FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — First Pacific Advisors — Investor Day (2024)
82 slides from FPA Queens Road Small Cap Value Fund Institutional Class's investor day presentation, Sep 12, 2024
Slide 1: rs is rs
L P rs, is o d v c A i f i a c t P Please NO videos, photos, or recording of any kind. F i rs Email Questions to crm@fpa.com
Slide 2: Important disclosures
Important disclosures P This document is intended for authorized recipients only and must be held strictly confidential. This document may not be reproduced or distributed in any format without the prior written approval of First Pacific Advisors, LP (“FPA”). The information provided is as of the da
Slide 3: Agenda
Agenda L P rs, is o d v c A i f i ac t P F i rs 3
Slide 4: Event speakers
Event speakers Mark Landecker Abhi Patwardhan L P First Pacific Advisors Portfolio Manager rs, First Pacific Advisors Portfolio Manager FPA Crescent Fund is o FPA New Income Fund FPA Flexible Fixed Income Fund d v c A i f i c Brian Selmo Steve Scruggs P a First Pacific Advisors Portfolio Manager Bra
Slide 5: FPA Crescent Fund
L P rs, is o d v c A FPA Crescent Fund i f i c With Mark Landecker and Brian Selmo a t P F i rs 5
Slide 6: FPA Crescent Fund mandate
FPA Crescent Fund mandate 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 ■ Flexible approach rs, o ‒ We utilize a go-anywhere approach with a broad mandate allowing u
Slide 7: Positive rolling 5-year returns
Positive rolling 5-year returns Worst Return in a Trailing 5-Year Period (Annualized) L P 1.00% rs, is o d v -2.26% c A -3.38% i f i a c -6.63% FPA Crescent Fund t P S&P 500 60% S&P 500 / 40% Morningstar Bloomberg US Agg Moderately Aggressive Allocation Category F i rs As of May 31, 2023. July 1, 19
Slide 8: Shorter recovery time than index and peers
Shorter recovery time than index and peers Max Recovery Time (in Years) L P 6.1 rs, is o 4.9 d v 3.5 1.8 c A i f i a c P FPA Crescent Fund S&P 500 60% S&P 500 / 40% Morningstar Bloomberg US Agg Moderately Aggressive rs t Allocation Category F i As of May 31, 2023. July 1, 1993 (the first full month
Slide 9: 5- and 10-Year performance
5- and 10-Year performance As of Date: 12/31/23 FPA Crescent Fund 5 Years 11.10% L P 10 Years 7.13% MSCI ACWI** 11.72% rs, 7.93% 60% MSCI ACWI** / 40% BBg US Agg is o 7.67% 5.68% Average Net Risk Exposure d v 73.5% 67.1% c A Past performance is no guarantee, nor is it indicative, of future results.
Slide 10: FPA Crescent Fund performance
FPA Crescent Fund performance Trailing Performance (%) L P Market Cycle Performance 3/25/00- 10/10/07- 1/4/22- , As of Date: 12/31/2023 Inception* 30 Years 20 Years 15 Years 10 Years 5 Years 3 Years 1 Year YTD QTD 10/9/07 1/3/22 12/31/23 rs FPA Crescent Fund (FPACX) 9.86 9.73 7.96 9.63 7.13 11.10 7.
Slide 11: FPA New Income Fund / FPA Flexible Fixed Income Fund
L P rs, is o d v FPA New Income Fund c A i f i c FPA Flexible Fixed Income Fund a P With Abhi Patwardhan t F i rs 11
Slide 12: FPNIX performance – net of fees
FPNIX performance – net of fees As of Date: 12/31/2023 QTD 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years L P 30 Years ITD (Since 7/11/84) FPA New Income Fund (“FPNIX”) Bloomberg U.S. Agg Bond Index 3.79 6.82 7.51 5.53 1.65 -3.31 2.25 1.10 2.02 1.81 2.09 2.68 rs, 2.53 3.17 4.07 4.41 6.23 6.36 CPI
Slide 13: FPNIX performance – net of fees
FPNIX performance – net of fees Annual Performance (%) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 L P , FPA New Income Fund 7.51 -3.10 0.82 2.51 3.81 2.30 2.67 2.53 0.15 1.32 0.67 2.18 2.23 3.18 2.89 4.31 6.02 4.79 1.57 2.60 rs Bloomberg U.S.
Slide 14: FPFIX performance – net of fees
FPFIX performance – net of fees As of Date: 12/31/2023 QTD 1 Year 3 Years ITD (Since 5 Years 12/31/18) L P FPA Flexible Fixed Income Fund (“FPFIX”) Bloomberg U.S. Universal Index 4.11 6.83 9.02 6.17 2.54 -2.97 rs, 3.22 1.44 3.22 1.44 CPI + 200 0.95 5.38 is o 7.75 6.18 6.18 d v Past performance is no
Slide 15: FPFIX performance – net of fees
FPFIX performance – net of fees Annual Performance (%) 2023 2022 2021 2020 L P 2019 FPA Flexible Fixed Income Fund Bloomberg U.S. Universal Index 9.02 6.17 -2.82 -12.99 1.77 -1.10 rs, 4.70 7.58 3.78 9.29 CPI + 200 5.38 8.58 is o 9.35 3.36 4.38 d v Past performance is no guarantee of future results a
Slide 16: Fund Highlights
Fund Highlights P FPA Flexible Fixed Income Fund Institutional Share Class (FPFIX) FPA New Income Fund (FPNIX) FPA New Income Fund seeks to provide long-term total , L Advisor Share Class (FFIAX) FPA Flexible Fixed Income Fund seeks to provide long-term rs total return, which includes income Investm
Slide 17: The ultimate goal is attractive long-term performance
The ultimate goal is attractive long-term performance… As of Date: 12/31/23 QTD 1 Year 3 Years 5 Years L P 10 Years FPA New Income Fund 3.79 7.51 1.65 rs, 2.25 2.02 o Bloomberg U.S. Agg 1-3 Year Bond Index 2.71 4.65 0.08 1.46 1.26 Morningstar U.S. Fund Short-Term Bond 3.34 v 5.73 is 0.14 1.88 1.58 B
Slide 18: Attractive long-term performance with a smoother ride
The ultimate goal is attractive long-term performance… with a smoother ride $14,000 FPA New Income Growth of $10,000 over ten years L P $13,000 Bloomberg U.S. Agg 1-3 Year Bond Index Morningstar U.S. Fund Short-Term Bond Bloomberg U.S. Agg Bond Index rs, $12,000 is o $11,000 d v $10,000 Dec-13 Dec-1
Slide 19: The ultimate goal is attractive long-term performance
The ultimate goal is attractive long-term performance… As of Date: 12/31/23 QTD 1 Year 3 Years L P 5 years FPA Flexible Fixed Income Fund 4.11 9.02 rs, 2.54 3.22 o Morningstar U.S. Fund Nontraditional Bond 4.12 6.95 0.68 2.56 Bloomberg U.S. Agg Bond Index 6.82 v is 5.53 -3.31 1.10 Bloomberg U.S. Uni
Slide 20: Attractive long-term performance with a smoother ride
The ultimate goal is attractive long-term performance… with a smoother ride Growth of $10,000 since inception of FPFIX (12/31/2018) FPA Flexible Fixed Income Bloomberg U.S. Universal Index L P $12,000 Morningstar U.S. Fund Nontraditional Bond Bloomberg U.S. Agg 1-3 Year Bond Index rs, Bloomberg U.S.
Slide 21: FPNIX return simulation vs. 7-year Treasury
FPNIX return simulation vs. 7-year Treasury ■ 7-Year Treasury has a similar duration profile as the Bloomberg U.S. Aggregate Index as of 12/31/23 L P FPNIX (gross of fees) 7 yr. Treasury FPNIX (net of fees) FPNIX (net of fees) less 7 yr. Treasury rs, 10.0 9.35 is o Hypothetical total return (%) 8.0
Slide 22: FPNIX return simulation vs. 12-month Treasury Bill
FPNIX return simulation vs. 12 month Treasury Bill L P FPNIX (gross of fees) 12 month Treasury Bill FPNIX (net of fees) rs, FPNIX (net of fees) less 12 month Treasury Bill 8.0 7.21 6.76 is o Hypothetical total return (%) v 6.0 5.18 4.76 4.73 4.76 4.76 4.0 2.00 A d 3.24 2.79 c 2.0 0.0 i f i c -0.03 a
Slide 23: FPNIX return simulation vs. 3-year Treasury
FPNIX return simulation vs. 3-year Treasury L P FPNIX (gross of fees) 3 yr. Treasury FPNIX (net of fees) rs, FPNIX (net of fees) less 3 yr. Treasury 8.0 7.21 6.76 is o Hypothetical total return (%) 6.0 5.94 5.18 4.73 d v 4.0 c A 4.01 i 3.24 f 2.79 2.0 ci 2.13 0.0 P a 0.82 0.72 0.66 r s -100 t 0 Refe
Slide 24: Investment grade bond yields remain near decade-plus highs
Investment grade bond yields remain near decade- plus highs Bloomberg U.S. Aggregate Bond Index L P 18.00% 16.00% rs, 350 300 14.00% 12.00% is o 250 v Yield-to-worst Spread (bps) 200 d 10.00% A 8.00% 150 c 6.00% 4.00% i f i 100 c 50 2.00% 0.00% P a 0 rs t YTW Spread F i Source: Bloomberg. As of Dece
Slide 25: Active duration management: upside versus downside
Active duration management: illustration of upside versus downside Hypothetical 12-month U.S. Treasury Returns L P rs, is o d v c A i f i a c t P F i rs Source: Bloomberg, HZ1 Function. ^ Yield-to-maturity is the annualized total return anticipated on a bond if the bond is held until it matures and
Slide 26: Agency mortgage pool spreads
Agency mortgage pool spreads 30-year Agency Mortgage Current Coupon Spread L P rs, is o v Spread to Treasury (%) A d i f i c a c t P F i rs Source: Bloomberg. Data covers time period from 1/1/1985-12/29/2023. Data represents the semi-annually compounded coupon on a hypothetical T+30 day settle, 0-da
Slide 27: Agency mortgage investment example (disclosures)
Agency mortgage investment example (disclosures) The information below supplements the information provided on page 28-31. The source of the data on slide 28-31 is from Bloomberg. L P Key Definitions rs, Yield-to-maturity is the annualized total return anticipated on a bond if the bond is held until
Slide 28: Agency mortgage investment example
Agency mortgage investment example ■ Current coupon 30 year agency mortgages traded at historically high spreads but those spreads L P belie what we believe is an unattractive total return profile. rs, Current Coupon 30 yr. Mortgage is FN MA5107o FPA Investment FN FS1967 Description Collateral d v (
Slide 29: Agency mortgage investment example
Agency mortgage investment example year agency mortgages can change significantly in a manner that is detrimental to investors; L P ■ As interest rates change, the weighted average life and, in turn, the duration of current coupon 30 FPA’s recent agency mortgage investments do not exhibit as much se
Slide 30: Agency mortgage investment example
Agency mortgage investment example ■ The steadier duration profile of FPA’s recent agency mortgage investments potentially creates a more attractive short-term upside versus downside return profile. L P Estimated 12 month Total Return Estimated 12 month Total Return rs, o FN MA5107 (proxy for curren
Slide 31: Agency mortgage investment example
Agency mortgage investment example ■ The steadier duration profile of FPA’s recent agency mortgages investments potentially creates a more attractive long-term return profile. L P 1.60 Multiple Multipleof of Invested Capital Invested Capital rs, o 1.54 is 1.50 1.46 Multiple of Invested Capital 1.40
Slide 32: Active management
Active management ■ FPA New Income and FPA Flexible Fixed Income are actively adding duration L P rs, Effective duration FPA New Income Fund 12/31/2021 1.39 is o 12/31/2023 2.75 Change (yrs.) +1.36 Morningstar U.S. Short-Term Bond Category 2.75 d v 2.79 +0.04 A Bloomberg U.S. 1-3 Yr Aggregate Bond I
Slide 33: Longer duration bonds tend to do well post-inversion
Longer duration bonds tend to do well post-inversion 2 yr. and 5 yr. Treasury Yield L P 18.00% 16.00% rs, 14.00% is o 12.00% 10.00% d v 8.00% c A 6.00% i f i 4.00% 2.00% a c 0.00% t P rs Dec-78 Dec-83 Dec-88 Dec-93 Dec-98 Dec-03 Dec-08 Dec-13 Dec-18 Dec-23 F i 2 yr. Treasury yield 5 yr. Treasury yie
Slide 34: High yield: reward generally not worth the risk
High yield: reward generally not worth the risk Bloomberg U.S. Corporate High Yield BB excl. Energy L P 18.00% 16.00% rs, 1,600 1,400 14.00% is o 1,200 v 12.00% 1,000 Yield-to-worst Spread (bps) 10.00% 8.00% A d 800 c 600 i 6.00% 4.00% ci f 400 200 a 2.00% P 0.00% 0 rs t F i YTW Spread Source: Bloom
Slide 35: High yield: reward generally not worth the risk
High yield: reward generally not worth the risk Bloomberg U.S. High Yield Index Spread less Bloomberg Investment Grade Corporate Spread L P 1,600 1,400 rs, 1,200 is o Basis Points (bps) v 1,000 800 600 A d 400 i f i c c 200 0 P a rs t All HY less Intermediate IG Corp. HY ex. Energy less Intermediate
Slide 36: FPA New Income Portfolio Update
L P rs, is o d v FPA New Income c A i f i c Portfolio Update a t P F i rs 36
Slide 37: FPNIX contribution to return
FPNIX contribution to return Average Q4 2023 Total Contribution Average Total L P Calendar Year 2023 Contribution , Weight (%) Return (%) to return (%) Weight (%) Return (%) to return (%) rs ABS 53.20 3.48 1.78 59.76 7.28 4.19 Auto 9.86 3.14 0.29 14.77 5.79 0.77 Equipment 15.92 3.77 0.59 15.01 6.12
Slide 38: FPA New Income portfolio characteristics
FPA New Income portfolio characteristics Sector Exposure Yield-to-Worst (% of MV) (%) Maturity Effective Duration Spread Duration Nominal Spread (years) (years) (years) (bps) L P Securitized Agency RMBS 84.2% 12.2% 5.71% 4.54% 3.5 5.3 2.8 4.5 rs, 3.0 4.5 160 62 o Non-Agency RMBS 4.3% 7.93% 2.4 2.1 2
Slide 39: FPA New Income exposures by investment idea
FPA New Income exposures by investment idea L P As of September 30, 2023 As of December 31, 2023 rs, ABS CLO 12% Agency Performing CMBS 11% Corporates 7% ABS is o Agency Performing CMBS 12% Mortgage Pass- through 12% Corporates 7% v Equipment Equipment 17% 15% Commercial Commercial Other 29% Real Es
Slide 40: FPA New Income quality distribution
FPA New Income quality distribution L P 100% 90% rs, As of 12/31/2023 AAA 60% 80% 70% is o AA A 23% 7% v BBB 4% % of portfolio 60% 50% 40% A d BB B CCC 0% 1% 0% c Total = 10% i CC 0% f 30% i C 0% 20% c D 0% 10% 10% 10% 10% 10% 10% a 10% 6% 6% 7% 9% 8% 7% 9% 9% 9% NR 5% P 0% Sep-20 Sep-21 Sep-22 Sep-
Slide 41: FPA New Income return simulation as of Dec. 31, 2023
FPA New Income return simulation as of Dec. 31, 2023 8.0 L P 7.0 rs, Hypothetical Total return - gross of fees (%) o 6.0 5.0 v is 4.0 3.0 A d 2.0 i f i c 1.0 a c 0.0 -100 -75 t P -50 -25 0 +25 +50 +75 Reference yield change (bps) +100 +125 +150 +175 +200 i rs The Chart shows the hypothetical impact
Slide 42: FPA Flexible Fixed Income Portfolio Update
L P rs, is o d v c A FPA Flexible Fixed Income i f i c Portfolio Update a t P F i rs 42
Slide 43: FPFIX contribution to return
FPFIX contribution to return Average Q4 2023 Total Contribution Average Total L P Calendar Year 2023 Contribution , Weight (%) Return (%) to return (%) Weight (%) Return (%) to return (%) rs ABS 51.12 4.07 1.98 57.26 9.08 4.98 Auto 9.27 2.90 0.24 12.66 6.00 0.67 Equipment 11.69 3.92 0.44 10.88 6.75
Slide 44: FPA Flexible Fixed Income portfolio characteristics
FPA Flexible Fixed Income portfolio characteristics Sector Exposure Yield-to-Worst (% of MV) (%) Maturity Effective Duration Spread Duration Nominal Spread (years) (years) (years) (bps) L P Securitized Agency RMBS 73.7% 10.3% 6.73% 4.50% 3.9 5.8 2.8 4.9 rs, 3.3 4.9 267 64 o Non-Agency RMBS 4.1% 7.37
Slide 45: FPA Flexible Fixed Income exposures by investment idea
FPA Flexible Fixed Income exposures by investment idea As of September 30, 2023 As of December 31, 2023 L P rs, CLO Corporates 13% ABS Equipment Corporates is o ABS Equipment 11% Mortgage Pass-through 10% CLO v 16% 12% Agency 10% 12% Performing Agency d CMBS Performing 7% CMBS A Other Other 8% ABS A
Slide 46: FPA Flexible Fixed Income quality distribution
FPA Flexible Fixed Income quality distribution L P 100% 90% rs, As of 12/31/2023 AAA 43% 80% 70% is o AA A 27% 7% v BBB % of portfolio 60% 7% 50% 40% A d BB B CCC 2% 6% 4% c 32% i 29% 30% 31% 29% 28% CC 0% Total = 23% f 30% 24% 27% 23% i 23% 24% 22% 21% 20% C 0% 20% 15% 10% a c D NR 0% 4% P 0% Dec-2
Slide 47: FPFIX return simulation as of Dec. 31, 2023
FPFIX return simulation as of Dec. 31, 2023 9.0 L P rs, Hypothetical total return - gross of fees (%) 8.0 7.0 6.0 is o 5.0 d v 4.0 3.0 c A 2.0 i f i 1.0 a c 0.0 -100 -75 t -50 P-25 0 25 50 75 Reference yield change (bps) 100 125 150 175 200 F i rs As of December 31, 2023. The Chart shows the hypothe
Slide 48: Question & Answer
L P rs, is o d v c Question & Answer A i f i ac t P F i rs 48
Slide 49: Assessing credit risk
Assessing credit risk 200 Bond Value L P , 180 160 rs Margin of $ Bond Value 140 120 Safety o 100 80 Bond is 60 Loss 40 v 20 0 d 0 20 40 60 80 100 120 140 160 180 200 $ Business or Asset Value c A Industry evaluation ■ Cyclicality Fundamentals ■ Capital structure and i f i Qualitative evaluation ■ W
Slide 50: Structured products comparison
Structured products comparison ■ During 1Q23 American Tower Corporation issued debt in both the IG corporate bond and ABS structured products markets L P ■ We believe the ABS issuance provides more attractive risk-reward as it has lower expected loan- to-value ratio with similar yield and duration p
Slide 51: Subprime auto loan asset-backed securitization example
Subprime auto loan asset-backed securitization example Breakeven L P Multiple of Principal Tranche A1 Original Balance $314,700000 S&P/DBRS Rating A-1+/R-1(h) Coupon 5.046% WAL (yrs.) (a) 0.23 rs Loss 85% , Cumulative Peak Losses (b) 3.9x payments o 5.51% / A2 525,000,000 AAA / AAA 0.99 55% 2.5x SOF
Slide 52: Subprime auto loan ABS credit stress test
Subprime auto loan ABS credit stress test L P Portfolio exposure as of 9/30/23 FPA New Income Fund 4.0% rs, FPA Flexible Fixed Income Fund 5.7% Average credit quality as of 9/30/23 AA is o AA Wtd. avg. breakeven collateral loss d v 45% 53% Wtd. avg. peak historical collateral loss c A 23% 23% Wtd. a
Slide 53: Investment process example
Investment process example ■ New issue CLO and BDC bond from a top tier direct lending franchise. Collateral pools were substantially similar. ■ BDC bond offered similar downside protection, greater upside, and a higher potential multiple of invested capital, L P , while benefitting from a lower ini
Slide 54: FPA Queens Road Small Cap Value Fund
L P rs, is o d v c A FPA Queens Road Small Cap i f i Value Fund a c With Steve Scruggs t P F i rs 54
Slide 55: FPA Queens Road Small Cap Value Fund performance
FPA Queens Road Small Cap Value Fund performance Trailing Performance As of Date: 12/31/2023 Inception 20 Years 15 Years 10 Years 5 Years 3 Years 1 Year YTD L QTD P FPA Queens Road Small Cap Value (%) Russell 2000 Value (%) Performance vs. Benchmark (bps) 9.41 8.19 122 8.39 7.68 71 10.65 10.27 38 7.
Slide 56: Since Inception Returns
Since Inception Returns L P As of 12/31/2023 rs, FPA Queens Road Small Cap Value Fund Russell 2000 Value is o 9.41% 8.19% d v ■ Risk-Adjusted Returns: c A i f i ̶ 62 small cap value funds have been around since at least July 2002 a c ̶ FPA Queens Road Small Value is #1 in the Morningstar Small Value
Slide 57: The case for FPA Queens Road Small Cap Value Fund
The case for FPA Queens Road Small Cap Value Fund Strong performance ■ Outperformed Russell 2000 Value by ~120+bps on average, with ~25% less volatility since inception in 2002* L P Easy to own ■ Morningstar rating of 5-stars overall and 5-stars over 10 and 5 years** rs, ■ Consistent downside risk m
Slide 58: Goal and philosophy
Goal and philosophy The Fund seeks to generate returns in excess of the Russell 2000 Value Index over full market cycles with less risk. L P ■ Fundamental Analysis rs, ̶ We have a straightforward investment philosophy: seek to invest in quality businesses at reasonable prices using a fundamental, bo
Slide 59: Four Pillar process
Four Pillar process The Team follows a disciplined four-step process seeking to identify companies with the greatest likelihood of maximizing after-tax returns while limiting volatility. Our Four Pillars: L P 1. Balance Sheet rs, ̶ o Look for companies with strong balance sheets, manageable debt, an
Slide 60: Quality and the Four Pillar process
Quality and the Four Pillar process We have a preference for high-quality compounders. That is; strong balance sheets, proven management teams and favorable industry dynamics. L P rs, ■ Valuation - Valuation conscious but generally willing to pay up a little for quality. is o are today. d v ■ Qualit
Slide 61: Performance since inception
Performance since inception FPA Queens Road Small Cap Value Fund & Russell 2000 Value: Growth of $10,0001 L P $80,000 rs, FPA Queens Road Small Cap o $70,000 Value Fund is $60,000 $69,317 $50,000 d v Russell 2000 Value Index A $54,521 $40,000 $30,000 i f i c $20,000 $10,000 a c $0 t P rs Jun-02 Jul-
Slide 62: 5-year rolling returns by market type since Fund inception
5-year rolling returns by market type since Fund inception 30% Down Market Normal Market Robust Market L P FPA Queens Road Small Cap 20% rs, Value Inv 10% 0% is o -10% -10% -5% 0% 5% 10% d v 15% 20% 25% 30% A Russell 2000 Value TR USD c i f i Down Market Russell 2000 Value 5 yr Normal Market Russell
Slide 63: Downside capture – Historically less risk
Downside capture – Historically less risk ■ Since inception in 2002, the Fund has outperformed during every large drawdown. L P 20% or Larger Russell 2000 Value Index Drawdowns Since Fund Inception rs, Jun 02 - Jun 07 - Jun 15 - is o Aug 18 - Nov 21 - Average of Each FPA Queens Road Small Cap Value
Slide 64: Lessons learned along the way
Lessons learned along the way L P rs, Value Avoid Focus on is o Traps Complexity d v Quality Cash c A Radio Shack i f i USEC RLI $ a c t P F i rs For illustrative purposes only. The companies mentioned should not be considered a recommendation to purchase or sell a particular security, or be conside
Slide 65: Active stock selection has driven differentiated returns
Active stock selection has driven differentiated returns Fully Invested Long-equity Gross Performance vs. Benchmark L P , S.I. 10yr 5yr 3yr 1yr YTD QTD rs QRSCV Fully Invested (Gross %) 12.47 10.98 15.61 11.61 18.88 18.88 14.85 Russell 2000 Value (%) 8.06 6.76 10.00 7.94 14.65 14.65 15.26 Excess Ret
Slide 66: Big trends impacting the portfolio
Big trends impacting the portfolio L P Interest Rates rs, is o Inflation d v c A f i Covid Normalization / Consumer Debt i a c P Artificial Intelligence t F i rs As of December 31, 2023 66
Slide 67: Portfolio companies impacted by AI
Portfolio companies impacted by AI Portfolio Company % of Year First Portfolio Purchased Description L P InterDigital Inc. 4.4% 2018 1 rs, InterDigital is a research organization that develops and acquires key wireless and video patents. Earlier this year, InterDigital announced highly accretive lic
Slide 68: Regional bank exposure
Regional bank exposure Portfolio Company % of Year First Portfolio Purchased Description L P Servisfirst , ServisFirst Bank is a conservatively-run lending franchise led by founder Tom Broughton. rs ServisFirst hires local bankers but doesn’t build branches, which promotes best-in-class efficiency m
Slide 69: Why own small-caps?
100% 1000% 10000% Jan-79 Dec-79 Nov-80 F Oct-81 i Sep-82 Data as of December 31, 2023. Aug-83 Jul-84 Jun-85 rs May-86 t Apr-87 Mar-88 Feb-89 Jan-90 P Dec-90 Nov-91 a Oct-92 Sep-93 c Aug-94 i Jul-95 Jun-96 May-97 f i Why own small-caps? Apr-98 c Source: Factset. Past performance is not indicative, no
Slide 70: Small caps are compelling
Small caps are compelling Third time in approximately 30 years that small caps have sold at this large of a discount. L P Small Cap to Large Cap Historical P/E Ratio (x100) rs, o Small Cap: S&P Small Cap 600 Index: P/E = 14.13x (as of 12/31/23) Large Cap: S&P 500 Index: P/E = 22.83x (as of 12/31/23)
Slide 71: Question & Answer
L P rs, is o d v c Question & Answer A i f i ac t P F i rs 71
Slide 72: Holdings as of December 31, 2023
Holdings as of December 31, 2023 Communication Services IAC Scholastic 4.0% 2.1% 1.9% Industrials Oshkosh MSC Industrial Direct 19.1% 3.0% 2.8% Materials Livent Graphic Packaging L P 3.4% 1.3% 1.0% Consumer Discretionary PVH Corp 11.5% 4.1% Concentrix CSW Industrials CSG Systems 2.7% 2.4% 2.0% Knife
Slide 73: Notable sector exposures
Notable sector exposures We do not target sector weights or invest thematically. We invest from the bottom up, one company at a time. L P rs, ■ Financials ̶ is o We own fewer financials than the benchmark and our exposure is heavily weighted towards insurance and away from banks. ■ Technology d v ̶
Slide 74: Investment goal met since inception
Investment goal met since inception The Fund seeks to generate returns in excess of the Russell 2000 Value Index over full market cycles with less risk. L P Attractive Long-Term Largest Drawdown in rs, Performance Russell 2000 Value Since Fund Inception is o Lower Volatility 12% 10% 9.40% 8.19% 0% -
Slide 75: Important disclosures
Important disclosures Important Disclosures Related to the FPA Funds L P Portfolio composition will change due to ongoing management of the FPA funds (each a “Fund” and collectively the “Funds”). References to individual securities or sectors should not be construed as a recommendation by the Funds,
Slide 76: Important disclosures (continued)
Important disclosures (continued) Important Disclosures Related to the FPA Funds (continued) L P Investments in private securities and limited partnerships present risks. These investments are not registered under the federal securities laws and are generally eligible for sale only to certain eligib
Slide 77: Important disclosures (continued)
Important disclosures (continued) Important Disclosures Related to the FPA Funds (continued) In relation to the FPA New Income Fund (“FPNIX”) and FPA Flexible Fixed Income Fund (“FPFIX”): L P , Abhijeet Patwardhan has been portfolio manager for the Funds since November 2015. Thomas Atteberry managed
Slide 78: Index definitions
Index definitions Index Definitions L P Index returns are generally provided for comparison purposes only. Indices are unmanaged and index returns do not reflect transactions costs (e.g., commissions), investment management fees or other fees and expenses that would reduce performance for an investo
Slide 79: Morningstar category definitions
Morningstar category definitions Morningstar Category Definitions L P Morningstar Small Value Category portfolios invest in small U.S. companies with valuations and growth rates below other small-cap peers. Stocks in the bottom 10% of the capitalization of the U.S. equity market are defined as small
Slide 80: Glossary of terms
Glossary of terms P ABS (Asset Backed Securities): financial securities backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. L Advance rate is the percentage of the value of the collateral that a lender is willing to extend as a loan. , Average
Slide 81: Glossary of terms (continued)
Glossary of terms (continued) P Market Cycle Performance reflects the two most recent completed market cycles (peak to peak) defined as a period that contains a decline of at least 20% from the previous market peak over at least a two-month period and a rebound to establish a new peak above the prev
Slide 82: Glossary of terms (continued)
Glossary of terms (continued) P Yield to Maturity (YTM) is the rate of return anticipated on a bond if held until the end of its lifetime. YTM is considered a long-term bond yield expressed as an annual rate. The YTM calculation takes into account the bond’s current market price, par value, coupon i