Author Topic: Fairfax India new issue  (Read 92471 times)

A_Hamilton

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Re: Fairfax India new issue
« Reply #20 on: February 13, 2015, 12:04:42 PM »
does it make sense to pay anything above 10 dollars for this?

You're definitely paying over NAV to do so.

However, there is likely to be a scarcity premium...how many India only PE-style funds with a value manager that has a track record do you have access to? This is all to say...if you think they will generate great returns and you don't think you can replicate the asset for less it may make sense to buy...

All this said, I don't own any directly and 1.5% and a 20% incentive are steep.


TwoCitiesCapital

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Re: Fairfax India new issue
« Reply #21 on: February 13, 2015, 01:16:04 PM »
The value investor in me doesn't like those fees. Just buy more Fairfax: each share has quite a bit of exposure to the Indian economy/stocks if you consider their 74% of Thomas Cook, the 26% of ICICI Lombard, and the 300M they have invested in this fund, and the fees they'll generate for the AUM in the fund.

ourkid8

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Re: Fairfax India new issue
« Reply #22 on: February 13, 2015, 01:42:37 PM »
+1

The value investor in me doesn't like those fees. Just buy more Fairfax: each share has quite a bit of exposure to the Indian economy/stocks if you consider their 74% of Thomas Cook, the 26% of ICICI Lombard, and the 300M they have invested in this fund, and the fees they'll generate for the AUM in the fund.

Pauly

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Re: Fairfax India new issue
« Reply #23 on: February 13, 2015, 02:09:28 PM »
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...

notorious546

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Re: Fairfax India new issue
« Reply #24 on: February 13, 2015, 05:36:50 PM »
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?...

dartmonkey

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Re: Fairfax India new issue
« Reply #25 on: February 16, 2015, 11:12:00 AM »
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.


learner

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Re: Fairfax India new issue
« Reply #26 on: February 16, 2015, 02:38:50 PM »
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?

petec

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Re: Fairfax India new issue
« Reply #27 on: February 17, 2015, 01:11:57 AM »
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.

petec

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Re: Fairfax India new issue
« Reply #28 on: February 17, 2015, 04:31:24 AM »
Does anybody understand the way the high water mark is calculated?!   P90?

dartmonkey

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Re: Fairfax India new issue
« Reply #29 on: February 17, 2015, 06:17:54 AM »
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.