Would you invest in a rare coin fund?

MrEureka · December 3, 2005 9:04AM

Assume that you respect the manager of the fund and trust the accounting.

Assume the fund can buy coins or anything related to coins.

Assume that the management fee is 1% per annum plus 20% of the net profits.

Assume the fund is an actively managed "trading fund". In other words, they usually don't buy and hold.

lordmarcovan · December 3, 2005 9:04AM

Nope.

CarlWohlforth · December 3, 2005 9:09AM

Nope. I don't think the market is as liquid as stocks and I wouldn't invest in a hedge fund because the %1 fees + %20 profits just irks me.

However I might enjoy collecting current stock certificates.

Outhaul · December 3, 2005 9:11AM

Nope

PerryHall · December 3, 2005 9:12AM

Noe

ER · December 3, 2005 9:13AM

<< Noe >>

tradedollarnut · December 3, 2005 9:14AM

I already have.

Clankeye · December 3, 2005 9:16AM

No. I don't like hoping someone else does a good job for me.

ormandh · December 3, 2005 9:17AM

Heck no. -Dan

MrEureka · December 3, 2005 9:17AM

I already have.

TDN - You have no idea how impressed I am that you can laugh about that.

FatMan · December 3, 2005 9:17AM

No, not because I am against investing in a well managed fund but because of how this fund it set up. The 20% of the net profit of an actively traded fund creates the wrong motivation for the manager. A profit or loss event can only take place at the sale of a coin as that is the only event that can accurately measure value. This would encourage the manager to sell profitable coins too early and keep losers in the fund.

100proof1957 · December 3, 2005 9:18AM

alot of people here dont remember 88-91

ill pass !

MrEureka · December 3, 2005 9:20AM

No, not because I am against investing in a well managed fund but because of how this fund it set up.

Fats - What arrangement would you recommend?

bonkrood · December 3, 2005 9:20AM

No, sounds to risky right now.

MrEureka · December 3, 2005 9:24AM

No, sounds to risky right now.

Bonkrood - Are you currently buying any coins? If so, why aren't they too risky for you?

TommyType · December 3, 2005 9:25AM

<< No, sounds to risky right now.

Bonkrood - Are you currently buying any coins? If so, why aren't they too risky for you? >>

Read our lips: Discretionary, entertainment, hobby funds.

coinguy1 · December 3, 2005 9:28AM

<< The 20% of the net profit of an actively traded fund creates the wrong motivation for the manager. A profit or loss event can only take place at the sale of a coin as that is the only event that can accurately measure value. This would encourage the manager to sell profitable coins too early and keep losers in the fund >>

<< Fats - What arrangement would you recommend? >>

Hopefully others are also allowed to reply to that question....Let the manager be paid his fee, if applicable, once the fund has been completely liquidated/closed.

MrEureka · December 3, 2005 9:33AM

Hopefully others are also allowed to reply to that question....Let the manager be paid his fee, if applicable, once the fund has been completely liquidated/closed.

Mark - Although I like your suggestion, you were not allowed to reply. (BTW, I especially like the suggestion because it forces the manager to time the market.)

Fats - I'm still waiting!

roadrunner · December 3, 2005 9:33AM

Yes, they have outlets and source I can only dream of. But there are precious few dealers I would trust. I mean like the fingers on one hand. Halperin's NERCA fund 1 from 1977-1980 was amazing.
These guys also know market timing.

Circumstances and my gut feeling for the buyers is critical. The 20% fee doesn't scare me. Halperin would be one. Andy, you might actually be another! Tremendous market saavy, access would be critical. There are so many less than fully honest dealers out there this is a tough one.

roadrunner

TorinoCobra71 · December 3, 2005 9:34AM

NEGATIVE!

TorinoCobra71

Gemini · December 3, 2005 9:34AM

I like to pilot my own ship...I might not know where I'm going but I'm having a heck of a time.

relayer · December 3, 2005 9:35AM

No, but it sounds like a good way for a dealer to make up to a 21% profit on other peoples money - with no downside (other than perhaps some jail time)

mercurydimeguy · December 3, 2005 9:36AM

<<Let the manager be paid his fee, if applicable, once the fund has been completely liquidated/closed. >>

Assuming the "manager" can be a firm, how would the firm be paid if it only made money once the fund is liquidated? It might not get liquidated for some time....

MrEureka · December 3, 2005 9:38AM

Assuming the "manager" can be a firm, how would the firm be paid if it only made money once the fund is liquidated? It might not get liquidated for some time....

Too bad for the firm. Sometimes, you don't get to take your money off the table as soon as you like.

coinguy1 · December 3, 2005 9:41AM

<<Assuming the "manager" can be a firm, how would the firm be paid if it only made money once the fund is liquidated? It might not get liquidated for some time....>>

<<Too bad for the firm. Sometimes, you don't get to take your money off the table as soon as you like.>>

Andy, if I wasn't allowed to answer, it seems a bit unfair that you could reply to a reply to my answer

classiccoin · December 3, 2005 9:43AM

"assume that you respect the manager of the fund and trust the accounting.

Assume the fund can buy coins or anything related to coins.

Assume that the management fee is 1% per annum plus 20% of the net profits.

Assume the fund is an actively managed "trading fund". In other words, they usually don't buy and hold."

a.. people initially respected noe and that fund too

b.. too much incentive for sweetheart deals.. under the table deals.. shady trades.. and everything else that coin dealers can do

c.. a management fee plus 20% of profits is highway robbery and obscene for a mutual fund.. it may even be illegal

d.. no way jose

classiccoin · December 3, 2005 9:44AM

<< No, but it sounds like a good way for a dealer to make up to a 21% profit on other peoples money - with no downside (other than perhaps some jail time) >>

ha.. how true

FatMan · December 3, 2005 9:45AM

<< Fats - I'm still waiting!

>>

Sorry Andy, went to get a bite to eat.

Are we negotiating?

I would think a back end load of x% of the gain would be a more appropriate method of compensation. As well as the 1% per annum management fee.

Mark · December 3, 2005 9:52AM

Andy:

Even taking totally as given what you are saying about honesty, etc., I think it would generally be a bad idea for many of us to invest in such a coin fund because many of us already have a sizeable fraction of our wealth in coins. It would be much better for us to diversify by putting our funds elsewhere: Stocks, bonds, real estate, etc.

Now, a large part of my wealth is tied up in coins. But I am not "upset" about my current lack of diversification because I truly enjoy looking at my coins. However, I sure wouldn't get that same enjoyment out of a coin investment fund. So investing in a coin fund would not give me any numismatic pleasure and would not diversify my funds at all; indeed, it would tend to concentrate them.

Historically, as I recall there have been a few coin funds started. Also as I recall, they all flopped, though I don't know any of the particulars. But this track record might suggest that your givens--honesty and so forth--might be tough to achieve. This point is yet another reason to avoid coin funds.

Mark

MAD4MORGANS · December 3, 2005 9:53AM

<< Assume that you respect the manager of the fund and trust the accounting. >>

Trust no one....

We are a nation that has evolved into not being able to trust anyone...not even in God!!

Shamika · December 3, 2005 9:53AM

Five years ago - definitely

Three years ago - probably

Today - no way

Abaco24 · December 3, 2005 9:53AM

No since the grading and values are all over the place. Too many varibles.

MAD4MORGANS · December 3, 2005 9:55AM

Suppose that manager or investment company invested in overpriced TPG coins....

Darkmane · December 3, 2005 9:58AM

<< Five years ago - definitely

Three years ago - probably

Today - no way >>

is that just because its been all up up up over the last 5 years? =P

MikeInFL · December 3, 2005 10:11AM

No chance. 20% is ridiculous compared with other investments that do have a proven track record and lower fees....Mike

CarlWohlforth · December 3, 2005 10:17AM

Not to pick on Mike in FL because others (including me) have said this: <No chance. 20% is ridiculous compared with other investments that do have a proven track record and lower fees....Mike>

To charge %1 + %20 of profits is typical of (stock) hedge funds today...

Andy, perhaps, is suggesting coins can be an investment. Or maybe I am reading too much into this...

DaveG · December 3, 2005 10:19AM

I wouldn't invest in a rare coin fund.

I might, however, invest in a coin dealer.

MrEureka · December 3, 2005 10:20AM

a management fee plus 20% of profits is highway robbery and obscene for a mutual fund.. it may even be illegal

I think you're making an unfair comparison to multi-billion dollar mutual funds. Also, you should see the fees charged by hedge fund managers.

Anyway, a coin fund would need to be well under $100 million to have a chance at making a good return. 20% of the profits (if any) on a let's say $50 million portfolio is not all that obscene, assuming the right manager. After all, anyone that can raise $50 million can probably make seven figures a year in other ways, without raising a dime.

mrearlygold · December 3, 2005 10:20AM

No.

MrEureka · December 3, 2005 10:23AM

No since the grading and values are all over the place. Too many varibles.

Those "variables" are major opportunities that will undoubtedly be exploited by the fund manager. Be glad they exist.

coinkat · December 3, 2005 10:23AM

Interesting concept... what are you buying?

Shorting?

CarlWohlforth · December 3, 2005 10:24AM

<After all, anyone that can raise $50 million can probably make seven figures a year in other ways, without raising a dime>

Andy is rationalizing the fee rather than the investment. Sure a great manager deserves dough, that is why they are running hedge funds rather than coin funds.

roadrunner · December 3, 2005 10:26AM

5-10 years down the road after the bubble bursts? Sure.

So many scams out there today and companies mis-stating their books (contrary to the wishers of SOX)....I'll take the coin fund.
A $10K share would not be too obtrusive. $100K...well that may be for the bigger boys.

Halperin's NERCA1 fund took $300K and turned it into $2MILL as I recall. Their timing was impeccable and they knew the market was coming to an end. I could accept that and only get 80%. Note that 90% of all coin collectors and investors LOSE money. Ironically most would do far better entrusting to the right dealer or fund....and I don't mean a Noe since that was a premise of the thread.

As much as I love being solo and think I can play the market, a fund by a group of pros with market connections will consistently kick my a$$....even with a 20% fee or a 30% fee. The fund WILL beat you and I consistently. Problem is finding a fund that is 100% legit and you can trust.

roadrunner

MrEureka · December 3, 2005 10:28AM

Andy is rationalizing the fee rather than the investment.

Only responding to the comment that "20% is obscene".

Obviously, any deal that can be sold at a price is reasonable at the price, and any deal that can't be sold at a price is priced unreasonably. (OK, maybe not obvious, but true.) Anyway, the deal wouldn't be priced at 20% if I didn't think it could be sold. Hypothetically, that is.

SethChandler · December 3, 2005 10:45AM

mercurydimeguy · December 3, 2005 10:50AM

I think questions/concerns around credibility can be largely mitigated given a proper governance/structure.

But I have been enlightened to the extent of distrust in the industry. People are portraying it like a den of thieves. I choose not to believe that -- I'm sorry.

Also, too many people are focusing on "my cut / your cut". The concept of hedging downside risk with upside potential is fool's folly.

500Bay · December 3, 2005 10:59AM

<< Assume that the management fee is 1% per annum plus 20% of the net profits.
>>

Imagine a stock mutual fund that kept 21% of the profits for the managers. No one would invest in it; and no one would invest in such a high fee investment vehicle either.

That said, even it were set up like a stock mutual fund, I would still not invest in it. Coins are too subjective and there is no regulation of the TPG's. It is a recipe for fraud with investment funds. It's risky enough doing it as a collector who just would like to preserve his capitol in his hobby.

RedneckHB · December 3, 2005 11:01AM

No. I would rather take my lumps and do it myself. I hate to blame others for my lack of due diligence.

20% of profits is not an obscene amount. A good manager is very difficult to find and should be appropriately compensated. 100's of billions of $$$ are currently invested under this payment structure. However very,very few of the money managers actually deserve it.

MrEureka · December 3, 2005 11:24AM

Also, too many people are focusing on "my cut / your cut". The concept of hedging downside risk with upside potential is fool's folly.

Mike - Please explain.

BBN · December 3, 2005 11:26AM

nope. Straight mutual funds for me.

MrEureka · December 3, 2005 11:30AM

Speaking for myself, when and if I retire from the coin business, I'd happily pay someone 20% to do for me what I have done for myself over the years. But for now, I have enough exposure to the coin market.

Would you invest in a rare coin fund?

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