Hartford launches Jenkins’s new fund

A day after what was arguably the worst day in the markets in more than a generation, Richard Jenkins still feels confident about his new firm, Black Creek Investment Management, launching a new mutual fund, which will be offered by Hartford Mutual Funds.

Jenkins, a former lead manager at Trimark Investments, will helm the new Hartford International Equity Fund, which has a mandate to invest 95% of the fund’s assets outside of Canada and the United States. The fund will use the MSCI EAFE Index as its benchmark.

Jenkins announced back in March that he was leaving the then AIM Trimark Investments to join his old colleague and star manager Bill Kanko at Black Creek. It’s only now that Jenkins and Hartford have been able to announce Jenkins’s mandates.

He’s the first to admit that the timing of the fund’s launch is probably not ideal from an investor confidence perspective, but Jenkins, who has an abnormally long holding period for stocks — between five and 10 years — is unfazed by global market conditions.

“I’m the guy who is always talking about holding on to a stock for 10 years, which tends to get investors rolling their eyes a bit. I just really believe over a 10-year period you can assess the business in good times and bad. Investors should also take the same time horizon,” he says. “We have a focused fund of 20 to 25 names, and each one of the businesses is a global leader in its field. Typically, the businesses are number one or number two in terms of market share. The businesses are also growing above GDP but have valuations substantially below what we think they are worth in the long term.

If anything, Jenkins says the market conditions might be ideal for his style — which he refers to as growth at a value price — because he’ll get to buy some of the fund’s foundational stocks at bargain prices.

“Given the sharp downturn, there are lots of opportunities,” he says. “If you go back two to three years ago, it’s very tough to find businesses these criteria. Today that is not the issue anymore. I can’t confirm it yet, but it sure looks and feels like we are in a recession that is rolling through Europe, the United States and Japan. It definitely looks like a slowdown in the emerging markets.”

Jenkins obviously can’t identify what his stock selections or sector picks will be just yet, but broadly speaking, he says there are two aspects investors should be looking at for businesses trying to survive in this current market of contracted credit.

“You ask the question, ‘Does the business provide a service or product that consumers would need if it’s a protracted downturn which is of the likes we saw in 1982 to 1983?’ If it’s not providing a product people need, it’s highly discretionary, in which case, you need to be very cognizant that it has the revenues and margins needed to weather the downturn,” he says. “If it’s a business that provides a product or service people need, then you need to be careful again to make sure the balance sheet is not too stretched.”

Jenkins warns, for example, that there is likely to be considerable strain on bank balance sheets for some time to come, not only due to the sub-prime lending crisis but because many were lenders during the private equity buying craze that took hold over the past two years.

It’s like some of the businesses will fail, and the massive leverage used to buy these businesses will come back to haunt lenders.

“You are going to see a lot more losses from having lent to private equity,” he says. “Private equity firms are too levered-up, and many can’t pay their loans now.”

In addition to the new fund, Jenkins has also been named lead manager of global equities on Hartford Global Balanced Fund. Black Creek founder Bill Kanko will continue to be lead manager of Hartford Global Leaders Fund and will support Jenkins on Hartford International Equity Fund and Hartford Global Balanced Fund.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com