Unless you’ve been under a rock for the last few years, you know what has transpired with Marty Whitman’s Third Avenue Management: the impeccable reputation and talent across multiple investment strategies that catapulted them to over $26B in assets as well as the tumultuous turn of events that toppled them off that pedestal. While these Icarus-like stories are difficult to watch, as champions of undiscovered mutual funds at Havener, we also know that these downturns often spring forth some of the most interesting breakaway managers. Enter Moerus Capital.
What’s the Scoop?
Before we go further, let’s start with the obvious question. How do you say “Moerus?” (Sometimes it’s the most basic questions like, “How do I pronounce this firm’s name?” that help when you start your due diligence.)
Moerus is pronounced “more-us” and the team believes the origins of the word are a strong representation of their investment philosophy.
Moerus is the Ancient Latin word describing a city’s defensive walls. Our style of investing requires a deeply discounted asset. Because of this, the companies we purchase typically face near term challenges, risks, and uncertainties. We welcome this transitory turmoil, as it can provide unusually compelling opportunities, but we must seek to populate the portfolio with companies that have a “Moerus” - the strength, staying power and wherewithal - to withstand a variety of risks, enabling these companies to survive and to thrive when the temporary difficulties subside.
Moerus’ co-founder Amit Wadhwaney led well-regarded mutual fund Third Avenue International Value Fund (TAVIX) from December 2001 to June 2014. Mr. Wadhwaney was synonymous with international investing at Third Avenue; in addition to the mutual fund, he also managed global and emerging markets strategies. Wadhwaney is joined at Moerus by co-founders John Mauro and Michael Campagna who worked alongside him at Third Avenue. Moerus recently welcomed a fourth partner, Ian Lapey, who was the sole portfolio manager on Third Avenue’s flagship Third Avenue Value Fund beginning in 2012, a promotion from his seat as co-manager alongside Marty Whitman starting in 2009. The hits list is long, so, let’s just summarize by saying, Moerus has “cred.”
Like many breakaway stories, Moerus is based on a strong set of values championed by Amit, John, Michael and Ian and upheld by their colleagues. They want to build a great firm that partners with investors who share their beliefs. Moerus is not focused on gathering assets, nor are they fans of institutional bureaucracy. They are focused on what they do best, utilizing the “purest form of their investment philosophy” to generate alpha. They want to find like-minded investors and shut the doors at capacity – which the team believes is around $5B.
As Michael said, “At Moerus, the investment team makes the investment decisions. The investment team also makes the business decisions.” This structure, and the team’s commitment to transparency, align the firm with the best interests of clients and create a shareholder-first experience.
How is the Strategy Different?
Moerus' flagship strategy is the Moerus Worldwide Value Fund (MOWNX, MOWIX). Where some of the competitors in the global equity space may invest in 100 – 150 of their “best” ideas, Moerus has between 25 - 40 unique one-off scenarios sourced and vetted via a rigorous bottom-up research process. The team is contrarian. “Moerus stocks” need to have a sustainable advantage, but they will also be deeply discounted due to a near term challenge, risk or uncertainty. As they say, “this transitory turmoil can provide unusually compelling opportunities.” The resulting portfolio may skew toward small cap and will likely be comprised of names you won’t see in other funds in their peer group. Think high active share portfolios with low correlation and low holdings crossover with other strategies in a line-up.
Why Should You Care?
This team has pedigree. They’ve “been there, done that” during their time at Third Avenue. They know how to pick eclectic value stocks, construct a contrarian concentrated portfolio, and generate alpha for their investors.
Moerus has strong values. Capacity constraint, transparency and alignment of business and investment decisions are some of the hallmarks of this undiscovered mutual fund firm.
In reflecting on the name Moerus and the concept of defensive walls, it is interesting to think not only about the stocks the team chooses to invest in, but also the type of firm they are building and the clients with whom they hope to partner. As mentioned, Moerus can be pronounced: ‘more-us.” More Us. Picture this team of industry veterans sitting around saying: this new firm will embrace who we are as people, what we believe in as investors, and who we feel are the right fit as investors. Moerus. High five to you.
Want to Learn More?
If you are an early adopter investor, Moerus should be on your radar. The firm offers separately managed accounts, a mutual fund with institutional and investor share classes, as well as a limited partnership vehicle.
To learn more, visit their website at moeruscap.com or give them a call at (212) 461-4088.