Alma Hotchkis & Wiley Global Value Equity Fund

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Overview

  • Alma Hotchkis & Wiley Large Cap Value Equity Fund seeks current income and long-term capital growth by investing in a concentrated portfolio of undervalued large companies.
  • Management of the fund is delegated to Hotchkis & Wiley LLC.

Share Class

NAV

Cumulative Performance (%)

Fund Inception 28 February 2019

Daily Monthly Ytd 1Yr 3Yr 5Yr Incept. Incept.Date

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

Funds Strategy

Investment objective: to seek current income and long-term capital growth by investing in a concentrated portfolio of large US 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 $ 1billion
  • Benchmark: MSCI World


Investment Manager

Hotchkis & Wiley is an SEC-regulated, Los Angeles-based investment adviser founded in 1980, specialized in US value equity and US high yield bond strategies.

  • Interests aligned with investors: Hotwhkis & Wiley is an employee owned firm– all 21 investment professionals own equity
  • George Davis, the CEO of Hotchkis & Wiley and senior portfolio manager of the fund, has over 30 years of investment experience. He coordinates the day-to-day management of around $27 billion of equity value assets
  • Hotchkis & Wiley manage $31billion

Key Persons

George Davis, Jr. CEO, Portfolio Manager and Principal

Mr. Davis became CEO in 2001. In his role as portfolio manager, Mr. Davis 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 and Large Cap Diversified Value portfolios, as well as represents the firm’s investment strategies to current and prospective clients. He also provides expertise and insight into the capital goods and financials sectors. Prior to joining the firm, Mr. Davis was an assistant to the senior partner of RCM Capital Management. He began his career in equity research with internships at Cramer, Rosenthal & McGlynn and Fidelity Management & Research.

Mr. Davis received his BA in Economics and History and MBA from Stanford University.

 

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.

 

 

 


Statistics & Commentary

Performance

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

as of 31/03/2019

Portfolio Characteristics

as of 31/03/2019
Main indicators Fund Index
No of Securities 54 1635
Weighted Average Market Cap ($ bn) 75.5 159.4
Median Market Cap ($ bn) 24.8 13.0
Projected P/E Ratio 9.7x 14.2x
Price / Normal Earnings 6.6x 15.8x
Price / Cash Flow 5.3x 9.8x
Price / Book 1.0x 2.3x
Price / Sales 0.8x 1.6x
Earnings Yield (%) 10.3 7.0
Dividend Yield (%) 3.0 2.5

Top 10 Position Details

as of 31/03/2019
Security name Sector % AUM
AMERICAN INTERNATIONAL GROUP Financials 5.07
GENERAL ELECTRIC CO Industrials 4.34
MICROSOFT CORP Information Technology 3.44
WESTJET AIRLINES LTD Industrials 3.30
GOLDMAN SACHS GROUP INC Financials 3.28
BAE SYSTEMS PLC Industrials 3.15
WELLS FARGO & CO Financials 3.02
SOCIETE GENERALE SA Financials 2.95
ORACLE CORP Information Technology 2.80
DISCOVERY INC-C Communication Services 2.75

Investment Manager's Commentary

as of 31/03/2019

Market Review and Outlook

After falling -13.4% in 4Q 2018, the MSCI World Index returned +12.5% in the first quarter of 2019. The swift decline and equally rapid recovery appear to have both been triggered by changes in investor sentiment as opposed to changes in underlying economic or business fundamentals. Investor concerns emerged late in 2018 regarding trade tensions and hawkish central bank action/language; this combination created fears of impending global economic recession. These concerns appeared to fade somewhat during the first quarter of 2019 due to positive progress on US/China trade talks and dovish central bank commentary that moved interest rates lower. All MSCI World sectors were positive in the first quarter, with the best returning +20% (technology) and the worst returning +8% (healthcare). The MSCI World’s forward P/E ratio increased from 14.3x at the end of 2018 to 15.7x at the end of the first quarter, which matches the index’s median valuation over the past ~20 years. While the valuation is now about average, it is considerably lower than the 18x level where it began 2018.

We view the overall global equity market as fairly valued, but believe that there is a large valuation disparity between certain segments of the market. Banks in our opinion remain a particularly attractive value. Banks in the MSCI World Index trade at 9.6x forward earnings. The median multiple for this group since 2002 (earliest data available) is 11.3x, so the group currently trades at about 85% of its historical average. Considering that banks’ balance sheets are as strong as they have been in decades, and the majority of earnings are being returned to shareholders via dividends and share repurchases, we view banks’ risk/reward tradeoff as especially compelling. The portfolio’s banks trade at an even lower valuation (7.8x consensus earnings and 6.0x normal earnings) with a payout yield of 7% (dividends + share repurchases as a percentage of total equity). Less attractive to us at current prices are utilities. The MSCI World’s utility sector trades at 17.2x forward earnings. The median multiple for utilities since 2002 is 15.4x, so the group currently trades at 112% of its historical average. Unlike banks global utilities have added financial leverage, increasing net debt to EBITDA by 25% over the past decade from 3.6x to 4.5x. Utilities can support higher debt levels than most other businesses, but paying high multiples for slow growing businesses with increased leverage is not an attractive proposition in our view. Reflecting these considerable valuation dispersion across sectors, the portfolio exhibits large sector deviations from the benchmark.

The MSCI World Growth Index outperformed the MSCI World Value Index in the quarter by about 4.6 percentage points (+14.8% vs. +10.2%); since the beginning of 2017, global growth has outperformed global value by 22 percentage points (+37% vs. +15%). Interestingly, the combination of earnings growth plus dividends paid has been similar for the underlying growth and value companies over this period. The performance difference, therefore, is almost entirely explained by changes in price multiples. The P/E ratio for the Value index has contracted by more than 20% while the P/E ratio for the Growth index has contracted by about 5%. This repricing has contributed to not only the large valuation differences across sectors but also to notable spreads within sectors. Given this backdrop, we have been able to build a portfolio that trades at a large discount to the market. The portfolio’s forward price-to-earnings ratio is just 82% of the MSCI World Value’s P/E compared to the long term average of 88%; the portfolio’s forward price-to-earnings ratio is just 53% of the MSCI World Growth’s P/E compared to the long term average of 67%. As active investors with a commitment to long-term fundamental valuation, we view this environment as conducive to our approach and we are optimistic about the portfolio’s prospects.

Fund

The portfolio underperformed the MSCI World Index for the month. Relative to the broad benchmark, the portfolio’s overweight in financials detracted from performance. The outsized position in European banks hurt; the group now trades at valuation levels not seen since the financial crisis, despite dramatically improved balance sheets, improved profitability, and payout yields in the mid-to-upper single digits. Stock selection in industrials and consumer discretionary also detracted from performance. The largest individual detractors to relative performance in the quarter were Royal Mail, Cairn Energy, WestJet Airlines, Adient PLC, and Danieli; the largest positive contributors were Hitachi, Whiting Petroleum, Unilever, Microsoft, and Oracle.


Facts & Documents

Facts

Fund Domicile: Luxembourg

Management Fee: 0.85% p.a. for I shares

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)

Identifiers:

Institutional USD Capitalisation share class
ISIN: LU1907586306   Ticker: ALHWGIU LX    Launch: 28 Feb 2019

Documents

SICAV ALMA CAPITAL INVESTMENT FUNDS
KIIDS Other sub-funds and other languages
available upon request