The next generation

After a long, long time in the doghouse, the fund market has sprung back to life, with HSX IPOing new funds like they’re going out of fashion. But, as always, there’s a catch. These are funds, Jim, but not as we know them. How do these new-style funds stack up – and are they worth investing in?

Here’s what Darth Mac has to say about the new funds: “I’ve instituted changes to funds, mainly with a H$20m starting fund and a 1:1,000,000 price/net worth conversion ratio. These changes were made because I see funds as long term investment vehicles having diversified portfolios within the fund theme, instead of as short term profit runs. I want to see funds act as educational tools using different investment strategies and exposing “hidden” securities to traders at large. More like funds in the real world.” Translation: the old-style fund were making too much money and delisting too quickly, which may have had a distorting effect on the market. HSX was looking for a way to slow the funds down.

Boy, did they find it.

Take it from somebody who knows – these new-style funds are tough.

How’d they do?The table below gives you an indication of how the funds have been doing.

The table below gives you an indication of how the funds have been doing.

@ Up to and as at 11/20/00.

* IPOed after start of season.

# IPOed after beginning of October.

OK, first a word about the table. The choice of October as the month and November 20 as the cut-off date for the season to date are completely random. They just happened to be the figures I had available. There is no other significance to them. They were not chosen to flatter any particular fund. Had I chosen different dates and/or months, the results would equally be different. How different? I don’t know, I haven’t cracked the numbers. There have been some slight jockeying for position. But I’m betting that the overall trends would have been pretty much the same – and that’s what I’m paying attention to. In fact, arguably these number are slightly biased, because they include the GRNCH/RATS2 adjust. If I’d looked at the numbers just a few days earlier, they would have been very different.)

With that disclaimer out of the way, what can we tell? First off, that performances for the month of October are almost universally better than for the season to date. The reason for this is insipid market conditions during pretty much the whole of September, which dragged the season to date figures down. Which brings us to another point: collectively, the funds are pretty good indicator of market conditions. If they’re all showing gains, the bulls are in full force and effect. If they’re all showing losses, duck and cover.

The other thing to notice is that not all funds have performed equally. Rather than rate them individually, I’m going to place them into four broad categories:

High fliersAre (in alphabetical order) BRITS, COMIC and ZOO. Little to choose between ZOO and BRITS (and on a personal note, a big thanks to Txredd, who has been the alternate fund manager for BRITS during my absences). ZOO didn’t play GRNCH, which is why its performance looks worse, but in the long run there isn’t much in it. A word about COMIC. Now you could argue that being the first new-style fund was an advantage, that the theme allows them to trade in lots of volatile stocks and that having four fund managers give them the chance to tag-team trade, which is probably the most efficient way of doing things. But still, wow. $45m in a new-style fund is an impressive feat. Let nothing detract from that. However, their performance in both the season to date and in October wasn’t quite so stellar. Either they’re running low on enthusiasm or (more likely) their running low on decent stocks to invest in. As the fund increases, returns drop. This is going to happen to all the funds in the same way as it happens to all ports, only faster since funds are already restricted in what they can invest in. If anything, I guess the fact that all the fund managers involved are HSX veterans. Big shock there: experience helps. Except there are funds out there run by vets which haven’t done so well. So experience helps, but it isn’t the be-all and end-and.

Are (in alphabetical order) BRITS, COMIC and ZOO. Little to choose between ZOO and BRITS (and on a personal note, a big thanks to Txredd, who has been the alternate fund manager for BRITS during my absences). ZOO didn’t play GRNCH, which is why its performance looks worse, but in the long run there isn’t much in it. A word about COMIC. Now you could argue that being the first new-style fund was an advantage, that the theme allows them to trade in lots of volatile stocks and that having four fund managers give them the chance to tag-team trade, which is probably the most efficient way of doing things. But still, wow. $45m in a new-style fund is an impressive feat. Let nothing detract from that. However, their performance in both the season to date and in October wasn’t quite so stellar. Either they’re running low on enthusiasm or (more likely) their running low on decent stocks to invest in. As the fund increases, returns drop. This is going to happen to all the funds in the same way as it happens to all ports, only faster since funds are already restricted in what they can invest in. If anything, I guess the fact that all the fund managers involved are HSX veterans. Big shock there: experience helps. Except there are funds out there run by vets which haven’t done so well. So experience helps, but it isn’t the be-all and end-and.Worth a lookAre (in alphabetical order) AUSIE, BOOKS, ELVES, HERO, SNL and SQUEL. A real mixed bag here, but respectable performances all. ELVES and HERO both suffer from what look to be extremely constrictive themes. The same may well apply to SNL. Just how many films can all those ex-SNLers make? On second thoughts, scrap that. The BOOKS was initially doing very well, tailed off a little and is now coming on strong again. It’s already been through a change of primary fund manager, which may account for the mid-season dip. SQUEL started off strong but has struggled slightly to keep up the same pace. I don’t know anything about the guys running the AUSIE fund, but they seem to be doing a good job.

Are (in alphabetical order) AUSIE, BOOKS, ELVES, HERO, SNL and SQUEL. A real mixed bag here, but respectable performances all. ELVES and HERO both suffer from what look to be extremely constrictive themes. The same may well apply to SNL. Just how many films can all those ex-SNLers make? On second thoughts, scrap that. The BOOKS was initially doing very well, tailed off a little and is now coming on strong again. It’s already been through a change of primary fund manager, which may account for the mid-season dip. SQUEL started off strong but has struggled slightly to keep up the same pace. I don’t know anything about the guys running the AUSIE fund, but they seem to be doing a good job.Too soon to sayAre DJAVU, KIDS, CAINE and AWARD. CAINE and AWARD fall completely outside October, and therefore my comparison. DJAVU and KIDS fall within it, but only just. This has the effect of slightly dampening their performance. KIDS is doing very well at the moment, off the back of the GRNCH/RATS2 adjust. But hey, even if you get the opportunity, you still have to call them right. So far, none of the other funds have set the market alight, but it often takes a little time for funds to settle. Don’t write them off just yet.

Are DJAVU, KIDS, CAINE and AWARD. CAINE and AWARD fall completely outside October, and therefore my comparison. DJAVU and KIDS fall within it, but only just. This has the effect of slightly dampening their performance. KIDS is doing very well at the moment, off the back of the GRNCH/RATS2 adjust. But hey, even if you get the opportunity, you still have to call them right. So far, none of the other funds have set the market alight, but it often takes a little time for funds to settle. Don’t write them off just yet.To avoidIs CANUK. What went wrong? The theme is on similar lines to BRITS and there’s theoretical reason why it couldn’t do as well, bearing in mind just how many Hollywood productions are now filmed in Canada to cut costs (I think both these funds have the edge over AUSIE in terms of opportunities). But somewhere along the lines, it’s all gone horribly wrong. The absolute minimum a fund should be able to do is to retain its value. Six weeks on, CANUK is still trading below it IPO price. Hopefully the fund managers are learning from their mistakes and we’ll see CANUK’s performance gradually improve. Or maybe they should speak to Jimmy.

Is CANUK. What went wrong? The theme is on similar lines to BRITS and there’s theoretical reason why it couldn’t do as well, bearing in mind just how many Hollywood productions are now filmed in Canada to cut costs (I think both these funds have the edge over AUSIE in terms of opportunities). But somewhere along the lines, it’s all gone horribly wrong. The absolute minimum a fund should be able to do is to retain its value. Six weeks on, CANUK is still trading below it IPO price. Hopefully the fund managers are learning from their mistakes and we’ll see CANUK’s performance gradually improve. Or maybe they should speak to Jimmy.Wrapping upEverything above is all well and good, but I’m guessing what you really want to know is; are they worth investing in? And the answer is. maybe. The rule of thumb generally tossed about is that an ROI of one or over is good. And yes, it’s true that a fund can hit an ROI of over one. But I’m still not sure they can do it for sustained periods of time. So none of them are going to earn you the screaming fortune that funds of yore promised. That was the idea. However, a lot of the funds are still solid earners. The kind of investments you can purchase and forget about as they work to earn you money. For a lot of traders – especially those who don’t want to be wed to HSX every waking day – that’s got to be worth something.

Everything above is all well and good, but I’m guessing what you really want to know is; are they worth investing in? And the answer is. maybe. The rule of thumb generally tossed about is that an ROI of one or over is good. And yes, it’s true that a fund can hit an ROI of over one. But I’m still not sure they can do it for sustained periods of time. So none of them are going to earn you the screaming fortune that funds of yore promised. That was the idea. However, a lot of the funds are still solid earners. The kind of investments you can purchase and forget about as they work to earn you money. For a lot of traders – especially those who don’t want to be wed to HSX every waking day – that’s got to be worth something.-Huy