Fund name: Cambiar Conquistador (CAMSX)
Objective: The fund seeks total return and capital preservation. The goal of the fund is to provide above-average performance in both rising and falling market periods by investing in stocks that have limited downside risk and positive upside potential. The managers construct a concentrated portfolio of small and midcap stocks which exhibit three characteristics: attractive valuations, high quality companies (both in quality of management and quality of balance sheets), and predictable catalysts. The fund manages risk, in part, by limiting the size of individual positions (2% of the portfolio) and sectors (25% of the portfolio) and by having a pretty clear sell discipline.
Adviser: Cambiar Investors LLC is an independently owned, Denver-based investment management firm managing assets for institutional and individual investors for over 34 years. They have over $8.0 billion in assets under management. Their "primary goal is to protect investors’ capital while capitalizing on emergent investment opportunities."
Manager: Brian Barish, Michael Gardiner, Maria Azari, Ania Aldrich, and Timothy Beranek. The core of this team has been together for nine years while running the very successful large-cap Cambiar Opportunity fund.
Inception: August 31, 2004.
Minimum investment: $10,000 for regular accounts, $2500 for IRAs.
Expense ratio: 1.50% after expense waivers on an asset base of $60 million.
Comments: The "Stars in the Shadows" feature was created to highlight great funds whose long-term track records are belied by their tiny asset bases.
Conquistador has a fine record: top 2% in ’05 and top 7% in ’06 and top third so far this year. But you might well ask, "So why is a fund without even a three-year track record here?"
The short answer is that the team of analysts who have crushed their competition for a decade with Cambiar Opportunity has been charged with doing the same thing here. They assembled a fairly compact portfolio whose constituents range from deep value to aggressive growth stocks. Their portfolio sector weights are determinedly independent of their peers, with some sectors (e.g., media and tech hardware) at double or triple the average and others completely absent (telecomm). As with CAMOX, the portfolio is compact – 50 names, which is particularly concentrated for a small-cap fund (and small caps account for about two-thirds of the portfolio).
The question is whether it’s reasonable to assume that their success elsewhere is predictive of comparable success here. While my cautious nature makes me reluctant to offer such a prediction (especially given the high standard that CAMOX sets for "comparable success"), there’s a fair amount of evidence that suggests that a replay underway. As I’ve noted before, a number of fund companies have been successful in moving their investment discipline from one size of stocks to another. Artisan and Baron, as recent examples, have successfully exported small cap disciplines into mid- and then large-cap funds. And many investors with great long-term records (Muhlenkamp, for example) have consistently invested across the size spectrum. The more important factor seems to be the rigor and the consistency of the investment discipline, rather than the size of the companies to which it is applied.
In the case of the Cambiar funds, all of the managers are heavily invested in all of their funds (Opportunity, International, and Conquistador). The core of the team has been together for about a decade, so they know the system and each other. New managers have been added slowly, so that they can be properly acculturated and Cambiar rarely launches new funds. That cuts against risks of overwork and dilution. And I’m always impressed by managers who are willing to sacrifice the prospect for flashy short-term gains when pursuing those gains distorts the long-term discipline. In the most recent Annual Report, President Brian Barish wrote:
By virtue of the guarded nature of Cambiar’s investment discipline, markets that rise vertically and without much interruption due to big picture themes are not as well navigated by our investment strategy and temperament. We have tended to find that long-term performance is more heavily influenced by keeping investors intact through difficult periods than by chasing bull runs.
Bottom line: the Cambiar team has a distinguished record. Its discipline and focus on risk-management suggest that it will continue develop Conquistador into a first-rate smaller company offering.
Company link: www.cambiar.com