In case someone would suggest that a good fund manager should have a selection of better stocks to start with, hence it is not an even odds of good versus bad stocks, bear in mind that for every stock the fund manager bought, another investor has thought it fit to be discarded from his portfolio, and when considering all the stocks available for investing in on the exchange, half of them will outperform the market, and the other half will underperform, the same argument that half the fund managers will outperform and the other half will underperform the average, by definition. Also, if the fund manager is so smart that he can actually select the better ones to start with, then he might just as well concentrate on the few top ones instead of holding so many others or holding cash. In option pricing, at the money strike price, both puts and calls are at or near parity, with delta being 0.50, meaning that the chance for the next share price move being up or down is 50:50, like a coin flip. There is no prior assumption that on average, any stock is going to outperform the rest, the weak form of the EMH that prices already discounted all that is known about the stock. Holding a healthy cash position is more an indication that the manager does not know which way the market is heading than a conviction that a crash is coming, as otherwise, he should be in all cash then. When in doubt, you hedge, with half stocks and half cash, until the future is clearer.

When Prof Fama attributed the outperformance of some managers as luck, this is how the numbers work out. If the manager picks the same number of good stocks and bad stocks, as what chance or luck would prescribe, the worst that can happen to the bad selections is a 100% loss and that's it, whereas the good stocks can grow into a 10 bagger, and just one of these would be enough to compensate for 10 complete wipe outs on the losing side, so the distribution of returns have a longer tail on the positive side than on the negative side. Simple statistics. So with just two of these 10 baggers, the fund manager would have turned out to be a super duper stock selector by just sheer luck. And this can only be discovered after the fact. If a fund manager ex-ante can tell how his stock selection can turn out 10 years from now, he don't need to be a fund manager, just manage his own money and make all the money for himself instead of the investors just for the miserable 1.5% annual management fee. As Prof Fama has joked, if someone can devise an AI algorithm to select winning stocks, he is going to keep it all to himself instead of taking it public. The nearest equivalent are the hedge fund managers, the 2+20 crowd. For them, scale is everything. 20% of a billion is 200 million, so unless they have 200 million of his own money to start with, it is faster with a billion of OPM and make his 200 million from the performance fee.

By allowing the last minute injunction against iCap, the court appears to be aiding and abetting the foreigners, but to protest this will be in contempt, so just blame the foreigners for disrupting their well planned scheme to deprive some shareholders of the rightful votes at the AGM as provided for in the constitution.

Wah, based on the number of responses that John Dough elicited from his single post, he must have stirred a hornet's nest here, but somehow, he seems immune from their stings, unlike Patient Investor, who is smart enough not to fight the odds.

@FastMoney I must thank you for this refresher course on the conventional wisdom of portfolio management by Prof. Fama. I was too chicken to take his course during my time because of its well earned reputation of being a tough one for the non-math inclined. Prof Merton Miller's was a softer alternative and just as relevant in dealing with iCapital's claims.

What to do, as John Dough has said, if the fund manager beats the market all these years, what's the use of all this EMT? Don't apply to CDAM.

@FastMoney Don't waste your time on this, TTB already said that Chicago Business School is teaching rubbish during the AGM! You have missed the Aussie professors' enlightening lectures instead, a novel theory on dividend and share price that can supersede the decades old M&M Theorem.

@FastMoney the words low and high by themselves are not legally defined, so it is different from the case with the foreign shareholding limit thingy, which is a simple case of true or false and can be stopped with a court injunction.

The simple historical data provided by page 6 of the annual report turns out to be a treasure trove for data mining. In the prospectus of iCap, the CAGR track record of CDAM before the IPO was 22.32% from Apr 1998 to Dec 2004. The historical average for the various holding periods since IPO for NAV and share price are 14.35 and 11.97% respectively. Still a very commendable performance on face value, though no where near the pre IPO track record. Using these two numbers, the theoretical current NAV value and share price after holding the shares for 17 complete years would be $9.77 and $6.83 respectively. But the actual values achieved are only $3.723 and $2.322. What went wrong? Well, in stock markets, there is always this thing called risk or volatility. It is not as simple as straight compounding every year with the average CAGR. A very simple illustration, for a price to go from $1 to $2, it is a 100% gain, then if it drops back down to $1, that is a 50% drop, so the simple arithmetic average performance for the two years is (100+(-50))/2=25%, but the CAGR is 0%, because there is no net gain for the two years. In iCap's case, instead of the CAGR reverting to the mean, it is falling away from the mean towards the low end of the historical numbers, as shown in Chart 2 in the attached link. The more interesting bit from the data is the myth of iCap being a low risk high returns investment. Risk is measured by price fluctuations, especially those on the down side, so for conservative investors, even though the price fluctuation may be the same 5%, a 5% drop is not symmetrical with a 5% gains in terms of utility, so any time an investment may drop in price, it is considered risky. What is low risk then? EPF for one. Even though the dividend rates vary from year to year, it has never been negative and so far, can be considered risk free, and well above bank FD rates, so that can be used as the benchmark for what a conservative investor can set as the bar for investing. Out of curiosity, I looked up the EPF rates for the same years as iCap and surprise surprise, it turns out to be higher than holding iCap share, on a price basis, $2.77 vs 2.322 for iCap. The actual rate for EPF for 2023 has not been announced yet, so I just use the average rate as the naive assumed rate. The results are shown in Chart 3 here.
https://1drv.ms/x/s!AgLvGZpm89Yswj5uA3ZQnXnYvBzF?e=FDFkvg

Very basic calculations. Insas has a ROE of 5%, nothing to brag about, but if I can buy the shares at 25% of book value, my ROI becomes 5%/.25 = 20%. How many listed companies can give you that? So just treat it as a long term investment, as a silent business partner in a private company. I am sure if iCap can present the same kind of numbers, very few people will be taking pot shot at management here. At least I won't.

BTW, I do have a very small position in Insas, just park it there and don't look at the share price, just look at the earnings reports along with that of Inari. With a PER below 5, it is giving an earnings yield of 20%, which if maintained, is far better than the compounding calculations used by iCap at 15%, when its historic rate has dropped down to below 5%. I can benefit in two ways, if business remains unchanged, my shareholders equity is compounding at the rate of 20% based on my cost of investment, and a possible re-rating of the low PE, which just merely going from 5 x to still a very cheap 6 x, is a 20% increase in share price, without any change in earnings prospect. If interest rates will reverse direction in the near future, the cost of equity capital will also drop along with the risk free rate. Battered down shares will be the first to benefit, being the low hanging fruits.

@Sslee Berkshire does not have a dividend policy because it believes it can earn a better return than in the hands of the shareholders, and the M&M dividend irrelevance theorem says that shareholders can create their own synthetic dividend by selling the increased value shares in the market if they need the cash flow. It is substituting growth rate as the valuation metric instead of dividend yield, which has served the investors well all these years. Also, doing a SBB is one way of putting cash back in the hands of shareholders, which under US taxation system, is more favorable as long term capital gains than regular dividend in the hands of shareholders. A dollar earned by the company theoretically increase the NAV by a dollar, which can be either retained as retained earnings on the books, or given out to shareholders as bonus issue or dividend, This has no effect on what the company is earning on its operations, the main determination of its value. How that is financed determines the average cost of capital of the firm, how it is sliced and diced among the various stakeholders. The firm can always borrow to finance new investments and pay dividend at the same time, no problem, so cash flow is not critical, if business is good,

While the company took the trouble to invite foreign experts to analyse and explain the price discount, they have missed the elephant in the room, which any first year finance student would be able to spot. Yes, you don't need a MBA for that. It is right there in page 6 of the annual report, Table 4 and Table 5, historical returns of NAV and share price from inception to financial year end 2023. Table 5 shows the CAGR of NAV and share price, which are the compounded annual growth rate of the two metrics, similar to the internal rate of returns generated by the investment. For NAV, the CAGR has ranged from a high of 44.65% in 2007 to a low of 7.69 in 2022, and ending with 7.74 in 2023. For share price, the range is from a high of 54.93 in 2007 to a low of 4.84 in 2022 and ending at 4.9 in 2023. From these figures, the actual NAV and share price for the respective years can be calculated and the price/book discount derived. In 2007, the year with the peak CAGR's, share price was traded at a premium, but CAGR started declining after that, with the share price following. Plotted together, there is a very strong correlation coefficient between NAV CAGR and price discount, at R square = 0.86, meaning that up to 86% of the price discount variation can be accounted for by the CAGR, i.e. the declining price discount can be directly traced back to the declining CAGR performance of the fund. Mystery solved.
https://1drv.ms/x/s!AgLvGZpm89Yswi_44eGD7tZQhA9y

@observatory The stockbroking community in Kuala Lumpur is not that big, so we are pretty familiar with the players in town. The problem with Insas is that accounting rules require it to mark to market all its listed investments, so every quarter, the fluctuations in value of the listed investments overshadow its reported earnings, making it near impossible to follow by analysts. If only these are unlisted, then things would be simpler.

You don't even need to be substantial shareholder to stand for election as director to any listed company board on Bursa by virtue of one of the listing rules. But getting elected is another matter, as that will need a majority vote of support.

The takeover defense for the Insas owner is his holdings of warrants, which he can exercise should the need arises. Their historical low cost would not raise his MGO price even if triggered, whereas any new comer will first need to build up a bigger shareholding than his from scratch, from the limited float in the market, and at what price if the MGO is triggered, as the former is already at the MGO threshold, to be bigger than this will exceed the threshold. And the owner can easily do a selective capital reduction offer from the cash hoard within the company to counter the GO, so no problem with the financing, but a GO will need to be fully financed by the offeror. Definitely a much tougher nut to crack than iCap here, haha.

@Sslee With Insas, it is a more a case of the major shareholder being against conventional wisdom (I won't want to use the word irrational here, he must have his own reasons), which would suggest that the company do a SBB to capture the price discount, but as you said, that would trigger the MGO. The other shareholders can do whatever they please with their shares in the market, up or down, none of his concern. For bargain hunters, with liquidation out of the question at the moment, the only possible play out there is a low ball selective capital reduction by the owner taking the company private, at whatever level he thinks he can get away with.

@FastMoney You are good at poking at people's eyes with your pen. If I see you coming, I will walk the other side to avoid you.

In Insas 'case, relying mostly on shareholders equity instead of bank borrowings, the company is also bankrupt proof. With minimal gearing, it can survive almost any black swan events, and clean up aftewards.

Insas is a private company masquerading as a public company, so market efficiency does not apply. If the owner's intention is never to sell his shares in the market, share price discount does not matter to him. It is like WB would say, just buy the shares and don't look at the newspaper share price page, just like it grow. His control is so solid that not only is it takeover proof, but also liquidation proof, so people cannot even buy it for risk arbitrage. The NAV is wholly academic unless liquidated. The dividend yield is just around bank FD rate, so at least it can be an alternative form of savings for those investors who want to be his long term business partners. Having a public company shell allows the owner to borrow from banks without personal gurantees, so the banking facilities can still be around even if he is not, allowing his successors to carry on.

@observatory Thanks for the compliments, but I can't claim to be knowledgeable because what I have been taught has been called rubbish. But given my age and the years on both the buy and sell side of the business, there are certain things can be learned from observation and experience. If a fund is building a position in a stock, it would be against its interest to push the price up with aggressive buying, so they will try to buy lower, and if there are ready sellers, it is not unusual for prices to drop while the buying is going on, purely by coincidence. To call that evidence of price manipulation is a bit of a stretch, but in a closed door meeting, one can say anything. My group had managed to collect a 10% block of a listed counter from the market before without raising the share price one bit, so it can be done. What more if every transactions by COL need to be reported, it is all transparent and aboveboard. Once CDAM and clients combined reach the 5% reporting threshold, then both can share the blame for the reduced free float and liquidity in the market.

Investment portfolio risk is not measured by simple P&L, but by volatility. If prices can go from premium to deep discount, that is risk.

Just to add, Efficient market hypothesis is a product of Chicago research and did win a Nobel Prize, so if this is considered rubbish, then all bets are off, and there are such things like low risk and high return investments, as iCap is claimed here.

This is what ChatGPT says about low risk high returns investment (they don't give Nobel Prize for such a simple basic concept) - In finance and investing, the relationship between risk and return is a fundamental concept. Typically, investments that offer the potential for high returns are associated with higher levels of risk, and investments that are considered low risk tend to offer lower potential returns. However, the absence of barriers to arbitrage does not necessarily change this fundamental relationship. Let's break down this concept:

Risk-Return Tradeoff: The risk-return tradeoff is the principle that investors generally require compensation in the form of higher potential returns for taking on higher levels of risk. This is because riskier investments have a greater likelihood of losing value, and investors want to be rewarded for bearing that risk.

Arbitrage: Arbitrage is the practice of exploiting price discrepancies of the same or similar assets in different markets to make a risk-free profit. In theory, if there are no barriers to arbitrage, prices in different markets should quickly adjust to eliminate any pricing discrepancies.

Now, if an investment is characterized as low risk but offers high returns, it may be seen as an anomaly or an arbitrage opportunity. In efficient markets with no barriers to arbitrage, such opportunities should be quickly exploited, leading to a correction in prices. This implies that such situations are unlikely to persist.

Here's a key point to consider:

Efficient Markets: In efficient markets, all available information is already reflected in asset prices, and it is difficult to consistently find assets that offer significantly higher returns without taking on additional risk.
In summary, while the absence of barriers to arbitrage can help ensure that prices quickly adjust to their fair values, it does not change the fundamental relationship between risk and return. Investments that are genuinely low risk tend to offer more modest returns, and high returns often come with higher levels of risk. However, it's essential to remember that real-world investing is complex, and there are no guarantees.

I think I have just figured out the meaning of the message on the T-shirts of the CDAM staff, Better than Best - working with CDAM is better than going to the best business schools! Can save USD 200K in tuition and expenses, what a deal.

@speakup Why complain, I went to the AGM and I was the only one singled out for special mention. out of the thousands attendees. One consolation though, didn't have my photo flashed on the big screen this time.

COL has been accused of corporate mischief by iCap in the previous litigation, which has been dismissed by the courts as without basis. That's the only other 'wrong doings' they have been accused of so far, besides buying beyond the 20% limit. Voting against certain resolutions? Why didn't they include this in the pleadings then? I am only defending a shareholder's rights to buy shares at a deep discount for potential profit, which I am also doing myself.

Also, quoting WB doesn't make anyone a WB wannabe either, what's worse, quoting one thing and doing the opposite, like on share buy backs.

@Patient Investor Sure, it is ok to accuse COL of share price manipulation in a closed door meeting, try doing it here in a public forum and see what happens? As I said, better spend your time preparing for the defense of the upcoming court case than to keep monitoring my rants here. You know why, half of them are in response to John Dough and your posts here, so your absence will automatically reduce my need to keep defending COL, which has so far, not taken up my suggestion that it has the right to sue for damages arising from the dismissed injunction against further buying of shares, leaving others to buy cheap shares without competition.

Recent enforcement cases by Bursa https://www.bursamalaysia.com/sites/5d809dcf39fba22790cad230/assets/63f73eda39fba27cf3b70602/4._Inaccurate_Disclosures_or_Announcements__amnd-Kheesan___Clean___1_.pdf

@i3lurker The consequences for not being able to prove the existence of the foreign shareholding limit in court will be more serious than losing the single shareholding limit last time, and I believe the BOD have already been warned by the foreign parties. https://www.bursamalaysia.com/regulation/about_bursa_malaysia_regulatory/enforcement/enforcement_approach

This is what a brave independent non-executive director did instead of just resigning quietly when confronted with wrongdoings within the company, launching a derivative action https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=141715&name=EA_GA_ATTACHMENTS

The saving grace is that here, directors' fiduciary duty is only to the company, not the shareholders, so only the company can sue the directors for any breach, not shareholders, unless they want to apply to court to initiate a derivative action.

The Fund Manager/Investment advisor and designated person's job scopes are to manage the portfolios only. Any thing else, the responsibility is solely with the board of directors, like making announcements to Bursa, and spending company funds to fight legal cases.

And if I did say anything negative during the meeting and tomorrow prices go limit down like what Speakup said, I may be blamed, what for? Any way, with the injunction case coming up, management will have bigger fish to fry than bother with me, if they have read the Bursa rules and regulations I posted earlier. For the independent non-executive directors, they should consider seeking independent legal opinions at company's expense, which they are entitled to.

@FastMoney It was clearly stated both in the annual report and before the meeting that no recording will be allowed and that this will be strictly a private and confidential meeting, meaning whatever is said inside will not be deemed in public, so not subject to the laws on libel and defamation. I may not be a lawyer, but at least I know what that implies. It will be a free for all to attack the opposition by those holding the microphone, the home ground advantage. Here, it is neutral ground, don't cost me a few hundred thousand hall rental and food catering in order to say my piece.

In the earlier case against COL breaching the 20% individual limit, all that its lawyer need to ask is, show me COL's name in the share register? Similarly, for this upcoming foreign limit, only question to ask is, show me the clause in the constitution. I have already asked this here and even provided a link to the constitution for easy reference, but no one has answered.

COL has been accused of causing the price discount by manipulating the trading on Bursa. How can this be manipulation when every trade by COL needs to be promptly reported once the 5% substantial shareholding limit has been reached? Everything is transparent, whether buying or selling. so if some shareholders willingly sell at a discount because the buyer is a institution, then it is the latter's fault? What about CDAM buying a couple of million shares for its private clients, all without having to report, unlike COL? CDAM buying for itself needs to disclose, but buying for clients need not, because that's the rules. Which part of COL buying did not follow the rules then?

Under the innovative dividend policy, those wanting a good dividend top up rate will have to live with a deep discount. I am not sure whether 24% is deep or not in the books of management, in order to enjoy a 4% payout. Get rid of the discount, then dividend can only be 1%. So much for having the cake and eat it. Those who want dividends and those who want to be fully invested will be in opposite camps.

I think management should now spend more time looking for the elusive foreign shareholding limit clause to prepare for the upcoming litigation than to keep track of my insignificant posts here. Is it because I have been asking questions about this clause in the constitution all this while and got the blame for the court injunction?

If my posts are such utter rubbish, why give me the special billiings and mention in the road shows and AGM, with slides and photos? Just ignore me and let me rant like a mad man.

What is there to debate, not even in the same league! https://www.usnews.com/best-graduate-schools/top-business-schools/mba-rankings

For someone to rubbish the teachings of a university that is associated with 100 Nobel Prize winners, must be mighty confident of himself. No wonder the staff all wore T shirts proclaiming "better than the best".

Attendees at today's AGM are really lucky, to be able to hear first hand an innovative dividend policy that is worthy of a Nobel Prize because it is going to supersede the earlier prize winning theorem on the irrelevance of dividend policy.

What the Aussie professors have failed to explain is how iCap's discount dropped from 35% in Dec 2021 when COL was stopped from buying, to as low as 43% discount in Mar and April this year, if COL's increasing ownership is the major cause of the price discount. When COL resumed buying in Aug this year, the discount narrowed back to just 22%. This stretch of the most recent data does not fit the hypothesis.

iCapital is spending big money organising road shows and Investor Days in order to raise expected returns from the stock market and reduce the price discount, and this ex journalist is now trying to pour cold water over such efforts. What is his hidden agenda?

Kadir Jasin no longer works for a newspaper nor is he holding a SC financial markets license. He is in no position to comment on what licensed holders are saying or give financial advice to the public.

Just like quoting WB. Anyone can do that.

I am no real Dr lah. Only throw in some fancy financial theorems and equations to cari makan here and there. For all you know, I may not even be a student of these Nobel laureate professors in the first place. So easy to just claim to be one nowadays, haha.

Same thing with taking the dividend cash. The value add to you is the elimination of the price discount on the cash, the management fee, and the corporate tax payable on the interest earned. No magic sauce added, just some fancy descriptive labelling. What you give up is the potential g>d factor. But then, you cannot have the best of everything in your favor.