Activist Value Fund
“When it comes to investing, my suggestion is to first understand your strengths and weaknesses, and then devise a simple strategy so that you can sleep at night!” – Walter Schloss
- Impressive Relative and Absolute Returns Since Inception in 2006
- Focuses on a Limited Selection of Undervalued Small Cap European Companies
- Activist Approach leads to timely ion of Undervaluation
- Private Equity in Public Markets
This Exceptional Activist Value Fund, founded in 2006, mainly focuses on undervalued European small-cap companies with a substantial untapped (value)potential. The fund focuses on a limited selection and consequently it actively works to raise and unlock the value to get the potential out of these companies.
Its investment strategy can be characterized as ‘private equity in public markets’.
‘Value with a catalyst’-style investing Occasionally, equity markets are inefficient in their pricing of individual shares. This value fund believes it can generate above-average returns by exploiting this. As such, its research of the markets is methodical in order to select the right individual shares. Its in-depth analysis also includes direct contact with senior management of identified companies, their competitors and other relevant parties. The fund bases its investment decisions on proprietary valuation models that attempt to determine the ‘fair value’ of an organisation and emphasise absolute – rather than relative – valuation multiples. When deciding to invest, it looks for any catalyst that will correct the undervaluation of a listed share within a reasonable period of time.
A focused portfolio Conventional portfolio theory holds that risks to a portfolio are lessened by diversification. Although this may be true for passive investors, the opposite applies to active investors. An active investor will limit risk by researching and analysing companies very closely, before selecting and pro-actively managing a highly focused portfolio. The fund´s focused portfolio has achieved good results and very low correlation with various reference indices – both of which are important to investors. In order to cater in particular to the demands of private investors, who are often unaccustomed to such a focused approach, the fund has added restrictions to its investment policy. It limits a position in one share to 33% of the portfolio. The position in one organisation is capped at 25% of the company’s share capital. A limited number of shares (maximum 10) are included in the portfolio.
Active and responsible The fund is an active shareholder. It believes that active involvement can help companies to fulfill their potential. Where necessary, the fund exercises its shareholder rights in a responsible manner. It aims to improve a company’s long-term opportunities and it views its share price as a reflection of its prospects. It carefully examines the business model of consistent underperformers. The fund is constructive and does not focus on quick share price gains. As a long-term investor, it is important to the fund to express any concerns and constructive criticism it might have. If it can initiate a transformational process on this basis, it will provide added value to both the company and its investors.
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