Hereford Funds-IMVA Opportunity Fund
May 2015
Investment Review
The Fund slipped a bit in May and is down slightly for the year. Standouts/outliers for the month were the strength in Anacor Pharmaceuticals (ANAC) and the weakness in 3D
Systems (DDD).
Transactions during the month included an addition to 3D Systems (DDD) and an initial position in Pier 1 Imports (PIR).
3D Systems has been a substantial drag on the Fund over the past few weeks. The 3D printing market appears to have taken a “pause” in the end of the 1st quarter; the slowdown
was seen across DDD’s competitors and geographies. Consequently, DDD management preannounced a revenue shortfall for the quarter and suspended forward guidance for the
rest of the year. In addition, the company replaced its CFO. These events drove the stock to a new low for the year (actually to a 3-year low). Management justified the suspension
of forward guidance by citing the current lack of visibility in the 3D printing market, though they did point out that some if not most of the orders that slipped from Q1 had been placed
in Q2. The CFO move appears to me to have been properly planned and not the result of accounting missteps yet to be announced. Moreover, I suspect the dramatic weakness in
the stock has been a wakeup call to the CEO and Board and may make the company more susceptible to hostile M&A activity. Management appears very confident about the
company’s competitive position and is accelerating their efforts to streamline the business and increase margins. Expenses should peak in Q2, and I expect that we will see
substantial margin improvement, in spite of the lack of revenue visibility, in the second half of 2015. I am maintaining an overweight position. The CEO Avi Reichental added to his
already large equity position at prices close to the Fund’s recent purchase.
Pier 1 Imports (PIR) is a retail business that sells home furnishings and gifts online and through retail outlets in North American and the U.K. The stock has been weak this year after
Management revised guidance in February, in spite of positive commentary about December (the CFO was changed, ostensibly for poor forecasting). Positive developments include
positive feedback from customers, increasing e-commerce traffic, and substantial room to improve margins after two years of high investment. We suspect that Management’s
forward guidance is conservative and believe that the stock’s modest valuation could attract M&A or activist activity. I purchased an initial position in mid-May and would like to
increase this position if the story improves (or the valuation slips further).
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 May 31, 2015
NAV A Shares:
Total Fund Size:
$64.90
$1.95 mil
$146.75 mil(a)
January 31, 2014(b)
Strategy Assets:
Fund Launch Date:
Monthly Performance (%)
as of May 31, 2015
Jan-15 Feb-15 Mar-15 Apr-15 May-15
Hereford Funds-IMVA Opportunity Fund
(8.6)
7.4
0.0
2.3
(1.0)
S&P 1500 Index(d)
(2.9)
5.7
(1.3)
0.7
1.3
S&P 500 Index(d)
(3.0)
5.8
(1.6)
1.0
1.3
YTD
(0.7)
3.4
3.2
Period Performance (%)
IMVA Opportunity Portfolio(c)
S&P 1500 Index(d)
S&P 500 Index(d)
Since Inception (March 31, 1999 - May 31, 2015)
YTD
(0.7)
3.4
3.2
1 yr
(31.0)
11.8
11.8
2 yr
(13.0)
16.0
16.1
3 yr
3.8
19.7
19.7
4 yr
1.6
14.1
14.3
5 yr
9.4
16.5
16.5
10 yr
9.3
8.3
8.1
Cumulative
135.4
143.1
121.9
Value of a Dollar
Past Ten Years (May 1, 2005 - May 31, 2015)
IMVA Opportunity Portfolio(c) vs. S&P 1500(d) & S&P 500(d)
450
410
370
Annualized
5.4
5.6
5.1
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
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
Hereford Funds-IMVA Opportunity Fund
May 2015
Portfolio
as of May 31, 2015
Sector Breakdown
%
Consumer Discretionary
6.1
Consumer Staples
0.0
Energy
19.4
Financials
12.5
Health Care
19.8
Industrials
5.2
Information Technology
22.3
Materials
5.4
Telecommunication Services
0.0
Utilities
0.0
[Cash]
9.3
Total
100.0
Ten Largest Holdings
Luminex Corp.
3D Systems Corp.
McDermott International, Inc.
Anacor Pharmaceuticals, Inc.
Babcock & Wilcox Co.
KVH Industries, Inc.
Advanced Energy Industries
Intrepid Potash, Inc.
Montpelier RE Holdings, Ltd.
Murphy Oil Corp.
Total
%
8.4
7.3
6.7
6.2
5.3
5.1
3.9
3.9
3.8
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
54.3
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 31/5/15. The figure includes $1.95 million in assets (Hereford Funds-IMVA Opportunity Fund), $136.43 million in assets
managed directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager"), and $8.37 million in assets managed by other firms based upon models provided by the Investment Manager. The
$136.43 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.