Overview
The Cavalier Fund is a long/short equity hedge fund that focuses primarily on domestic equities including small, mid-and large capitalization companies. Our goal will be to produce positive alpha with low volatility by purchasing great businesses at reasonable prices and shorting flawed businesses at overvalued prices. We will target an 80% net long bias. Our ability to short stocks and indices will decrease the volatility of returns and produce additional alpha through good stock selection. We aim to produce a high return relative to the S&P 500 Index and the CSFB/Tremont Hedge Fund index with low volatility.
Investment Thesis
Our primary focus will be to purchase great businesses at reasonable prices. We seek to purchase companies that consistently produce high returns on capital at an attractive earnings yield. Our bottom up investment strategy will lead us to own sustainable business franchises that are undervalued relative to their earnings power potential for the long term. Our secondary focus will be to implement deep value analysis to purchase companies that are being offered at discounts to their net tangible asset value.
For short positions, our primary focus will be to short companies that have flawed business plans with overly optimistic analyst expectations. We seek to identify companies that appear to have materially overstated earnings, an unsustainable or operationally flawed business, and/or are in engaged in outright fraud.
Our fund will hold approximately 15-25 long positions at all times. As well, the value of our short positions will not exceed 20% of our total assets. The Cavalier Fund is able to invest in all capitalizations and sectors, excluding the microcap designation.
All long positions will be strictly reevaluated at a 15% loss. No one long position at initiation will exceed 6% of total assets, and no long position will be greater than 10% of the total portfolio at any one time. The maximum size, at initiation, of any short position will not exceed 3% of the total portfolio, and the maximum position size for short positions will be 6%. Stop loss orders will be used to limit the maximum loss of any one short position to less than 1% of the total value of the portfolio. All shorts will be strictly reevaluated at a 10% loss and are subject to a 15% stop loss provision. The maximum value of all short positions at initiation will be 20% of total assets.
Portfolio Manager Bios
Kenan Lucas – Senior Portfolio Manager
Kenan graduated from Vanderbilt University with a BA in Economics in 2007. Prior to Darden, he worked as an associate at Swander Pace Capital, a middle-market private equity firm focused on consumer products companies. Before Swander Pace, Kenan was an analyst at Cowen and Company, a middle-market investment bank. Following his first year at Darden, Kenan worked at Cavalier Capital, LLC, a long-short equity hedge fund.
Jessica Alvarez — Portfolio Manager
Jessica graduated from Harvard College in 2009 with a degree in Government and History of Art and Architecture. Following graduation, she worked for over two years as a consultant for Deloitte in London. She worked primarily on strategy and operations projects across Europe for large multinational financial services corporations. After completing her analyst program, Jessica pursued a Masters in the History of Art at the Courtauld Institute of Art, specializing in Northern Renaissance art. Prior to starting at Darden, she interned at the Fine Art Fund Group, an art investment house that manages assets across five funds and private advisory accounts. Following her first year at Darden, Jessica interned at J.P. Morgan in the Private Bank.
Matt Assad – Portfolio Manager
Matt graduated from the University of Chicago in 2006 where he majored in Economics and was a four year member of the varsity baseball team. Prior to Darden, Matt worked as a compensation consultant for six years for Towers Watson in Chicago. There, he specialized in designing pay structures for executives and upper management that aligned employee interests with those of the company and its shareholders. He also worked with companies to minimize risk in their incentive plans and to maximize return on compensation investment. During the summer after his first year at Darden, Matt worked for Credit Suisse in New York in the investment banking division, specializing in the Retail and Consumer Products industry.
Bill Yates – Portfolio Manager
Bill Yates is a Darden MBA student (Class of 2014) and a graduate of the University of North Carolina at Chapel Hill where he earned a B.S. in Business Administration from the Kenan-Flagler Business School. Prior to business school, Bill worked for HSBC in the Leveraged and Acquisition Finance Group where he structured and executed leveraged acquisitions, in addition to helping corporates access the leveraged debt capital markets. During the summer after his first year at Darden, Bill worked at Updata Partners, a technology-focused growth equity firm in Washington, D.C.