Fairholme Capital Management lost their top manager last year when the fund was losing ground exponentially. Charles Fernandez, was the president at the deep value hedge fund founded by Bruce Berkowitz. Fernandez has now launched his own fund, Barnstar Opportunities Fund which is expected to become fully operational by the end of this year.
In an interview with FINalternatives, Fernandez pointed out the difference between his “multi-disciplinary, special situations long-bias” fund and the deep value fund approach. He explained that his fund comes into play when the event has occurred rather than predicting the event. He told that his investment approach is to look for regulated public entities, with focus on American equities that are involved in some legal and financial trouble and there is potential that they could benefit from the solution of the difficulty.
The action plan used by Fernandez would be to gather a team of experts which sits down to answer fundamental questions, like how the damage can be repaired, if it is reparable at all, and whether would paying taxes or other kinds of restitution fix it. He says that this process can take anywhere from one to six months. After a favorable decision has been made about investing in the company, Barnstar will start working with the company to define ways to recover and restructure.
Fernandez sees these opportunities all the time, irrespective of how the market has been performing. For now, the portfolio will be positioned with four to six core positions, making up 40 percent of the portfolio, and some 15 other positions will take up the rest of the portfolio. The fund will be focused on US stocks and invest some 5 percent of total assets in Canada and Australia in the beginning.
While talking to another outlet, eVestment|HFN, Fernandez said that he had learned a lot from Bruce Berkowitz while he worked at Fairholme Capital, and that his experience there would be instrumental in setting up the new business. Goldman Sachs Group, Inc. (NYSE:GS) has assigned a capital introduction team to Barnstar and is acting as the custodian.