Hereford Funds-IMVA Opportunity Fund
October 2015
Investment Review (a)
October was a disappointing month for the Fund. The equity market rebounded from the alarming volatility in August and September, but the Fund, while positive for the month, did not keep up
with the strong move in the S&P 500 Index. The Fund has started November very well but still has a ways to go to catch up with the S&P 500 Index returns in 2015.
Transactions during October included swapping Southwestern Energy (SWN) for Noble Energy (NBL). The Fund had a substantial loss in Southwestern, which is focused on North American
natural gas. Natural gas prices have been even worse than oil, and this switch has been a good one. Southwestern has continued to struggle while NBL has had a very nice run. Noble
recently announced a disappointing dry hole in the Falkland Islands but also had good news from projects in the Gulf of Mexico and from the government of Israel regarding that government’s
support for development of the Tamar and Leviathan fields in the Eastern Mediterranean. Noble will likely make a final investment decision regarding these projects next year. I reduced the
Advanced Energy Industries (AEIS) position in the midst of a number of merger and acquisition announcements in the semi-conductor industry in order to take advantage of the euphoria in that
sector generated by the M&A. Finally, I reduced the Fund’s position in Intrepid Potash (IPI); potash pricing has been weak, and IPI has had some operational issues. The company is healthy,
in my opinion, and I believe the stock price collapse is overdone. Nonetheless, “the horse was out of the barn” by the time I reduced the Fund’s position. The Fund still has a small position in
the stock, and competitor Mosaic just announced that it believes potash prices have bottomed, so I hope the worst is behind us in IPI.
Other developments during October included the resignation of 3D Systems’ CEO, Avi Reichental, and FDA approval of Luminex’s new product, Aries. After having counted on Avi Reichental’s
intelligence, ambition, and intensity to turn around DDD, it is problematic to spin the upside in his sudden departure. Nonetheless, and in hindsight, it sounds to me like Mr. Reichental’s
leadership style was not optimal for employees or customers, and that challenge, when combined with the company’s operating results over the last year, pushed the Board to take action. This
morning’s conference call (11/4/15) makes clear that DDD’s industrial markets are still lackluster, but I continue to believe the company’s new metal printers (still in beta testing) are getting
customers’ attention, and that Mr. Reichental’s departure will clear the way for faster operating expense improvements and increased focus on the most profitable products. In general, DDD’s
revenue predictions are difficult, but operating expenses and inventories should see notable improvement going forward. Luminex has, on the other hand, had a series of positive
announcements and has seen its stock price react accordingly. The most important announcement was FDA approval of Project Aries on October 7th. This product, in my opinion, will play a
big part in determining LMNX’s take-out potential and price over the next eighteen months. LMNX plans to push these diagnostic machines into the market and should exit next year with 100
Aries machines in the market and half a dozen FDA approved assays for Aries.
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 October 31, 2015
NAV A Shares:
Total Fund Size:
$56.76
$1.66 mil
$122.38 mil(b)
(c)
January 31, 2014
Strategy Assets:
Fund Launch Date:
Monthly Performance (%)
as of October 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(e)
(2.9)
5.7
(1.3)
0.7
1.3
(e)
S&P 500 Index
(3.0)
5.8
(1.6)
1.0
1.3
Jun-15
(0.7)
(1.8)
(1.9)
Jul-15 Aug-15 Sep-15
(4.2)
(2.7)
(9.0)
1.8
(6.0)
(2.6)
2.1
(6.0)
(2.5)
Period Performance (%)
IMVA Opportunity Portfolio(d)
(e)
S&P 1500 Index
S&P 500 Index(e)
Oct-15
3.7
8.1
8.4
YTD
(13.1)
2.5
2.7
Since Inception (March 31, 1999 - October 31, 2015)
YTD
(13.1)
2.5
2.7
1 yr
(24.2)
5.0
5.2
2 yr
(24.5)
10.6
11.1
3 yr
(7.7)
16.2
16.2
4 yr
2.2
15.8
16.0
5 yr
3.8
14.3
14.3
10 yr
6.9
8.0
7.8
Value of a Dollar
Cumulative
105.9
140.9
120.8
Annualized
4.5
5.4
4.9
Past Ten Years (October 31, 2005 - October 31, 2015)
IMVA Opportunity Portfolio(d) vs. S&P 1500(e) & S&P 500(e)
450
410
370
Start of Hereford FundsIMVA Opportunity Fund
31-Jan-14
KEY
IMVA Opportunity Portfolio
S&P 1500
S&P 500
330
290
250
210
170
130
90
50
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Hereford Funds-IMVA Opportunity Fund
October 2015
Portfolio
as of October 31, 2015
Sector Breakdown
%
Consumer Discretionary
6.3
Consumer Staples
0.0
Energy
17.2
Financials
15.3
Health Care
17.7
Industrials
10.6
Information Technology
23.8
Materials
0.9
Telecommunication Services
0.0
Utilities
0.0
[Cash]
8.2
Total
100.0
Ten Largest Holdings
Luminex Corp.
McDermott International Inc.
BWX Technologies Inc.
3D Systems Corp.
Quidel Corp.
KVH Industries Inc.
Cameron International Corp.
Altisource Ptfl Solns Reg Shs
Cree, Inc.
T. Rowe Price Group Inc.
Total
%
8.5
8.1
5.3
5.1
4.8
4.7
4.6
4.5
4.0
4.0
Since Inception (March 31, 1999 - September 30, 2015)
Risk Statistics(f)
Volatility
Sharpe Ratio
Information Ratio
Tracking Error
Beta
Alpha
IMVA Opportunity Fund
28.28
0.13
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
S&P 1500
17.04
0.17
0.04
18.52
1.29
1.47
S&P 500
16.84
0.13
0.07
18.70
1.29
2.19
53.6
Fund Details
Bloomberg:
ISIN:
Reuters:
Sedol:
Valoren:
WKN:
HFIMVOALX*
LU1022309220
N/A
BJ625V8
23467814
A1XCJ3
* Share Class A
Annual Management Charge
Share Class A
(g)
1.25%
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.
Minimum Investment
Share Class A
$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 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.
(b) This figure refers to the approximate total assets invested in the reference strategy as of 31/10/15. The figure includes $1.66 million in assets (Hereford Funds-IMVA Opportunity Fund), $115.88 million in assets
managed directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager"), and $4.84 million in assets managed by other firms based upon models provided by the Investment Manager.
The $115.88 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.
(c) The Hereford Funds-IMVA Opportunity Fund was funded on 31/1/14. The first trades were executed on 3/2/14.
(d) 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.
(e) Total return including dividends.
(f) Source: eVestment Analytics – All numbers are presented gross of fees and expenses.
(g) 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, L-2661 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.