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Grandeur Peak "mea culpa"

Happened upon the new quarterly letter which, inter alia, states the rather obvious:

"We’re sure you are well aware that our portfolios have not been immune to this shift in market sentiment; we have delivered the worst relative (to our benchmarks) quarterly performance in our history. We’ll address this in more detail later in this letter, but at the heart of the problem is that for the past 10 years, with the exception of a few short periods in 2015 and 2018, the market has rewarded Growth Assets with ever expanding valuations. By November 2021, valuations for Growth Assets had become extremely stretched across most markets. For most of the Grandeur Peak portfolios, this ballooning of valuation was a key driver of our strong outperformance in 2020 and 2021. But now the pendulum is swinging back the other way. While the corrections in valuations we’re seeing across the portfolios isn’t surprising in hindsight, unfortunately we just didn’t position ourselves very well for it because the fundamentals of our underlying holdings have been so strong."

Comments

  • This underscores the fact that its really tough for managed Mutual funds to continually beat the indices. The historical numbers don't lie.

    Even funds with the ability to short/hedge often fail to adequately protect principal and generate decent returns.

    I've converted over to index ETFs. My actively managed mutual fund holdings will continue to dwindle in number.
  • Grandeur Peak funds invested in domestic and overseas mid- to micro caps stocks. These areas are not readily available in ETFs. Right now, money is flowing toward large caps and GP struggles. The business cycle perspective also points toward larger caps. Not surprise that GP is struggling to the rest of the market. Still a great fund family but the timing does not favor their investment area.
  • I was already well positioned in value, utilities, and consumer defensive. So I'll be adding some money to the Grandeur peak funds that I own. And I'll check to see if any of their funds have reopened.
  • Timing may not be the best right now considering the country is slowing down or entering a recession. I would be careful with smaller cap funds, especially growth style.
  • edited April 28
    It's a difficult question to answer regarding small-caps. There's a case to be made for small local companies if one considers that globalization may be coming to an end as trade wars, energy prices, and grotesque nationalism heat up. Multi-nationals may have to deal increasingly with supply chain, shipping cost and regulatory issues regarding cross-border trades. Then again, if a recession hits, it's true that the small-fry tend to get hit the worst and even small companies are global nowadays in many ways.
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