Alma Hotchkis & Wiley US Large Cap Value Equity Fund

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Overview

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

Share Class

NAV

Cumulative Performance (%)

Fund Inception 6 August 2014

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: 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 60 securities and generally invests in companies with a market capitalization above $3 billion
  • Investment strategy mirrors the Large Cap Fundamental Value strategy managed by the Investment manager since 1980


Investment Manager

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
  • 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 manages $25 billion

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.

 

Patty McKenna, CFA Portfolio Manager and Principal

In her role as portfolio manager, Ms. McKenna plays an integral part in the investment research review and decision-making process and represents the firm’s investment strategies to current and prospective clients. She also provides expertise and insight into the consumer and healthcare sectors. Prior to joining the firm, Ms. McKenna was an equity analyst at Trust Company of the West. Before entering the field of investment management, she has worked for five years in corporate finance at Bankers Trust and then at Fieldstone Private Capital Group. Ms. McKenna began her career as a forensic accountant in 1983.

 

Sheldon Lieberman Portfolio Manager and Principal

In his role as portfolio manager, Mr. Lieberman plays an integral part in the investment research review and decision-making process and represents the firm’s investment strategies to current and prospective clients. He also provides expertise and insight into the energy and technology sectors. Prior to joining the firm, Mr. Lieberman was the chief investment officer for the Los Angeles County Employees Retirement Association (“LACERA”). At LACERA, he was responsible for overseeing the fund’s investment activity, as well as developing and implementing investment policy, strategy and guidelines. Prior to his position at LACERA, he was manager of trust investments at Lockheed Corporation.


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.

Portfolio Characteristics

Top 10 Position Details

Investment Manager's Commentary

as of 29/05/2020

Market Review and Outlook

The S&P 500 Index returned +20.5% in the second quarter of 2020, recovering most of its first quarter decline; the index is -3.1% since the beginning of the year. Most US states took steps to reopen during the quarter, and the Federal Reserve announced additional actions to further stimulate the economy: continue large scale asset purchases, hold interest rates near zero through 2022 if needed, and initiate purchases of individual corporate bonds. Employment and consumer spending improved more quickly than the market anticipated, helping fuel the equity market rebound. Volatility remained elevated, however, as an increase in COVID-19 cases accompanied the reopening efforts, and turbulent US/China trade negotiations resurfaced.

The Russell 1000 Growth Index outperformed the Russell 1000 Value Index by more than 13 percentage points in the quarter (+27.8% vs. +14.3%). This extended growth’s year-to-date advantage to more than 26 percentage points (+9.8% vs. -16.3%) and its three-year edge to 63 percentage points (+68.5% vs. +5.5%). The wide valuation gap between growth and value now resembles levels only 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 in any one year are impaired, due to a pandemic or otherwise, it will reduce our estimate of intrinsic value. However, unless the company lacks the financial wherewithal to survive challenging times—something we work hard to avoid in the first place—it is unlikely to result in a 50% reduction to our intrinsic value estimate. Yet in many cases recent market prices have declined by this amount or more, often despite little to no solvency/survival risk. 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 by similar amounts. 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.

Fund

Attribution: 2Q 2020

The portfolio outperformed the Russell 1000 Value Index in the second quarter of 2020. Positive stock selection trumped the portfolio’s value-biased headwind in the quarter. Stock selection was positive in all but two sectors, with financials, energy, and healthcare leading the way. The overweight exposure to energy and technology along with the underweight exposure to consumer staples and utilities also helped performance. Stock selection in industrials and materials were detractors, along with the underweight exposure to materials. The largest positive contributors to relative performance in the quarter were Apache, Hess, Microsoft, AIG, and Magna International; the largest detractors were General Electric, Wells Fargo, Royal Dutch Shell, Hewlett Packard Enterprise, and PPL.

Largest New Purchases: 2Q 2020

Booking Holdings is one of the largest online travel agents (“OTA”) in the world, operating leading brands worldwide: Booking.com, Priceline.com, Agoda, Kayak, Rentalcars.com, and Opentable. Booking is the global leader in the OTA market, which enjoys a secular growth rate that is 2-3x faster than the overall travel industry. The company has greater exposure to the more profitable European lodging market because it is more fragmented than the US. The impact of COVID-19 will have a material impact on near term earnings and cash flows, but the company has ample liquidity to weather an extended lockdown.

PNC Financial Services is one of the nation’s largest banks with leading deposit share in many of the geographies in which it operates. This advantage enables the company to earn margins and returns on capital at above-peer levels. It recently sold a large and long-standing stake in Blackrock, which should have a minimal impact on normal earnings power but increases its excess capital, further strengthening an already defensive bank franchise.

PPG Industries is one of the world’s largest paint and coating companies. The current macro environment is leading to sharp declines in PPG’s key end markets, most notably auto OEM and refinish, aerospace, and general industrial. While 2020 will be a weak year, PPG should weather this environment better than most chemicals companies given its flexible/variable cost structure. The company can grow over the long run with minimal capital reinvestment and has a strong history of return cash to shareholders.


Facts & Documents

Facts

Fund Domicile: Luxembourg

Fund Type: UCITS SICAV

Fund Launch: 6 August 2014

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)

Fund Managers: George Davis, Scott McBride, Judd Peters, Patty Mckenna, Sheldon Lieberman, Patrick Meegan

Countries where the fund is registered:
France, Germany, Luxembourg, Switzerland, United Kingdom, Austria

Identifiers:

Institutional USD Capitalisation share class
ISIN: LU0963547111   Ticker: ALDCPBI LX    Launch: 6 Aug 2014

Retail USD Capitalisation share class
ISIN: LU0963547970   Ticker: ALDCBRU LX    Launch: 21 Nov 2017

Documents