Q:  What’s your investment philosophy?

A: Investing without borders is our core investment philosophy. This applies not only to geographical borders, but also to the asset class, industry, and market capitalization constraints that often limit portfolio managers. We look to generate long-term positive returns in all market conditions, and we believe that through our flexible, active style we can discover under-valued investments globally, avoid over-valued ones and manage our funds for best risk-adjusted return potential in a constantly changing world.

Q:  How do your four funds differ?

A: Each of the four Utopia Funds is an actively managed balanced, global fund designed to serve as a complete standalone investment portfolio. The key difference between the Funds is the interplay of potential risk and reward and the strategic allocation of equity, fixed income, and cash investments. The Funds were designed to meet a wide range of investor preferences for risk , time horizon, and projected cash flow needs.

Utopia Growth Fund (UTGRX) is designed for the investor with the most comfort with volatility, the longest time horizon and the least amount of portfolio cash flow needs. So that fund will get, in relative terms, slightly larger allocations to equity and other longer-term investment ideas.

Utopia Core Fund (UTCRX) is designed for an investor with a slightly lower appetite for risk. Utopia Core Conservative Fund, (UTCCX) and Utopia Yield Income (UTYIX) are designed for the more risk averse investor, but they are not fixed income funds. They are total return balanced funds that take advantage of all asset classes as appropriate. We typically take smaller equity positions in the Core Conservative and Yield Income funds relative to the Core and the Growth funds.

Q:  What are the advantages of the absolute return way of managing money?

A: For investors seeking long-term positive returns, the absolute return approach is consistent with these needs. We don’t consider it rational to focus on relative returns to some arbitrary benchmark. We think that losing 15% of the fund’s value when the market is down 25% is definitely not investment success. Therefore we focus on generating long-term positive returns in all market environments .

Q:  Do you have any certain target for absolute returns?

A: We do not have a stated quantitative target, but we do feel that our funds are appropriate for one expecting to eventually spend five percent of their portfolio value annually in retirement. Assuming 3% inflation, this gives us a minimum return target of 8%. We aim for this minimum target as an annualized number over a minimum three-year time horizon.

Q:  What are the key elements of your investment strategy?

A: We are trying to actively manage a global fund of risk-adjusted bargains. We have a team of three portfolio managers and an analyst and we spend significant time investigating and analyzing new ideas and monitoring our existing holdings for the macro and micro factors that could impact our long-term performance.

We look for sustainable businesses that trade below our estimate of intrinsic value and we don’t really worry whether they are classified by the market as growth or value. We spend time trying to determine intrinsic value by focusing on the current financial position of the company and the factors that will impact the sustainability of the company going forward. Generally speaking, we are looking for companies that have sustainable cash flow growth potential and management that has a proven track record of growing these flows.

We have a daily investment management committee meeting where we discuss ideas and challenge each other. Then we make group decisions on whether or not to buy or sell and how to best position the Funds for best risk-adjusted return potential.

Q:  How is your research process organized?

A: First, we have a medium to longer term global thematic map that helps us focus our research time. We are looking for investment themes that are sustainable over longer time horizons. One example of a current global theme we are looking at is healthcare IT and service providers that are helping practitioners in hospitals manage their businesses more effectively and efficiently. Asian infrastructure is another broad theme.

Running quantitative screens on certain valuation metrics is the second tool in our blended approach. We travel a lot; we go to industry conferences; we visit companies and their suppliers and competitors. As a small team with limited resources internally, we also do a good deal of networking which helps generate ideas.

Q:  Could you illustrate your research process with an example?

A: One of the ideas that we invested in a year ago is a company in Malaysia called Boustead Holdings. We were looking for high Asian dividend payers in the property space and it came up on a screen having an attractive dividend yield, book value growth, and an attractive price relative to its net asset value.