e-fundresearch: Which benchmark do you adhere to?
Byrne: Russell 1000 Value Index. However, we do not manage the portfolio to the index but we are benchmark “aware” . We manage the fund in an attempt to provide attractive risk-adjusted returns versus ‘relative’ to the benchmark returns.
e-fundresearch: Are you also responsible for other funds at the moment?
Byrne: We have other fund strategies but I focus on our Large Cap strategy.
I’m also the CIO of Westwood Management.
e-fundresearch: What is the total volume that you manage in all your funds?
Byrne: About USD 5bn in this strategy.
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2003-2008? Absolutely and relatively to the relevant benchmark?
e-fundresearch: How content are you with your own performance in the last years and this year?
Byrne: 2008 was not satisfying to anyone in our firm despite outperforming. It was one of the more challenging years in my career but our disciplined risk aversion process mitigated our exposure relative to our value peers from the devastation in the financial sector
While 2009 was disappointing, because we lagged more aggressive managers, the full year return was a positive 15%. With the economy in shambles, we focused our investments in high-quality, stable companies; however, the most debt-laden equities and low-quality business franchises rebounded most aggressively. Our philosophy of prudence keeps us from investing in these type of companies.
The first half of 2010 was frustrating. Despite high-quality U.S.companies executing well and above expectations, their stock prices were hampered by concerns of foreign sovereign debt crisis, slowing in China and fears of a double-dip recession. However, since the 2nd Quarter, our performance has exceeded benchmarks due to rotation toward the type of high-quality stocks that we favor.
We are never content as there are always mistakes to improve upon.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Byrne: We believe that the use of proprietary fundamental research is the best way to identify high quality companies with undervalued earnings growth prospects.
Investor skepticism leads to an under-appreciation of the earnings potential, while strong fundamental characteristics produce a high margin of safety.
e-fundresearch: How long have you been a fund manager already?
Byrne: I have been in the investment business for 40 years. I began my career in New York in the early 1970’s and founded Westwood in 1983.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Byrne: Our biggest success is probably the length of our record. Our oldest fund started in late 1986, so we have survived many different market conditions and the long term record is excellent. We are gratified that so many of our clients have been with us for such a long period of time.
Our biggest disappointment would be in 2008. Although we did better than most other managers, it is hard to be proud of negative numbers.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Byrne: With the uncertainties and risks in the global economic outlook, we believe our portfolio is positioned appropriately for the current environment. We are focused on high-quality companies with attractive fundamentals, including strong free cash flow, low debt, revenue visibility, and exposure to the faster growing foreign markets. We have not deviated from our investment philosophy and disciplined risk-control process. The combination of Investing in companies with strong financial metrics and whose earnings prospects are not reflected in the current stock price, has been the historical driver of our success and will drive future success.
e-fundresearch: What are the special challenges in this environment?
Byrne: Current conditions are interesting because of new sets of variables due to participation of many new economic players in world markets. Determining the accuracy and impact of the enormous content and instantaneous delivery of information from anywhere in the world reinforces our belief in the importance of doing our own research. We always find each year a challenge, which is why we concentrate on the fundamentals of individual companies and reduce as much of the outside variables as possible.
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Byrne: To continue to contribute to our portfolio team’s endeavor to deliver strong performance while mitigating downside risk for our clients.
e-fundresearch: Do you model yourself on someone? Any ideals?
Byrne: We have developed our company culture to strive to exceed client expectations through exceptional risk-adjusted performance, ethical conduct and excellent service through team-based practises and accountability.
We believe in working hard but that family time is important.
We also embrace and provide our employees opportunities to serve and enrich individuals and organizations in our community that are in need.
e-fundresearch: What motivates you in your job?
Byrne: The competition of being the best we can. We are very aware of the trust our clients place in us and do not want to disappoint them.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Byrne: I want to continue as long as our team finds me helpful. Being a fund manager is my passion. Other than family, I have no other aims.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Byrne: I founded our firm in 1983. That has kept me quite busy. I am also a wife, mother and grandmother. My family is my main interest outside of work.