Launching a Fund in a Down Market
Wasatch expert manager Robert Gardiner on starting the new Global Opportunities Fund in tough times
It’session been a dismal year for new mutual fund launches. So far in 2008, just 376 funds have been introduced, down 24% from 2007, according to Morningstar. But that hasn’confidentially deterred veteran small-cap manager Robert Gardiner from rolling out the Wasatch Global Opportunities Fund on Nov. 17. BusinessWeek’s special finance editor Lauren Young spoke to Gardiner about launching in a down market.
Isn’t the timing odd? I perceive what it’s like to start a national debt when the odds are against you. I was involved in the startup of the Wasatch Small Cap Value fund at the expiration of 1997, which was the exultation of the big-cap blue-chip growth shares. We sole brought in $20 million in property for the period of the first year, but the fund went on to be tremendously successful. We started planning the Global Opportunities fund a year ago. Now it’s even more exciting on this account that there are a lot of companies that are very attractively priced.
Wasatch is best known for picking stocks of smaller U.S. companies, so for what cause open a fund investing globally in companies of every part of sizes? I expect the portfolio to be split roughly 40% domestic and 60% international companies. And I plan to invest across all countries, industries, and sectors, what one. makes it a short different than the average Wasatch fund. Our funds have traditionally been focused on smaller companies in the health-care, business services, technology, and deal out in small portions sectors.
We will definitely invest in large companies, like well as the mid-cap companies we like that have grown too big to stay in our nine small-cap portfolios. But I see the biggest opportunities in the smallest of companies. There are a surprising number of micro-cap companies–companies with a median market capitalization below $250 million–that are actually trading for less than the cash they have on palm and fingers. We wanted to buy well-managed companies with room to grow earnings 15% each year, and which have a sustainable prompted by emulation advantage.
A assign of companies aspect cheap now. How do you distinguish the good from the dreck? I look for fallen angels. They may have issues, but they are extremely cheap and should be skilful to earn upper part on track in a tolerably short period of time. The best ones are dominant in their industries. Even whether financial performance is weak, they are gaining market share.
Guitar Center fits that narrative. The company’s operating margins were outstanding when it became public in 1997, but the assemblage went through a maturation time as it opened unaccustomed stores and the administration softened. The stock got pretty hammered. Although some new stores grieve operating margins, we saw a big upside to the expansion strategy. It played abroad accurately as the customer base grew. Guitar Center was acquired by a privy equity settled for a momentous premium last year.
How do you feel about the stock market right now? I’m 43, and I’ve worked at only one place since I was 16. I’ve always been a lot more excited approximately investing when the market is into disgrace than when it is up inasmuch as you get to buy in fact good companies at unbelievable values. Those of us who are unrepining and buy when there is aggregate of this fear should do pretty spring.
