| Venator Investment Trust Performance (net of fees) | |||||||||||||
| Jan | Feb | March | April | May | June | July | Aug | Sept | Oct | Nov | Dec | YTD | |
| 2007 | NA | NA | NA | NA | NA | NA | NA | NA | 1.1% | -2.2% | -4.1% | 3.9% | -1.5%* |
| 2008 | -9.8% | 5.6% | -5.0% | 8.1% | 9.7% | 2.4% | -1.6% | 3.7% | -8.8% | -15.4% | -12.8% | 4.8% | -20.9% |
| 2009 | 6.4% | -4.0% | 7.3% | 9.5% | 5.3% | 0.4% | 5.8% | -0.8% | 3.5% | 2.2% | -3.7% | 3.2% | 39.9% |
| 2010 | 4.7% | 2.4% | 3.9% | 1.5% | -4.1% | -4.2% | 1.4% | -6.4% | 5.8% | 2.7% | 1.0% | 7.9% | 16.8% |
| 2011 | 0.6% | 4.0% | -1.3% | 0.0% | -6.2% | -1.7% | 4.3% | -7.7% | -10.5% | 3.5% | 0.3% | 1.0% | -14.0% |
| 2012 | 5.3% | 8.4% | 4.25% | -0.98% | 17.8% | ||||||||
*The fund was launched on August 1, 2007.Therefore 2007 YTD only represents 4 months of performance. YTD returns are net of distributions reinvested.
INVESTMENT TRUST INTRODUCTION
Structured as a “Fund of Funds”, the Investment Trust will initially invest in the Venator Founders Fund, and will have the ability to invest in other funds we run in the future. Our low level of exposure to financial and resource companies makes the Investment Trust a good diversification tool for Canadian investors. The minimum initial investment in the Trust is $500, and all investors must be “accredited investors”. The Investment Trust is RSP-eligible.
Investment Philosophy:
Preservation, Appreciation, Performance
The Investment Trust will initially invest in the Founders Fund (“the Fund’), which is a long/short investment fund structured to capitalize on exceptional investment opportunities in the capital markets. The Fund returned 40.4% in its first 12 months.
The Fund focuses on business fundamentals, with a philosophy that great investment opportunities can make money in any market environment. Essentially, we look for the outliers, investing on the peripheral of the market for those companies that are performing beyond the “macro environment”. These include high growth companies as yet undiscovered (or unappreciated) by the market, as well as out-of-favor companies trading at low valuations that do not reflect “hidden assets”, intermediate business prospects, reversing fortunes or changing managerial philosophies. We incorporate proprietary screening tools to uncover potential opportunities, followed by fundamental due diligence, to separate the great opportunities from those that just “look good on paper”.
As a result of this philosophy, the Fund’s investment mandate is largely focused on the industrial sector, and is unlikely to be significantly weighted to speculative areas such as commodity exploration, junior biotechnology, or any other “pre-revenue” opportunities. The Fund has a mandate to invest in any instrument that can take advantage of an exceptional investment opportunity including common stock, convertible debentures, warrants and options.
Hedging:
The Fund hedges its market risk in several ways including the “short selling” of what we believe to be fundamentally flawed companies and situations where current expectations exceed realistic prospects. The Fund may also engage in “pairs-trading” from time to time which may be in the form of direct pairs-trading (i.e. long one company and short a higher priced yet inferior competitor) as well as indirect negatively correlated positions (i.e. long an airline company and long oil). Beyond the fundamental hedging, the Fund will attempt to hedge additional market risk through the short selling of market index tracking instruments. Finally, the Fund borrows U.S. dollars against its un-hedged U.S. dollar positions; we are looking to pick stocks that will go up in price, and expect to turn a profit in these stocks regardless of what currency they trade in.
Risk Tolerance/Risk Management:
An investment in the Investment Trust should be for investors with a high degree of risk tolerance. The Founders Fund is a long-biased fund, with a minority weighting to short opportunities where we expect to turn a profit, and the majority of hedging focused on reducing market risk and currency risk. With regards to leverage and total market exposure of the Fund, we are not of the mindset of using leverage to enhance the returns of the Fund as well as the risk. However, in an “optimal” investment scenario, we would find enough market opportunities to be “fully invested” and be short on top of this in order to lessen our net market exposure. It is important to note that in such a situation, the overall market exposure of the Fund would be twice the asset value of the Fund.
Fee Structure of Venator Founders Fund:
While the Investment Trust has no direct fees attached to it, the Founders Fund charges a 2% management fee and a 20% performance fee with a “high watermark”. The initial investment commitment is 12 months. Due to the expectation that a portion of the initial fund will be invested smaller cap, and potentially less liquid stocks, we will require three months of “lead time” on fund withdrawals.