Matthew Haynes, lead manager of the recently launchedGGOF Global Absolute Return, likes being able to invest in companies of all sizes.
"I believe part of my success in the past has been a result of being flexible," says Haynes, a director of global equities at Lazard Asset Management LLC in New York. "If I'm seeing lots of mid-cap mining companies trading at undervalued prices, I want the opportunity to do that." The most relevant benchmark for Haynes is the MSCI World Index. But he doesn't feel compelled to own the index heavyweights, even if it's an underweight position.
However, while there are no restrictions on the range of market capitalization for the holdings of GGOF Global Absolute Return, there are geographic constraints. Haynes will invest no more than 50% of the fund in any one country or region.
The fund, which was launched on Aug. 16 and currently has $2.3 million in assets, will mainly hold equities. It will also be able to invest in other asset classes, such as bonds.
According to Haynes, however, asset allocation doesn't drive the product. Instead, he practices a bottom-up, stock-picker's strategy. "I try to buy a dollar for 50 cents," says Haynes, "I'm just kind of your classic, old-fashioned value guy."
Haynes's strategy is not so bottom-up that he ignores the geographic and currency-related exposure of the fund. He says he will either try to buy great assets at an average price, or average assets at a great price. He believes that capital markets, over time, tend to offer more opportunities in the first-case scenario.
When it comes to the sell discipline, a number of factors come into play. If value creation is not unfolding as expected, that may necessitate either paring down the position or it may trigger a sale of the whole position. If history is any guide, says Haynes, the fund's annual portfolio turnover will be about 30% or 40%.
Among industry sectors, Haynes is finding value today in materials, industrials and natural resources, specifically in metals and mining. Geographically, he is finding a lot of opportunities in Europe, fewer in the U.S. and Canada, and fewer still in Asia.
Haynes thinks 40 holdings is generally around the sweet spot in a multi-cap product. That way, each position is large enough to "move the needle," yet diverse enough to mitigate risk.
Among the top 10 holdings, Haynes says that Anglo American PLC ( AAUK/NASDAQ) captures the essence of his investment style. "I'm a big bull on mining, first thing," says Haynes. If his thesis is right, the fundamentals of the mining company are going to result in tremendous cash-flow generation and, based on historical trends, the stock price will move up.
Besides trading at a discount to other large, diversified mining peers, Anglo American is spinning off its paper and packaging business. Haynes is trying to capitalize on this catalyst -- the shedding of non-core assets -- which he believes will create value for the shareholder.
Haynes, 41, brings 17 years of investment experience to his global mandate. He earned a BA, concentrating in finance, in 1988 from William Paterson University in Wayne, New Jersey.
In 1989, Haynes joined Morgan Stanley Dean Witter Advisors in New York. As vice-president and portfolio manager of international equities, he co-managed two global equity funds. He received the CFA designation in 1997.
In June 2001, he moved to Franklin Mutual Advisors LCC, where he was a vice-president and portfolio manager. He worked there until joining Lazard in January 2005.
At Lazard, Haynes draws on a broad platform of more than 10 team members and more than 30 analysts from around the world. Despite the benefits of being able to draw on all this expertise, Haynes says there are inherent biases among analysts. He prefers to do comprehensive first-hand research. Part of that effort entails frequent travel to Europe and elsewhere.
This preference for hands-on research is consistent with Haynes's belief that, as a value investor, he must possess a healthy sense of skepticism. "I'm not a portfolio manager who just accepts ideas and recommendations from others," he says.
What he does believe in is winning by striving to avoid losses. "Great long-term investment records," says Haynes, "are just as much about preserving capital in down markets as they are about participating in up markets."
