and share buyback now is using 70 to 75 cents to own a dollar of assets that includes KGB, SAM, PADINI, Capital-A, as long as you have basic fundamentals in math and a basic IQ of 100 points.

@patient

Incase you missed my message:

"Doing share buy back increase overall fund exposure to portfolio holdings."

Might not be so. The fund manager can sell all stock holdings and cash proportionately. Not necessarily just use Cash. And by selling proportionately all the stocks in the portfolio and cash,
1) The NAV per share rises, and
2) The fund manager still have cash (in the same proportion) as before share buyback.

@patient

Incase you missed my message:

"Doing share buy back increase overall fund exposure to portfolio holdings."

Might not be so. The fund manager can sell all stock holdings and cash proportionately. Not necessarily just use Cash. And by selling proportionately all the stocks in the portfolio and cash,
1) The NAV per share rises, and
2) The fund manager still have cash (in the same proportion) as before share buyback.

The only person loses in this is the management, since he is paid based on the fund size. And share buybacks makes the fund smaller (even if it is good to retaining shareholders).

@patient

"Doing share buy back increase overall fund exposure to portfolio holdings."

Might not be so. The fund manager can sell all stock holdings and cash proportionately. Not necessarily just use Cash. And by selling proportionately all the stocks in the portfolio and cash,
1) The NAV per share rises, and
2) The fund manager still have cash (in the same proportion) as before share buyback.

As for performance, can compare with Icap with Berkshire.

"Share buy back can lift the share prices but doesnt really create value."

Share buyback at a discount to NAV, creates value for BOTH departing and retaining shareholders. For retaining shareholder, the NAV per share immediately rise.

@Kevin Tam, do you need example to understand this basic maths?

@Patient Investor

Buybacks at a discount increases the NAV per share. Do you have problems understanding that?

"Bill ackman fund also trades at a NAV discount for long period of time. I’ll put some money into it."

Bill Ackman does sharebuybacks. He understands that when the fund is selling at a discount to its NAV, buybacks benefits everyone (except himself as the fund manager).

@Patient Investor, How long have you owned Icap stocks?

@JunHoHoHoHo Interactive Brokers

I have a suggestion for the fund, which is good for all shareholders (both incoming, and departing):

1) sell all stocks and buy 100% Berkshire.
2) whenever icap sells at discount to 2% of NAV, do share repurchase with no limit. and whenever icap sells at a premium of 2%, icap sell shares in the open market, or issue shares, also with no limit.
3) reduce mgmt. fee to 0.15% since they're just holding Berkshire. For RM 450 Mil, that's still RM 700k a year. Pretty good $. If the fund manager don't wanna do it, can just ask the board to hire someone to do it. Easy work.

It would be Berkshire proxy, except that it doesn't have Estate Tax. Also, it trades in RM, makes it convenient for us Malaysians to buy/sell Berkshire.

Had this been approved,
1) Icap would no longer be selling at a discount by more than 2%, and it will never be selling at a premium above 2%.
2) TTB likes to quote from Warren Buffett. Might as well invest in Berkshire so that he can quote Warren Buffett even more! :-)
3) Berkshire's performance is way better than than icap. Had this been implemented either 1,3,5,10 or since inception, shareholders would have been way richer than now.
4) It solves the problem of "if icap is liquidated, where to invest the proceeds". Just buy Berkshire.

Had this been implemented, i would invest in this fund significantly. And i would recommend it to all my friends/family to invest in it too. And before anyone asked me to buy berkshire directly, there is an estate tax for anything above USD 60k.

Icapital does not needs to be liqudated since there are investors who wants TTB to manage their money (thru icapital.biz).

What is needed, is a proper governance and policy in place to ensure that the stock price stays close to its NAV (say, +/- 2%) thru buybacks when discount, and selling/issuing shares when its at premium.

This way, it allows all investors to have their stock performance in price commensurate to the performance of the fund's NAV per share during their holdings.

Buffett says it best in his 1995 letter to Berkshire shareholders, "What we would prefer instead is to have the market price of Berkshire precisely track its intrinsic value. Were the stock to do that, every shareholder would benefit during his period of ownership in exact proportion to the progress Berkshire itself made in the period."

If icap's stock price is trades at a substantial discount to its NAV, its good for the buyer, which comes at the expense of the seller. Likewise, if icap's stock price is at a premium to its NAV, its good for the seller, but it is at the expense of the buyer. Peter is earning a better return at the expense of Paul.

And if icap is trading at a persistent discount while the management is not doing anything about it, perhaps the discount is warranted. That's why you have activist. You don't see any activist in Berkshire, partly due to its size, but mainly because it is consistantly selling close it its intrinsic value at almost all the time.

"The job of a fund manager is not to manipulate the share price of its own fund through active purchase/selling."
I Agree. But buying back its stocks when its at a discount, and selling it to the open market when its at premium, is not manipulate. If you can't see the logic, you can imagine icap invest in an undervalued fund when its selling at a discount to its NAV, and when its at a premium to NAV, sells it, just like you would buy it if icap is selling at discount right now.

"If Icap utilized the cash to do a SBB to push price up, and COL start selling, who would be the loser if not the long term shareholder?"
The loser, is obvious. TTB. His fees might be reduced. You can also say investors like you might not get to accumulate more at a huge discount to NAV, but the aim is to benefit from the growth of NAV per share of the fund, and NOT from gaining more than the NAV growth at the expense of another shareholder who earns less returns than the NAV growth.

"In value investing, the only rational thing to do during price depression in regards to actual value is to keep buying and wait, instead of wishing the gap closes faster."
Yes, thus icap should buy that undervalued fund, and hope that the price remains depressed for a long term so that icap can continue to buy more and more.

Patient Investor : "after the cash are spent [for Share Buybacks, SBB], what's left to build on the landbank?"

Instead of using cash for SBB, the fund manager can reduce each holdings proportionately (including cash) when doing SBB at a discount to NAV. This way:
1) the fund remains having cash for bullets (at the same percentage of the remaining fund size), and at the same time,
2) increases its NAV per share for existing shareholders, and also
3) allow people who wants to sell their holdings in the fund (maybe need money for emergency or other needs) at a fairer price than the huge unjustified discounts.

The only downside, is perhaps.... the fund manager's pay is reduced (due to shrinking fund size), even though its NAV on a per share basis increases.

I find the biggest issue is the lack of alignment of interest between the Fund Manager and the owners of the fund. And due to that, human psychology will kick in to bend the truth to a reality that is acceptable by them. Example, Elizabeth Holmes (former CEO of Theranos) really did believe she was helping the world (Source: https://www.cnbc.com/2018/08/22/ex-theranos-ceo-holmes-believed-she-was-helping-the-world-author-says.html). Thus, its no surprise TTB truly believe Share Buyback (SBB), when bought at a discount to NAV, does not help in reducing the discount, because it is against the fund manager's benefits.

The easiest is to have a SBB policy, to buy back from the open market anytime the discount is say 2% or more of the fund's NAV, and to sell shares back to open market when the stock price is 2% or more of the NAV, with unlimited capital, with no expiration date.

Another option (which can also be done together with the above), is to align the fund manager's interest with the shareholders, namely:
1) Modify the fund manager's pay from 1.5% of NAV, to 1.5% of Market Cap.
2) Pay the fund manager in units, instead of cash.
3) Requires the fund manager to own at least 5 years of his/her compensation in the fund (equivalent to 7.5% of the fund's NAV).
4) Pay the fund manager a fixed fee (or better yet, fixed units), and not percentage of the fund size.

The (4) options above isn't as good as SBB when at discount to NAV and selling those shares at premium to NAV, but it is still way, way better than current arrangement

Of course, to do all these, it requires smart shareholders to vote wisely for directors that would effect those changes, Just like the our Malaysia's politics, It requires that the voters be smart to choose the right leader to effect a change towards better Malaysia.