Hi BK. I agree its ridiculous. It charges NO performance fee, and NO management fee. Is that a charity? All it has is overheads of a board and admin I guess.
As for settting up an international brokerage and replicate it for virtually free. Hey, good luck with that. I guess you'll be taking dividends and franking from your Berkshire Hathaway stock too? Which you are getting at a discount
Maybe the question is why do you think this, or any LIC, deserves to trade at a discount? Self fulfilling isn't it
The key is to see what its long term investment portfolio performance is. Most LICs are pretty hard to follow because they issue new shares and options, and there is tax paid and so on. I can't reconcile that. In this instance performance wise the Berkshire performance is what it is, and the others... (from December newsletter update)
"....During the quarter, Berkshire Hathaway (NYSE: BRK) posted strong gains of +12.9%; Athelney Trust (LSE: ATY) posted a particularly strong result of +25.9% as investor sentiment in the UK was more positive; and Flagship Investments (ASX: FSI) was the lowest contributor over the quarter posting a modest +3.9% improvement by quarter end.
This table here http://www.cefa.com/default.fs shows that the average discount for a UK equity fund is 8%, so thats a guide.
GFL has maybe 20-25% (can't tell from the chart) in Flagship, which according to this http://www.morningstar.com.au/s/documents/201612_ASX-LIC-NTA-Report.pdf is at a 6% discount itself (Apparently the reason it holds this is to get a dividend so as to pay the GFL operating costs, remember that FSI doesn't have a management fee either, just a performance fee
On a comparison basis, International LICs are at premiums through to 10/15% discountss, so this discount being -10% is probably on the money ...comparatively
The question then moves to performance. Would a person be prepared to invest in a fund that has no fees other than operating costs?
As for Global Masters, it shows a 5 year return of 20%pa
You will see that Magellan and Hunterhall have similar 5 & 10 year numbers- 25%pa and 20%, and they trade at 10% discounts
On this basis, I would say 10% discount to NTA is a price the market doesn't want to pay more for, adjusted for any liquidity discount you might want depending on your investment horizon and the amount you want to buy
The irony is that these guys KILL the big name fund managers performance wise, and you don't need a financial planner to invest in them, and they pay dividends, and franking, and you can go to an AGM or speak to the manager. Compare that to the others, or, even those bigger black holes, the industry funds
Don't know if that helps but helped me, I enjoyed going into these holes and cranny's to get an update on all the performances.
Personally I don't hold because I'm not US centric in my investing philosophy, but I do like the manager and Warren Buffet so keep an eye on this one. If I did want exposure to BH well this stock is a lay down misere to obtain that...and at a discount...and get a divvie out of it
GFL Price at posting:
$1.79 Sentiment: Buy Disclosure: Not Held
