Hereford Funds-IMVA Opportunity Fund
September 2014
September 2014 Investment Review
The Fund was down sharply for the quarter. I have always talked about how this portfolio can be volatile, but unrealized losses this past quarter were excessive
and an unwelcome change from many years of “volatility” to the upside. The main culprits were weakness in some of our core positions and a pronounced sell-off in
the energy sector at the end of the quarter.
The Fund has been overweight in energy sector names and cyclicals in general. That positioning is mostly based on my attraction to the individual fundamentals
of these companies but also my suspicions that the U.S. economy is slowly gaining momentum and that interest rates will begin to reflect that strength.
Unfortunately, the action in the U.S. dollar and, correspondingly, commodities, over the past month has been sudden and devastating to many energy stocks. Oil’s
collapse, in particular, appears to be the result of a perfect storm of plentiful supply in North America, demand concerns in China and Europe, and fears that Saudi
Arabia will not cut production to protect prices. Predicting oil prices is very difficult, but I suspect these conditions will ameliorate over the next few months. Oil prices
(and the U.S. dollar) are volatile and don’t go one way forever; moreover, Saudi Arabia is unlikely, in my opinion, to allow the market to slip too much further without
some supply cuts. So, the Fund has suffered from our energy exposure, but I think these stocks are very attractive and should be held and added to at this level.
Despite dramatic underperformance, year-to-date, the portfolio has strong upside potential over the medium- to long-term, and all of our top positions appear, to
me, to be executing well. We don’t have a timeline for the solution to the regulatory issues at Altisource and Ocwen Financial, but I think their current valuation and
long-term potential offset this risk. I understand that good company execution but poor stock price performance is, eventually, not good enough for investors.
Nonetheless, many of these companies have very, very attractive long-term operating and stock price potential, and I hope Fund investors can keep that prospect in
mind. This is especially true right now as macro trends (strong dollar, weak commodities, large capitalization outperformance) are hurting our performance. Market
sentiment and short-term positioning can move markets over short periods of time, but company fundamentals and the present value of future cash flows eventually
set stock prices. I believe that our positions will ultimately reward patient investors as that truism plays out.
Key Information
NAV A Shares (30/09/14): $86.17
Total Fund Size: $4.16 mil
Strategy Assets: $202.78 mil(a)
Fund Launch Date: 31-Jan-14(b)
Monthly Performance (%)
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14
N/A
-0.8
-1.3
-2.1
-1.9
5.3
-6.4
1.7
-8.6
N/A
4.6
0.8
0.4
2.2
2.3
-1.8
4.1
-1.8
N/A
4.6
0.8
0.7
2.4
2.1
-1.4
4.0
-1.4
Hereford Funds-IMVA Opportunity Fund
S&P 1500 Index(d)
(d)
S&P 500 Index
Period Performance (%)
IMVA Opportunity Portfolio
S&P 1500 Index(d)
S&P 500 Index(d)
YTD
-18.1
7.5
8.3
(c)
1 yr
-8.7
18.6
19.7
2 yr
12.9
19.5
19.5
3 yr
23.3
23.0
23.0
4 yr
18.2
17.0
17.1
5 yr
17.1
15.8
15.7
10 yr
12.8
8.3
8.1
YTD
-13.8
11.2
12.2
Since Inception 31/03/99
Cumulative
Annualised
212.6
7.6
123.4
5.3
104.9
4.7
IMVA Opportunity Portfolio (c) vs. S&P 1500(d) & S&P 500(d)
Ten Years Ending 30/09/14
450
Start of Hereford Funds-IMVA Opportunity Fund
31-Jan-14
350
400
300
350
250
300
200
250
150
200
100
150
50
100
500
IMVA Opportunity Portfolio
Fund's TopTen Holdings
Luminex Corp.
Stone Energy
Altisource Ptfl Solns Reg Shs
Ocwen Financial Corp.
3D Systems Corp.
Emerald Oil, Inc.
Murphy Oil Corp.
American Eagle Energy Corp.
KVH Industries, Inc.
Quidel Corp.
% NAV
7.27
7.22
6.67
6.27
5.86
5.84
4.14
4.11
4.10
3.99
S&P 1500
S&P 500
Fund's GICS Sectoral Breakdown
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
[Cash]
Total
% of assets
--31.4
16.4
17.1
5.9
18.7
7.8
--2.7
100.0
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.
Risk Profile(e)
Fund Codes
Bloomberg:
ISIN:
Reuters:
Sedol:
Valoren:
WKN:
HFIMVOALX*
LU1022309220
N/A
BJ625V8
23467814
A1XCJ3
Since Inception (31/03/99) - 30/06/14
Volatility
Sharpe Ratio
Information Ratio
Tracking Error
Beta
Alpha
Reference Strategy
27.90
0.29
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
(listed below benchmark)
S&P 500
17.39
0.14
0.33
17.14
1.30
5.97
S&P 1500
17.58
0.17
0.29
16.98
1.29
5.14
* Share Class A
Fund Details
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
VPB Finance S.A., 26 Avenue de la Liberté, L-1930 Luxembourg
VP Bank (Luxembourg) S.A., 26 Avenue de la Liberté, L-1930 Luxembourg
Elvinger, Hoss & Prussen, 2 Place Winston Churchill, L-1340 Luxembourg
Deloitte Audit S.à.r.l., 560 Rue de Neudorf, L-2220 Luxembourg
Annual Management Charge
Share Class A(f)
1.25%
Minimum Investment
Share Class A
$100,000 initial; $10,000 subsequent
Order Transmission / Information
Original Applications To:
VPB Finance S.A.
attn. Fund Operations / TA-HFF
P.O. Box 923
L-2019 Luxembourg
or, for transmissions via courier service,
26, avenue de la Liberté, L-1930 Luxembourg
Subsequent Applications Only Via Facsimile:
VPB Finance S.A.
attn. Fund Operations / TA-HFF
Fax :
(+352) 404 770 283
Tel:
(+352) 404 770 260
e-mail: [email protected]
(a) This figure refers to the approximate total assets invested in the reference strategy as of 30/09/14. The figure includes $4.16 million in assets (Hereford Funds-IMVA Opportunity Fund) and $180.47 million in assets managed
directly by Investment Management of Virginia, LLC ("IMVA" or "the Investment Manager") and $18.15 million in assets managed by other firms based upon models provided by the Investment Manager. The $180.47 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, 26, avenue de la Liberté, L-1930
Luxembourg or from VPB Finance S.A., 26, avenue de la Liberté, L-1930 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.