Emerging Manager Monthly: RVX Finds Institutional Traction With Diversified Approach
RVX Equity Fund Leading Diversified Product Approach
Emerging Manager Monthly, February 2020
RVX Asset Management’s emerging markets equity strategy has gained institutional traction in recent years, leading the firm’s diversified product approach.
CIO Raymond Zucaro launched the Aventura, Fla.-based firm in 2015 with its flagship RVX Global Opportunity Fund, which invests in emerging markets via credit, equity and derivative products across the capital structure, but always knew he wanted RVX to be able to offer a diversified product lineup to allow for multiple avenues of growth.
The firm has grown to roughly $300 million overall across several products including the hedge fund, emerging markets all-cap, emerging markets small-cap and emerging markets corporate fixed-income strategies.
“We’ve been able to get some nice mandates and a diversification of clientele,” Founder and CIO Raymond Zucaro said. “The thesis ever since I started the firm was to have diversification of strategies and clientele.”
Leading the firm in the charge for mandates has been the emerging markets equity strategy, which was launched following the additions of Managing Partners indy New and Robin Kollannur from Mercator Asset Management in 2016. The pair have worked together since 2011.
The all-cap strategy boasts mandates with the Alameda County (Calif.) Employees Retirement Association through emerging manager-of-managers Bivium Capital Partners and the New York State Teachers Retirement System through FIS Group, the latter of which was awarded in November, said Todd Jessup, director of institutional client services.
“Our system is the star,” Kollannur said. “It’s the investment process that really drives our country and sector allocations. We have spent a lot of time enhancing our screening process, which is very unemotional and unbiased. Where our collective experience comes in is the fundamental analysis portion, after we analyze our screening results.”
“The unique part of our toolset comes from having both debt and equity emerging market products under one umbrella, and the collaboration between our xperienced team members,” Zucaro said.
“You’re never going to see us doing Chicago municipal bonds. That’s a stretch because it’s outside of what we do, but if it’s in emerging markets it’s in the capabilities of what we do. We have no problem,” he added.
On the equity side, the all-cap and relative value aspects have provided our strategy with a differentiating factor compared to its competitors, New said.
“For example, a lot of other deep value managers may not have a lot of exposure to many technology companies, but in our relative ranking methodology, we’ll consider some technology or other typically expensive sectors when they look inexpensive.”
The firm’s emerging markets equity strategy tends to be more concentrated than the average emerging markets manager with a stated range of 25 to 50 stocks and low turnover, Kollannur said.
“On the average we’ve been holding our names for two or three years,” he added. “We take a very long-term view on the company.”
Zucaro notes that there are plenty of names in emerging markets on both the equity and debt sides and that signals from team members on different strategies can benefit RVX more broadly.
“We look at the same companies and earnings,” he said. “The idea is we’re all looking at the same company, but let’s look at it in different ways and let’s make sure we’re not missing a signal…and any negative repercussions because of it.”
In addition to the all-cap equity strategy, the firm also has an emerging markets small-cap strategy that hold roughly 50 to 70 names and the goal of securing its first institutional mandate this year, Jessup said.
The emerging manager-of-managers community has been a significant resource for RVX to this point in the firm’s lifetime, according to Jessup, particularly at a stage when other allocators have been less inclined to commit to RVX because of its size.
“We’ve had a tremendous amount of interest, however with no live assets and running a model portfolio many people liked what they heard and saw but said they wanted to track us for a while until we gained some traction. It was a wait and see attitude from them,” Jessup said.
In addition to the all-cap equity mandates, the firm had also recently secured an investment in the corporate fixed-income strategy with emerging
manager-of-managers Progress Investment Management Company through the State Universities Retirement System of Illinois, though the plan is in the midst of replacing Progress as a result of the firm’s impending closure later this year.
“It’s been a slower road than we anticipated, but we believe the momentum’s started and we’re looking forward to it. We will continue to utilize the [emerging manager-of-managers] space because we’re true believers in it and think [the firm’s success] would have been even more difficult without it,” Jessup said.
Jessup said that the firm would likely cap its all-cap equity and emerging markets debt strategies at roughly $3 billion each, the emerging markets small-cap strategy at $1 billion and the hedge fund at $500 million.
While the firm’s success across strategies has helped move the needle with growing, Jessup noted that developing that pipeline in the current institutional fundraising landscape remains an incremental process.
“As your relationships grow, funding starts coming in, and you begin to build a live track record, if that record is good people start calling you in addition to your own outreach efforts. It grows on itself and that is what you hope for,” Jessup said. “However, while it’s certainly very beneficial to meet certain thresholds, as more entities become interested in you, it’s not like an automatic domino effect where clearing one hurdle automatically begets the next. Nothing’s quick in this business anymore.”