Morningstar ’ s multisector bond category .
But investors perhaps should focus on the five-year period starting in 2019 . That ’ s when Hayes teamed up with Travis to co-manage the fund . Travis , who cofounded Intrepid Capital Management in Jacksonville Beach , Fla ., 30 years ago , had co-managed the fund for about 10 years before he stepped aside . By November 2018 he was back , and Hayes came on board two months later .
Together , they rejiggered the fund to concentrate on what they believe are Intrepid ’ s strengths . “ When you look at the fund before 2019 , there were periods when we weren ’ t fully invested , and at times we would take on non-income risk ,” Hayes explains . “ When you pulled those two things out of the performance before 2019 , the credit-related performance of the fund was phenomenal .
“ We decided we needed to lean more into what we ’ re really good at , which is core credit work ,” he continues . “ And we do a really good job with the underwrit-
ing — picking solid companies to lend money to .”
The duo significantly underperformed the fund ’ s peers in 2019 . “ Mark and I had a transition year in 2019 ,” Hayes says . “ It was a pivot year coming out of the prior regime into this one .” Beginning in 2020 the fund has turned in top-tier performance against its category peers and various benchmarks .
According to Intrepid , the Income Fund ’ s five-year annualized return of 6.16 % ( through this year ’ s first quarter ) exceeded that of three comparison benchmarks — the Bloomberg U . S . Government / Credit 1-5 Year Index , the Bloomberg U . S . Aggregate Bond Index and the ICE BofA U . S . Corporate Index — by roughly 600 basis points each . And it topped the ICE BofA U . S . High Yield Index by a little more than 200 basis points .
“ It ’ s a case of if you do the same thing everyone else is doing you get the same result ,” Travis says . “ Obviously , we haven ’ t been doing the same thing everyone else is doing when we ’ re up 600 basis points over the past five years and the [ Bloomberg Agg ] has been virtually flat .”
Hayes notes that investors see the fund ’ s performance and ask how the portfolio managers were able to call interest rates so accurately . “ The reality is that it hasn ’ t been a call on interest rates ,” he states . “ We lend for short time periods not because we ’ re prognosticating on what the Fed is going to do , which is a fool ’ s errand . It ’ s a matter of underwriting the companies we think have a high level of certainty to pay us back . That ’ s good , fundamental core credit work .”
Investors pay up for the Intrepid fund ’ s outperformance . Its expense ratio of 1.01 % puts it in the second-costliest quintile of its Morningstar category . But that hasn ’ t seemed to deter investors . According to Hayes , the fund ’ s assets have grown from a little more than $ 300 million going into 2023 to roughly $ 535 million recently . “ We ’ ve found good ways to put that money to work ,” he says .
Manager Mark Travis Age 62
Professional Background He is CEO , president and co-founder of Intrepid Capital . He is the lead portfolio manager of the Intrepid Capital Fund ; the separately managed Intrepid Balanced portfolio ; and Intrepid Capital L . P ., a long-short hedge fund .
Outside Interests He is an avid outdoorsman who enjoys hunting , surfing and fishing .
Manager Hunter Hayes Age 31
Professional Background He joined Intrepid Capital in 2017 . He is a co-lead portfolio manager of the Intrepid Income Fund and the separately managed Intrepid Income portfolio . He is also a member of the investment team responsible for the Intrepid Endurance Fund , the Intrepid Capital Fund , and the separately managed Intrepid Small Cap and Intrepid Balanced portfolios .
Outside Interests He enjoys long-distance running and playing the piano ( his dual college majors were piano performance and finance ). He also enjoys reading old science fiction books and spending time with his wife , Blair .
Small Is Beautiful
Travis and Hayes take pride in not being index huggers . “ The majority of our positions aren ’ t indexed , meaning they ’ re not in any index ,” Hayes says .
He notes that investment ideas can come from anywhere and everywhere , and they ’ re always income-centered . The managers prefer what he describes as typical vanilla bonds with coupon payments and a maturity date . “ Occasionally , we ’ ll do something beyond that purview when it makes sense , such as busted convertible bonds or preferred stock or esoteric fixed-income instruments ,” Hayes says .
Most of the securities in the portfolio come from smaller high-yield issues of less than $ 500 million . The Intrepid team
Portfolio Statistics
Number Of Positions |
76 |
Effective Duration |
2.2 years |
Turnover Ratio |
112 % |
Net Expense Ratio |
1.01 % |
Holdings and portfolio stats as of 3 / 31 / 24 . Turnover stat as of 9 / 30 / 23 . Sources : Intrepid Capital Management and Morningstar .
ADVISOR PHOTOGRAPHS COURTESY OF INTREPID CAPITAL MANAGEMENT JUNE 2024 | FINANCIAL ADVISOR MAGAZINE | 45