The naked truth about Gobal Value Fund (GVF)

Investing Recommendation: GVF's discount capture strategy is not replaceable by a passive ETF so if its true-risk adjusted performance and volatility or drawdown record suits then it may be worth investing in. The high dividend yield tends to keep the discount from getting too high and provides worthwhile entry and exit opportunities.

Trading Recommendation: Trade when discount is at least 2% greater than recent (1 to 6 months) average. Minimum discount advised is 2%.

Actual Performance:

In its most recent presentation (Nov 2018) with performance comparisons GVF reports the following performance:

Using Excel's CAGR formula I've computed the actual GVF Inception to Date (ITD) performance using the IPO NTA after offer costs ($0.975), 28 Feb 2019 Pre-tax NTA ($1.0733), Dividends (20.6 cents), Franking (6.43 cents) and Option value at expiry (0 cents).

Actual Compound Annual Growth Rate for Pre-tax NTA: 7.21% 

- This is a long way from GVF's published ITD (p.a) of of 11.8% (inception to 30 Sept 2018)

- GVF's true NTA performance includes dilution due to multiple capital raisings below NTA.


Actual TSR Comparison with relevant benchmark ETF:

Using Sharesight and a performance report period of 21 July 2014 to 28 Feb 2019 you can accurately determine like-for-like Total Shareholder Return annualised performance between investing in the GVF IPO and investing in the closest index fund to the most useful benchmark.

- GVF has an annualised TSR of 6.21%

- NASDAQ:ACWI has an annualised TSR of 11.81%

Obviously, GVF is not simply a long only ACWI-style equity-only fund and so on a risk-adjusted basis the performance difference is less. However, it is always useful to know the ACWI TSR for the exact same period in determining how good performance has really been.


Performance Impact on NTA Discount/Premium:

The large difference between the ACWI TSR of 11.81% and GVF's 7.21% NTA CAGR has driven the discount down to ~3% and the GVF TSR to be 6.21%. And that's with virtually all investors not having done their own NTA CAGR calculation and likely assuming the true NTA return has been around 8-9%.