Manager Ownership

VintageFreak

I didn't think twice about asking this before. However, one of my funds now has long term manager showing no investment and new managers showing "substantial" investment, so I looked a little closer at the SAI.

What is the difference between "Shares Owned By The Manager" and "Shares BENEFICIALLY Owned By the Manager"? Does the former mean Manager explicitly invested in the fund and stands to lose with fund shareholder vs the latter, which is like stock options. If so the latter would imply if the fund does badly the manager really does not feel the pain.

I'm purposely not mentioning the fund because I think it will distract from the discussion.

David_Snowball

"Beneficial ownership" occurs when shares that I purchased are legally held in another entity's name. If you look at Seafarer's SAI, you'll see that the single largest shareholder of SFGIX is Charles Schwab at 77.5% of shares outstanding. If you bought Seafarer through Schwab, your shares are beneficially owned.

Seafarer is, by the way, rolling along. $717 million in AUM and a thousand basis point lead over its average peer. I finally got around this week to selling the shares that I owned beneficially through Scottrade; as soon as the check arrives, I'll become a direct shareholder with an AIP. Then watch out, Chuck, I say! The Iowa State Lottery lump-sum is $24 million right now; all by itself, that'll catapult me to a "top five" listing.

David

MrRuffles

@David_Snowball Curious as to why you’re selling your shares rather than transferring them to Seafarer - is this a tax-loss harvesting maneuver?

David_Snowball

No, sadly, this will be major tax-gain harvesting.

Seafarer gives direct investors access to their low expense institutional class shares; you just need to meet the retail minimum and set up an AIP. The minimum additional investment via Scottrade is $500, which is rarely manageable for me, but with an AIP I can set it to $100/month which helps restore my discipline on such matters.

So effective December 1, I'll be doing $100/month into Seafarer, T. Rowe Price Spectrum Income and Grandeur Peak Global Microcap. I've discontinued my AIP with F P A Crescent (FPACX) since that position is now larger than my next-two largest positions combined.

For what that's worth,

David

heezsafe

@MrRuffles Maybe it's because he no longer holds absolute trust in his brokerage, and wishes to transfer his shares and have them held in certificate form at Seafarer, rather than have them held in street name, with his name listed only as beneficial owner. Of course, that would mean David has become paranoid that a colossal collapse of the US financial system is a distinct possibility, in which case Scottrade actually could grab all shares held in street name and sell them to save themselves (he gave his consent to this when he signed his brokerage account agreement, but probably didn't realize what the language describing this event really meant... who does?).

msf

Does Seafarer offer to issue certificates as an alternative to book entry? How quaint and charming.

I still have a mutual fund certificate (from a very old fund that has gone through several name changes as well as fund family changes). I couldn't find it a few years ago after a move, so I contracted the fund company. Just as with a stock certificate, they said they'd replace it if I'd pay something like 2% of the value to ensure that it really was lost (or something like that). I declined.

Not much later, the fund company decided that it didn't want to deal with certificates any more, so it converted all certificates regardless of whether they were returned. So I now have book entry, and I finally found the certificate for my scrapbook.

If Scottrade (or any brokerage) were to abscond with street name assets (which are segregated and held by DTC), SIPC would kick in. "Street name" is equivalent to how banks hold your cash. It's not your cash - it's the bank's cash, which it is free to lend out and keep an IOU for you on its books. If the bank goes bust, or someone steals "your" cash, FDIC kicks in.

heezsafe

@msf

VintageFreak

Okay so just so I understand, I shouldn't care about manager's direct ownership or beneficial ownership. He has bought those shares one way or the other and that is representative of having skin in the game.

Is this correct?

David_Snowball

I believe that's correct.

David