Phronimos Capital believes that superior investment performance requires the willingness and ability to invest “off the beaten path” with a contrarian, deep-value investment philosophy. We believe the most rewarding investments tend to reside in dark corners where there is some sort of barrier to entry to competing investors and not in the glare of flood lights that shine upon well-followed large companies. It is likely a paradoxical truth that although small and micro-cap securities offer the best opportunity for excess returns, this niche--owing to capacity constraints--is also the least lucrative for most large investment managers. That the fee generating potential is much smaller, stems from the fact that it would be very difficult to manage more than a few hundred million dollars using a deep-value small/micro-cap strategy. For high net worth individuals, family offices, and other small investors unconstrained by the need to purchase billions of dollars worth of assets, we believe this segment of the market is fertile ground for generating superior returns. Phronimos Capital intends to remain small and lean to exploit the opportunities available in the least efficiently priced segments of the market.
Phronimos Capital uses both fundamental and quantitative research to identify deep value investments across the globe. Separately-managed accounts offered by Phronimos are customizable per the client’s investment objectives, but will generally fall into one of three strategies.
Global Quantitative Deep Value: This portfolio will consist of at least 30 positions utilizing our quantitative deep value research and is intended for investors who have long investing time horizons and the ability to endure significant short-term volatility in the pursuit of attractive long-term profits, but are not willing to endure the degree of potential draw-downs associated with a concentrated strategy.
US Quantitative Deep Value: For clients whose investment mandates include geographic restrictions, we offer a US-only version of the Global Deep Value strategy.
Global Concentrated Deep Value: For those comfortable with a concentrated 10-15 position deep value portfolio, we will overweight positions based on a combination of our quantitative and fundamental research. Our fundamental research is focused on investments that are under-followed and little-known. By scouring the globe for companies that have tiny market capitalizations, low trading volume or are out-of-favor, Phronimos Capital is better able to identify securities trading at large discounts to intrinsic value. Small, illiquid, under-the-radar companies tend to attract minimal interest from institutional investors, offering a larger number of opportunities for those willing to put in the effort to uncover mispricings. A substantial majority of the investments may be in international markets where we believe there are: 1) fewer investors pursuing a disciplined value investing philosophy; and 2) more frequent and severe de-coupling of trading prices from intrinsic value.