FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — FPA Crescent Fund — Q4 2021 Earnings Presentation
29 slides from FPA Queens Road Small Cap Value Fund Institutional Class's earnings presentation, Feb 2, 2022
Slide 1: FPA Crescent Fund Fourth Quarter 2021 Webcast Presentation
L P rs , is o d v FPA Crescent c A Fund (FPACX) i f i a c Fourth Quarter 2021 Webcast Presentation Presented by: Steven Romick, Mark Landecker, Brian Selmo t P February 2, 2022 Fri s Follow us on:
Slide 2: Performance
Performance Trailing Performance (%) L PMarket Cycle Performance , 3/25/00- 10/10/07- As of Date: 12/31/2021 Inception* 20 Years 15 Years 10 Years 5 Years 3 Years 1 Year YTD QTD 10/9/07 12/31/21 rs FPA Crescent Fund (FPACX) 10.25 8.94 7.80 9.39 9.63 15.72 15.17 15.17 1.87 14.70 7.63 MSCI ACWI NR** -
Slide 3: Executive summary
Executive summary ■ Crescent posted good absolute and relative returns in 2021. L P ■ Crescent doesn’t “own the market”, but many of the companies held in the portfolio are not as cheap as they were at the start of the year helping to explain the modestly reduced net risk exposure. rs , ■ We believe
Slide 4: Fund philosophy
Fund philosophy Investment objective: The FPA Crescent Fund seeks to generate equity-like returns over the long-term, L P take less risk than the market and avoid permanent impairment of capital. Philosophy rs , ■ Flexible approach is o v ‒ We utilize a go-anywhere approach with a broad mandate allo
Slide 5: Quarter and Trailing Twelve-Month Performance vs. Indices
Performance Quarter and Trailing Twelve-Month Performance vs. Indices L P Q4 2021 rs , Trailing 12-Month Crescent – FPACX* Crescent – Long Equity** 1.87% 3.68% is o 15.17% 23.18% MSCI ACWI NR USD S&P 500 d v6.68% 11.03% 18.54% 28.71% 60% MSCI ACWI NR USD/ 40% Bloomberg US Agg c A 4.02% 10.20% 60% S&
Slide 6: US growth stocks were back in the driver's seat in 2021
US growth stocks were back in the driver’s seat in 2021 2021 Performance vs. Indices L P 35% 32.01% rs , o 28.71% 24.90% is 25% 23.18% 21.82% 19.62% v 18.54% 17.10% 15.17% d Return 15% A 7.82% 5% -5% i f i c -2.54% S&P 500 Growth S&P 500 S&P 500 a Value c FPACX Long Equity ** MSCI World MSCI ACWI Va
Slide 7: Active stock selection has driven differentiated returns
Active stock selection has driven differentiated returns Long Equity Carve-Out Gross Performance vs. Indices L P CAGR CAGR 1/1/07 to 1/1/11 to 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 rs , 2011 2010 2009 2008 2007 o 12/31/21 12/31/21 is FPACX 11.36% 14.17% 23.18% 12.55% 31.53% -12.33% 21.07
Slide 8: Performance contribution
Performance contribution Trailing Twelve-Month Contributors and Detractors L P Contributors Performance Average Detractors rs ,Performance Average o Contribution Position Size Contribution Position Size is Alphabet 3.01% 5.7% Alibaba -0.69% 1.2% American International Group 1.41% 2.9% SPDR S&P 500 E
Slide 9: Portfolio Composition
Portfolio Composition FPA Crescent Fund Asset Class Composition L P Risk Asset 12/31/2021 9/30/2021 12/31/2020 rs , Average Since Inception* Common Stock, Long Common Stock, Short 75.3% -2.5% 73.6% -2.9% is o 73.9% -3.5% 56.9% -4.9% Credit, Long Credit, Short 0.2% 0.0% 0.7% -0.2% d v 6.6% -1.0% 10.5
Slide 10: Bond returns impacted by low starting yield
Bond returns impacted by low starting yield Bond Returns L P 2021 rs , 10-Year Government Bonds United States is -5.7% o v Germany -10.2% d Japan -10.5% US Corporate Bonds c A i Investment Grade -1.0% High Yield c i f 3.3% P a ri st F Source: Bloomberg, FRED. As of December 31, 2021. Past performanc
Slide 11: Risk exposure
Risk exposure FPA Crescent Fund Historical Asset Class Composition L P 100% rs , 90% 80% is o 70% d v A 60% c 50% 40% i f i c 30% 20% 10% P a 0% '96 '97 ri s '98 t '99 '00 Common Stocks, Net '01 '02 '03 '04 '05 Bonds - Credit, Net '06 '07 '08 Other '09 '10 '11 '12 Net Risk Exposure '13 '14 '15 '16 '
Slide 12: Increasing foreign exposure
Increasing foreign exposure Net Equity Geographic Exposure L P United States Domicile 61.5% Revenue 38.8% rs , International Developed 38.5% 33.1% is o 61.2% 29.6% Emerging Mark ets d 5.4% v 15.9% A Rest of World (Uncategorized) - 15.6% i f i c Foreign exposure increased from 20.3% to 38.5% between
Slide 13: International stocks are cheaper than US stocks
International stocks are cheaper than US stocks Twelve-Month Forward Price to Earnings Ratio Discount L P MSCI AC World Index ex-US vs S&P 500 Index 20 Yr. Avg. Fwd. rs , o Fwd. P/E Ratio P/E Ratio is S&P 500 16.8x 22.8x ACWI ex-US 14.6x 14.5x d v c A i f i a c t P F ri s As of December 31, 2021. So
Slide 14: Interest rates have declined for almost 40 years
Interest rates have declined for almost 40 years 10-Year Government Bond Yields: 1963 to 2021 L P 18.00 US, Japan and Euro Area US 10-Year Japan 10-Year Euro Area 10-Year rs , 16.00 is o v 14.00 12.00 10.00 A d Percent c 8.00 6.00 i f i 4.00 2.00 a c 0.00 t P Sep-85 Feb-88 Sep-14 Feb-17 Jan-05 Jan-7
Slide 15: US Inflation at a four-decade high
US Inflation at a four-decade high US CPI: 1965 to 2021 L P 16% Recession CPI - All Items rs , 14% 12% is o 10% d v A 8% 6% 4% i f i c c 2% 0% Dec-65 -2% Dec-72 P a Dec-79 Dec-86 Dec-93 Dec-00 Dec-07 Dec-14 Dec-21 ri st F Source: FRED. Chart data covers the period December 31, 1965 through December
Slide 16: Expectations for future inflation are higher than recent history
Expectations for future inflation are higher than recent history 5-Year Forward US Inflation Expectation Rate L P 3.5% Recession Inflation rs , 3.0% is o 2.5% 2.0% d v 1.5% c A 1.0% i f i 0.5% a c 0.0% Dec-02 t Feb-06 P Apr-09 Jun-12 Aug-15 Oct-18 Dec-21 F ri s Source: FRED. Chart data covers the pe
Slide 17: Elevated equity pricing globally
Elevated equity pricing globally US and World Ex-US Stock Market as a Percent of GDP L P 270% rs , US World Ex-US o Stock Market as a Percent of GDP is 240% v 210% 180% 150% A d 120% 90% i f i c 60% 30% a c 0% '80 t'85 P '89 '93 '97 '01 '05 '09 '13 '17 '21 Chart as of December 31, 2021. ri s Source:
Slide 18: Equity valuation metrics vs market
Equity valuation metrics vs market FPA Crescent Fund Long Equity Holding Valuations and Earnings Growth vs. Stock Market L P Price/Earnings 1 Year Forward Price/Book 3-Year Trailing EPS Growth rs , 3-Year Forward Estimated EPS Growth o 12/31/2020 12/31/2021 12/31/2020 12/31/2021 12/31/2020 12/31/202
Slide 19: US stocks look relatively attractive vs bonds. Int'l stocks more attractive.
US stocks look relatively attractive vs bonds. Int’l stocks more attractive. S&P 500 Forward Earnings Yield & Nominal 10-Year Treasury Bond Yield L P rs , is o d v c A i f i a c t P F ri s Source: Yardeni.com, I/B/E/S data by Refinitiv, FRED. Chart data covers the period December 31,1978 through Jan
Slide 20: Investors accepting low junk bond yields
Investors accepting low junk bond yields High? Yield L P US EU rs , Gross yield Default rate, historical 4.4% -3.1% is o 2.8% -4.3% Recovery rate, historical Net default d v 39.6% -1.9% 38.8% -2.6% Net yield c A 2.5% 0.2% i f i a c t P ri s Sources: US gross yield as of December 31, 2021: BofA Merri
Slide 21: Q&A
L P rs , is o d v Q&A c A i f i ac t P Fri s 21
Slide 22: Top equity holdings
Top 10 equity holdings FPA Crescent Fund Top 10 Equity Holdings by Weight L P Portfolio Holding Alphabet Portfolio Weight 6.0% rs , Broadcom Comcast SPACs (various issues) o 3.5% is 3.4% 3.2% TE Connectivty Meta Platforms d v 3.1% 2.9% A Analog Devices 2.9% American International Group 2.9% c Holcim
Slide 23: Appendix
L P rs , is o d v Appendix c A i f i ac t P Fri s 23
Slide 24: Fund holdings as of December 31, 2021
Fund holdings as of December 31, 2021 Communication Services Alphabet 19.5% 6.0% Industrials Howmet Aerospace 6.4% 1.4% Credit – Long McDermott International L P 0.4% 0.2% , Comcast 3.4% LG 1.1% Lealand Finance 0.1% Meta Platforms 2.9% Wabtec 1.0% Steenbok 0.0% rs Charter Communications 2.5% Univar
Slide 25: Important disclosures
Important disclosures These slides are intended as supplemental material to the Fourth Quarter 2021 FPA Crescent Fund audio presentation and transcript that are posted on FPA's website at www.fpa.com. L P , This presentation is for informational and discussion purposes only and does not constitute,
Slide 26: Important disclosures (continued)
Important disclosures (continued) You should consider the Fund's investment objectives, risks, and charges and expenses carefully before you invest. The Prospectus details the Fund's objective and policies and other matters of interest to a prospective investor. Please read the Prospectus carefully
Slide 27: Important disclosures (continued)
Important disclosures (continued) L P Investing in Special Purpose Acquisition Companies (“SPACS”) involves risks. Because SPACs and similar entities have no operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability
Slide 28: Important disclosures (continued)
Important disclosures (continued) L P MSCI ACWI Growth Index captures large and mid-cap securities exhibiting overall growth style characteristics across 23 Developed Markets (DM) countries and 24 Emerging Markets (EM) countries. The growth investment style characteristics for index construction are
Slide 29: Important disclosures (continued)
Important disclosures (continued) Other Definitions (Cont’d) Investment grade is a rating that signifies that a municipal or corporate bond presents a relatively low risk of default. L P limited partnerships, derivatives/futures, corporate bonds, mortgage-backed securities, and cash and cash equival