Hereford Funds-IMVA Opportunity Fund
August 2015
Investment Review (a), (b)
August produced historic volatility in the U.S. and world equity markets. Fears of a hard landing for China’s economy (and the consequent increased world-wide recession risk), the
Chinese Government’s obvious discomfort with the slings and arrows of free markets, and continuing uncertainty over the timing of the Federal Reserve’s first interest rate hike raised
the discount rate for most risk assets (translation: they went down). One beneficiary of the volatility was oil which jumped 27% in three days. This tremendous move was obviously
positive for energy sector assets. Perhaps more importantly, Schlumberger’s announcement of its planned acquisition of Cameron International (CAM) was very helpful to the Fund,
not only for our position in CAM, but also for the possible read-through to the energy sector in general. Schlumberger understands the world-wide decline curve of oil production
perhaps better than any other company, so their decision to go on offense may be a good sign for oil prices and the energy sector in general. A couple of sizeable insider purchases
from SLB Board members after the deal was announced support this thesis, as does fairly widespread insider buying in the energy sector in general. As I pointed out last month, our
energy sector exposure has been an ugly detractor to the Fund over the past year, so it was nice to see those positions help out for a change. I intend to keep our energy exposure
as is for now.
During August, our best positions were, predictably, energy sector names. Cameron International was the leader due to the announcement of its pending acquisition by
Schlumberger. McDermott International also had a good month due to its announcement of a large award from Saudi Aramco. Luminex benefitted from management’s commentary
on the 2nd quarter and the progress of Project Aries.
We had a couple of notable laggards in August. Rayonier Advanced Materials announced a legal dispute with its largest customer, Eastman Chemical. This was devastating to the
stock, and I have taken our loss and moved on. Altisource Asset Management (AAMC) was also very weak. The source of the stock’s weakness is difficult to discern; it is likely that
there was/is pressure on the stock from one of the largest holders who is reputed to be raising cash. Also, AAMC is still recovering from a bruising renegotiation of its General
Partner agreement with Altisource Residential earlier this year, and the business is progressing more slowly than we would like. I am maintaining our position. Finally, Epiq Systems
was also weak. I suspect the culprit is probably the deteriorating relationship between one or more activist investors and the current management team. EPIQ’s business is relatively
stable, and the stock is likely worth a good deal more than the current price in the event of a change of control, so I am maintaining our position.
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 August 31, 2015
NAV A Shares:
Total Fund Size:
$60.14
$1.81 mil
$134.21 mil(c)
January 31, 2014(d)
Strategy Assets:
Fund Launch Date:
Monthly Performance (%)
as of August 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(f)
(2.9)
5.7
(1.3)
0.7
1.3
S&P 500 Index(f)
(3.0)
5.8
(1.6)
1.0
1.3
Jun-15
(0.7)
(1.8)
(1.9)
Jul-15 Aug-15
(4.2)
(2.7)
1.8
(6.0)
2.1
(6.0)
Period Performance (%)
IMVA Opportunity Portfolio(e)
S&P 1500 Index(f)
S&P 500 Index(f)
YTD
(8.0)
(2.7)
(2.9)
Since Inception (March 31, 1999 - August 31, 2015)
YTD
(8.0)
(2.7)
(2.9)
1 yr
(36.2)
0.5
0.5
2 yr
(18.0)
12.0
12.2
3 yr
(4.1)
14.4
14.3
4 yr
3.3
15.2
15.2
5 yr
8.7
16.0
15.9
10 yr
6.8
7.3
7.2
Value of a Dollar
Cumulative
118.1
128.7
108.8
Annualized
4.9
5.2
4.6
Past Ten Years (August 31, 2005 - August 31, 2015)
IMVA Opportunity Portfolio(e) vs. S&P 1500(f) & S&P 500(f)
450
410
370
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
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Aug-14
Aug-15
Hereford Funds-IMVA Opportunity Fund
August 2015
Portfolio
as of August 31, 2015
Sector Breakdown
%
Consumer Discretionary
7.4
Consumer Staples
0.0
Energy
16.6
Financials
14.6
Health Care
16.9
Industrials
6.6
Information Technology
25.1
Materials
3.9
Telecommunication Services
0.0
Utilities
0.0
[Cash]
8.9
Total
100.0
Ten Largest Holdings
McDermott International Inc.
Luminex Corp.
3D Systems Corp.
KVH Inds Inc Com
Quidel Corp.
BWX Technologies Inc.
Altisource Ptfl Solns Reg Shs
Cameron Intl
Cree, Inc.
T. Rowe Price Group Inc.
Total
%
8.2
7.8
6.4
4.9
4.7
4.5
4.1
4.1
4.0
3.5
Since Inception (March 31, 1999 - June 30, 2015)
Risk Statistics(g)
Volatility
Sharpe Ratio
Information Ratio
Tracking Error
Beta
Alpha
IMVA Opportunity Fund
28.16
0.17
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
S&P 1500
17.05
0.20
0.08
18.52
1.27
1.97
S&P 500
16.86
0.16
0.11
18.69
1.28
2.72
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(h)
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) The securities discussed are based on their contribution to or detraction from the entire performance of the Portfolio. A complete description of the performance calculation methodology, including a complete list of
each security that contributed to the performance of the Portfolio highlighted above, is available upon request.
(b) The transactions/securities discussed in this section are generally portfolio-wide transactions for the accounts in this Portfolio and have not been selected by any performance criteria. It should not be assumed that all
accounts in the Portfolio had the same transactions or that transactions in the future will be as profitable or will equal the performance of the securities mentioned.
(c) This figure refers to the approximate total assets invested in the reference strategy as of 31/8/15. The figure includes $1.81 million in assets (Hereford Funds-IMVA Opportunity Fund), $126.85 million in assets
managed directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager"), and $5.55 million in assets managed by other firms based upon models provided by the Investment Manager. The
$126.85 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.
(d) The Hereford Funds-IMVA Opportunity Fund was funded on 31/1/14. The first trades were executed on 3/2/14.
(e) 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. Past performance is no guarantee of future results, and no representation is made that results similar to those shown can be
achieved.
(f) Total return including dividends.
(g) Source: eVestment Analytics – All numbers are presented gross of fees and expenses.
(h) 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