From our experience, when investing in emerging market debt (EMD), we believe in the need to invest in people more than financials. In many cases, the founding family still runs the company. You need to understand whether you are lending them money to grow the business or to buy a more luxurious jet.
On one occasion, a CEO of a large public company invited me on a pre-IPO “dog and pony” show, saying proceeds would be used to pay down debt. That night over dinner, he negotiated a major new acquisition that would use all the IPO money and increase leverage. I left the tour and never touched his paper again.
We also do not invest in countries where there is no rule of law, such as in Venezuela, Russia, and Nicaragua. Emerging market debt is like a minefield where you are well paid for successfully crossing it. If you truly do your homework, you can generally avoid the hazards and glean the rewards.
Hortz: What was your reason and strategy for launching a mutual fund?
Maizel: LM Capital has been managing institutional portfolios for over 27 years, using a proprietary, time-tested and differentiated investment process. We believe that the mutual fund marketplace can use something different and have seen increased demand in creating our product offering for retail clients.
We built the LM Capital Opportunistic Bond Fund (LMCOX) to be a low beta, low turnover, low expense fund that aims to exceed its benchmark, the Bloomberg Barclays U.S. Aggregate Index, over a full market cycle. Our unique investment process aims to eradicate risk for downside protection. The fund avoids derivatives and uses no leverage. These key differentiators have typically delivered very consistent returns. LM Capital has managed to avoid the minefields and our portfolios shine in tough times. Having a mutual fund also opens us up to partner with leading financial advisors across the country looking for a risk-averse bond strategy for their clients.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here.