Most Atlantic Investment Management funds ended 2014 in the red, but CIO Alex Roepers is optimistic about 2015

Atlantic Investment Management had a rough 2014, ending 2014 with a loss in nearly all of its funds. The flagship Cambrian Fund was down 2.1% for the year, a far cry from its 18.4% annualized growth since inception. Only Cambrian Japan (both the smallest of Atlantic’s funds and the one with the lowest annualized returns since inception) had a solid year, gaining more than 16%.

“We are obviously disappointed to report a down year for most of our funds. The intense effort that went into 2014,” writes Atlantic Investment Management founder and CIO Alex Roepers in the 2014 year-end letter to investors, a copy of which was obtained by ValueWalk. “On balance, with an upward bias to equity markets, a return to fundamentals and stock picking, combined with the compelling nature of our current portfolio and our long-standing ability to generate strong returns with our approach to value investing, we are looking forward to a solid 2015.”

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Cambrian Japan has a strong run, but still down since inception

The Cambrian Fund (concentrated US equity value fund; $1 billion AUM) and Cambrian Global (high conviction investments in US, Europe, and Japan; $275 million AUM) were both down about 2% for the year, while AJR/Quest (US long/short, $479 million AUM) was down nearly 7% and Cambrian Europe ($177 AUM) was down more than 8%.

Cambrian Japan ($99 million AUM) had another strong year, following up 2013’s 42.9% returns with 16.1% last year. Ironically, while that brings the fund’s five-year annualized return up to 12.6% it’s still the one Atlantic fund with negative returns since inception.

Atlantic Investment Management has a combined $2.1 billion AUM with 45% from individuals and family offices, 22% from institutional investors, 14% from funds of funds, 12% internal capital, and 7% from sovereign wealth funds.

Cambrian Fund’s top long contributors

Top long contributors for 2014 (the letter doesn’t break them down by fund) were Koito Manufacturing, Harman International, Baker Hughes, Goodyear Tire, Faurecia, Arkema, Kuraray, and Kurita Water. Top long detractors were Owens-Illinois, Technip, Sulzer, Cameron International, General Cable, and Terex.

Roepers also writes that Atlantic successfully pushed for change in many of its core holdings including Owens-Illinois, Oil States International, Baker Hughes, Harman International, Triumph Group, Atos, Osram, Sulzer, Kurita Water, and Kuraray, even though two of those names showed up as top detractors.

Roepers optimistic about 2015

Atlantic’s top ten long positions are trading at 8x forward EV/EBIT, and Atlantic is one of the largest shareholders at each of those companies so it is in a good position to engage in shareholder activism. Atlantic hasn’t yet filed its 4Q14 holdings, but we’ll update you as soon as they do. The top five positions at the end of 3Q14 were Owens-Illinois, Triumph Group, Baker Hughes, Harman International, and Cameron International.