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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Seafarer Fund's Thoughts on China

Interesting analysis of China in Seafarer annual report:
seafarerfunds.com/letters-to-shareholders/2018/04/annual/

Comments

  • @LewisBraham. I always enjoyed Andrew Foster's communications.
  • So interesting to read. But the fund has lagged for too long. SFGIX is in my past.
  • @Crash. Me too. But in my case age and portfolio goals had everything to do with it.
  • Same here. I'll be 64 tomorrow. Age, yes. Though I want to stay mostly in equities, while still collecting monthlies from my bond funds, because wifey is just 45, yet. And I get quarterlies from one or two, still. I let go of SFGIX because it wasn't producing--- regardless of age or anything else... Oops, 28th July, just past midnight in the East.
  • @crash
    Happy bday! Yeah I've been pondering what to do with SFGIX. I could take its underperformance when EM was doing well last year thinking that it would perform better in a down market. But that hasn't been the case. I've been thinking of selling. Curious what everyone else is doing with this fund
  • The eternal question: is it a solid fund to add to after a bad year or has it lost its mojo? I see no reason (manager change, asset bloat, etc.) for the latter. I have just a toehold in it in my solo 401K (along with a bigger stake in its partner SIVLX) and might add to it.

    But I tend to hold on to funds way too long and fall into value traps.
  • Please read David Snowball's write up on SFGIX again. I continue to invest with Andrew Foster since the time when he managed Matthews Gro&Inc fund. Over the 10 years period he made more money for me than the Vanguard EM Index fund in mt 401(K). His funds tend to excel during the down market while they lag in the bull market. His long term record speaks for itself. In 2008 his fund outperformed the EM index by 20%. But everybody need to decide the amount of EM exposure they need with respect to their risk tolerance. These days there are not many great managers left in the EM space.
  • beebee
    edited July 2018
    @Sven. SFGIX hasn't been around for 10 years. Inception date looks like 2/15/2012...so closer to 6 years. I'll agree that it has out performed the index (a fund such as VWO), but SFGIX is not an all equity fund (closer to 70/15/15 over its lifetime).

    70% EM
    15 % of his fund is in LT and IT Treasuries
    15% of his fund is classified as "Ex - US Develop"

    I compared his fund to a "2 fund combo of PRMSX & PREMX" (70/30). The trade off here is SFGIX opts for US Treasuries where PREMX is most EM Corporates.

    Similar results...so nothing special here.

    But, over shorter time frames he does a good job of managing downside risk.

    I Like MAPIX, FMIJX, PRWCX for the same reason.

    Fund managers that manage downside risk and deploy into opportunities are hard to find.
  • edited July 2018
    MikeW said:

    @crash
    Yeah I've been pondering what to do with SFGIX. I could take its underperformance when EM was doing well last year thinking that it would perform better in a down market. But that hasn't been the case. I've been thinking of selling. Curious what everyone else is doing with this .

    Keeping a toehold and have it under observation. Sold the bulk of it. Not a fan of clutter in my portfolio, but several times, I've sold out of a closed fund out of frustration and regretted it when the fund starts outperforming and I'm on the outside looking in.

  • M* has a long current discussion of SFGIX:
    http://socialize.morningstar.com/NewSocialize/forums/p/384620/3946110.aspx#PageIndex=1

    A poster there pointed out it is 50/50 EM/developed markets.
  • edited July 2018
    Foster’s commentary though is about China and how much exposure investors should have in it. He even suggests that his fund is probably not the most appropriate vehicle to get that exposure, which leads me to believe he may be launching a China fund soon. But here’s something to think about it: For most people on this board it isn’t just their investment portfolio that is tied up in the U.S. It’s your entire life—your house, your bank account, your job, your pension plan. All tied to U.S. dollars and the fate of the U.S. economy. In that light, I think most people are woefully underinvested in foreign assets and if you want growth emerging markets are the place to be. Now if Foster is right and China finally arrives as the truly dominant global hegemon it has long strived to be, then a larger allocation there is warranted. Finally I would add that the value premium is never easily earned. Buying cheap assets and selling expensive ones means adding to assets that are underperforming and selling those that are outperforming. Right now emerging markets are underperforming. The bold value investor should be adding here or at least staying the course. Foster has underperformed largely I believe because he wouldn’t own the FAANG of Asia—Tencent and Alibaba. I don’t see anything fundamentally wrong with his fund otherwise. But this kind of investing does require patience and those who want emerging exposure and don’t want the headaches of underperforming a benchmark even if that’s ultimately temporary may be better suited in an index fund.
  • @bee,
    Not trying to be nitpick here. Please let me clarify what I said earlier. Prior to forming SFGIX, Andrew Foster was the lead manager of several Asia-centric funds at Matthews Asia Funds since 1998. This places his track record back to 20 years, not 10 years. His stellar record is exemplified in Matthews Asia Growth & Income fund, MACSX from 2003-2011 (8 years), the Dividend fund, MAPIX for 6 years and the India fund, MINDX for 5 years.

    David Snowball has written a detailed profile on Foster's approach and I couldn't come close to write a such as thoughtful analysis. So here is the link.
    mutualfundobserver.com/2013/03/seafarer-overseas-growth-income-sfgix/

    I started to invest with MACSX in 2000 when I noticed the fund is holding up much better than VWO during the height of tech bubble from 2000-2002. It taught me a lesson that those "tortoise" funds are more likely to be successful for their investors because they limit the downside loss. When the annual returns are compounded over time and through several market cycles, the total return can be fully captured. Many investors who move in and out of the mutual funds tend to have much lower returns than the market returns.

    Coincidentally, I also like MAPIX (Bob Horrocks), FMIJX (Alex English), and PRWCX (David Giroux).
  • edited July 2018
    @Sven While fundamentally I agree with your and David’s analysis of this fund, I do think it’s disappointing that the fund has underperformed recently on the downside too as emerging markets have fallen. That may unsettle many investors and bears watching. Yet I again think like in the U.S. much of this may be FAANG-type stock related. Up until very recently—Facebook collapse—these growth tech stocks even outperformed on the downside too as investors were desperate for growth in a low interest rate environment. That may be changing soon. But it’s disappointing nonetheless. It’s an unusual market.
  • beebee
    edited July 2018
    Thanks @Sven...great additional information on your personal journey with this manager.

    Upside Capture has struggled while his downside capture, while not great short term is better long term:
    image

    Hard to find funds that do both of these consistently well.

    2016 Study:
    Ability to Capture Up Market Gains and Avoid Down Market Losses: The Upside and Downside Capture Ratios
    The Upside and Downside Capture Ratios

    image
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