Hereford Funds-IMVA Opportunity Fund
April 2015
Investment Review
The Fund was up nicely in April but still lags the S&P 500 Index for the year-to-date period.
Transactions during the month included purchases of EPIQ Systems (EPIQ), T. Rowe Price Group (TROW), and an addition to Luminex (LMNX).
Epiq Systems provides bankruptcy, class action administration, and electronic discovery services. The company’s business can be considered counter-cyclical to some degree. Epiq has a couple of
activist shareholders who have forced the company to closely review its operations and strategic alternatives; when taken together, these firms own over 30% of the outstanding stock in the company.
I believe pressure from these shareholders, and the review process, will improve the profitability of the current operations and eventually lead to a sale of the company. Epiq has, in my opinion, a
bloated SG&A structure that should be leaner and more performance-based. Compensation expenses would likely be a key area for synergies and/or cost improvements in the event of a change of
control. EPIQ pays an attractive dividend and is trading 15% below a previous buy-out offer that the Board dismissed.
T. Rowe Price (TROW) is a well-known asset manager. TROW is a leader in actively managed mutual funds and, in general, has an impressive long-term performance record. The company will, I
suspect, reverse the recent loss of AUM to ETFs and other passive strategies as the equity market’s choppiness continues. The stock has an attractive yield and ample ability to repurchase stock.
I added to Luminex on the last day of the month. LMNX has been in a trading range since its 4th Quarter conference call, and the stock and market weakness gave us a chance to add near the bottom
of that range. Management subsequently reported a strong 1st Quarter, and the stock has reacted well. The new CEO seems to be giving investors increased confidence in the stock; he is laying out
his plan and strategy and reporting all relevant developments, positive or negative. He seems determined not to over-promise. The stock’s long-term potential will be determined by the success of the
launch of Project Aries; that product launch appears to be on schedule (Q4 launch in the U.S.), and could have very good ramifications for the stock price.
Sales during the month included a reduction in Anadarko Petroleum and the liquidation of Noble Corporation (NE). Anadarko (APC) has been a good performer lately, and I wanted to reduce the
position somewhat, given the popularity of the stock on Wall Street. In my opinion, APC is considered a “safe date” for professional investors looking for liquid energy equity exposure, and, as such,
may be reasonably valued. I liquidated Noble (drilling) after a short and unsuccessful holding period. Like all off-shore drillers, Noble is operating in a very challenging environment, and book value has
proven to provide little downside protection lately. NE is one of the highest quality off-shore drillers, and I may revisit the position if oil prices retrace their recent gains.
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 April 30, 2015
NAV A Shares:
Total Fund Size:
$65.56
$1.97 mil
$147.60 mil(a)
January 31, 2014(b)
Strategy Assets:
Fund Launch Date:
Monthly Performance (%)
as of April 30, 2015
Jan-15 Feb-15 Mar-15 Apr-15
Hereford Funds-IMVA Opportunity Fund
(8.6)
7.4
0.0
2.3
S&P 1500 Index(d)
(2.9)
5.7
(1.3)
0.7
S&P 500 Index(d)
(3.0)
5.8
(1.6)
1.0
YTD
0.3
2.1
1.9
Period Performance (%)
Since Inception (March 31, 1999 - April 30, 2015)
YTD
0.3
2.1
1.9
IMVA Opportunity Portfolio(c)
S&P 1500 Index(d)
S&P 500 Index(d)
1 yr
(31.6)
12.8
13.0
2 yr
(8.6)
16.6
16.7
3 yr
2.4
16.7
16.7
4 yr
1.4
13.4
13.6
5 yr
7.4
14.3
14.3
10 yr
9.9
8.6
8.3
Cumulative
137.8
139.9
119.1
Value of a Dollar
Past Ten Years (April 1, 2005 - April 30, 2015)
IMVA Opportunity Portfolio(c) vs. S&P 1500(d) & S&P 500(d)
450
410
370
Annualized
5.5
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
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Hereford Funds-IMVA Opportunity Fund
April 2015
Portfolio
as of April 30, 2015
Sector Breakdown
%
Consumer Discretionary
3.9
Consumer Staples
0.0
Energy
14.4
Financials
12.9
Health Care
17.5
Industrials
11.4
Information Technology
21.7
Materials
5.6
Telecommunication Services
0.0
Utilities
0.0
[Cash]
12.6
Total
100.0
Ten Largest Holdings
Luminex Corp.
3D Systems Corp.
McDermott International, Inc.
KVH Industries, Inc.
Babcock & Wilcox Co.
Stone Energy
Anacor Pharmaceuticals, Inc.
Intrepid Potash, Inc.
Murphy Oil Corp.
Montpelier RE Holdings, Ltd.
Total
%
7.7
6.7
6.3
5.4
5.0
4.6
4.5
4.1
4.1
3.7
Since Inception (March 31, 1999 - March 31, 2015)
Risk Statistics(e)
Volatility
Sharpe Ratio
Information Ratio
Tracking Error
Beta
Alpha
IMVA Opportunity Fund
28.38
0.17
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
S&P 1500
17.18
0.20
0.07
18.67
1.27
1.97
S&P 500
16.99
0.16
0.11
18.84
1.28
2.74
52.2
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 30/4/15. The figure includes $1.97 million in assets (Hereford Funds-IMVA Opportunity Fund), $136.62 million in assets
managed directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager"), and $9.01 million in assets managed by other firms based upon models provided by the Investment Manager. The
$136.62 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.