Investor Information
Perfomance Record
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Management Company
Board of Directors
| Name European Asset Value | Base Currency EUR | NAV 50.88‡ | Updated 03/07/2008 - Fund Data |
Asset Value Investors Limited (AVI)
Click here to visit the AVI website.
The company was established in 1985. Funds under management have grown from £6m to over £1.6 billion (including commitments as at 31 December 2006) through growth in the market, a number of acquisitions, the launch of three funds including The European Asset Value fund and management for several US Endowments and Foundations.
AVI's philosophy is to concentrate on finding value among high quality asset classes. The investment process emphasises:
The purchase of assets that are of high intrinsic quality.
This is a subjective judgement, but essentially implies assets for which there would normally be a ready demand, even in unfavourable conditions. Ciga Hotels, owner of the Danieli and Gritti Palace in Venice, and a portfolio of other high quality hotels, is one example among our former holdings.
Diversification of risk
AVI often buys the securities of companies owning diversified portfolios. They may be investment holding companies owning a very concentrated portfolio (in which case a number need to be owned) or closed-end funds with highly diversified portfolios. This approach limits specific risk.
Economic Value
The underlying assets must offer appreciation potential. Stock market experience through history suggests this is best achieved by purchasing securities selling on relatively low price earnings multiples equating to high pre-tax returns on investment. A p/e of 10 gives a starting pre-tax return of 15%.
Complementary to this is a judgement on the quality i.e. reliability or predictability of the earnings flow. Some businesses are intrinsically lower risk than others. A city centre hotel group would tend to have a more predictable earnings flow than a telecoms equipment supplier.
Discounts to Underlying Value
AVI is interested in finding anomaly valuations. These can be secular (lasting for a long time, e.g. discounts on closed funds and investment holding companies) or cyclical (an opportunity to advantage from psychological factors, (greed and fear) or an over-concern with short-term industry factors.
Discounts increase Rates of Return
Via the discount, assets can be accessed to provide higher than market rates of return. Underlying, holdings on say a market p/e of 20x can be accessed on a p/e of 12x through a discount of 40%. Even if there is no catalyst to eliminate the discount, increased returns should be achieved.
Portfolio Activity
The discipline of investing with reference to discounts helps to clarify risk/reward ratios. If we do not expect a catalyst to help achieve net asset value we will analyse whether, if the stock has been bought on a discount of 40%, it is still attractive on a discount of 20%. If not we recycle assets into a wider discount security, subject also to asset quality and appreciation potential.
Corporate Activity / Constructive Engagement
Asset Value Investors has been involved in many behind-the-scenes discussions with Boards and management to increase shareholder value by simple measures such as buy-backs and unitisations. Such activity always aims to be constructive.
We are also the beneficiary of a strongly entrenched trend for other investors to seek shareholder value enhancements from restructurings and buybacks.
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