Alma Hotchkis & Wiley Global Value Equity Fund
Alma Hotchkis & Wiley Global Value Equity Fund seeks current income and long-term capital appreciation by investing in a portfolio of global companies.
Investment manager: Hotchkis & Wiley Capital Management, LLC
Hotchkis & Wiley is an SEC-regulated, Los Angeles-based investment adviser founded in 1980, specialised in value equity and high yield bond strategies.
Cumulative Performance (%)
Fund Inception 28 February 2019
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
Strategy & Manager
Investment objective: seek current income and long-term capital appreciation by investing in a portfolio of global companies
- Investment process: analyse long term company fundamentals through in-house bottom-up research aiming to identify undervalued stocks
- The fund typically holds 40 to 80 securities and generally invests in companies with a market capitalization above $1 billion
- The fund invests primarily in companies located in developed countries, with at least 40% outside the U.S. Emerging markets: up to 20%
Hotchkis & Wiley is a SEC-regulated, Los Angeles-based investment adviser founded in 1980, specialised in value equity and high yield bond strategies
- Employee owned firm: 90% of the investment team and 67% of all employees own equity
- Investment team has over 23 years average investment experience and 15 years average tenure at Hotchkis & Wiley
- Hotchkis & Wiley manages $25 billion
Scott McBride, CFA Portfolio Manager and President
Mr. McBride became President of Hotchkis & Wiley in 2016. In his role as portfolio manager, Mr. McBride plays an integral part in the investment research review and decision-making process. He coordinates the day-to-day management of Large Cap Fundamental Value, Large Cap Diversified Value, Global Value and International Value portfolios, as well as represents these strategies to current and prospective clients. He also provides expertise and insight into the consumer, financials, healthcare and technology sectors. Prior to joining the firm, Mr. McBride was an associate consultant with Deloitte Consulting and worked as an investment marketing analyst with Fidelity Investments.
Patrick Meegan, CPA Portfolio Manager
In his role as portfolio manager, Patrick Meegan plays an integral role in the investment research review and decision-making process. He coordinates the day-to-day management of all High Yield bond and Capital Income portfolios. He also provides expertise and insight into the financials and healthcare sectors. Mr. Meegan began his career at H&W as an investment analyst and became portfolio manager in 2001. Prior to joining the firm, Mr. Meegan was an audit manager at Arthur Andersen and specialized in financial statement audits and advising clients on SEC reporting issues.
Mr. Meegan, a Certified Public Accountant, received his BA in Business Administration with honors from California State University, Fullerton and his MBA with honors from the Anderson School of Management at the University of California, Los Angeles.
Judd Peters, CFA Portfolio Manager
In his role as portfolio manager, Mr. Peters plays an integral part in the investment research review and decision-making process. He coordinates the day-to-day management of Large Cap Fundamental Value, Large Cap Diversified Value, Small Cap Diversified Value and Global Value portfolios, as well as represents these strategies to current and prospective clients. He also provides expertise and insight into the capital goods, energy and technology sectors. Prior to joining the firm, Mr. Peters was an analyst in the corporate finance department of an investment banking firm.
Scott Rosenthal, Portfolio Manager
In his role as portfolio manager, Mr. Rosenthal plays an integral part in the investment research review and decision-making process. He coordinates the day-to-day management of Global Value and International Value portfolios and represents these strategies to current and prospective clients. He also provides expertise and insight into the capital goods, energy and financials sectors. Prior to joining the firm, Mr. Rosenthal was a member of the investment team at FLAG Capital Management where he worked to identify and evaluate fund-of-funds investment opportunities in venture capital and private equity. He began his career as an analyst with UBS’ Health Care investment banking group. Mr. Rosenthal received his BA in Economics from Boston College and MBA with honors from Columbia Business School.
Statistics & Commentary
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
Sector Breakdown as a % of AUM
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Top 10 Position Details
Investment Manager's Commentaryas of 29/05/2020
Market Review and Outlook
The MSCI World Index returned +19.4% in the second quarter of 2020, recovering most of its first quarter decline; the index is -5.8% since the beginning of the year. During the quarter, economic activity began to rebound globally. Prices of risk assets, including equities, also benefited from aggressive central bank and government intervention. Volatility remained elevated, however, as the recovery remains uneven and uncertain, with the virus’ continued presence complicating reopening efforts.
The MSCI World Growth Index outperformed the MSCI World Value Index by nearly 13 percentage points in the quarter (+25.5% vs. +12.6%). This extended growth’s year-to-date advantage to more than 24 percentage points (+6.5% vs. -17.8%) and its three-year edge to 51 percentage points (+48.6% vs. -2.4%). The wide valuation gap between global growth and global value is approaching levels only previously observed during the late 1990’s tech/growth bubble.
Our estimate of a company’s intrinsic value is based on its earnings power over the long term, i.e. over a period of many years. If a company’s earnings temporarily contract in any period—as will happen to many of our businesses due to the global pandemic and related recession—it should only modestly reduce our estimate of intrinsic value. The exception is when a company lacks the financial wherewithal to survive the contraction—something we work hard to avoid. We believe that the share price declines for many of our cyclical businesses have meaningfully outpaced the declines in intrinsic value. Meanwhile, companies that are largely insulated from COVID-19’s reach, and those that benefit from it in the short term, have seen their stock prices rise considerably. Many of these companies traded at elevated valuations even before this period. We recognize the seriousness of the pandemic, including its extensive impact on the economy and capital markets; however, we view the market’s response as myopic. While COVID-19 has taken a painful toll, both human and economic, we will get through it. When we do, we are confident that more rational economics will prevail, and valuations will revert toward more normal relationships—our clients are well positioned to benefit from such a scenario.
Recently, the Business Cycle Dating Committee of the National Bureau of Economic Research (“NBER”) declared February 2020 as the official start of a recession in the United States. This ended the 128-month expansion, which was the longest, though not the strongest period of sustained economic growth in the history of US business cycles, dating back to at least 1854. Since the Great Depression, the average recession has lasted less than a year. In the recovery following recessions, value has outperformed growth consistently and by a large margin. In the five-year period following a recession’s end, value beat growth in all 14 recovery periods dating back to the Great Depression, with an average performance advantage of more than 50 percentage points. Value has demonstrated similar performance trends in international markets.
The irrational gap between global growth and value indices represent an uncommon opportunity, but in our view, the true opportunity in today’s market goes well beyond this simple relative incongruity. The opportunities within value are extraordinary. The portfolio trades at 6.4x normal earnings which is near record low levels compared to its history; this represents a significant discount to the MSCI World Index, which trades at 16.2x normal earnings.
Attribution: 2Q 2020
The portfolio underperformed the MSCI World Index in the second quarter of 2020. The strategy’s value bias caused the underperformance as growth outperformed value considerably; the strategy did outperform the MSCI World Value Index meaningfully. Relative to the broad benchmark, stock selection in technology and industrials detracted from performance. The overweight exposure to financials and underweight exposure to technology also hurt. Positive stock selection in real estate and financials helped performance, along with the underweight exposure to real estate and utilities. The largest individual detractors to relative performance in the quarter were General Electric, Wells Fargo, Tokio Marine Holdings, BAE Systems, and Embraer; the largest positive contributors were Magna International, AIG, Siemens, Royal Mail, and News Corp.
Largest New Purchases: 2Q 2020
Euronet Worldwide is a provider of electronic payment systems, with a network of ATMs, a money transfer business, and a digital media payment business. Core markets are sensitive to travel, and as a result are under pressure today. We believe that travel ultimately resumes and recovers. The business has a long runway for growth, a history of consistent execution, a good balance sheet, and strong leadership. The current share price does not reflect these qualities.
Evercore has built a strong investment banking advisory business that has consistently gained market share from its peers. The company has a clean balance sheet and the business model generates extremely high incremental returns and should be able to return most of its net income to shareholders. Concerns about a sharp decline in M&A advisory activity have pressured shares, but we believe that the company’s earnings will recover.
Popular, the largest bank in Puerto Rico, has a dominant market share of loans and deposits in the US territory. In addition to its leading share in Puerto Rico, it has a niche US regional banking business with operations primarily in Florida and New York City targeting the Hispanic market. As a result of this unique market position, the bank earns very high returns on its capital. The bank has substantial excess capital on its balance sheet, positioning it well to manage through the current environment.
Facts & Documents
Fund Domicile: Luxembourg
Fund Type: UCITS SICAV
Fund Launch: 28 February 2019
Base Currency: USD
Depositary, Administrator, Transfert Agent: BNP Paribas Securities Services (LU)
Dealing: Each day with a 1-day notice
Cut-off time: 5 pm CET
Management Company: Alma Capital Investment Management
Investment Manager: Hotchkis & Wiley Capital Management, LLC (US)
Institutional USD Capitalisation share class
ISIN: LU1907586306 Ticker: ALHWGIU LX Launch: 28 Feb 2019
available upon request