Overview
The Monticello Fund’s philosophy begins with the premise that superior returns over time can best be achieved through investment in undervalued companies with superior and sustainable growth prospects while integrating macroeconomic and local market factors into stock selection decisions. As a result, the Fund will consist of a blend of companies domiciled around the globe. By employing a bottom-up approach with intensive research focused on company fundamentals and macroeconomic and local market factors, the Fund’s managers are able to identify undervalued, financially strong, and well-managed domestic and international companies in a global sector context. Further, the managers each strive to continuously educate ourselves with regards to investment analysis and portfolio management theory.
Investment Thesis
Buy decisions are based on a rigorous research process that pays special attention to relative valuation on a local market and broad sector basis, profitability, management strength and competitive advantage while taking into consideration both global market and business risk. As a result, the Fund will be comprised of approximately 20-40 individual equity holdings with differing market capitalizations from a variety of countries and sectors.
Risk Mitigation
Both buy and sell decisions will require a majority vote by the Fund’s managers.
Stocks become candidates for sale if 1) they fail to meet milestones, 2) they reach pre-determined price targets, 3) their fundamentals deteriorate, or 4) changing fundamentals undermine the original investment premise. Price targets are set based on specific company and industry analysis, and the Fund managers will update their analysis when a price target is reached to determine whether or not to sell the stock. Appreciated long positions that exceed 10% of portfolio value will be scaled back, while short positions that exceed 6% of the total portfolio value will be scaled back.
Long stocks that decline by 15% in value will be subject to a full re-analysis. Any stock (long or short) that has a negative impact of greater than 1% on the total portfolio will be subject to a review by the CIO and faculty advisor. All shorts will be strictly reevaluated at a 10% loss. Stop loss orders will be used to limit the maximum loss of any one short position to 15% of the value of the position. The goal of this intensive review process for underperforming investments is to promote a well-rounded, challenging discussion of all the issues in a timely and urgent manner.
Portfolio Manager Bios
John Petrofsky – Senior Portfolio Manager
John came to Darden after three years at Cambridge Associates, LLC. During his time at Cambridge Associates, John was a Consulting Associate in the Menlo Park office advising a variety of clients on issues ranging from asset allocation and portfolio management to manager research and selection. Prior to Cambridge Associates, John worked at Deutsche Bank London in Global Prime Finance. John graduated from Stanford University in 2008 with a B.A. in International Relations and a minor in Arabic language and culture. After his first year at Darden, John spent the summer working at Advisory Research Investment Management.
Charles Land – Portfolio Manager
Prior to Darden, Charles spent two and a half years as an associate at Valuation Services, Inc., a business valuation firm based in the Washington, D.C. area, and two years in New York as an analyst at TM Capital Corp., a middle-market investment bank. Charles graduated from the McIntire School of Commerce at the University of Virginia in 2007 with a concentration in finance. Following his first year at Darden, Charles spent his summer in Atlanta at SunTrust Robinson Humphrey as part of the Mergers and Acquisitions group.
Sumit Malhotra – Portfolio Manager
Sumit is a 2007 graduate of IIT Bombay, India where he earned an engineering degree in Physics. Before Darden, Sumit worked with JP Morgan India in the risk management division of their lending business. At JP Morgan, his work involved analytics and statistical modeling for managing fraud risk on different lending portfolios, primarily credit cards. Following his first year at Darden, Sumit spent his summer working with Investment Management of Virginia.
Yue Zhu – Portfolio Manager
Yue spent two years in Deloitte and four years in Ernst & Young in Suzhou, China as auditor and tax advisor prior to attending Darden. He graduated from Renmin University of China in 2006 with double Bachelor’s Degree in Economics and Philosophy. He is member of China Institute of Public Accountant and passed all three levels of CFA program. Yue spent his past summer with Danaher, a science and technology leader, in its general management leadership program.