Friday, January 8, 2010

Karsan Value Funds: 2009 Q4 Results

Karsan Value Funds (KVF) is a value-oriented fund, as described here. Though some readers have expressed an interest in investing, due to securities regulations the fund is not open to the public at this time. Should that change in the future, there will be an announcement on this site.

For the fourth quarter ended December 31st, 2009, KVF earned 58 cents per share, bringing the value of each share to $11.40. Once again, the markets were strong, and therefore most funds and most types of funds will have made money in this period. The true test of whether this (or any other) fund is adding value will take place over a period of several years and through both bull and bear markets.

Once again, weakness in the US dollar (relative to the Canadian dollar, the fund's reporting currency) hurt results. Had the exchange rate ended the quarter at the same position at which it started the quarter, earnings this quarter would have been 10 cents per share higher. Currency volatility is likely to continue to have a significant bearing on quarterly results, but over the long-term it is not expected to be a material factor.

As the market rose over the quarter, some stocks were divested following their exceptional price run-ups. These stocks include ATV, MRD, CMI and GDL. Despite these divestments, KVF continues to own a great many stocks that are deemed to be undervalued. At the same time, KVF is also capitalized to seize any opportunities the market may offer through both temporary or prolonged pullbacks.

KVF's income statement and balance sheet are included below. Note that securities are marked to market value:


Mike B said...

So about even with S&P500 returns since July? It would be nice if you posted an appropriate benchmark along with your results. From my own similar experience, small-cap value investments only kept pace with large-caps in the past 6 months.

Saj Karsan said...

Hi Mike B,

If you add back currency changes and taxes, the fund has performed better than the S&P 500. However, to your point about reporting such comparisons, it is too premature in my opinion. Perhaps after a few years such comparisons would be meaningful, but for now they would only encourage activity that attempts to beat the average whenever quarterly results come out, which is not in the best interests of shareholders.

Aniruddha said...

Hi Saj,
How do you calculate the units of your portfolio? How do you manage cash paid in/out?


Saj Karsan said...

Hi Aniruddha,

Units are calculated at market value. I'm not sure what you mean by 'how do you manage cash paid in?'

Mike B said...


I think he's asking the following. (I, too, have faced this conundrum..). If investors contribute additional capital mid-year, what do you do with the cash? Possible options:

1. Use the new cash to buy additional shares of existing portfolio holdings in proportion. Although you keep the same portfolio balance, you may be purchasing shares at a higher price.

2. Purchase whatever shares appear most attractive at the time of the cash contribution.

3. Hold the cash until attractive opportunities arise.

Each of these presents problems. The most notable issue is whether you "segregate" these holdings until the end of the year when the member/partner interests are apportioned. You wouldn't want new contributions left as cash to drag down the overall returns of the other partners.

I'm also curious as to what you think about this.

Mike B.

Aniruddha said...

Thanks Mike B, That's exactly what i wanted to know.

Saj, Do you have any framework, template with which you do this Fund's calculations?
- Does your income shown in Income statement contain only profit made from buy/sell? or you include dividends also?
- How do you keep track of commissions?

Thanks in advance

Saj Karsan said...

Hi Mike,

There's no hard rule. All three options you discuss are on the table, depending on the circumstances (market conditions, opportunities available etc).

The funds are not segregated, however, and immediately become part of the entire pool.

Hi Anirudha,

1) yes
2) includes dividends
3) I keep track of them using accounting records

Unknown said...


Do you use software to keep track of the fund accounting records, or do you do it all manually? Most of the software packages I've seen to handle this have been rather pricey.

Ed G.

Saj Karsan said...

Hi Ed,

To keep costs down I generally stick to free software, so there are some manual elements to it.