Horizon Kinetics Conference Call: The Spinoff Index

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Murray Stahl’s Horizon Kinetics  FRMO Corp. Q2 2014 Conference Call


Good afternoon everyone and welcome to the FRMO Corp. quarterly conference call. As a reminder, this call is being recorded. At this time, I would like to turn the conference over to Therese Byars. Please go ahead.

Thérèse Byars – Corporate Secretary of FRMO Corp.

Thank you, Danielle. Good afternoon, everyone. My name is Thérèse Byars, and I’m the Corporate Secretary of FRMO Corp. We appreciate all of you joining us for today’s call.

The statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events, or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will prove to be profitable, or that future investment decisions will be profitable or will equal or exceed the past performance of the investments. For additional information, you may visit FRMO Corp.’s website at www.frmocorp.com.

Today’s discussion will be led by Murray Stahl, Chairman and Chief Executive Officer of FRMO Corp., and Steven Bregman, President and Chief Financial Officer.

Murray Stahl – Chairman & Chief Executive Officer

Thank you everyone for attending today. I’ll make one small observation on the balance sheet, then I’ll turn my attention to more strategic issues. It was a goal of ours to get to $100 million plus of assets. Why was that an important goal of ours? Because it gives us strategic flexibility to make investments other than just securities. It’s those strategic investments that one day might prove to be important. One of those strategic investments is that we have a fairly large investment in the Minneapolis Grain Exchange. Nothing really happened in the last quarter other than we bought yet one more seat through an investment fund. So, I believe we’re the largest holder of seats on the Minneapolis Grain Exchange, and I’ve been a board member of that exchange for a little less than half a year.

I can’t tell you much about what’s happening there strategically, but I can just tell you about the real estate part of it, because that’s all in the public domain. The Minneapolis Grain Exchange owns the Minneapolis Grain Exchange Building, which is three blocks away from the Minnesota Vikings Stadium that is being demolished and will be completely rebuilt. The plan is to have the new stadium completed in 35 months. As a real estate investment by itself, the exchange’s building might have some merit and then, more importantly, it includes the exchange itself. With all the consolidation of exchanges around the world, you have an absolutely clean exchange, and it has permission to engage in all sorts of interesting activities in that realm. It certainly has considerable value. I don’t think it would be easy to get those licenses today, and time will tell how it develops.

Other strategic points. In quarters past we mentioned products as seedlings. For example, we mentioned the various index products created by Horizon Kinetics: the Virtus Wealth Masters fund, which is the Wealth Index and which we do in partnership with Virtus; the spin-off index; and the Japan Founders Index. It would be interesting for you to learn that we might have to think of a word other than seedling to describe it. For example, as of yesterday, the Virtus Wealth Masters Fund—I believe you can get this off the Virtus website, but in any event, for those who don’t want to look there—it had assets under management of approximately $93 million. By way of reference, at the August 27, 2013 Annual Meeting, or just less than six months ago, I recall telling the attendees that the assets under management of the Virtus Wealth Masters Fund was $7-odd million, which is a lot of expansion in less than six months.

It’s also worthy of note that there is another $5 million of assets you really can’t see in the Virtus Wealth Masters Fund, because the Wealth Index is on a platform called Envestnet. Envestnet is a model platform. Essentially, you deliver your model, which is a list of securities and weights, and people are free to invest in that model or not, and if they choose to invest in that model Envestnet, automatically puts you in. We don’t really engage in marketing in the sense of business development; people just have to find it, and about $5 million dollars’ worth have found it. In prior meetings we didn’t mention it because it was truly de minimis and maybe the $5 million here is de minimis as well, but it’s important to note there are now two platforms. If you permit me to add the two together, we’re not far from $99 million, or almost $100 million. That’s already a successful index product.

It’s also worthy of note that all of this money really came from very small platforms. The big platforms only very recently—I mean literally days or weeks ago—approved the Wealth Masters Fund. So, it’s still early in the game.

This is important, not merely because it has X dollars in assets under management, but because in order to grow FRMO properly and diversify it properly, it has to evolve beyond a firm that just has investment products that Steve and I manage. As I said in prior meetings, there is a finite limit to how much money we can manage in our strategy. I believe we will be successful in what we’re doing, and you can debate what that number is, but that number is not $1 trillion, for sure. In any event, it’s strategically important for us that the seedlings take root, and this is a seedling that’s taking root.

As for the other indices, nothing much happened with the Spin-Off Index in the last three months. You’ll remember that the Spin-Off Index was previously available only on the swap market. It was another channel of distribution for us and very recently the Spin-Off Index became available on Envestnet. It’s too early to talk about any meaningful assets under management, but that’s another platform on which the index is available, and we are going to be developing that, hopefully.

See full PDF here.

Via FRMO Corp.

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