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Brief History of First Eagle Investment Management:
First Eagle, founded in 1864, is an independent Investment Management Company that manages the investment of its clients (both institutions and individuals). The New York-based company is a hedge fund with 33 clients and around $110 billion of investment. The services offered by First Eagle include investment advisory services, financial planning, and portfolio management. First Eagle Investment Management mainly serves institutional accounts, investment funds, financial advisory sectors, and high-net-worth individuals in the United States.
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Before moving further, let’s learn more about what a hedge fund is.
What is a Hedge Fund?
A hedge fund pools money from investors and invests in comparatively liquid assets in an attempt to improve performance. Institutional investors manage these funds normally to operate with the prime goal to mitigate risk.
Types of Investment Funds Offered by First Eagle Investment Management:
There are a number of investment funds that First Eagle Investment Management manages. Some of them include:
- Fund of America (FEFAX)
- Overseas (SGOVX)
- Global (SGENX)
- U.S. Value (FEVAX)
- Gold (SDGDX)
- Global Income Builder (FEBAX)
- High Yield (FEHAX)
Let’s drill these down further and see what else they have got to offer:
1. First Eagle Fund of America (FEFAX):
Capital appreciation and present income are two goals of this investment. To a lesser degree, it also invests in debt and international equity securities. Investments in domestic stock and debt instruments typically account for at least 80% of net assets (including any borrowing for investment purposes). Common stock, hybrid instruments including preferred stock and convertible securities, warrants, corporate bonds, repurchase agreements, real estate investment trusts, and derivatives are examples of these types of investments. It lacks variety.
2. First Eagle Overseas Fund (SGOVX):
With this strategy, the goal is to grow wealth over the long term by purchasing stocks issued by companies based outside of the United States. Equity securities from non-U.S. firms will be the fund’s primary investment; but, it may also invest in nations with economies that are still in the early stages of development (like Japan, Germany, and France). Most of its net assets (including any borrowing for investment reasons) are invested in foreign securities, and it “counts” derivative positions that are related to that allocation toward that percentage.
3. First Eagle Global Fund (SGENX):
In the long run, the fund’s goal is to increase the value of investors’ money. However, it may also invest in fixed income, gold, and futures contracts for precious metals such as silver and gold. In the event of market or economic conditions changing, the Fund can adjust quickly.
4. First Eagle U.S. Value Fund (FEVAX):
The cautious portfolio of First Eagle U.S. Value works well in down markets. The fund’s assets amount to about $1.32 billion as of August 18, 2021, spread among 74 distinct investments. The majority of the fund’s holdings are in big and mid-cap firms. Compared to other funds, this one has a low risk of outperforming the market.
5. First Eagle Gold Fund (SDGDX):
In exchange for a percentage of their entire investment portfolio, investors will have the chance to participate in the investing qualities of gold through this investment strategy. This fund’s goal is to provide gold-related investment characteristics to investors, so it invests at least 80% of its net assets (plus any borrowing for investment purposes) in gold and/or securities directly related to gold or issuers principally engaged in the gold industry, including securities of gold mining finance companies and operating companies with long, medium, or short mine life.
6. First Eagle Global Income Builder Fund (FEBAX):
This investment aims to generate short-term income and long-term financial gains. US is the beneficiary of the fund’s assets. And foreign common stocks with attractive dividend yields, as well as a variety of fixed income instruments, such as high-yield, below-investment-grade instruments, investment-grade instruments, and sovereign debt, from markets in the United States and around the world. Any maturity or investment rating, as well as unrated securities, can be invested in.
7. First Eagle High Yield Fund (FEHAX):
About 80% of the net assets of this fund are allocated to low-quality debt instruments, sometimes known as “high yield” or “junk” bonds. Unrated securities or other instruments judged below investment grade by the fund’s Adviser may be invested in and count towards this 80% allotment.
Gold Holdings:
Most of First Eagle’s funds, on average, have some gold in them. One of the main holdings of the Global Fund is gold bullion, which accounts for 6.2 percent of the fund’s total assets.
What’s the deal with all the gold? The fund managers at First Eagle have found that using it as a hedge against market declines has been quite effective.
Minimum Investment and Contributions:
The First Eagle funds have a $2,500 minimum investment requirement. The minimum monthly commitment for First Eagle members who are active contributors is $100. Class I shares need a minimum investment of $1,000,000 to become a shareholder.
Fees and Expense Ratios of First Eagle Investment Management:
The expense ratios for all First Eagle funds are listed below:
- Fund of America (FEFAX): 1.30%
- Overseas (SGOVX): 1.14%
- Global (SGENX): 1.10%
- U.S. Value (FEVAX): 1.09%
- Gold (SDGDX): 1.27%
- Global Income Builder (FEBAX): 1.18%
- High Yield (FEHAX): 1.15%
Shareholder costs for First Eagle Fund portfolios range from 5% for investments under $25,000 to 0% for investments above $1,000,000, depending on the amount invested.
High Yield Funds demand a 4.50 percent sales charge for investments under $100,000 and zero percent fee for investments over $1,000,000, with the exception of mutual funds.
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Pros of First Eagle Investment Management:
• Small fund size: less “cash drag” than larger funds because a small percentage of shareholder cash needs to be invested each day.
• Turnover ratio is low – 9%; that impressively compares favorably to peer average of 50% or more – thus keeping transaction costs down, which helps performance over the long run
• Since inception, First Eagle Global has outperformed the S&P 500 by an average of more than three percentage points per year (19.3% annualized vs. 16.4%). Over the same time period, First Eagle Value has beaten the Russell 2000 Value Index by almost four percentage points per year (14.2% vs. 10%).
Cons of First Eagle Investment Management:
• Funds may not do well during unfavorable market conditions like bear markets, economic downturns, and periods of high inflation or deflation.
• Expense ratios are higher than competitors – 1.02%; First Eagle funds cost about 40 to 50 basis points less on a net basis after taking into account revenue sharing expense offsets that some competing firms provide their outside clients.
• Stock holdings are concentrated in value stocks which many experts believe carry a higher risk factor than growth stocks, and vice versa for bond holdings.
With that being said, First Eagle Investment could be the life-changing option that you have been waiting for all this time.