Hereford Funds-IMVA Opportunity Fund
March 2015
Investment Review
The Opportunity Portfolio was flat for March and down slightly for the quarter. Most of the Portfolio’s challenges in the first quarter were lingering issues from last year. I have cleaned house a bit, but
our largest positions remain basically the same. The energy exposure is higher quality/lower volatility than it was for most of last year. This may reduce our bounce back potential somewhat in the
event of a “V” recovery in the price of oil, but it will also protect us a bit if the oil price recovery proves elusive.
Sales during the quarter included the liquidation of Freeport-McMoRan, Ocwen Financial, Triangle Petroleum, Apple, and American Eagle Petroleum. Freeport (FCX) has backed away from its
previous capital allocation plans and now appears committed to investing more in Indonesia; this is not the debt reduction and eventual stock repurchase strategy that was the foundation for our
investment. I liquidated Ocwen Financial (OCN); this was a very bitter pill after having enjoyed years of success with OCN. Nonetheless, I have tried to keep our capital with Bill Erbey by switching the
exposure to Altisource Asset Management (AAMC). AAMC appears, to me, to be sufficiently separate from OCN to reduce our headline risk materially. Others might point out that we should move on
from Ocwen’s founder, Bill Erbey, given his performance last year. I disagree and believe he will navigate his regulatory hurdles with more caution and perspicacity, going forward. Triangle Petroleum
(TPLM) and American Eagle (AMZG) are both Bakken oil producers that are highly dependent on higher oil prices. TPLM is a higher quality company and has substantial strategic alternatives, so we
may revisit that investment at some point. AMZG was total failure on my part, and I am relieved to be rid of it. Our experience with Apple is on the other side of the spectrum; after buying APPL when
no one wanted to touch it, I decided to sell when the stock had become a “must own” for professional portfolio managers. It is hard for me to believe that APPL is not appropriately valued at this point,
and the lack of fear or skepticism around the stock makes me nervous. Partial sales during the quarter included reductions in Quidel (QDEL), Anacor Pharmaceutical (ANAC) twice, Altisource
Portfolio Solutions (ASPS), and Noble Corporation (NE). I had been worried that Anacor would weaken along with the broad bio-technology group after a very strong run, but the stock has held up, and
the recent stock purchase by the CFO, with the shares near an all-time high, is a very good sign, in my opinion. I reduced Altisource Portfolio Solutions (ASPS) and Noble (NE) into stock price
weakness; this has not been my normal modus operandi over the years, but our experience last year has caused me to pull in my horns a bit.
Purchases during the quarter included McDermott International (MDR) twice, MDC Holdings, IBM, Altisource Asset Management (AAMC), and American Express (AXP). McDermott is a name I/we
are familiar with, having liquidated it at a substantial loss last October. Since that time, the share price has come down substantially, several impressive jobs/awards have been won by the Company,
and the new management team has made a concerted effort to explain the story and show their confidence to Wall Street. The stock is working, and I think the opportunity here is very attractive over
the long run, regardless of the price of oil. MDC Holdings is a small capitalization housing company. The founders of MDC, both substantial shareholders, are very conservative, and the Company is
often faulted for being too stogy. The stock pays a nice dividend and seems very attractive at one times book value, the price of our initial purchase. IBM and American Express are obviously blue chip
names with much different risk-to-reward profiles than some of our smaller capitalization holdings. I’d love to be able to say we can expect the same result we got from purchasing AAPL when it was
out of favor, but I do believe that the odds are in our favor in these two very high quality names.
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.
Key Information
as of March 31, 2015
NAV A Shares:
Total Fund Size:
$64.12
$1.93 mil
$145.97 mil(a)
January 31, 2014(b)
Strategy Assets:
Fund Launch Date:
Monthly Performance (%)
as of March 31, 2015
Jan-15 Feb-15 Mar-15
Hereford Funds-IMVA Opportunity Fund
(8.6)
7.4
0.0
S&P 1500 Index(d)
(2.9)
5.7
(1.3)
S&P 500 Index(d)
(3.0)
5.8
(1.6)
YTD
(1.9)
1.4
1.0
Period Performance (%)
IMVA Opportunity Portfolio(c)
S&P 1500 Index(d)
S&P 500 Index(d)
Since Inception (March 31, 1999 - March 31, 2015)
YTD
(1.9)
1.4
1.0
1 yr
(34.5)
12.5
12.7
2 yr
(8.4)
17.2
17.2
3 yr
2.4
16.2
16.1
4 yr
0.5
14.1
14.2
5 yr
7.6
14.6
14.5
10 yr
9.3
8.3
8.0
Value of a Dollar
Cumulative
132.6
138.3
117.1
Past Ten Years (March 1, 2005 - March 31, 2015)
IMVA Opportunity Portfolio(c) vs. S&P 1500(d) & S&P 500(d)
450
410
370
Annualized
5.4
5.6
5.0
KEY
IMVA Opportunity Portfolio
S&P 1500
S&P 500
Start of Hereford FundsIMVA Opportunity Fund
31-Jan-14
330
290
250
210
170
130
90
50
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Hereford Funds-IMVA Opportunity Fund
March 2015
Portfolio
as of March 31, 2015
Sector Breakdown
%
Consumer Discretionary
4.2
Consumer Staples
0.0
Energy
15.7
Financials
9.3
Health Care
18.3
Industrials
9.9
Information Technology
23.0
Materials
5.3
Telecommunication Services
0.0
Utilities
0.0
[Cash]
14.3
Total
100.0
Ten Largest Holdings
3D Systems Corp.
Luminex Corp.
KVH Industries, Inc.
Babcock & Wilcox Co.
Anacor Pharmaceuticals, Inc.
McDermott International, Inc.
Cree, Inc.
Stone Energy
Murphy Oil Corp.
Quidel Corp.
Total
%
7.4
7.3
6.2
5.1
5.1
4.7
4.1
4.1
4.1
4.0
Since Inception (March 31, 1999 - December 31, 2014)
Risk Statistics(e)
Volatility
Sharpe Ratio
Information Ratio
Tracking Error
Beta
Alpha
IMVA Opportunity Fund
28.59
0.17
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
S&P 1500
17.32
0.19
0.09
18.79
1.27
2.23
S&P 500
17.12
0.16
0.12
18.96
1.28
2.97
52.1
Fund Details
Bloomberg:
ISIN:
Reuters:
Sedol:
Valoren:
WKN:
HFIMVOALX*
LU1022309220
N/A
BJ625V8
23467814
A1XCJ3
* Share Class A
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.
Annual Management Charge
Minimum Investment
Share Class A(f)
Share Class A
1.25%
$100,000 initial; $10,000 subsequent
Order Transmission / Information
Original Applications to:
UBS Fund Services
Attn: Transfer Agent
33a, avenue J.F. Kennedy
L-1855 Luxembourg
Subsequent Applications only via Facsimile:
UBS Fund Services
Attn: Transfer Agent
Fax: (+352) 4410106417
Tel: (+352) 4410106404
Email: [email protected]
(a) This figure refers to the approximate total assets invested in the reference strategy as of 31/3/15. The figure includes $1.93 million in assets (Hereford Funds-IMVA Opportunity Fund), $134.74 million in assets
managed directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager"), and $9.31 million in assets managed by other firms based upon models provided by the Investment Manager. The
$134.74 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, 44F, rue de la Vallée, L2661 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.