of early August , it had massively outperformed its peers and its Morningstar designated benchmark index ; it lost only about 2 %, which outperformed the category by 17 percentage points and the benchmark by 14 percentage points .
Seafarer Capital Partners is an investment advisor founded and run by Andrew Foster , a former high-level investment executive at Matthews Asia . The firm also runs the Seafarer Overseas Growth And Income Fund , which is the larger of the company ’ s two funds . That fund holds more traditional and familiar large-cap overseas companies , whereas the Seafarer Overseas Value Fund offers a more eclectic and diversified portfolio that includes recent top-10 holdings from such places as Qatar , the United Arab Emirates and the Czech Republic . Among other holdings within the portfolio ’ s 35 constituents are companies that hail from Georgia , Peru and Vietnam , along with a healthy dollop of smaller , lesser-known companies listed in China / Hong Kong .
And despite its emphasis on emerging markets , the fund invests in companies headquartered in developed markets that have significant operations in developing nations .
Portfolio Statistics
Number Of Holdings 35 Weighted Average Mkt Cap
13.6 billion P / E Ratio 9.8x Std . Dev Fund / Benchmark 17.91 / 18.28 Turnover Ratio 12 % Net Expense Ratio 1.05 %
Portfolio stats as of 6 / 30 / 22 . Standard deviation ( three-year period ) versus the Morningstar EM TME NR USD Index as of 7 / 31 / 22 . Sources : Seafarer Capital Partners and Morningstar .
Old-School Investing
Foster is a co-manager at the Overseas Value Fund , and analyst Brent Clayton is also part of the investment team . But Espinosa is the main driver of the fund ’ s strategy , which he says is an amalgamation of everything he ’ s learned over the years at previous jobs .
The fund employs a bottom-up security selection process based on fundamental research , and it doesn ’ t rely on algorithms to point the way . “ The process is labor-intensive ,” Espinosa explains . “ I like to think of it as old-school investing . We don ’ t start from the benchmark at all . It ’ s about pencil and paper , and doing the numbers .”
He posits that investing strategies based on artificial intelligence and reams of statistics can produce data that sometimes lack context . “ The fact you can analyze data doesn ’ t mean that you have information ,” he continues . “ Information comes from thinking , so this is about setting the numbers first , and then meeting the companies and talking to management and then putting the numbers together .”
He adds that his investment process isn ’ t about trying to capture which sector or company will work in the next year , but rather how in real terms he will get a dollar return above inflation from investing in a particular company at a particular price .
Espinosa uses screens for seven categories of value in emerging markets to identify long-term investments . These categories are related to a company ’ s balance sheet and cash flows and include measures such as balance sheet liquidity ( cash or highly liquid assets undervalued by the market ) and a company ’ s breakup value ( when its liquidation value exceeds its market capitalization ).
“ The seven categories try to define value in terms of their fundamental drivers and not just in terms of multiples , which I think is the problem with the traditional definition of value of low multiples . If you do that , you could fall into traps ,” Espinosa says .
He incorporates these categories with other attributes of a company ,
“ The fact you can analyze data doesn ’ t mean that you have information . Information comes from thinking , so this is about setting the numbers first , and then meeting the companies and talking to management and then putting the numbers together .”
— Paul Espinosa
Manager Paul Espinosa Age 48
Professional Background He joined Seafarer Capital Partners in 2014 , where he is the lead portfolio manager of the Seafarer Overseas Value Fund and a lead manager of the Seafarer Overseas Growth and Income Fund . Previously , he was a London-based equity research analyst at Legg Mason responsible for stock selection in the industrial and consumer sectors . Before that , he performed the same function at Citigroup Asset Management and J . P . Morgan Investment Management in New York . He began his career as a corporate finance analyst at Salomon Brothers ’ Financial Institutions Group .
Outside Interests He ’ s an audiophile who likes music and is obsessed with the equipment he plays the music on . The Madrid native returns to Spain each summer where he dives for sea urchins and mussels , and he eats them on the boat . “ Once you ’ ve tasted sea urchins directly from the sea , there ’ s nothing like it ,” he says . He also runs and does yoga .
48 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER 2022 WWW . FA-MAG . COM