Download Click to download IMVA Opportunity November 2014

Hereford Funds-IMVA Opportunity Fund
November 2014
November 2014 Investment Review
November was another disappointment for the Fund. Unfortunately, this trend is not likely to change dramatically in December, given the pressures from tax-loss selling and portfolio
managers’ tendency to “window dress” their holdings.
The main culprit in November was the collapse in energy sector stocks in the last week of the month. OPEC’s decision to leave production “as is” was obviously not priced into the
market, and the resulting drop in WTI prices hurt our energy holdings. All energy stocks have been affected, but many small capitalization energy stocks were decimated. The mix of
commodity price uncertainty, tax-loss selling, and end-of-year window dressing has created a downward spiral that feeds upon itself. The small capitalization companies we own
generally have financial flexibility next year and can go into survival mode if need be. That attitude does not play well on Wall Street, but it is natural for managers whose net worth is
tied to the long-term health of their insider holdings. The energy sector appears toxic right now to most, but the sector’s swings are rarely predicted accurately by the consensus.
Looking ahead, I believe that there are good odds this will prove to be a favorable time to maintain our energy exposure.
Altisource Portfolio Solutions took another leg down during the quarter. The Company announced it would shut down a portion of its business (about 25% of earnings estimates for
next year). This announcement is most likely part of a settlement process with the New York Department of Financial Services. ASPS is still selling at less than 10x earnings
projections for next year, and management believes the Company has exciting growth prospects outside of their traditional business with Ocwen. I continue to hold both of these
stocks on the assumption that the companies will come to a settlement with the New York DFS and have good capital gains potential after that settlement.
Among our other large positions, 3D Systems appears to be doing well, though the stock did not improve much in November. Management was excited about their showing at
Euromold last week (the preeminent 3D printing trade show). The Chairman has been buying the stock on the open market, and management seems as confident as ever that their
plan to “harvest” this year’s R&D investments over the next five years will be very favorable to equity holders. I believe them, but there are many short sellers who appear not to. We
shall see.
Healthcare, generally speaking, has been a bright spot for us this year, one of the few. We remain overweight in Luminex based upon our expectation of an eventual sale of the
company. Anacor Pharmaceuticals continues to report good news, and its shares are reacting accordingly.
As I mentioned above, December is not likely to produce a strong turnaround for the Fund due to a variety of end-of-the-year phenomena. Looking ahead, I am eager to get into 2015
and, hopefully, begin to see a reversal in the trends and issues that have caused our losses this year.
Key Information
NAV A Shares (30/11/14): $69.16
Total Fund Size: $2.11 mil
Strategy Assets: $165.04 mil(a)
Fund Launch Date: 31-Jan-14(b)
Monthly Performance (%)
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14
N/A
-0.8
-1.3
-2.1
-1.9
5.3
-6.4
1.7
-8.6
-13.1
-7.7
N/A
4.6
0.8
0.4
2.2
2.3
-1.8
4.1
-1.8
2.7
2.5
N/A
4.6
0.8
0.7
2.4
2.1
-1.4
4.0
-1.4
2.4
2.7
Hereford Funds-IMVA Opportunity Fund
S&P 1500 Index(d)
(d)
S&P 500 Index
Period Performance (%)
YTD
-34.3
13.2
14.0
IMVA Opportunity Portfolio(c)
(d)
S&P 1500 Index
S&P 500 Index(d)
1 yr
-30.8
16.0
16.9
2 yr
-0.4
23.3
23.4
3 yr
10.6
20.8
20.9
4 yr
9.2
17.3
17.5
5 yr
12.5
16.2
16.0
10 yr
10.0
8.3
8.1
YTD
-30.8
17.1
18.1
Since Inception 31/03/99
Cumulative
Annualised
150.9
6.1
135.2
5.6
115.5
5.0
IMVA Opportunity Portfolio (c) vs. S&P 1500(d) & S&P 500(d)
Ten Years Ending 30/11/14
450
Start of Hereford Funds-IMVA Opportunity Fund
31-Jan-14
350
400
300
350
250
300
200
250
150
200
100
150
50
100
500
IMVA Opportunity Portfolio
Fund's TopTen Holdings
3D Systems Corp.
Ocwen Financial Corp.
Luminex Corp.
Anacor Pharmaceuticals, Inc.
Advanced Energy Industries
Intrepid Potash, Inc.
Altisource Ptfl. Solns. Reg. Shs.
Freeport-McMoran
KVH Industries
Stone Energy
% NAV
8.71
6.89
6.81
5.63
5.22
5.02
4.90
4.64
4.59
4.56
S&P 1500
S&P 500
Fund's GICS Sectoral Breakdown
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
[Cash]
% of assets
1.6
-21.1
16.5
18.9
4.3
25.4
9.7
--2.5
Total
100.0
Investment Objective
The investment objective of the Hereford Funds-IMVA Opportunity Fund is to provide capital appreciation over a multi-year investment horizon by investing primarily
in a diversified portfolio of publicly traded equity securities of US-based companies, which hold unique opportunities in the opinion of the Investment Manager.
Potential investments comprise small, mid, and large capitalization companies; growth and value companies; and special situations, including non US-based
companies, which are listed on a US exchange. The strategy is highly concentrated and appropriate only for risk-tolerant, long-term investors who can accept the
potential for materially greater volatility than the broad market indices.
The indicative benchmarks are the S&P 1500 and the S&P 500 Indices.
Risk Profile(e)
Fund Codes
Bloomberg:
ISIN:
Reuters:
Sedol:
Valoren:
WKN:
HFIMVOALX*
LU1022309220
N/A
BJ625V8
23467814
A1XCJ3
Since Inception (31/03/99) - 30/09/14
Volatility
Sharpe Ratio
Information Ratio
Tracking Error
Beta
Alpha
Reference Strategy
27.99
0.25
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
S&P 500
17.24
0.14
0.26
17.49
1.30
4.87
S&P 1500
17.43
0.17
0.22
17.29
1.30
4.11
* Share Class A
Fund Details
Investors
Dealing day
Dividends
Investment Manager
Management Company
Custodian
Legal Advisers
Auditor
Open to Non-U.S. investors only
Daily
None: income accumulated within the fund
Investment Management of Virginia, LLC, 919 E. Main Street, Suite 1600, Richmond, VA 23219, USA
BSI Fund Management S.A., 44F, rue de la Vallée, L-2661 Luxembourg
BSI Europe S.A., 122, rue Adolphe Fischer, L-1521 Luxembourg
Elvinger, Hoss & Prussen, 2 Place Winston Churchill, L-1340 Luxembourg
Deloitte Audit S.à.r.l., 560, rue de Neudorf, L-2220 Luxembourg
Annual Management Charge
Share Class A(f)
1.25%
Minimum Investment
Share Class A
$100,000 initial; $10,000 subsequent
Order Transmission / Information
Original Applications To:
UBS Fund Services (Luxembourg) S.A.
attn: Transfer Agent
33A, avenue J.F. Kennedy
L-1855 Luxembourg
Subsequent Applications Only Via Facsimile:
UBS Fund Services (Luxembourg) S.A.
attn: Transfer Agent
Fax :
(+352) 441010 6417
Tel:
(+352) 441010 6404
e-mail: [email protected]
(a) This figure refers to the approximate total assets invested in the reference strategy as of 30/11/14. The figure includes $2.11 million in assets (Hereford Funds-IMVA Opportunity Fund), $148.70 million in assets managed
directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager"), and $14.23 million in assets managed by other firms based upon models provided by the Investment Manager. The $148.70 million
managed directly by IMVA comprise those accounts in the Opportunity Portfolio composite (see www.imva.net), as well as “Special” Opportunity Portfolio accounts, which are excluded from the composite for reasons/variances,
including but not limited to these: they have different weightings; client restrictions have been imposed; they are wrap accounts; they do not own all Opportunity Portfolio positions, or they own additional positions. Model assets
have been excluded from the definition of the firm for GIPS purposes.
(b) The Hereford Funds-IMVA Opportunity Fund was funded on 31/1/14. The first trades were executed on 3/2/14.
(c) Data and graph depict IMVA Opportunity Portfolio composite returns through January of 2014 and Hereford Funds-IMVA Opportunity Fund Class A thereafter (net basis). Historical net performance of the IMVA Opportunity
Portfolio composite (the Reference Strategy) reflects modeled fees and expenses typical of Hereford Funds-IMVA Opportunity Fund Class A (1.25% fee + 0.25% expense). Fund follows substantially the same parameters as
the Reference Strategy, although the Fund has a 10% constraint for individual positions and a 40% limit for the top five names (IMVA's Opportunity Portfolio has no such constraints). Performance presentation is incomplete
without accompanying footnotes as shown at www.imva.net.
(d) Total return including dividends.
(e) Source: eVestment Analytics – All numbers are presented gross of fees and expenses.
(f) Share Class A is tax transparent in Germany and has been granted Reporting Status by HMRC as of 31 January 2014.
This document is for information purposes and internal use only. It is neither an advice nor a recommendation to enter into any investment.
Investment suitability must be determined individually for each investor, and the financial instruments described above may not be suitable for all investors. This information does not provide any accounting, legal, regulatory or
tax advice. Please consult your own professional advisers in order to evaluate and judge the matters referred to herein.
An investment should be made only on the basis of the prospectus, the annual and any subsequent semi-annual-reports of HEREFORD FUNDS (the "Fund"), a société d'investissement à capital variable, established in
Luxembourg and registered under Part I of Luxembourg law of 20 December, approved by the Commission de Surveillance du Secteur Financier (CSSF). These can be obtained from [the Fund, 26, avenue de la Liberté, L-1930
Luxembourg or from BSI Fund Management S.A., 44F, rue de la Vallée, L-2661 Luxembourg and any distributor or intermediary appointed by the Fund].
No warranty is given, in whole or in part, regarding performance of the Fund. There is no guarantee that its investment objectives will be achieved. Potential investors shall be aware that the value of investments can fall as well
as rise and that they may not get back the full amount invested. Past performance is no guide to future performance.
The information provided in this document may be subject to change without any warning or prior notice and should be read in conjunction with the most recent publication of the prospectus of the Fund. Whilst great care is
taken to ensure that information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omission or for future returns.
This document is intended for the use of the addressee or recipient only and may not be reproduced, redistributed, passed on or published, in whole or in part, for any purpose, without the prior written consent of HEREFORD
FUNDS. Neither the CSSF nor any other regulator has approved this document.