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New Tweedy Fund - Worldwide High Div
Old 08-07-2007, 10:43 AM   #1
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New Tweedy Fund - Worldwide High Div

Tweedy Browne is starting a new World wide High Dividend Fund. They do a good job with value investing. http://tweedy.com/content.asp?pageref=highdiv The ER is high at 1.37. I know Nords has some Global value he is divesting I was wondering how this ranks to the other High Dic funds out there.

-h
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Old 08-07-2007, 03:18 PM   #2
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Nords and I exchanged PMs over this one and the consensus between us was -- pass! You can find Intl' dividend focused ETFs for a fraction of the cost. The fund is based on what seems to be the same research Wisdomtree used for their models although I imagine the weightings will differ.
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Old 08-07-2007, 03:59 PM   #3
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Originally Posted by lswswein View Post
The ER is high at 1.37. I know Nords has some Global value he is divesting I was wondering how this ranks to the other High Dic funds out there.
A few things bother me about this fund in particular and Tweedy in general.

With a gazillion mutual funds out there, all of whom are running with different expenses and different business models, somehow Tweedy's third fund (their first since 1993) ended up at exactly the same ER as Global Value. What an amazing concidence that it costs exactly the same amount of money to find high-quality dividend stocks as it does to find cheap value stocks.

Compare that statistically surprising result with Powershares International Dividend (PID) ETF's expense ratio of 0.6%. Wisdomtree's International Small-cap Dividend (DLS) ETF's ER is 0.58%, and that's a world of small-caps where presumably the spreads are larger and the volumes are smaller. Yet these guys are doing it for less than half of Tweedy's expenses.

Global Value has been closed for over two years because they can't find stocks selling at a big discount to their intrinsic value. Perhaps dozens of yummy candidate stocks have been evaluated and regrettably discarded because they don't meet Global Value's criteria. Yet some of these discarded stocks, presumably paying dividends, are suddenly deemed worthy of a dividend fund.

Tweedy is able to add their Dividend fund while keeping exactly the same number of researchers & managers as they currently have slaving away looking for value stocks in their Global Value fund. Someone's not going to be spending all their billable hours on the new fund... or the current one.

Let's hypothecate that, with the same size staff and double the number of stocks they're holding now, how much would Tweedy's expenses go up? Would they double? Or would they go up by maybe 20-25% to balance the additional commissions against the savings from economies of scale? So why does adding another fund raise Tweedy's expenses by exactly 100.000%?

A quiet little secret is that Tweedy's customer service sucks when compared to companies like Fidelity. Global Value has been closed since early 2005, yet they kept the same voicemail on their phone line for nearly two years (it's finally been changed). Every IRA account was charged $10 every year, no matter how many separate IRA accounts one held or what their balance was. When their "customer service" VP personally promised to refund the charge for two of our IRA accounts it took four months and another half-dozen phone calls for him to get around to it. Their website doesn't handle redemptions, yet when I called Tweedy on the phone I'd get endless attitude about redemptions and about transferring the cash to our Fidelity brokerage account.

I finally transferred all our Tweedy shares in kind to our Fidelity account, where I can hold them for no charge and sell them for no fee. We sold all our IRA holdings in Tweedy for PID. We still have about 8% of our ER portfolio in Global Value (down from 30% in early 2006) and it's lagged PID's performance by several percent over the last 14 months. We'll keep killing off Tweedy over the next five years in favor of ETFs.

I could be jaundiced by the fact that Tweedy's our only mutual fund, or that ETFs are so much cheaper than mutual funds, or that we don't work with any truly sucky fund companies. Tweedy might be a real gem alongside some of the other turkeys out there, but we're feeling much better off with Fidelity & index ETFs.

Here's an idea. IIRC Tweedy reports their fund holdings every 90 days and their turnover is usually under 15%-- they hold their average stock for over six years. It might be possible to track their top 25 stocks and just buy the ADRs, which I bet is a lot less expensive than 1.37%...
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Old 08-07-2007, 06:45 PM   #4
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I agree with Nords, Tweedy's ER cannot be forgiven. I held it for years and it did OK but finally decided that unhedged would be better for me. In late 2005 moved the TBGVX to DODFX (ER=.70) and HAINX (ER=.87) which I already owned. BTW, that is a good argument for owning a few funds in a given asset class. There is less psychological baggage dumping one of them. I'm willing to overlook the managers padding their pockets if the fund had some superb results but my current funds have done better with much lower ER's.

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Old 08-07-2007, 09:38 PM   #5
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Originally Posted by Nords View Post
Here's an idea. IIRC Tweedy reports their fund holdings every 90 days and their turnover is usually under 15%-- they hold their average stock for over six years. It might be possible to track their top 25 stocks and just buy the ADRs, which I bet is a lot less expensive than 1.37%...
I wonder if most of the shares will be available as ADRs?

Ha
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Old 08-07-2007, 11:01 PM   #6
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The 1 Aug prospectus arrived in the mail today. I read it a little more closely and I stand corrected on a couple issues:
- the Dividend Fund's expense ratio is estimated to be 1.37% for comparison to their other funds. (BTW the Value Fund's ER has remained constant despite the fund's size doubling in the last four years.) The actual Dividend Fund expenses are projected to be 1.53% but they're waivering 16 basis points (woo-hoo).
- the Dividend Fund's managers aren't necessarily the same as the Value Fund's managers. Instead they're the same managers who've been managing Tweedy's private accounts which have had a dividend focus. What they're saying is that they're keeping the managers who incubated the Dividend Fund.

Which is not necessarily a good thing. Those managers have lagged the MSCI World Index by at least 1.5% for every one of the four years they've been incubating. (Hey, they picked the index.) Even worse that's AFTER 1.37% expenses but before taxes AND in U.S. dollars (unhedged). Just about anyone with any unhedged global investments has made money off a dropping dollar in the last four years, so these guys have no excuse to be getting paid for this performance.

But maybe I'm just contaminated by confirmation bias.

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I wonder if most of the shares will be available as ADRs?
Ha
They're expecting that their stocks will be mostly large-caps, but I don't know what's available in ADRs and what's not.
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Old 08-08-2007, 10:19 PM   #7
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Thanks Nords etc
I came to the conclusion that the new fund was not worth buying. I still have 12% in TBGVX and I am looking into moving it to Vanguard just to consolidate my stuff.

Nords did you have any issues with calculating your cost basis or did TBGVX provide the info to Fidelity? I am asking because I have TBGVX in my taxable account (because of low turnover etc) and DCA'ed into it for the last 4yrs or so. I stopped after realizing that TBGVX was contributing to half of my portfolio ER even though it is only 12% of my portfolio.

Now I have to look into selling and dividing the stuff between BRK and someother Intl Value fund - VTRIX maybe

-h
p.s: With a falling dollar I think the hedge effects TBGVX negatively against other Intl funds. I liked the hedging because that gave me the confidence to increase my Intl equity allocation but now I am more comfortable with my Intl allocation - could be a contration indicator
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Old 08-09-2007, 10:59 AM   #8
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... or did TBGVX provide the info to Fidelity?
That's pretty funny!

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Nords did you have any issues with calculating your cost basis
I've been tracking share purchases on Quicken for 15 years so I had all our Tweedy data. Fidelity didn't get any cost basis from Tweedy (heck, I don't know if I could get that from Tweedy) and I don't know if brokerages exchange that data. After we moved the shares over to Fidelity we entered the cost basis data manually on Fidelity's website.

We sold off the IRA Tweedy shares and we've let the taxable account ride until this dip. For our first taxable Tweedy sale at Fidelity we forced Fidelity's website to shift from FIFO to specific shares. In return Fidelity's software forces you to acknowledge that you know what you're doing at least three separate times-- including permission slips from your CPA, the IRS, and your mommy. This is the first year we actually sold shares in a taxable account so it'll be interesting to see what the 1099s look like. Of course since Fidelity's just regurgitating our manually-entered data the 1099s should match our Quicken data but I've learned to make Schedule D exactly match the 1099s and to keep printouts of everything. I've never known the IRS to chase down specific-share sales (unless the filer improperly switches from that to average cost basis) but I have no plans to be a test case.


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I stopped after realizing that TBGVX was contributing to half of my portfolio ER even though it is only 12% of my portfolio.
Now I have to look into selling and dividing the stuff between BRK and someother Intl Value fund - VTRIX maybe
Yep. I'm expecting emotional investors (I know, redundant) to stampede toward large-caps soon so we may sell off more Tweedy to buy more of our Dow dividend ETF (DVY). BRK "B" shares have been trading between $3600-$3700 most of this year and it's tempting to buy more but that's already 30% of our ER portfolio and over half the kid's college fund.

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p.s: With a falling dollar I think the hedge effects TBGVX negatively against other Intl funds. I liked the hedging because that gave me the confidence to increase my Intl equity allocation but now I am more comfortable with my Intl allocation - could be a contration indicator
Absolutely, same here. Of course we'd be hurting if the dollar goes rip-roaring back up to its 1980s levels, but I have a hard time seeing how that would happen. Maybe when the Democrats take the White House & Congress and impose spending cutbacks with more fiscal austerity to restore global faith in the dollar and make our exports more expensive... never mind.

Even Tweedy's research & literature acknowledges that currency fluctuations are flat in the long term. Hedging is just their way of reducing volatility. The outperformance of PID over TBGVX, even after the difference in expense ratios, is probably unhedged vs hedged.
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Old 08-09-2007, 03:51 PM   #9
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Absolutely, same here. Of course we'd be hurting if the dollar goes rip-roaring back up to its 1980s levels, but I have a hard time seeing how that would happen. Maybe when the Democrats take the White House & Congress and impose spending cutbacks with more fiscal austerity to restore global faith in the dollar and make our exports more expensive... never mind.
Nords probably knows this but the dollar had a huge spike up in the 1980's when Reagan was in his early term and Volker was killing inflation. That started an era of very high real interest rates. People who invest in international unhedged should be aware of this, see link St. Louis Fed: Series: TWEXMTHY, Trade-Weighted Exchange Value of U.S. Dollar vs G-10 Countries (DISCONTINUED SERIES) . Personally I'm not sure how to "watch" for this. If the situation shifted dramatically both at the political and fed reserve levels then I suppose it would be prudent to lighten up on international.

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Old 08-09-2007, 04:10 PM   #10
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Personally I'm not sure how to "watch" for this.
I think one indicator will be when Americans start flocking to Europe again and the American travel industry notices that Europeans can't afford an American vacation.

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... then I suppose it would be prudent to lighten up on international.
And cut back to make it only, what, half of the equity portion of one's portfolio? I think it'll have a permanent place in ours, especially since it got such a good boost in the 1990s-present.
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Old 08-09-2007, 06:27 PM   #11
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I think one indicator will be when Americans start flocking to Europe again and the American travel industry notices that Europeans can't afford an American vacation.

And cut back to make it only, what, half of the equity portion of one's portfolio? I think it'll have a permanent place in ours, especially since it got such a good boost in the 1990s-present.
Hard to imagine the Euro so low but who knows. By that time it would probably be too late to reduce the international allocation. Currently we're at 36% of equities in international but no plans to go to 50%.

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