ALF - Australian Leaders Fund

[GlobeTrekker]

So,... it's been doing badly recently because the mkt has been doing well ??

No, the idea of ALF's investment methodology is that its returns are to a great extent independent of market movements. Essentially they buy stocks that they see as undervalued, but then they also offset this by shorting (essentially selling) a similar level of stocks that they see as being undervalued. If they offset within the same industries eg buy one mining stock and short another mining stock then if the mining industry plummets, in theory (if they pick the right long & shorts) they won't suffer as badly (or at all) because they are both long and short (essentially hedged). It can conversely mean though that when the markets are going gangbusters, the shorts can drag on their performance. It really relies on them getting their longs and shorts right, if they do they can seriously outperform (especially during market downturns) but if they don't then their losses can be magnified. I sold out (luckily still at a small profit) a while ago after a period of underperformance, thinking that their investment style just wasn't for me.

Also, didn't Buffett's wager prove that over 10 years the ETF outperformed the LIC by 70%? So we're not talking a slight outperformance.

I think he was talking about managed funds rather than LIC's per se, and their underperformance was in a big way due to the fees that they charged. There are several big LICs that charge no fees, and whose management expense ratios are as low as 0.13%.

 

[WRiley]

No, the idea of ALF's investment methodology is that its returns are to a great extent independent of market movements. Essentially they buy stocks that they see as undervalued, but then they also offset this by shorting (essentially selling) a similar level of stocks that they see as being undervalued. If they offset within the same industries eg buy one mining stock and short another mining stock then if the mining industry plummets, in theory (if they pick the right long & shorts) they won't suffer as badly (or at all) because they are both long and short (essentially hedged). It can conversely mean though that when the markets are going gangbusters, the shorts can drag on their performance. It really relies on them getting their longs and shorts right, if they do they can seriously outperform (especially during market downturns) but if they don't then their losses can be magnified. I sold out (luckily still at a small profit) a while ago after a period of underperformance, thinking that their investment style just wasn't for me.

I think he was talking about managed funds rather than LIC's per se, and their underperformance was in a big way due to the fees that they charged. There are several big LICs that charge no fees, and whose management expense ratios are as low as 0.13%.

Tq GT,... Looks to me like this is a 'gambling ctr',...

 

[GlobeTrekker]

Essentially they buy stocks that they see as undervalued, but then they also offset this by shorting (essentially selling) a similar level of stocks that they see as being undervalued.

Oops, just re-read my post - should read "they buy stocks that they see as undervalued, but then they also offset this by shorting (essentially selling) a similar level of stocks that they see as being overvalued".

 

[WRiley]

Oops, just re-read my post - should read "they buy stocks that they see as undervalued, but then they also offset this by shorting (essentially selling) a similar level of stocks that they see as being overvalued".

Tq for the correction,... I was confused there a moment ago,...
But it looks like their buying of undervalued stocks and shorting of overvalued stocks don't seem to be yielding a net positive result though,...Seems to be underperforming the benchmark index,.. as is with the latest reporting of NTA and Monthly Update today.

 

[So_Cynical]

Also, didn't Buffett's wager prove that over 10 years the ETF outperformed the LIC by 70%? So we're not talking a slight outperformance.

Looking back 10 years on the ASX, the big LIC's have substantially out performed the ETF's.

AFI Aust Foundation Investment - Vs - STW (ASX300) the only EFT that was listed back then.
~

STW still trading under the March 2007 share price - as for ALF they are somewhat market neutral with their strategy, the share price has been a little weak as have the dividends over the last 12 months or so, they are only as good as their stock picks.

 

[WRiley]

Hmm,... moving forward,... are we saying that ALF may not be able to perform anymore, unlike in the past ?

 

[So_Cynical]

Hmm,... moving forward,... are we saying that ALF may not be able to perform anymore, unlike in the past ?

They are long short stock pickers, if they pick well they do well, i see no reason why they wouldn't do well again into the future.

 

[JTLP]

Looking back 10 years on the ASX, the big LIC's have substantially out performed the ETF's.

AFI Aust Foundation Investment - Vs - STW (ASX300) the only EFT that was listed back then.
~
View attachment 70369

STW still trading under the March 2007 share price - as for ALF they are somewhat market neutral with their strategy, the share price has been a little weak as have the dividends over the last 12 months or so, they are only as good as their stock picks.

Thanks for this. Very interesting to see. I've got a few LICs on the list, and for my own measure may do a 50/50 split on and ETF and LIC to see how they track.

 

[Miner]

Hello to ALF holders and followers
Since almost last two years there was no posting on this thread and ALF also went down the hill.
The CIO has begged for the lack of performance but did not see any where if he reduced the performance fee for lack of performance. Probably would not get any fee any way unless the fine prints of performance earning is well explained to share holders. DNH. Became interested now after one newsletter heavily backing it has withdrawn its support.
https://www.asx.com.au/asxpdf/20190226/pdf/442zl8clpx202j.pdf

 

[HelloU]

money where his mouth is this week for braitling - but makes me wonder where he had all that money stashed prior to the big alf buy ups recently and why it is going into alf only now (and i bet it was earning a truckload more than it would have by being invested in alf for all that time)

he might actually be the smartest manager of them all (he was smart enough to keep a chunk of his assets outside alf anyway)

hi miner, u big sweetie, watermark is braitling is alf (ur post read a little different to that)

 

[Belli]

It's years since I even looked at this "family" of LICs. I've never placed any funds in any of them as I seem to recall that a number of directors had, and maybe still do, a pecuniary interest in the management company. It put me off so I've just left them alone.

 

[Miner]

It's years since I even looked at this "family" of LICs. I've never placed any funds in any of them as I seem to recall that a number of directors had, and maybe still do, a pecuniary interest in the management company. It put me off so I've just left them alone.

I have been reading your comments @Belli and noticed how one director JB has keeping himself busy in buying CD shares almost daily. What pecuniary interest he would or could have while investing back to the company he manages?

 

[Belli]

To be honest I don't know. I don't follow ALF at all - I think it was called something else at one stage. Haven't looked at the notices but is it him directly or through other entities in which he has an interest in or controls? Could be doing it as a trustee or as an administrator at the behest of others.

I just stay well away from these particular LIC's. Anything they do is only a curiosity on my part if I can be sufficiently interested to even look at them, which is rare.

 

[Dona Ferentes]

Australian Leaders Fund (ALF) has now sought the necessary shareholder and court approvals, with shares being suspended on 17 March and the scheme now legally effective. The investment portfolio had been largely liquidated back in November 2019, excluding two immaterial securities that were suspended, jointly accounting for less than 0.5% of NTA. The reported 28 February NTA was $1.026, adjusted for the 3c scheme dividend, current tax liability, operating costs, scheme costs and Investment Management Agreement termination fee.

ALF will reduce its capital via a one-for-one in specie distribution of new units in the Watermark Absolute Return Fund, with the residual post-tax cash asset of ALF also being transferred to the fund. Shareholders will receive holding statements in respect to their new units by post following implementation of the Scheme. ALF shareholders who want to withdraw their new units must return their completed Withdrawal Form and Know Your Client Information Form, together with any information/ documents required by the Responsible Entity by the cut-off time each month.

The cut-off time for the first round of withdrawals will be 5.00pm on 31 March. The withdrawal price will be the NAV per unit less any applicable transaction costs.

 

[System]

On March 29th, 2021, Australian Leaders Fund Limited (ALF) was removed from the ASX's Official List in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement between ALF and its shareholders in connection with the acquisition of all the issued capital in ALF by the Watermark Fund.