Zilvinas Mecelis‘ Covalis Capital is an employee-owned, London, United Kingdom-based hedge fund launched in May 2012, with offices in New York and George Town. Its Chief Investment Officer is Zilvinas (Zach) Mecelis, who was also one of its five launching partners, alongside Toby Mitchell, Jakob Moberg, Peter Murphy, and Rolanas Stikovas.
The 38-year-old Mr. Mecelis started his career as a Senior Analyst at Zimmer Lucas Partners in 2000. Three years later he obtained a B.A. in Finance from Pace University. While serving as a Portfolio Manager and Executive Officer at GLG Partners LP, he developed his investment management strategy, focusing primarily on European utilities. In 2009, he moved his team of senior investment professionals to commodities company Noble Group. Two years later he launched Arc Asset Management.
Covalis Capital invests in public equities, with an emphasis on equities of European OECD countries, and hedging markets. With coverage of 30 countries and roughly 300 different companies, 125-150 of these being active and under full coverage, Covalis’ industry experience covers a broad range of sectors. First, there are utilities such as electricity, gas, and water, followed by infrastructure, or to be more precise, energy and transport. Then, there are renewable sources, namely wind and solar, and finally commodities such as steel, base metals, carbon, fertilizers, iron ore, etc.
Although Covalis Capital’s returns fluctuated over the last five years, the fund can be proud of them being positive the whole time. For example, its Covalis Capital Master Fund Class A fund returned an astonishing 28.84% in 2013. In 2014 the fund’s returns decreased by over 20 percentage points to 7.29%, while in 2015 the fund got back on track with returns of 17.50%. The years 2016 and 2017 were steady for the fund, which returned 16.59% and 13.47%, respectively. However, from January to October 29, 2018, the fund’s returns had fallen back to 8.20%. Covalis Capital had a total return of 138.12%, and a compound annual return of 15.56%. Its worst drawdown was 5.36. As of March 3, 2018, Covalis Capital managed $701.67 million of assets of pooled investment vehicles and $84.62 million of institutional clients’ assets.
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At the end of Q3, Covalis Capital’s 13F portfolio counted 24 positions, with 12 of them being newly added ones. During the same period, 18 companies were dropped, so there was a great deal of turnover among its holdings. On September 30, the fund’s 13F portfolio was valued at $209.26 million. Even though none of the most popular stocks among hedge funds in Q3 of 2018 found a place in Covalis Capital’s equity portfolio, the fund’s returns through the years suggest that Zilvinas Mecelis and his team know where to invest. We’ll check out the biggest holdings and moves made by the fund during Q3 on the next page.
As of September 30, the largest position held by Covalis Capital is Avangrid Inc. (NYSE:AGR), an energy services and delivery company, which accounts for 10.39% of its 13F portfolio value, consisting of 453,998 shares valued at $21.7 million. The fund hiked its stake in Avangrid by 250% during Q3, with it becoming Covalis’ favorite equity as a result. Second was American Electric Power Co Inc (NYSE:AEP), which was also the fund’s top new holding. The fund opened a stake in the investor-owned electric utility worth $17.1 million, buying 242,508 shares.
As for the other new additions to the fund’s portfolio, there was Nisource Inc (NYSE:NI), a regulated natural gas and electric utility company, in which the fund acquired 586,648 shares valued at $14.6 million, as well as Cms Energy Corp (NYSE:CMS), in which the fund purchased 202,215 shares worth $9.90 million.
The fund boosted its stake in Scana Corp (NYSE:SCG) by an amazing 3,899% to 254,514 shares worth $9.89 million. It also raised its stake in FirstEnergy Corp (NYSE:FE) by 75%, to 272,825 shares valued at $10.14 million. On the other hand, Edison International (NYSE:EIX) and Commercial Metals Co (NYSE:CMC) were companies in which the fund lowered its stakes, by 59% to 78,018 shares and by 35% to 115,386 shares, respectively.
The biggest positions Covalis decided to completely sell during the third-quarter were in Portland General Electric Co (NYSE:POR), 5,548 shares of which the fund previously owned, and Hudbay Minerals Inc (NYSE:HBM), whose 58,986 shares the fund said goodbye to.
Disclosure: None. This article was originally published at Insider Monkey.