Goodwood Funds - WAIS C · Growth of $100,000 Invested in the Goodwood Fund Since Inception:...
Transcript of Goodwood Funds - WAIS C · Growth of $100,000 Invested in the Goodwood Fund Since Inception:...
September 2015
Goodwood FundsWorld Alternative Investment Summit Canada
Confidential not for distribution
GOODWOOD INC.
Curt CummingPresident
Goodwood Fund – 19-Year Performance History
Goodwood Capital Fund – 16-Year Performance
Goodwood Milford Fund – 9-Year Performance
Goodwood SPValue Fund – new Activist Fund offering
Goodwood FundsWorld Alternative Investment Summit Canada
Confidential not for distribution
GOODWOOD INC.
Goodwood’s Investment Philosophy
Goodwood approaches each targeted investment strategy with a “private equity” approach - company specific, bottom-up analysis that leverages our core strengths and maximizes long-term success
• Opportunistic
• Value-Oriented
• Company Specific
• Concentrated Positions
• Event-Driven
• Long-Term Strategy
• Non-Correlation
• Alignment
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Proven Long-Term Performance for 19 Years
The Goodwood Fund has delivered an attractive return to investors relative to other Canadian stock indices for 19 years
$592,979
$379,210
• Long-term cumulative outperformance of S&P/TSX Composite Total Return Index (the “Index”) by ~214% since inception
• Goodwood Fund has outperformed the Index 61% of full calendar years since inception
• Goodwood Fund has delivered diversified risk to investors with only a 0.54 correlation to the Index since inception
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Growth of $100,000 Invested in the Goodwood Fund Since Inception:
Goodwood Fund
S&P/TSX Composite TR Index
Returns are net of fees from inception Oct 26, 1996 until August 31, 2015.
Source: Goodwood Inc., Goodwood Fund Class A. Past performance may not be repeated. See disclosure at the end of the presentation. The S&P/TSX Composite Index is designed to reflect an
investment in a broad array of Canadian securities listed on the Toronto Stock Exchange. This Index is not a benchmarks of the Fund but rather is displayed for comparison purposes to the broad
market.
Goodwood Fund
Goodwood Fund
Portfolio Manager:Peter H. Puccetti, CFA
Fund Objective/Description:The Goodwood Fund (the “Fund”) investment objective is to maximize long-term total return through the purchase and short sale of primarily North American exchange-listed securities based on a bottom-up, company specific approach. The portfolio is relatively concentrated with 8-10 core positions typically representing over 50% of the portfolio. The value-oriented stock picking strategy allows the manager to focus on a limited number of ideas and build strong relationships with senior management of investee companies.
Key Reasons to Own this Fund:• Long-term track record of outperformance
• Long and Short portfolio• Primarily equity based• Bottom-up, company specific investment approach
• Low correlation to TSX• Value based and event driven• Management alignment
Historical Performance:
Outperformance of S&P/TSX Index:• 61% of Full Calendar Years
Limited Market Correlation:• 0.53 L-T-M• 0.54 since inception
Returns are net of fees. Source: Goodwood Inc. and Bloomberg. See disclosure at end of presentation.
Returns are net of fees. Source: Goodwood Inc. See disclosure at end of presentation.
Current Asset Allocation:
Number of Long/ (Short ) Positions 23 / (3)
Top 10 as % Portfolio 72.8%
Long Exposure 95.7%
Short Exposure 2.4%
Net Exposure 93.3%
Leverage 0.0%
% Portfolio S&P/TSX Composite Index 20.1%
Avg Mkt Cap of Top 5 Long Positions C$248M
Asset selection driven by bottom-up, company specific approach in seeking under-valued securities for the fund. As such, the composition of the portfolio bears limited correlation to the S&P/TSX Composite Index. The portfolio typically holds its core positions for a long period of time (often over 3 years). As such and on purpose, the month-to-month change in asset composition is limited.
As of August 31, 2015
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Source: Goodwood Inc., S&P CapitalIQ. See disclosure at end of presentation.
Sector S&P/TSX FUND
Financials 35.7% 7.8%
Energy 19.6% -2.4%
Consumer 11.1% 7.3%
Materials 9.6% 0.0%
Industrials 7.9% 10.1%
Healthcare 6.0% 15.9%
Telecom 5.2% 0.0%
Info Tech 2.8% 16.4%
Utilities 2.2% 38.3%
Net Exposure 93.3%
Source: Goodwood, Bloomberg. Numbers may not add due to rounding.
Performance Metrics Since Inception S&P/ TSX FUND
Cumulative Return 279.21% 492.98%
Compounded Annual Growth Rate 7.33% 9.90%
Best Monthly Return 12.1% 15.8%
% of Positive Monthly Performance 61.5% 62.8%
Standard Deviation 15.4 16.7
Fund Correlation 0.54 1.00
Compound Return (%) YTD 1 Yr 3 Yr 5 Yr 10 Yr Inception
Goodwood Fund 2.49 0.42 8.08 2.90 -0.56 9.90%
S&P/TSX SmallCap TR Index -7.97 -23.77 -0.82 -0.22 1.15 N/A
S&P/TSX Composite TR Index -3.47 -8.68 8.25 6.09 5.57 7.33%
Active Relationship with Management
Goodwood always looks to develop a relationship with the management teams of its core holdings in an effort to better understand the investment and to promote long-term value
Activism - Goodwood invests in a limited number of companies that are undervalued. Market value dislocationsmay be temporarily mispriced for a variety of reasons, including perceived unfavorable industry conditions, poorbusiness performance, and changes in management, reorganizations, or other external factors. These conditionscan often result in good businesses that are available at depressed valuations
Positive Cooperation with Management and Board - the goal in each active investment is to workconstructively with management and/or the company’s board to implement a strategy or strategies that maximizereturns for all shareholders
Non-Receptive Management and Board - occasionally, if the company is wholly non-receptive to valueenhancing strategies and we have significant support from fellow shareholders, the engagement moves into thepublic domain to become proxy contests with the goal of seeking to replace certain directors or potentially a fullreconstitution of the company’s Board
Source: Goodwood Inc. Past performance may not be repeated. See disclosure at end of presentation.
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Active Relationship with Management
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‘02-’07 ‘02-’05 ‘05-’07 ‘06-’08 ‘06-’09‘08-
Present
Goodwood always looks to develop a relationship with the management teams of its core holdings in aneffort to best understand the investment as well as ensure that our ideas around long-term valuerealization are at the forefront of management’s mind
‘12-’13 ‘12-’14‘14-
Present‘10-’12 ‘14-’15
‘15-Present
Goodwood SPValue Fund LP
Goodwood SPValue Fund LP
Portfolio Manager:Peter H. Puccetti, CFA
Fund Performance to August 31, 2015:
*Past performance not indicative of future returns. See last page for further disclosure
Fund Objective/Description:The Goodwood SPValue Fund (the “Fund”) investment objective is to generate attractive long-term total returns through selective investments in companies deemed by the manager to be undervalued and that offer potential of being positively influenced by the manager taking an active role in seeking to implement changes in the areas of corporate governance, capital allocation, strategic and operational issues, management and other related activities.
Key Reasons to Own this Fund:• Track record of similar style investment success• Bottom-up, company specific investment approach• Event driven returns as compared to market driven• Concentrated and active approach to investments to ensure long-term value realization
• Unique investment opportunity• Established relationships to execute strategy successfully
Fund Details:
Small/Midcap Opportunity:• Key to activist strategy starts with finding undervalued stocks
• Small/midcap space offers most fertile ground for finding undervalued stocks- Limited research support- Limited institutional focus
• Canadian market particularly attractive today given underperformance relative to US peers over last few years
Goodwood’s Historical Active Investments:
Index P/2015E Book
S&P/TSX Small Cap Index 0.80x
Russell 2000 Index 1.08x
Activist Investing in Canada:• Inefficient market as Canadians are generally unwilling to engage in activist opportunities
• Iconic Canadian names set precedent for future activist capital
• Increasing support from large Canadian pensions and institutional investors
• Goodwood believes the Canadian activist market more attractive than US and Europe
• Limited local market participants
CP Rail Agrium RONA
Goodwood’s Investment Process:
12 investments over past 13 years• One of the most experienced active investors in Canada
Ongoing transactions held in Goodwood Fund• New investments to be held by the Goodwood SPValue Fund
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Source: Bloomberg Consensus Estimate as of August 31, 2015
Small & midcap stocks
Attractive assets or business
Undervalued
Poor share price performance
Limited ownership/control
Path/Strategy to unlock value
Most fertile market
Quality assets only
Embedded value upside
Market support likely
Open to listen/change
Logical path to value
Goodwood SPValue Fund leverages opportunities in other managed capital pools to indentify attractive value opportunities.Goodwood then determines if unrecognized value is most likely to be realized through proactive engagement with the investeemanagement or board.
*Class A – Lead Series. Past
performance not indicative of future
returns. See page 2 for further
disclosure.
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Credit Strategy Broadens Platform
The Goodwood Milford Fund has significantly outperformed the broader market for almost 10 years
$399,970
$161,700
• Long-term cumulative outperformance of S&P/TSX Composite Total Return Index (the “Index”) by 238% since inception
• Goodwood Milford Fund has outperformed the Index 78% of full calendar years since inception
• Goodwood Milford Fund has delivered diversified risk to investors with only a 0.60 correlation to the Index since inception
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Growth of $100,000 Invested in the Goodwood Milford Fund Since Inception:
Goodwood Milford Fund
S&P/TSX Composite TR Index
As of August 31, 2015
*Prior performance of the Fund up to and including September 30, 2013 relates to periods of time when the Fund’s Investment Manager was Milford Capital Management Inc. and the portfolio manager was Chris Currie,
CFA. Goodwood Inc. became the Investment Manager of the Fund on October 1, 2013 and Chris Currie joined Goodwood Inc.’s investment team continuing as portfolio manager for the Fund. There is no change to
the investment strategy of the Fund. Fund returns are net of all fees. Past performance is not indicative of future results. Performance returns above are calculated for the founding class of Units, other classes may
charge different fees and therefore returns between the different classes may vary. The S&P/TSX Composite Index is designed to reflect an investment in a broad array of Canadian securities listed on the Toronto Stock
Exchange. This Index is not a benchmarks of the Fund but rather is displayed for comparison purposes to the broad market. Source: Goodwood Inc., Goodwood Milford Fund Class S.
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Goodwood Milford Fund LP
Goodwood Milford Fund LP
Portfolio Manager:Christopher Currie, CFA
Fund Objective/Description:The Goodwood Milford Fund LP (the “Fund”) investment objective is to offer investors significant portfolio diversification and long-term capital growth. The Fund uses a unique strategy of combining higher coupon corporate bonds and long/short equity positions. Similar to other Goodwood Funds, the investment focus is a bottom-up, company specific approach that focuses on North American companies. Weightings between bonds and equity (long/short) vary based on the manager’s view of risk/reward at the time.
Key Reasons to Own this Fund:• Long-term track record of significant outperformance
• Portfolio Manager has 25 year plus investment experience
• Bottom-up, company specific investment approach
• Volatility of equity reduced by bond component
• Credit Driven versus Interest Rate driven -low duration
• High percentage of positive months versus broader market
As of August 31, 2015
Historical Performance:
Compound Return (%) YTD 1 Yr 2 Yr 3 Yr 5 Yr Inception
Goodwood Milford Fund 0.11 0.32 11.18 11.26 16.79 15.42%
S&P/TSX Composite TR Index -3.47 -8.68 7.75 8.25 6.09 5.10%
Performance since inception S&P/ TSX
FUND
Cumulative Return 61.70% 299.97%
Compound Annual Growth Rate 5.10% 15.42%
Best Monthly Return 11.5% 17.2%
% of Positive Monthly Performance 59.5% 72.4%
Fund Correlation 0.60 1.00
Returns are net of fees. Source: Goodwood Inc., Bloomberg. See disclosure at end of presentation.
Returns are net of fees. Source: Goodwood Inc. See disclosure at end of presentation.
Growth of $100,000 Invested January 1, 2006:
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Goodwood Milford Fund
S&P/TSX Composite TRI
Fund Target Ranges and Current Asset Allocation :
$399,970
$161,700
Corporate Bonds – Corporate bond spreads (risk premium over Government bonds)widened in August due to the equity market downturn resulting in price drops for amajority of the Fund's corporate bond holdings. Corporate bonds represent 73% of theFund's assets and we estimate that the corporate spread widening impacted the Fundby about -0.90 bps overall. In the investment grade segment which is 43% of thecorporate credit portfolio, spreads widened by on average 20 bps which is about onemonth of coupon income. In the higher yielding portion of the portfolio whichrepresents 67% of the corporate credit portfolio spreads widened on average a moresignificant 55 bps with large variances in individual bonds.
Long Equities – The Funds equities performed poorly in August which attributed themajority of the losses for the Fund in August. Equities comprise about 1/3rd of theasset mix in the Fund and the losses in equities were wide spread across the vastmajority of the Fund's holdings. The S&P/TSX Composite TR Index returned -4.0% inAugust which was down significantly as well.
Short Equities – The Fund's short positions have been decreasing in weight over thesummer as prices for the positions approached our price targets and we realizedprofits. As a result, the drop in equities experienced in the last two weeks of Augustwas not as beneficial to the portfolio as it would have been had the Fund continuedholding the positions. The short positions the Fund held generated modest overallprofits.
Target Investment Range
Latest Month
December 31, 2014
Portfolio Weighted Duration: 3.7
0%
50%
100%
150%
200%
Corporate
Bonds
Long Equities Short Equities
Award Categories:
2014 – Best 5 YrReturn – 2nd place
2012 – Best 3 YrSharpe Ratio – 2nd
place
2012 - Best 3 YrReturn – 3rd place
Segregated Managed Accounts: Personalized Portfolios
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Goodwood’s investment philosophy is uniquely adjusted to fit your risk profile and investment timehorizons. We appreciate that every investor has varying capital requirements, every segregatedmanaged account strategy is different. We allocate capital based on unique investment goals
Custom Portfolio Management: we start our process with an in-depth discussion about goals, investmentobjectives, risk tolerance, tax situation and liquidity needs.
Institutional Fund Managers: our corporate credit experience is not easily replicated or offered elsewhere in theCanadian market. Our ability to access the institutional capital markets is utilized to provide institutional qualityopportunities to personalized portfolios of private individual investors.
Alignment: we are independent and unbiased; we are not limited to ‘banking products’, we are committed toaligned interest with our investors by investing our own capital alongside that of our clients.
Clear, concise reporting: we communicate often with our clients through quarterly and annual reports as weunderstand the vast majority of our clients are not investment experts. We subscribe to the notion that an informedinvestor is a good investor.
Partners: we have partnered with high quality service providers to ensure an institutional level ofcompliance. National Bank Financial is our preferred custodian, responsible for records and safekeeping of clients’assets and provides quarterly statements, annual T5 and T3 statements and annual trading and investment incomesummaries. Goodwood is a member of the Canadian Investor Protection Fund, Investment Industry RegulatoryOrganization of Canada, Investment Industry Association of Canada and Alternative Investment ManagementAssociation (UK).
Fund Subscription Information
Goodwood Fund Goodwood Capital Fund Goodwood Milford Fund LP Goodwood SPValue Fund LP
Strategy: Long/Short Long-only Bond & Long/Short Equity Activist Equity
Exposure: North America North America North America North America
Style: Fundamental bottom-up value oriented
Fundamental bottom-up value oriented
Fundamental corporate credit with equity long/short overlay
Fundamental bottom-up value with active engagement of investee management
Tax Plan Status: RRSP/RRIF eligible RRSP/RRIF eligible - -
Inception Date: 1996 1999 2006 2014
Fund Type: Mutual Fund Trust Mutual Fund Trust Limited Partnership Limited Partnership
Mgt Fee: Class B = 1.90%Class F = 1.00%
Units = 1.90% Class A = 1.90%Class F = 0.90%
Class A = 2.00%Class F = 1.00%
Performance Fee: 20% None 20% above High-Water-Mark 20% above High-Water-Mark
Valuations: Weekly/Monthly Weekly/Monthly Weekly/Monthly Monthly
Subscriptions: Weekly/Monthly Weekly/Monthly Weekly/Monthly Monthly
Redemptions: Weekly/Monthly Weekly/Monthly Weekly/Monthly Monthly
Redemption Restrictions: 1% if within 3 years 2% if within 90 days 1% if within 1 year 2-yr lock-up
Trailer: Class B = 1% and 10% of Realized Performance Fee
Class F = n/a
1% Class A = 1% and 10% of Realized Performance Fee
Class F = n/a
Class A = 1% and 50% of Realized Performance Fee
Class AF = n/a
Minimum Initial Investment: $25,000 (accredited Investor) $5,000 $25,000 (accredited Investor) $25,000 (accredited Investor)
Min Subsequent Investment: $5,000 PAC Eligible $5,000 $5,000
FundSERV Codes:Fund Class – Code
GWDClass B – 022Class F – 222
GWD001
GWDClass A – 017Class F – 117Class S - 127(Q3 2015)
Available Upon Request
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Disclosure
Performance returns throughout this presentation are calculated for the founding Class of Units and lead series for each respective Fund -Goodwood Fund Class A Units, Goodwood Capital Fund, Goodwood Milford Fund Class S and Goodwood SPValue Fund Class A. The returnsand are net of all management fees, expenses and incentive performance fees. The performance fee for Goodwood Fund Class A units is20% of positive returns over a 10% hurdle. Therefore in periods of positive performance the Class A is subject to lower performancefees. Currently only the Class B and Class F units of the Goodwood Fund are offered. Goodwood Milford Fund Class S charges a 1.5%management fee, other classes may charge different fees and therefore returns between the different classes may vary. Goodwood Inc.became the Investment Manager of the Goodwood Milford Fund on October 1, 2013 and Chris Currie joined Goodwood Inc.’s investment teamcontinuing as portfolio manager for the Fund. There will be no change to the investment strategy of the Fund. The Goodwood SPValue Fund’sreturn profile is inherently volatile due to holding extremely concentrated positions. Currently the Goodwood SPValue Fund’s assets areinvested in only one security. Readers should take note of this when comparing returns across the various Goodwood Funds. Pastperformance of the Goodwood Funds does not guarantee future results. No assurances or guarantees can be given or implied concerningfuture investment results or any investment index. Future returns may differ significantly from the past due to economic and marketconditions and other factors. Investments within portfolios, and therefore, portfolios, involve risk and the possibility of loss, including apermanent loss of principal. No representation is being made that any investment will or is likely to achieve profits or losses similar to thoseshown. There can be significant differences between hypothetical performance results and the actual results subsequently achieved by anyparticular trading program.
The information contained in this presentation is delivered on a strictly confidential basis to each offeree solely to enable the persons attending thispresentation to learn about Goodwood Inc. and the Goodwood Fund and does not constitute an offer to any other person or to the public generally tosubscribe for or otherwise acquire any securities offered or managed by Goodwood Inc. in the United States.
Distribution of this information to any person other than the original recipients thereof or those persons, if any, retained to advise the recipients thereof withrespect to these materials is unauthorized, and any disclosure of any of this information without Goodwood Inc.’s prior written consent is prohibited. Eachrecipient of these materials, by accepting delivery of this information, agrees to the foregoing and further agrees to make no photocopies of this information,or of any documents delivered in connection with or attached to this presentation. Distribution of this information in certain jurisdictions may be restricted bylaw. Persons into whose possession this information comes must inform themselves about and observe any such restrictions.
Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the offering memorandum orprospectus before investing. The indicated rates of return are historical annual compounded total returns including changes in unit value and reinvestment ofall distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would havereduced returns. Performance results are not guaranteed, values may change frequently and past performance may not be repeated. The S&P/TSXComposite Total Return Index reflects an investment in a broad array of Canadian securities. Performance data from certain market indices are provided inthis presentation for information purposes only. A comparison of the Funds’ performance to such market indices is of limited use because the composition ofthe Funds’ portfolio may contain other securities not found in the market index. As a result, no market indices are directly comparable to the results of theFunds and are displayed for comparison purposes to the broad market. The Goodwood Funds hold both Canadian and foreign securities. In addition, theGoodwood Fund, Goodwood Milford Fund and Goodwood SPValue Fund may use short sales, with the objective of enhancing returns.
**Principals of Goodwood Inc. may, from time to time, accept officer positions and/or directorships from companies unrelated to Goodwood Inc. In thiscircumstance, that company would be considered under relevant securities law to be a "connected issuer" to Goodwood Inc. Currently, The WestaimCorporation is considered a "connected issuer" in respect of Goodwood Inc. Furthermore, Goodwood Inc., or an affiliate of Goodwood Inc., may provideservices to and receive compensation from issuers in which the Funds are invested. Goodwood Management Services Ltd., an affiliate of Goodwood Inc.,entered into a five year Consulting Agreement on May 13, 2015 with Polaris Infrastructure Inc. (formerly Ram Power Corp). Goodwood Inc. has adoptedappropriate policies and procedures to address conflicts of interest with respect to connected issuers.
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