dartmonkey Posted February 16, 2015 Share Posted February 16, 2015 Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20... ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?... Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20... ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?... The fees go to Fairfax, of course, not Watsa. Fairfax owns 30 million shares in the fund, so for every share of FFH you own, you indirectly own 1.5 shares of FIH. So if you own 1000 shares of FFH, you already own 1500 shares of FIH, and you are paying yourself somewhere between 1.5% (if FIH gets a return of 5% or less) and 4.5% (if FIH gets a 20% return). If you buy more FIH, you will pay more fees to FFH shareholders, but you will not get any more of them as a FFH shareholder. So no, buying FIH shares is not paying from one pocket to the other, and you should be concerned about the fees. Not that that stopped me from quadrupling my FIH stake. The fund seems attractive to me from both sides. Link to comment Share on other sites More sharing options...
learner Posted February 16, 2015 Share Posted February 16, 2015 I had a follow-up question regarding investing in FIH. Indian equity markets have generated ~15% return over the last 15 years or so. Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return. Because of the large fund size of FIH, I think it is fairly difficult to do that. How have you guys gotten comfortable with the fee structure? Link to comment Share on other sites More sharing options...
petec Posted February 17, 2015 Share Posted February 17, 2015 I had a follow-up question regarding investing in FIH. Indian equity markets have generated ~15% return over the last 15 years or so. Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return. Because of the large fund size of FIH, I think it is fairly difficult to do that. How have you guys gotten comfortable with the fee structure? Remember the 15% is local fx, including inflation. The real numbers are going to be different. Link to comment Share on other sites More sharing options...
petec Posted February 17, 2015 Share Posted February 17, 2015 Does anybody understand the way the high water mark is calculated?! P90? Link to comment Share on other sites More sharing options...
dartmonkey Posted February 17, 2015 Share Posted February 17, 2015 Does anybody understand the way the high water mark is calculated?! P90? Look at pp 90-91 of the final prospectus, available on sesar.ca. Basically, the starting highwater mark is the NAV at the IPO, i.e. About $9.63 per share. Then NAV + total distributions in the just completed 3-yr period is calculated, the first calculation date being Dec 31, 2017 and then every 3 yrs. The difference between that amount and the current highwater mark is the appreciation. If that appreciation is positive, a performance fee of 20% of the amount exceeding 5% per annum goes to FFH, and the current NAV becomes the new highwater amount. If the NAV + distributions is not higher than the highwater mark, then there is no performance fee and no modification of the highwater mark. Link to comment Share on other sites More sharing options...
petec Posted February 17, 2015 Share Posted February 17, 2015 Does anybody understand the way the high water mark is calculated?! P90? Look at pp 90-91 of the final prospectus, available on sesar.ca. Basically, the starting highwater mark is the NAV at the IPO, i.e. About $9.63 per share. Then NAV + total distributions in the just completed 3-yr period is calculated, the first calculation date being Dec 31, 2017 and then every 3 yrs. The difference between that amount and the current highwater mark is the appreciation. If that appreciation is positive, a performance fee of 20% of the amount exceeding 5% per annum goes to FFH, and the current NAV becomes the new highwater amount. If the NAV + distributions is not higher than the highwater mark, then there is no performance fee and no modification of the highwater mark. That's what I thought - I just found the wording confusing. Thanks. Link to comment Share on other sites More sharing options...
dartmonkey Posted February 17, 2015 Share Posted February 17, 2015 I had a follow-up question regarding investing in FIH. Indian equity markets have generated ~15% return over the last 15 years or so. Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return. Because of the large fund size of FIH, I think it is fairly difficult to do that. How have you guys gotten comfortable with the fee structure? Remember the 15% is local fx, including inflation. The real numbers are going to be different. Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD. Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy. Link to comment Share on other sites More sharing options...
petec Posted February 17, 2015 Share Posted February 17, 2015 I had a follow-up question regarding investing in FIH. Indian equity markets have generated ~15% return over the last 15 years or so. Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return. Because of the large fund size of FIH, I think it is fairly difficult to do that. How have you guys gotten comfortable with the fee structure? Remember the 15% is local fx, including inflation. The real numbers are going to be different. Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD. Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy. Assuming, of course, that the Indian market continues to do what it's done before ;) Link to comment Share on other sites More sharing options...
dartmonkey Posted February 17, 2015 Share Posted February 17, 2015 I had a follow-up question regarding investing in FIH. Indian equity markets have generated ~15% return over the last 15 years or so. Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return. Because of the large fund size of FIH, I think it is fairly difficult to do that. How have you guys gotten comfortable with the fee structure? Remember the 15% is local fx, including inflation. The real numbers are going to be different. Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD. Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy. Assuming, of course, that the Indian market continues to do what it's done before ;) Admittedly, there are a lot of assumptions here, but the assumption that the Indian market might go up 15% a year, or 6-7% in real terms, is not a heroic one. This is almost exactly the average real total stock market return, according to Siegel. Link to comment Share on other sites More sharing options...
petec Posted February 17, 2015 Share Posted February 17, 2015 I had a follow-up question regarding investing in FIH. Indian equity markets have generated ~15% return over the last 15 years or so. Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return. Because of the large fund size of FIH, I think it is fairly difficult to do that. How have you guys gotten comfortable with the fee structure? Remember the 15% is local fx, including inflation. The real numbers are going to be different. Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD. Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy. Assuming, of course, that the Indian market continues to do what it's done before ;) Admittedly, there are a lot of assumptions here, but the assumption that the Indian market might go up 15% a year, or 6-7% in real terms, is not a heroic one. This is almost exactly the average real total stock market return, according to Siegel. Fair point. I was thinking about it from the perspective of the -ve correlation between stock market returns and GDP growth. It's a complex relationship, but if Modi does transform India I think it's quite possible that the overall market will disappoint as markets are opened up to competition and capital floods in. Link to comment Share on other sites More sharing options...
roughlyright Posted February 17, 2015 Share Posted February 17, 2015 Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20... ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?... Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20... ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?... The fees go to Fairfax, of course, not Watsa. Fairfax owns 30 million shares in the fund, so for every share of FFH you own, you indirectly own 1.5 shares of FIH. So if you own 1000 shares of FFH, you already own 1500 shares of FIH, and you are paying yourself somewhere between 1.5% (if FIH gets a return of 5% or less) and 4.5% (if FIH gets a 20% return). If you buy more FIH, you will pay more fees to FFH shareholders, but you will not get any more of them as a FFH shareholder. So no, buying FIH shares is not paying from one pocket to the other, and you should be concerned about the fees. Not that that stopped me from quadrupling my FIH stake. The fund seems attractive to me from both sides. Dartmonkey, I am curious as to why you find the FIH attractive, when we are already owning a shares of indirectly via FFH ownership. Particularly, I did not understand what you mean by "The fund seems attractive to me from both sides". do you mind sharing your thesis on FIH, Please? Roughlyright Link to comment Share on other sites More sharing options...
dartmonkey Posted February 17, 2015 Share Posted February 17, 2015 Dartmonkey, I am curious as to why you find the FIH attractive, when we are already owning a shares of indirectly via FFH ownership. Particularly, I did not understand what you mean by "The fund seems attractive to me from both sides". do you mind sharing your thesis on FIH, Please? Roughlyright I have about 25% of my portfolio in FFH (that number is a fair bit higher today than it was last week) so I indirectly have about 0.5% in FIH as you say. It is easy to see why getting 1.5 and 20 is attractive from the FFH side, since it immediately adds a minimum of $15 million going straight to FFH (albeit 30% of that is going from one FFH pocket to another). Why do I find it attractive from the FIH side? There can not be a more pure jockey play than investing in a billion dollar fund that is as yet entirely undeployed. So the only possible explanation is my high regard for Watsa in general and for Fairfax's Indian operations in particular, and the chance that a small, highly regarded fund with extensive local connections may be able to find good opportunities for investing capital in India, particularly with a business-friendly regime in place and a lot of catching up to do with other less developed countries. Combining that with the complete absence of Indian investments in my portfolio (apart from FFH), and my concerns that equity markets in North America may be overvalued, I added 2% of directly held FIH to my indirect 0.5% stake via FFH. Link to comment Share on other sites More sharing options...
roughlyright Posted February 18, 2015 Share Posted February 18, 2015 Thank you so much Dartmonkey. I appreciate the explanation. It is like owning the hedgefund and the management company. I like the deal :) Link to comment Share on other sites More sharing options...
bluedevil Posted February 18, 2015 Share Posted February 18, 2015 Does anyone know if buying FIH from an American Roth IRA account might subject any gains to Canadian capital gains taxes? Link to comment Share on other sites More sharing options...
Zorrofan Posted March 12, 2015 Share Posted March 12, 2015 what's up with the share price today? it is a pretty hefty premium at this point! cheers Zorro Link to comment Share on other sites More sharing options...
original mungerville Posted March 12, 2015 Share Posted March 12, 2015 what's up with the share price today? it is a pretty hefty premium at this point! cheers Zorro Did the fund raise $US or Cnd? Link to comment Share on other sites More sharing options...
barsax Posted March 12, 2015 Share Posted March 12, 2015 FIH.U.TO trades in Toronto in $USD Link to comment Share on other sites More sharing options...
RichardGibbons Posted March 13, 2015 Share Posted March 13, 2015 what's up with the share price today? it is a pretty hefty premium at this point! It was mentioned in a (non-subscriber) mass email from the The Motley Fool Canada. That may account for it. Link to comment Share on other sites More sharing options...
giofranchi Posted March 13, 2015 Share Posted March 13, 2015 Is the NAV $10 USD per share? Thank you! :) Gio Link to comment Share on other sites More sharing options...
bearprowler6 Posted March 13, 2015 Share Posted March 13, 2015 Hi Gio, Yes---the NAV at the time the company went public was $10 USD---in late January. The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased. The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD. I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar. Take care, BP6 Link to comment Share on other sites More sharing options...
giofranchi Posted March 13, 2015 Share Posted March 13, 2015 Hi Gio, Yes---the NAV at the time the company went public was $10 USD---in late January. The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased. The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD. I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar. Take care, BP6 Yes, I have found on the prospectus Equity per share was $10 USD, but I was not sure if the $billion raised is still parked in cash or already invested… in part at least. Though I guess, if they had made an acquisition, they would also have published a press release, right? Why are prospectuses always so incredibly long?!... I will try to read this one anyway! ;) Thank you! :) Gio Link to comment Share on other sites More sharing options...
hillfronter83 Posted March 13, 2015 Share Posted March 13, 2015 There was a $0.5/share underwriting fee, which was eliminated or discounted for large order. So I would imagine NAV is slightly under $10/share. Link to comment Share on other sites More sharing options...
FFHWatcher Posted March 13, 2015 Share Posted March 13, 2015 Hi Gio, Yes---the NAV at the time the company went public was $10 USD---in late January. The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased. The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD. I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar. Take care, BP6 Yes, I have found on the prospectus Equity per share was $10 USD, but I was not sure if the $billion raised is still parked in cash or already invested… in part at least. Though I guess, if they had made an acquisition, they would also have published a press release, right? Why are prospectuses always so incredibly long?!... I will try to read this one anyway! ;) Thank you! :) Gio Why would they issue a press release? They certainly don't at Fairfax, so unless it is required under law, I wouldn't expect that they issue press releases, just quarterly Sedar filings. If they take more than 10% or so, perhaps they might have too. Not sure if that would be governed under Cdn Securities laws are Indian Laws? Cdn Security laws I assume, meaning if they acquire >10% of a particular company, they may have to report it on Sedar. Link to comment Share on other sites More sharing options...
barsax Posted March 13, 2015 Share Posted March 13, 2015 Despite the 10 $USD issue price I found an insider report posted March 12th on the TMX market site: http://www.tmxmoney.com/TMX/HttpController?GetPage=SearchInsiderTrade&Language=en&Submit=Submit&QuerySymbol=fih.u&x=28&y=18[ftp][/ftp] Someone bought 7099 shares @ an average price of $10.82 per share Link to comment Share on other sites More sharing options...
giofranchi Posted March 16, 2015 Share Posted March 16, 2015 I have just put 8% of my firm’s stock market investments portfolio in FIH. Maybe I have paid a bit more than many people on this board are used to and like… But we all know the kind of growth Watsa & Company are purchasing in India and at which prices. Not to act on such an opportunity imo would have been a serious mistake of omission! ;) Furthermore, I have left plenty of room to average down: at the right price I would gladly double the percentage of my firm’s portfolio invested in FIH. Cheers, Gio Link to comment Share on other sites More sharing options...
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