Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
Hi,

Thanks for the kind words.

...I too was a little taken aback by the 1.35% expense ratio that could even go higher. It seems to me that starting this expense ratio at .95% would have been more Foolish.

As others no doubt saw in the initial post (or on the website), the actual "gross" expense ratio is well over 2%. They arrived at the lower "net" number (1.35%) by way of a temporary waiver of about 1/2 the total expenses.

Those who've been around have seen such "temporary" waivers become permanent at some funds (I think the Fidelity Spartan funds are an example, if fading memory is correct). But it's not true in all cases, so an investor ought to be wary of that number possibly rising on the predicted date.

And in the meantime, one might ask them just why the number is as high as it is. I honestly would not be surprised that it's due to inefficiencies that a company faces when it is just starting up in this business, but I don't know. In any case it does jump out at any reader who is familiar with The Motley Fool.

...the manager is Bill Mann who is pretty respected at TMF... One fear I have is that Bill Mann is just the nominal manager but all the actual managing is done by the other 3 people listed. Not to knock them because Im sure they are pretty sharp, but Id rather my money with Bill Mann.

Regardless of one guy's chops, I would never ever invest in a fund like this -- which says it intends to pick stocks from every industry, and from every corner of the planet -- without a really good team and competent research staff. The universe of potential opportunities is too large for one person to sift through. So if the other 3 people have decent credentials, I think I'd be reassured by their presence, rather than disturbed.

Im interested by what else in the prospectus was making you skeptical/cautious.

Well, first off I didn't read the prospectus. I just scanned the stuff they had on the website. I suppose it probably summarized a lot of the prospectus content in a different format. In any case my impression was formed from a rather hurried and casual reading, so I can't parse each sentence and tell you the specific cues that got my attention. I tend to look for nuance that other people might dismiss.

But the easy part is that I would be "skeptical/cautious" about any fund whose manager hasn't run a fund before and whose portfolio is described in only the vaguest of terms. I mean, if this fund has a NAV as of today, then necessarily it must own stocks as of today. There might be good reasons for delaying the revelation of this information -- but offhand I can't think of any except to give the management time to tinker, and perhaps do some window dressing, right up until the day they lift the curtain.

Put another way, I can't recall hearing about a new fund being announced in which the portfolio was kept secret. It may have happpened -- may even be common -- but I don't know of any cases.

Im personally not too worried about investing in this new fund b/c I know a lot about the manager.

On this board we sometimes discuss the "cult of personality" that some managers acquire, evidenced (for instance) by Morningstar analyses that glow about a manager's expertise even when his fund does poorly for 8 years out of 10, or whatever. It's one thing to believe that a guy is smart, or perhaps that he writes well about investing. It's another thing to give him your money without him having proven that he knows how to make money grow faster than all the other 10,000 mutual funds out there.

That is the kind of criterion I personally look for. Not literally comparing one against 10,000, but one against its category peers, or against funds that provide exposure to a similar range of stock categories. Or, if nothing else, comparing against longterm returns from the Total Stock Market and Total Bond Market indices.

And of course, longterm comparisons will be unavailable for a long time. This is another topic we discuss here from time to time, which brings me to the beginning and end of my reaction: I simply would not buy a fund in the first month of its existence. I think I may have bought a fund one time -- from an established management company -- that was only a year old or so, and I think some folks here commented that my decision seemed rash to them. :-)
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.