mayar fund ltd letter to partners
TRANSCRIPT
MAYAR FUND LTDLETTER TO PARTNERS
1st Quarter 2021
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Table of Contents
Our Partnership Principles 4
Our Strategy 5
Investment Process 6
Performance History 8
Letter from the Managing Director 10
Asset Allocation 14
About Mayar Fund and Mayar Capital 17
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4
Our Partnership Principles
We will communicate with you regularly and in a straightforward manner. We will not sugarcoat or exaggerate the truth. We will never promise what we cannot deliver.
We will continue to keep a substantial percentage of our net worth invested along your side, as have many of our family members and friends. Rest assured that our interests are aligned with yours.
We will strive to manage your capital to maximize long-term results and will gladly accept “bumpier” short-term results to achieve them.
We will look at risk before return and will ignore high-risk opportunities regardless of potential payoffs.
Our StrategyWe invest globally in great businesses that have durable economic moats, favorable customer economics, consistent financial results, high and stable returns on capital, strong cash flow generation, and attractive capital redeployment opportunities.
We do that by buying securities of great companies with able and shareholder-oriented managements, a conservative capital structure, and a strong track record of rational capital allocation.
We pay reasonable prices for these securities, giving us a margin of safety on our investment, and we place significant amounts of our capital into such rare opportunities and continue to own such companies as long as these conditions are satisfied.
We are patient and disciplined. We don’t view ourselves as investing in little pieces of paper that trade in markets. Behind every stock there is a real business and we, the shareholders, collectively own that business. This mental framework drives our decision-making process. Many in the investment field call us value investors, we call ourselves businesspeople.
Most of the time, the successful execution of our strategy requires us to act against the crowd. Or, in the words of Warren Buffett: “Be fearful when others are greedy. Be greedy when others are fearful.” Our edge over other market participants is in having a much longer investment horizon, better temperament, and the investment discipline to stay the course, especially in down and volatile markets.
Intri
nsic
Val
ue
Mar
ket P
rice
Margin of Safety
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Great Business• Customer Economics• Consistent• High ROIC• Cash Conversion• Redeployment
Great Company• Management• Capital Structure• Capital Allocation
Great Value
Investment ProcessPROPRIETARY CHECKLIST-BASED SCORING SYSTEM
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Intrinsic ValueRange of Values
Position SizeRisk vs returnDiversification
Killing the Idea
UnderstandableEthical
Red FlagsQuantitative& Qualitative
The Deep Dive
Evaluate the Moat, Industry, Management, Financials, Prospects
Valuation & Portfolio
Daily News, Company Filings, Portfolio prices
QuarterlyFinancials,Checklist, Valuation
Regular Monitoring
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May-11
Aug-11
Feb-12
Aug-12
Aug-15
May-16
May-17
Nov-17
Nov-18
Feb-18
Nov-11
May-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Nov-15
Feb-16
Aug-16
Nov-16
Feb-17
Aug-17
May-18
Aug-18
Feb-19
May-19
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
May-21
Firm AUM*Annualized Performance
Mayar Fund - Class A
MSCI World Index Net TR *Firm AUM is a combination of the AUM of the fund and managed accounts
Performance HistoryMayar Fund Class A (Initial Series) - Since InceptionValue of $100,000 invested
$100,000
$80,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
$240,000
$260,000
$280,000
$300,000
$320,144
$255,056
8%
10%
6%
4%
2%
0%
12%
14%
12.50%
9.94%
MSCI World IndexMayar Fund (net)
$320,000
$221
-
150
30
90
Millions
May-11
Nov-11
May-12
Nov-12
May-13
Nov-13
May-14
Nov-14
May-15
Nov-15
May-16
Nov-16
May-17
Nov-17
May-18
Nov-18
May-19
Nov-19
210
May-20
Nov-20
May-21
60
120
180
240
$340,000
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Cumulative Performance
Class A Class B
Fund (net), % MSCI World, % Fund (net), % MSCI World, %
MTD 4.22 3.33 4.32 3.33
QTD 7.30 4.92 7.59 4.92
YTD 7.30 4.92 7.59 4.92
1 Year 66.59 54.03 68.44 54.03
3 Years 63.70 43.57 67.21 43.57
5 Years 108.80 87.16
7 Years 127.38 91.59
Since Inception 220.14 155.06 80.66 60.70
Annual Performance
Class A Class B
Fund (net), % MSCI World, % Fund (net), % MSCI World, %
2011 -1.93 -10.40
2012 13.37 15.83
2013 26.91 26.68
2014 5.68 4.94
2015 1.33 -0.87
2016 7.64 7.51
2017 18.73 22.40 9.20 13.39
2018 -0.56 -8.71 -0.06 -8.71
2019 24.67 27.67 25.30 27.67
2020 24.63 15.90 25.83 15.90
2021 7.30 4.92 7.59 4.92
Performance Statistics (Since Inception)
Class A Class B Class A Class B
ANNUALIZED ALPHA 3.53 3.96 ANNUALIZED VOLATILITY 12.73 15.54
SHARPE RATIO 0.99 1.06 BETA 0.87 0.93
INFORMATION RATIO 0.6 0.77 R-SQUARED 0.91 0.93
SORTINO RATIO 1.55 1.61 UPSIDE CAPTURE RATIO 95.72 97.71
TRACKING ERROR 4.27 4.44 DOWNSIDE CAPTURE RATIO 76.39 76.27
*Calendar year 2011 is a partial year starting May 16, 2011
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Letter from the Managing Director
For the three months ending March 31, 2021, Mayar Fund (Class A) returned 7.3% net of all expenses and fees while the MSCI World Index increased by 4.9%. Since its inception in May 2011, Mayar Fund is up 220.1% net versus a 155.1% increase for the MSCI. That corresponds to a 12.5% annualized rate of return for Mayar Fund, compared to 9.9% for the MSCI.
If anyone was wondering if things were going to get less exciting in 2021 after an action-packed 2020, the first quarter provided a clear answer to the contrary.
In early January we all watched in horror as supporters of President Trump stormed the US Capitol to try and disrupt the peaceful transfer of power. At around the same time, and in the face of surging cases of COVID-19, the UK entered a new national lockdown. Many European countries would follow within a month or two.
A couple of days later Democrats gained effective control of the US Senate after winning a pair of Georgia run-off elections. This was followed, on January 20th, with the peaceful inauguration of US President Biden. Markets breathed a collective sigh of relief, and with expectation of massive new government spending, pushed Treasury interest rates from around 0.9% in early January to 1.74% at the end of March. The yield curve sharpened considerably as market participants started to expect a much faster economic recovery and at least somewhat higher inflation in the future.
Shortly after that, the SubReddit “WallStreetBets” started the first of what would become many speculative trading frenzies. Videogame retailer GameStop, whose stock had closed at a little over $39 on January 20th, saw the price of its shares skyrocket to a peak of $347.51 a week later, almost bankrupting a couple of hedge funds and the Robinhood trading platform in the process. The mania continued with shares in AMC, Blackberry, Nokia, Bed Bath & Beyond, and many others going through similar episodes. Bitcoin and other cryptocurrencies, already on fire, broke through previously undiscovered atmospheric layers.
This crazy trading frenzy culminated with the bizarre episode of Bill Hwang of Archegos
Our Performance
General Commentary
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Capital Management who managed to lose $20 billion dollars in just two days in late March, causing significant disruption in many stocks and multi-billion-dollar losses at Credit Suisse and Nomura. Here’s a Bloomberg Businessweek article about the whole thing: Bill Hwang Had $20 Billion, Then Lost It All in Two Days
But not all was bad or crazy in the first quarter of 2021. In good news, the US re-joined the Paris Agreement on climate change on February 19th and more countries continued to set new lower emission targets.
In other good news, COVID-19 vaccines are getting us closer to a post-COVID world. Despite a rough start and continued vaccine supply disruption, countries are accelerating the pace of vaccination, with some countries like the United Kingdom, the United States, the UAE, Chile, Israel, Bahrain, Bhutan, Seychelles, and Hungary already successfully vaccinating between a third and two thirds of their populations. The COVAX program is helping poor countries gain access to vaccines, albeit with some delays and disruptions. We can finally see a path out of this pandemic.
With the help of pent-up demand and government stimulus, most economies are starting to come out of this pandemic with accelerating economic growth, with the IMF recently increasing its global growth estimates for 2021 and 2022.
The question now though is whether we have learned anything valuable from this experience, and whether we will use this opportunity to try and tackle some of the challenges and issues that we were facing prior to the COVID pandemic.
First, I think we have learned a lot about the downside of over-optimising how we run things like supply chains. Most companies we follow are now thinking hard about how to build slack and redundancies into their supply chains to better withstand shocks.Second, I am cautiously hopeful that we have learned a bit about the downside of populism. It would be great if our leaders started to make decisions based more on evidence and less about how they look in front of their supporters.
Third, and most importantly, I am also optimistic that we will start to tackle some of the long-term challenges that we face, most importantly the climate crisis that I believe is the biggest risk to us all over the next few decades. I think taking advantage of low interest rates to invest in long-term assets that pay off over decades and help combat climate change is a sensible idea. The US seems to be heading in that direction. I hope other countries will consider similar plans.
We initiated a new position in the shares of Danone, a multinational food company based in France. Danone operates in three main business lines: dairy and plant-based dairy, water, and specialized nutrition, with the latter including products like baby formula and medical nutrition. Danone is the world leader in fresh dairy, plant-based dairy, and advanced medical nutrition and a strong #2 in early life nutrition and packaged water. Despite being based in France, Danone’s biggest markets are the United States and China. A recent shareholder activism campaign is bringing in new blood to re-ignite the company’s growth potential and we see significant long-term upside if those efforts succeed.
Our Portfolio
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During the quarter we reduced our holdings in Google, Samsung Electronics, Vestas, Ashtead, and Evertec as their stock prices reached new highs. While we continue to believe in the attractiveness of their businesses, we remain committed to our valuation discipline and their current valuations make them less attractive investments for us, meaning they deserve to make up a smaller percentage of our portfolio.
We also sold most of our holdings in Discovery as the stock price continued to increase to new highs. However, in late March the stock declined considerably when brokers liquidated holdings by Archegos Capital (see above in General Commentary) to satisfy margin calls. That brought the stock price down to levels that we found attractive, and we bought back a significant amount of the shares that we had sold earlier that month. We also added to some of our existing holdings including Unilever, UPS, Johnson & Jonson, Electronic Arts, LabCorp, and SAP.
I wrote to you over a year ago about our plans to redomicile the Fund from the Cayman Islands to Ireland under UCITS (Undertakings for the Collective Investment in Transferable Securities) to enable us to market the fund to a wider investor base. Although there were some unexpected delays in 2020, I am happy to say that the process has now been re-started and we are making good progress and hope to complete this in the summer.
To make the transition to Ireland easier, we have decided to start by switching the fund administrator from Apex Fund Services Bahrain to Apex Fund Services Ireland. We completed this switch this month and as of April 1st, Apex Ireland is officially the Fund’s administrator.
Marc Cox, our Head of Investor Relations, should continue to be your first point of contact. However, here are the contact details of Apex Ireland should you need them:
We welcomed several new partners during the quarter and many of our existing partners added to their investments with us taking Mayar Capital’s Assets Under Management to a new high of $221 million. We take our responsibility as stewards of your capital very seriously and really appreciate your continued confidence in us.
As always, I remain available if you have any questions or thoughts.
Best regards,
Abdulaziz A. Alnaim, CFAManaging DirectorApril 18, 2021
The Fund and The Company
Apex Fund Services (Ireland) Limited
2nd Floor, Block 5Irish Life CentreDublin 1Ireland
+353 1 411 [email protected]@apexfunds.ie
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Asset AllocationTen Largest Positions
Company Name % Industry Country of Listing
Johnson & Johnson 5.50 Pharmaceuticals United States
Unilever 5.31 HH & Personal Prod United Kingdom
Brenntag 5.27 Capital Goods Germany
Lab Corp of America 5.22 Health Care Equip & Svcs United States
United Parcel Service 5.18 Transportation United States
Electronic Arts 5.12 Media & Entertainment United States
Danone 5.09 Food, Beverage, and Tobacco France
SAP SE 4.79 Software & Services Germany
Henkel 4.52 HH & Personal Prod Germany
Nordstrom Inc 4.43 Retailing United States
Total 50.44
Top Contributors to Losses (%)Top Contributors to Gains (%)
Vestas Wind Systems
SAP SE
Unilever
-0.68
-0.31
-0.29
-0.11
-0.07
Evertec Inc
Electronic Arts
Samsung Electronics
Neinor Homes
-0.05
-0.01
Discovery
Lab Corp of America
Nordstrom Inc
Asthead
Pz Cussons Plc
Brenntag
Toll Brothers
Johnson & Johnson
Richemont
4.11
0.98
0.84
0.78
0.63
0.63
0.52
0.28
0.26
Alphabet
0,25
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United States 40%
United Kingdom 16%
Germany 15%
Cash 13%
Denmark 6%
South Korea 6%
Switzerland 4%
North America 42%
Europe 28%
Asia 13%
Cash 13%
Other 4%
41% North America
28% Europe
14% Asia
13% Cash
4% Other
Portfolio (by revenue)
Portfolio (by listing)
Portfolio (by country of listing)
Europe 42%
North America 39%
Cash 13%
Asia 6%
42% Europe
40% North America
14% Cash
4% Asia
43% United States
16% United Kingdom
15% Germany
14% Cash
4% South Korea
4% Switzerland
2% Denmark
Last Quarter This Quarter
16% Capital Goods 13% Cash 12% Software & Services 12% Media 10% Household & Personal Products
8% Pharmaceuticals & Life Sciences 8% Consumer Durables & Apparel 6% Technology Hardware & Equipment
5% Retailing 5% Transportation 4% Health Care Equipment & Services 1% Real Estate
13% Cash 12% Media 11% Capital Goods 10% Software & Services 10% Household & Personal Products
9% Pharmaceuticals & Life Sciences 8% Consumer Durables & Apparel 6% Retailing 5% Transportation
5% Food and Beverage 5% Health Care Equipment & Services 4% Technology Hardware & Equipment 1% Real Estate
Portfolio(by industry)
Last Quarter
Portfolio(by industry)
This Quarter
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About Mayar Fund and Mayar Capital
Mayar Fund Ltd. (the “Fund”) was incorporated as an Exempted Limited Liability Company under the Laws of the Cayman Islands on March 7th, 2011 and commenced operations on May 16th, 2011. The Fund registered under the Mutual Funds Law of the Cayman Islands on May 3rd, 2011 and was converted into an administered mutual fund on January 23rd, 2017. The principal and registered office of the Fund is located in the Cayman Islands.
The principal activity of the Fund is to carry out the business of an investment fund. The Fund’s principal investment objective is to achieve long-term growth of capital by investing in equities and other securities to generate satisfactory risk-adjusted returns over the long term.
The investment activities of the Fund are managed by Mayar Capital Ltd. (the “Manager”) and from the 1st April 2021, the administration of the Fund is delegated to Apex Fund Services (Ireland) Limited.
The Investment Manager, Privium Fund Management (UK) Limited, has been appointed by theManager on November 2nd, 2015 to provide investment management services in relation to theFund. Privium Fund Management UK Ltd, have delegated investment manager responsibilities to Mayar Capital Ltd.
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Investment ObjectiveThe fund’s investment objective is to achieve long-term growth of capital by investing in equities and other securities to generate satisfactory risk-adjusted returns. The fund seeks to achieve its objective over the long term, which we define as a minimum of five years, by applying a disciplined value investing strategy to the selection of securities in global financial markets, and only invests in securities that comply with the Ethical Investment Criteria (as per PPM).
Structure & ProvidersFUND ASSETS (US$): 96,145,288FIRM AUM* (US$): 220,558,714FISCAL YEAR END: 30 June 2020FUND INCEPTION: May 16, 2011FUND MANAGER: Abdulaziz A. Alnaim, CFAMINIMUM INVESTMENT (CLASS A): $100,000MINIMUM INVESTMENT (CLASS B): $2.5 millionMANAGEMENT FEE: 1.5% (Class A) / 1.0% (Class B)INCENTIVE FEE: 20% (Class A) / 14% (Class B) of spread above benchmark, with a high watermarkBENCHMARK: MSCI World IndexDOMICILE: Cayman IslandsADMINISTRATOR: Apex Fund ServicesAUDITOR: KPMG (Cayman Islands)BLOOMBERG TICKER: MAYARFD KY, MAYARLB KY
ISIN: KYG5905A1058 (Class A); KYG5905A1132 (Class B)
*Firm Assets Under Management (“AUM”) include all assets managed bythe firm within the fund and separately managed accounts.The present investment strategy was adhered to by the portfolio managerwhile managing predecessor funds: TwentyEight Inc (2003), and YareemLtd (2004 – 2011).This communication is confidential and is intended solely for shareholdersof Mayar Fund Ltd.Mayar Capital Ltd, and its affiliates provide investment advisory and asset management services to institutions, family offices, and high net-worth individuals globally. Mayar Capital Ltd.is authorised and regulated by the UK’s Financial Conduct Authority. (number 926424).Mayar Capital Ltd. | 31 Clerkenwell Close, office 108 London EC1R 0AT United Kingdom | [email protected] | www.mayarcapital.comPrivium Fund Management (UK) Ltd | The Shard, 24th Floor 32 LondonBridge Street London SE1 9SG | [email protected] | www.priviumfund.com
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ADMINISTRATION
AUDIT
LEGAL
MIDDLE & BACK OFFICEFINANCIAL OUTSORSING SERVICES
BROKERAGE
CUSTODY
Venture One Legal
Board of DirectorsMayar Fund Ltd
Abdulaziz A. Alnaim, CFAManaging Director, Mayar Capital
Ali M. Al DaftariCEO, Pantera Investment Management
Ayman Afghani Advisor to the Saudi Minister of Economy and Planning.
Mayar Capital Ltd.
Abdulaziz A. Alnaim, CFAManaging Director, Mayar Capital
Aubrey W. BrocklebankDirector, Senior Analyst & Assistant Portfolio Manager
Saud O. AlblehedManaging Director at Afras Contracting and Chairman at Morgan Stanley Saudi Arabia
Laurent S. HopmanPartner, 21North Advisors
Our TeamResearch & Investment
Abdulaziz A. Alnaim, CFAManaging Director
Aubrey Brocklebank Director, Senior Analyst
Operations
Stefan Dawidowski Chief Operating Officer
Marc Cox Head of Investor Relations
Kamea Mayes Operations Associate
Sophie ForsythExecutive Assistant & Office Manager
Compliance & Risk (Privium Fund Management UK Ltd)
John GriffithsCompliance Officer
Ruben LeemeijerRisk Manager
Operations (Apex Financial Outsourcing Services)
Venki SubramanianMiddle and Back Office Manager
Akhtar AnsariMiddle and Back Office Team
Fund Administration (Apex Fund Services)
Koshy OommenManaging Director
Ruqaya NeamahAccount Manager, Bahrain
Sylvain VillecrozeHead of Hedge Fund Accounting Dublin
Karl DalyFund Accounting
Graham CusackTransfer Agency
Lorraine GrenFATCA/CRS and AML Services
Taha AlsadadiCompliance Officer & MLRO
Offshore Legal Advisor (Venture One Legal Ltd)
Fawaz ElmalkiCounsel
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Awards20
Long Only Equity Fund of the Year — 2017
Award for Excellence in Value Investing Strategies 2017 & Best Performing Value Fund
(5 Years): Mayar Fund
2017
2015
Winner - Acquisition International Hedge Fund Awards 2015 – Best
Global Equities Hedge Fund — Cayman Islands
Award for Innovation in Value Investing — 2015
Mayar Capital Management Investment Company
Of The Year — Saudi Arabia 2015
Saudi Asset Manager of the Year Shortlisted — 2015
2013
Saudi Asset Manager of the Year Shortlisted — 2013
European Hedge Fund of the YearShortlisted — 2013
2014
Saudi Asset Manager of the Year Shortlisted — 2014
2018
MAYAR FUNDCLASS A USDAS OF 31/12/2018
MAYAR FUNDCLASS A USDAS OF 31/10/2017
2019
MAYAR FUNDCLASS A USDAS OF 31/12/2019
2020
MAYAR FUNDCLASS A USDAS OF 31/12/2020
5-CROWNS FE TRUSTNET CROWN RATING
2021
MAYAR FUNDCLASS A USDAS OF 31/03/2021
DisclaimerThis document is prepared by Mayar Capital Ltd., a delegated investment manager of Privium Fund Management (UK) Limited(“Privium”) which is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom. It is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Within the EEA the Fund is only available to Professional Investors as defined by local Member State law and regulation.
Outside the EEA, the Fund is only available to Professional Clients or Eligible Counterparties as defined by the FCA, and in compliance with local law. This document is not intended for distribution in the United States (“US”) or for the account of US persons, as defined in the Securities Act of 1933, as amended, except to persons who are “Accredited Investors”, as defined in that Act and “Qualified Purchasers” as defined in the InvestmentCompany Act of 1940, as amended. It is not intended for distribution to retail clients.
This document is provided for information purposes only and should not be regarded as an offer to buy or a solicitation of an offer to buy shares in the fund. The prospectus and supplement of the fund are the only authorised documents for offering of shares of the fund and may only be distributed in accordance with the laws and regulations of each appropriate jurisdiction in which any potential investor resides. Investment in the fund managed by Privium carries significant risk of loss of capital and investors should carefully review the terms of the fund’s offering documents for details of these risks. Mayar Fund follows a long-term investment strategy.
Short-term returns will vary considerably and will not be indicativeof the strategy’s merits. This document does not consider thespecific investment objectives, financial situation or particularneeds of any investor and an investment in the fund is not suitablefor all investors. Investors are reminded that past performanceshould not be seen as an indication of future performance and that they might not get back the amount that they originally invested.
Comparison to the index where shown is for information only and should not be interpreted to mean that there is a correlation between the portfolio and the index. The views expressed in this document are the views of Mayar Capital® and Privium at time of publication and may change over time. Where information provided in this document contains “forward-looking” information including estimates, projections and subjective judgment and analysis, no representation is made as to the accuracy of such estimates or projections or that such projections will be realised. Nothing in this document constitutes investment, legal tax or other advice nor is it to be relied upon in making an investment decision. No recommendation is made positive or otherwise regarding individual securities mentioned herein.
No guarantee is made as to the accuracy of the information provided which has been obtained from sources believed to be reliable. The information contained in this document is strictly confidential and is Intended only for use of the person to whom Mayar Capital Ltd. or Privium has provided the material. No part of this document may be divulged to any other person, distributed, and/or reproduced without the prior written permission of MayarCapital Ltd.
Mayar Capital Ltd. provides investment advisory and asset management services to institutions, family offices, and high networth individuals globally.
Mayar Capital Ltd. is a delegated investment manager of PriviumFund Management (UK) Ltd., which is authorised and regulated by the Financial Conduct Authority in the UK.
Mayar Capital Ltd., 27-31 Clerkenwell Close, Office 108,Clerkenwell Workshops, London EC1R 0AT, United [email protected] | www.mayarcapital.com
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