Robert Moses’ RGM Capital’s Return, AUM, and Holdings

RGM Capital is a private investment advisory firm based in Naples, Florida with around $1.27 billion in assets under management (as of March 2018). It was founded by Robert G. Moses back in 2003, who is the company’s Portfolio Manager and Managing Partner as well. Moses started his career in 1991, after receiving a Bachelor’s degree in Finance and Real Estate from Ohio State University. He first worked as a sell-side research analyst at McDonalds & Company in Cleveland, Ohio, where he spent his first 5 years in the profession. Later on, he moved to Private Capital Management, a value-oriented manager, where he worked as a Portfolio Manager and Managing Director.

The fund’s investment philosophy is centered around the idea of investing in businesses rather than stocks, especially targeting those that are trading at 50% of their true value. RGM Capital usually holds a concentrated portfolio with no more than 20 positions, which tends to hold for a long time (3-5 years). According to Robert Moses, this long term investment strategy is the best one for gaining higher tax-efficiency. On the other hand, concentrated portfolio demands more careful and thorough approach to picking up the companies to invest in, and RGM Capital prefers businesses where it is possible to work together with the management on implementing new ideas and views on a variety of issues such as capital allocation decisions and repurchase programs.

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Its primary focus is on undervalued high-quality companies from healthcare, industrials, technology, and consumer-related sectors, usually with the market caps between $100 million and $2 billion. As Robert Moses emphasized, what differentiates RGM Capital from many other hedge funds is their independence – the fund doesn’t get involved in the idea-sharing networks, nor does it use Wall Street research. In other words, it avoids “group think”. Let’s take a look at what this strategy has brought back in terms of performance.

Since its inception in June 2003, until September 2005, its RGM Value Opportunity Fund LP delivered a return of 21% with an annualized return of 9%. Its RGM Value Opportunity Fund II LP brought back 16% since inception in September 2003 until September 2005, with an annualized return of 8%. As for some more recent data, its RGM Value Opportunity Fund LP returned an amazing 28.22% in 2013, 6.10% in 2014, and 2.58% in 2015. Then, in 2016, it started to bring higher returns again, delivering 10.28%, and 13.06% in 2017. Last year through October, it brought back a strong 18.41%. Its total return was 372.47% for a compound annual return of 10.66%. RGM Value Opportunity Fund LP’s worst drawdown was 41.76.

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On December 31st, RGM Capital’s equity portfolio was valued $1.19 billion, down by 5% from one quarter earlier when it carried a value of $1.26 billion. During the quarter, the fund added 3 new long positions, while also dumping two, having 20 positions in the portfolio at the end of the period. The fund’s selection process must be unique, as it didn’t hold a single position in any of the 30 Most Popular Stocks Among Hedge Funds in Q4 of 2018.

During the Q4 2018, the fund dropped its position in Servicesource International Inc (NASDAQ:SREV), a company that provides professional services in inside sales, revenue retention, customer journey experience, and customer experience. The fund sold out its entire position, which was worth $19.23 million, on the basis of 6.75 million shares.

RGM Capital seriously boosted its positions in some of the stocks during the last quarter of 2018. Among those stocks were LivePerson, Inc. (NASDAQ:LPSN), Ellie Mae, Inc. (NYSE:ELLI), ServiceNow, Inc. (NYSE:NOW), and Tyler Technologies, Inc. (NYSE:TYL). Starting with the biggest increase – LivePerson (LPSN) in which the fund raised its stake by 102% to 3.09 million shares with a value of $58.37 million. In Ellie Mae (Elli) RGM Capital boosted its stake by 93% to 628,007 shares that were worth $39.46 million, whereas in ServiceNow (NOW) the fund upgraded its stake by 64% to 392,839 shares, which carried a value of $69.95 million. At the end of the fourth quarter of 2018, RGM Capital’s position in Tyler Technologies (TYL) was valued at $76.55 million, on the basis of 411,977 shares outstanding, but only after the fund had raised its stake by 29%.

Click here to read the rest of the article where we present the fund’s top positions from the quarter.

Disclosure: None.
This article is originally published at Insider Monkey.