FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — FPA Crescent Fund — Q4 2022 Earnings Presentation
25 slides from FPA Queens Road Small Cap Value Fund Institutional Class's earnings presentation, Jan 26, 2023
Slide 1: FPA Crescent Fund Fourth Quarter 2022 Webcast Presentation
L P rs , i so d v c FPA Crescent Fund (FPACX)A i f i a c Fourth Quarter 2022 Webcast Presentation P Presented by: Steven Romick, Mark Landecker, Brian Selmo t s January 26, 2023 F i r Follow us on:
Slide 2: Performance
Performance Trailing Performance (%) Market Cycle Performance As of Date: 12/31/2022 Inception* 20 Years 15 Years 10 Years 5 Years 3 Years 1 Year YTD QTD L P 3/25/00- 10/10/07- 1/4/2022- 10/9/07 1/3/2022 12/31/2022 FPA Crescent Fund (FPACX) MSCI ACWI NR** S&P 500 60% MSCI ACWI NR**/40% BBg US Agg 9.
Slide 3: Executive summary
Executive summary ■ 2022 marked the end of the longest bull market in recent memory and the end of the second complete market cycle L P since the Crescent’s inception. The Fund performed in line with its objective in this October 2007 to January 2022 market cycle. rs , debt positions, for example. i
Slide 4: Fund philosophy
Fund philosophy Investment objective: The FPA Crescent Fund seeks to generate equity-like returns over the long-term, take less risk than the market and avoid permanent impairment of capital. L P Philosophy rs , ■ Flexible approach i so ‒ We utilize a go-anywhere approach with a broad mandate allowi
Slide 5: Performance
Performance Quarter and Trailing Twelve-Month Performance vs. Indices L P Crescent – FPACX* Crescent – Long Equity** Q4 2022 8.42% rs , Trailing 12-month -9.20% o 11.50% -15.48% MSCI ACWI 9.76% -18.36% S&P 500 50% S&P 500 / 50% MSCI ACWI v i s 7.56% 8.66% -18.11% -18.24% d 60% MSCI ACWI NR / 40% Blo
Slide 6: Growth stocks were weakest in 2022
Growth stocks were weakest in 2022 Trailing Twelve-Month Performance vs. Indices L P 0% rs , o -5% s -5.22% i -10% -7.55% -9.20% -15% v Return d -15.48% -16.00% -20% -18.11% -18.14% -18.36% A -20.09% -25% -30% -35% i f i c -28.61% -29.41% c S&P 500 MSCI FPACX* FPACX MSCI S&P 500 MSCI MSCI MSCI EM MS
Slide 7: 2007 market cycle finally comes to an end
2007 market cycle finally comes to an end Most Recent Market Cycle Performance L P Crescent MSCI ACWI 10/10/2007-1/3/2022 7.65% 6.33% rs , S&P 500 50% S&P 500 / 50% MSCI ACWI MSCI ACWI Value i so 10.43% 8.38% 3.89% MSCI ACWI Growth 60% MSCI ACWI / 40% Bloomberg US d v 8.68% 5.74% A Agg 60% S&P 500 /
Slide 8: 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 12/31/22 12/31/22 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 rs , 2011 2010 2009 2008 2007 FPACX Long Equity 9.45% 8.39% so -15.48% 23.18% 12.55%
Slide 9: Performance contribution
Performance contribution Trailing Twelve-Month Contributors and Detractors L P Contributors Performance Contribution Percent of Portfolio Detractors rs , Performance Contribution Percent of Portfolio Interest Rate Caps (multiple) FPS LLC (shipping investment) 1.11% 0.92% 0.5% 2.0% Alphabet i s Meta
Slide 10: Portfolio Composition
Portfolio Composition FPA Crescent Fund Asset Class Composition L P Risk Asset 12/31/2022 9/30/2022 rs 12/31/2021 , Average Since Inception* Common Stock, Long Common Stock, Short 68.5% 0.0% 68.3% 0.0% i so 75.3% -2.5% 57.4% -4.7% Credit, Long Credit, Short 2.4% 0.0% d 2.2% 0.0% v 0.2% 0.0% 10.2% -0
Slide 11: Global breadth
Global breadth Net Equity Geographic Exposure L P United States Domicile 62.7% Revenue 44.2% rs , International Developed 37.3% 32.1% i so 55.8% 26.0% Emerging Mark ets d 5.2% v 15.7% Rest of World (Uncategorized) c A - 14.1% i f i Foreign exposure increased from 20.3% to 37.3% between Q4 2017 and Q
Slide 12: 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 12/31/2021 12/31/2022 12/31/2021 12/31/2022 12/31/2021 12/31/202
Slide 13: US stock valuations in line with 25-year average
US stock valuations in line with 25-year average S&P 500 Valuations L P Forw ard P/E Year-end 2022 16.7x 25-year Avg. 16.8x rs , Shiller's P/E (CAPE) 28.0x i so 27.9x v Dividend Yield 1.8% 2.0% Price to book Price to cash flow A d 3.8x 12.4x 3.1x 11.2x* i f i c a c t P i r s F As of December 31, 202
Slide 14: Valuations outside the US less expensive
Valuations outside the US less expensive Global Twelve-Month Forward Price to Earnings Ratios L P US Year-end 2021 21.2x Year-end 2022 16.7x 25-year Avg. rs 16.8x , Japan 14.7x 12.2x i so 19.7x v Europe 14.6x 11.9x 14.9x Emerging Markets China 11.8x 11.7x A d 11.7x 10.8x 11.8x 12.5x i f i c a c t P
Slide 15: Credit spreads still tighter than historical levels
Credit spreads still tighter than historical levels High Yield Bonds Credit Spread & Default Rate L P rs , i so d v c A i f i a c t P i r s F As of December 31, 2022. Source: J.P. Morgan Asset Management Guide to the Markets. Long-run average is based on monthly historical data beginning in January
Slide 16: Weak covenants
Weak covenants Cov-Lite Loans Percentage of Loan Market as of August 31, 2022 L P rs , i so d v c A i f i a c t P i r s F Chart as of August 31, 2022. Source: The 2023-2024 Credit Cycle Public & Private Credit Markets Outlook & Opportunities Q4 White Paper page 6. Marathon Asset Management. 16
Slide 17: Q&A
L P rs , i so dv Q&A c A i f i a c t P i r s F 17
Slide 18: Appendix
L P rs , i so dv Appendix c A i f i a c t P i r s F 18
Slide 19: Fund holdings as of December 31, 2022
Fund holdings as of December 31, 2022 Communication Services 13.0% Health Care 0.5% Common Stocks – SPACs 2.9% P Alphabet 4.4% Icon PLC 0.5% SPACs (multiple securities) 2.9% Comcast 2.9% L Charter Communications 1.6% Industrials 9.1% Credit – Long 0.7% Meta Platforms 1.3% Safran 1.4% McDermott Inter
Slide 20: Important disclosures
Important disclosures These slides are intended as supplemental material to the Fourth Quarter 2022 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, an
Slide 21: 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 website at www.fpa.com, by calling toll-free, 1-800-982-4372, or by contacting the Fund in writing. Pas
Slide 22: Important disclosures (continued)
Important disclosures (continued) Investing in Special Purpose Acquisition Companies (“SPACS”) involves risks. Because SPACs and similar entities have no operating history or ongoing business other than seeking P acquisitions, the value of their securities is particularly dependent on the ability of
Slide 23: Important disclosures (continued)
Important disclosures (continued) MSCI ACWI Value Index captures large and mid-cap securities exhibiting overall value style characteristics in Developed Markets countries and Emerging Markets countries. The value P investment style characteristics for index construction are defined using three vari
Slide 24: Important disclosures (continued)
Important disclosures (continued) Other Definitions (cont’d) P Covenants in finance most often relate to terms in a financial contract, such as a loan document or bond issue stating the limits at which the borrower can further lend. L Cyclically adjusted price-to-earnings ratio (CAPE), commonly know
Slide 25: Important disclosures (continued)
Important disclosures (continued) Other Definitions (cont’d) P Price-to-cash flow (P/CF) ratio is a stock valuation indicator or multiple that measures the value of a stock’s price relative to its operating cash flow per share. L Price to Earnings is the ratio for valuing a company that measures its