ALF - Australian Leaders Fund

[Julia]

Holding ALF in my SMSF Julia, paid a divvy last week. It's been doing what it should for a while now.

Yes, in a reasonably strong uptrend and trading above the EMA since July. Liquidity has improved over the same period.

It does have a high yield.

Merely an observation in that it isn't a plain vanilla LIC as is ARG , MLT, AFI and various other older LICs. It is a Long/Short fund.

As at end September 2013 it has 60.9% of its funds in equities with 175.1% long and 114.1% short.

That's partly what attracted me, Judd.

Also the fund incurs a management fee of 1% of the Gross assets as well as a 20% performance fee if the fund outperfoms the All Ordinaries Accumulation Index. So shareholders are paying 1% on the 39.1% in cash or equivalent (which is passive income I'd really like) and 1% plus performance fee on the Gross 289.2% of FUM which effectively is much higher than a headline of 1%.

Offputting.

Yes Julia im still holding for long term yield, my average price is $1.16 so sitting on a handsome capital gain of around 50% and pulling a ROIC gross dividend yield of 13.4% ~ i like the long short aspect of the fund and so don't see it as a negative at all especially in a diversified portfolio.

Of course with any fund that operates a little differently (good decision dependant) one should expect some variation in dividend yield, again this variation suits me as i hold a large (many stocks) portfolio and concentrate on entry timing so overall benefit from volatility.

That entry must have been quite some time ago, SC. Good capital gain. Did you have any concern about buying when it appears to have been pretty thinly traded? I always like to be able to get out quickly if necessary.

 

[Judd]

Offputting.

Maybe, maybe not. Depends on whether one is happy to pay for the outcome.

The benchmark for payment of the performance fee could appear to be low to some people. The fund simply has to outperform the All Ordinaries Accumulation Index. No AOAI plus 5% or anything like that. Last year, apart from the $70k in directors fees, the manager of the fund, of which Mr Braitling is the sole Director and beneficial owner, was paid $1.4m and just under $7m in a performance fee. Also an interesting Service Agreement where the manager pays 25% of all the managers fee and performance bonus to Boutique Asset Management which is 80% owned by entities associated with Mr Wilson.

 

[Boggo]

Yes, in a reasonably strong uptrend and trading above the EMA since July. Liquidity has improved over the same period.

Weekly chart displays that nicely.
(click to expand)

 

[Julia]

Thanks Boggo. Bought some of these today.

 

[McLovin]

Maybe, maybe not. Depends on whether one is happy to pay for the outcome.

The benchmark for payment of the performance fee could appear to be low to some people. The fund simply has to outperform the All Ordinaries Accumulation Index. No AOAI plus 5% or anything like that. Last year, apart from the $70k in directors fees, the manager of the fund, of which Mr Braitling is the sole Director and beneficial owner, was paid $1.4m and just under $7m in a performance fee. Also an interesting Service Agreement where the manager pays 25% of all the managers fee and performance bonus to Boutique Asset Management which is 80% owned by entities associated with Mr Wilson.

On a gross or net basis? One of my pet peeves with these sort of companies and funds is that they take their bonus based on a the pre-tax performance but the post tax reality might be that a substantial part of the year's returns are actually going straight to the taxman. Personally, I think they should have disclose the after tax performance for a few "example investors" on different tax rates.

 

[Judd]

On a gross or net basis? One of my pet peeves with these sort of companies and funds is that they take their bonus based on a the pre-tax performance but the post tax reality might be that a substantial part of the year's returns are actually going straight to the taxman. Personally, I think they should have disclose the after tax performance for a few "example investors" on different tax rates.

Gross, I understand. I had a quick read of the accounts and the net assets is $225M or so which means the actual fees of $8M represents 3.6% of net. However, if shareholders consider this good value and the fund suits their purpose well and good as far as I am concerned. Don't hold this particular number but I do hold WAM Capital although I have not added to my holdings for two years.

 

[WRiley]

Kind of got hooked onto this fund, but at a current price of $1.42, I suspect I'm kinda late to board the boat. Yield's still acceptable at 1.42 though,... all-in grossed-up at 10.2%,... fully-franked.

 

[WRiley]

Received an alert from my alert system that ALF dropped to a 21-day low today. Anybody knows why ??

 

[monkton]

Received an alert from my alert system that ALF dropped to a 21-day low today. Anybody knows why ??

ALF now trading around it's nta,dropped dividend by 1c also note John Abernathy a non-executive director, sold 50,000 shares last week & now holds only 10,000.

 

[GlobeTrekker]

also note John Abernathy a non-executive director, sold 50,000 shares last week & now holds only 10,000.

Not a good look is it?

I used to hold ALF a while ago but not any more. People investing ALF really need to understand exactly what it is that ALF does because its not like most other LICs. Being a long/short fund means it has different risks to the others, it can easily head south when the rest of the market is powering ahead. And I really dislike that extra performance fee for outperforming the market (though quite a few other smaller LICs charge this as well) - its not like they also refund part of their fees when they underperform the market.

 

[WRiley]

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

 

[monkton]

CDM is another lic that is a long/short fund,it too was trading well above it's nta then had a pullback to around it's nta but is moving higher again now but continued to pay a good dividend.ALF still pays a reasonable dividend so will hold & watch it but perhaps not add to it yet.

 

[WRiley]

CDM is another lic that is a long/short fund,it too was trading well above it's nta then had a pullback to around it's nta but is moving higher again now but continued to pay a good dividend.ALF still pays a reasonable dividend so will hold & watch it but perhaps not add to it yet.

That's what I'm doing too,... not adding to ALF yet, but kept thinking abt it. Reason being if ALF has potentials to rise, then buying now at depressed prices would be the right way to go !

 

[monkton]

True WR but then dividend is coming up will see what happens after that,main concern for me was why JA sold out of such a large percentage now before it went ex dividend.

 

[WRiley]

True WR but then dividend is coming up will see what happens after that,main concern for me was why JA sold out of such a large percentage now before it went ex dividend.

A very obvious possibility is after XDate, the price might drop further, or,... he needed his funds badly now,...

If CDM's characteristics are exactly as ALF's, then if CDM can rise, chances for ALF would be very high. But are their characteristics really that similar ?

 

[monkton]

Guess you've got to believe in the management which is why we likely bought it in the first place and with lic's buying near or below nta is ideal.As to whether price drops further after Xdate guess it's a case of good tech/anal. or "Do I feel lucky?" and that's the game!

 

[JTLP]

Now when I see an LIC, I just think of Buffett and him placing the wager on buying an index fund over an LIC. Why wouldn't you just buy something like VAS?

 

[monkton]

Now when I see an LIC, I just think of Buffett and him placing the wager on buying an index fund over an LIC. Why wouldn't you just buy something like VAS?

Income for a start.VAS paying just over 4%,while these 2 LIC's are paying over 6% and have a more concentrated portfolio and are more active,yes I'm aware that more is paid in fees for this so they need to deliver.While I do have a couple of etf's, for me they're a bit too expensive at the moment.

 

[WRiley]

Now when I see an LIC, I just think of Buffett and him placing the wager on buying an index fund over an LIC. Why wouldn't you just buy something like VAS?

In addition to what Monkton said in the above, if things run right, the capital gain that can be made with ALF, or CDM, will be much, much more compared to something along the line of VAS,....

 

[JTLP]

In addition to what Monkton said in the above, if things run right, the capital gain that can be made with ALF, or CDM, will be much, much more compared to something along the line of VAS,....

So I understand Monkton's point on they feel the index has run hard, but aren't these LICs just picking longs and shorts from the same index per se?

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.