Morningstar Advisor - June/July 2013 - (Page 58)
Undiscovered Manager
Waiting to Pull Up Anchor
By Michael Brennan
Small caps have reached the top of their cycle, manager Eric
Cinnamond says. He’s hoarding cash for when the market turns.
By at least one standard, it might be difficult
to be Eric Cinnamond right now. The brains
behind River Road Asset Management’s
small-cap strategy, which fuels ASTON/River
Road Independent Value ARIVX, spent the
winter watching mostly from the sidelines as
the Russell 2000 Value Index posted scorching
returns. After it shot up 15.5% in 2012, the
small-cap index swelled by more than 8% this
year through April 22.
Meanwhile, Independent Value, which
accounts for $740 million of the $1 billion in
58 Morningstar Advisor June/July 2013
assets Cinnamond’s strategies manage (the
remaining $260 million are in separate
accounts), has not done much. It’s up 3% on the
year and appears unlikely for a performance
boost in the short term. Cinnamond has
fled from the party by unloading many of his
holdings and letting cash build up to a
whopping 58% of his portfolio as of March 31.
Given the recent disparity between Cinnamond’s performance and that of the Russell
2000 Value, how is it that he’s activated a soft
close and is turning away would-be investors?
He reached his $1 billion limit mostly by way
of inflows rather than from performance;
Independent Value and his separate accounts
netted $660 million worth of inflows in 2011
and $224 million in 2012. It suggests that
Cinnamond’s 15-year track record has earned
him a good deal of trust among investors.
Cinnamond says that his investment universe—
the 300 small caps on his watchlist—has
enjoyed a runup and is approaching what he
believes is the peak of its performance
cycle. A downturn, he believes, is approaching.
Table of Contents for the Digital Edition of Morningstar Advisor - June/July 2013
Morningstar Advisor - June/July 2013
Contents
Contributors
Letter From the Editor
Not Your Values
How Do You Use Alternatives for Clients?
Working to Build a Niche
How to Put Buffett’s Investing Philosophy into Practice
Sophisticated Strategies for the Masses
Investments á la Carte
Investment Briefs
The Percentile Trap
Defense Firms Will Stay Aloft
Beware the Lure of Diversification
Using Alternatives in Practice
Managed Futures and Cash Rates
The World Is Getting Grayer
Waiting to Pull Up Anchor
The Price of Managing Volatility
Let’s Get Back to Basics
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
Mutual Fund Urban Myths
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