Saturday, March 17, 2012

ICAP: An overperforming fund with underperforming price

Perhaps the one "i" brand recently that underperformed. Look at Apple's price...Now valued at $550 billion and moving towards $600 a stock...Wooohoo!

Anyway, let's talk about iCap. I have to admit I have not been following iCap until lately. Latest NAV (best barometer to measure the funds performance) as at 15 March 2012 was RM2.88 but its share price was at RM2.24, a 22% discount to the NAV. To be fair, it is the only listed closed end fund in Malaysia and a very successful one.

While I like the concept closed end fund better than open ended fund, there are just none to compare. The only way to compare is the performance against KLCI which they do very well indeed.

Why then is it trading at 22% below NAV? In fact when the fund was introduced, it was at premium over its NAV. Starting from around October 2008, investors started to discount it from its NAV and lately the price pulled further and further away from its NAV. Look below:

 Why? Usually, a fund trading at a discount from its NAV would be due to two main reasons.

  1. Investors no longer believe in the fund managers - in this case, I do not think so as they continue to perform well and it you do a straight line measurement of performance, it achieves a staggering 29% over a period of the 6-1/2 years since its inception in 19 Oct 2005. There is no reason to fault this amazing performance;
  2. Investors expect the performance of the funds to be below par -  for iCap, I have to admit it is difficult to measure this as the latest portfolio they revealed was 22 June 2011 as below
Since then, they probably would have moved in and out for some of the stocks but I have the feeling that they would keep to some of the larger holdings such as Parkson, Padini, Boustead, Petronas Dagangan still. F&N? I would like to discount F&N now as I would like wait and see the performance of F&N after its lost of the Coke's franchise. Don't know about iCap though.

Those who follow iCapital's newsletter would probably know better what they like - I don't. In any case, I am a little perplexed over why a strong performance fund is trading at such a discount.

Serious and Happy Investing!



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Anonymous said...

Is it ok to buy icap at around 2.15? Thx a lot.

felicity said...

Its NAV now is RM2.95. The price is RM2.17. That's a huge discount. Problem with Icap is it does not give anything away as in dividends etc. Perhaps if you are really of long term view, then perhaps you can consider based on its price below NAV.