real company dissolves. Nothing else need change. (I am rather familiar with this process, as I worked with our company lawyers in reorganizing our company as a Delaware corp last year.) Shareholder of the old company get shares of the new company , but no one can buy shares of the new company until this transaction completes.
I gave you the example of Oppenheimer funds that are reorganizing as Delaware corps. Same management company, same fund family, same owners (shareholders). But you cannot buy shares in those Delaware-based funds (yet - the reorg has not completed).
You assert as a "fact" that M* should have noted when one legal entity terminated and another began. That's an "opinion", and one that you have yet to substantiate. Same management, same objective, same way of running the portfolio. Just a different legal entity.
Compare and contrast:
a)Oppenheimer funds (same family, same management, same objective, same ticker, but you could not buy the new investment company (fund) prior to reorganization)
b)Wells Fargo Advantage Ultra Short Term Income Fund (STADX) -was Strong Ultra Short Term Income Fund until Wells Fargo acquired Strong in 2004-5 (different family, same manager to this day(!) - Thomas Price - as with Strong (but different management company), same objective, same ticker, but you could not buy the new investment company(fund) prior to reorganization)
c) Wells Fargo Advantage Capital Growth Fund (SLGIX), formerly Strong Endeavor (SENDX) (different family, same manager to this day(!) - Thomas Pence - as with Strong (but with a different management company), same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization).
d) Perkins Mid Cap Value (JMCVX), was Berger Mid Cap Value (BEMVX) until Janus acquired Berger funds in 2003 (different family, same manager from the Berger inception to this day(!) - Thomas Perkins (with the same management company Berger used, same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization). Here's an extra twist - when Janus acquired the Berger funds, it also acquired a minority stake in the management company; it has since taken over a majority (80%) of Perkins, Wolf, McDonnell and Co, and renamed the company.
It appears that your opinion is that for each of these funds (and many more), the funds began anew when they were acquired. So all the violations of the Strong funds were washed clean when they were reorganized - they're not the same funds, often with changed tickers, so not the same track record and not the same shady history.
My memory is fuzzy but I think it was Auxier fund that assumed the track record of the manager's IRA. It cannot get worse than that.
The shame is on the regulatory bodies that allows such practice to continue.
Additionally, the much written about Nakoma Absolute Return (NARFX) recently was taken over and became Schooner Global Absolute Return (SARIX) with different management.
Management changes are a whole 'nuther beast. Even within the same family, there's a question of how meaningful a performance history is. For example, T. Rowe Price is very meticulous in grooming successor managers, in effecting smooth transitions, and in preserving the style of the fund. On the other hand, when Fidelity changes managers, watch out. Complete portfolio overhauls are possible, style box shifts, etc.
With respect to SARIX, its prospectus notes: "The performance of the Predecessor Fund is not relevant because the Predecessor Fund was managed by the Predecessor Advisor. The Advisor does not and has never controlled Predecessor Advisor. ..."
The investment strategies of the former and current fund are quite different, the former investing "principally in common stocks traded in U.S. markets [long and short] ... principally ... in mid- to large-cap U.S. traded companies." The latter "provid[ing] the Fund with exposure to global equity, bond, currency and commodities markets." (All quotes from respective prospectuses.)
Quite a difference, and why NARFX and SARIX are indeed two different funds.
Even while circumventing regulations prohibiting use of incubator performance figures, "fund companies can choose not to mention their incubator funds in any prospectus."
The paper mentioned in the article is no longer at that URL, but can be found here. Quoting from that paper: "Private incubation is the conversion of the best-performing private accounts managed by an advisor into public mutual fund offerings. ... These privately managed assets are typically not governed by the Investment Co. Act of 1940, and as a result, the advisor does not file ... prospectuses... The adivsor can, however, include the performance of the unregistered private account in the prospectus, advertising the mutual fund under certain conditions ...."
It appears (from Sec 1C of that paper) that so long as the purpose of the funds is not "for the purpose of generating track records", their track records can be used. The paper suggests that if a company incubates funds with different objectives, then it meets this requirement of not incubating for the purpose of generating a track record." (Personally, I'd think the emphasis would be more on actually making money for the private investors, since setting up multiple funds without that goal would seem to be precisely for generating track records.)
Whatever. The point is that incubator funds do not have to file with the SEC. A couple of the main requirements to keep the track record is that the management and the strategy remains the same. Same reasoning applies to this whole thread, which is why the Absolute Return fund couldn't use the same track record across owners, but all the other funds I named could.