Loyal followers of star fund manager Francisco Garcia Parames had to wait until the end of the two-year non-compete agreement he signed with his former employer, Bestinver, to learn for sure in September that he would take the unexpected step of opening his own firm, which is set for full operation in February.
Parames, Spain’s most successful investor, departed from the country’s Bestinver in September 2014 after delivering 16% annual returns over 25 years using a value approach. With his exit, Bestinver’s assets fell by almost a third in 2014, according to a report by Reuters.
Along with client money, two of the firm’s influential managers, Alvaro Guzman de Lazaro and Fernando Bernand, also left. Parames was rumored to be joining the fund his two associates subsequently founded, azValor, at the end of his non-compete period, before he made his surprise move.
Parames' return history:Ă‚
Parames registered his first new fund, called the Cobas Seleccion Fund, on Oct. 14 and began distribution through its exclusive marketer, Banco Inversis, on Nov. 2. On Jan. 10, he received regulatory approval from the National Commission of the Securities Market (CNMW) to form his independent investment boutique, Cobas Asset Management, and expects it to be in full swing next month. Parames already has $100 million in assets committed by thousands of investors.
In a statement, Pamares said thank you “for the enormous confidence placed by the 4,000 clients registered so far at Inversis to subscribe to the fund Cobas Seleccion F.I. Our team has been working from the very first moment in the selection of the values that will form the portfolios of our five funds under the same criteria, rigor and wisdom that we have over 25 years.”
The Cobas Seleccion Fund will have 80% or more of assets in equity, primarily in international stocks, and up to 40% in emerging markets. It will have a management fee of 1.75% per year and redemption fee of 4% for capital withdrawn in less than one year. Cobas Asset Management also plans to open four additional funds: Cobas International, Cobas Iberia, Cobas Grandes companias and Cobas Tesoreria.
Most of the analysts assisting in managing the funds also followed Parames from his previous employers. Six who worked with him at Bestinver left along with him to work at the firm they thought he would join, azValor. They have since left that firm to work for him at Cobas.
Parames plans to employ the same value philosophy in the new fund that guided him over past years. But, he said, he will shift from focusing on cheap to high-quality companies.
“When you're young you want to achieve a quick, high return and you think you can get it with cheap companies, so you avoid quality companies that are more expensive,” he told Citywireselector in October. “Over time you realize these cheap companies are cheap because they are regular businesses and things can go wrong. You've fallen into a value trap.”
Quality companies with good returns on capital and high barriers to entry have better five-year prospects, he said, an opinion he shares with Warren Buffett (Trades, Portfolio).
If held to date, Parames’ top positions at the time of his departure would have netted significant returns. Wolters Kluwer NV (XAMS:WKL, Financial) has risen 59%, Thales (XPAR:HO, Financial) 105% and Informa PLC (LSE:INF, Financial) 37%. Hundai Motor Co. (XKRX:005387, Financial) has declined 20% and Bayerishe Motoren Werke AG (XTER:BMW3, Financial) 0.5%.
Read more about Parames here.
