US Smid Cap Opportunity Strategy

Inception Date: AUG 26, 2022

Seeks long-term growth of capital.

Strategy at a glance

  1. The above are not investment guidelines or restrictions and are subject to change without notice.

  2. The information provided is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any fund or security.

Investment Philosophy

The team seeks to invest in small and midcap companies that have become disconnected from their normalized valuations and have an identifiable catalyst for improvement. The Smid Cap strategy’s broad opportunity set promotes the potential for an attractive risk/return tradeoff and positions the team to capture the evolution of quality businesses as they grow.

Strategy Highlights

  • Transitional Company Focus

    The seasoned management team has deep experience identifying value in companies’ life cycles through all markets.

  • Catalyst-Driven Value

    The U.S. Smid Cap Opportunity Strategy employs in-house fundamental research in an effort to identify temporarily mispriced companies with potential catalysts for earnings-growth normalization.

  • Volatility Leads to Potential Opportunity

    The smid cap market may create attractive opportunities within security-level volatility due to short-and long-term dislocations in the market for disciplined active investors. It seeks to provide an enhanced risk/return trade-off by combining investment opportunities from both the small and midcap market segments.

Strategy at a glance

  1. The above are not investment guidelines or restrictions and are subject to change without notice.

  2. The information provided is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any fund or security.

Our Process

Our disciplined investment approach is executed by an experienced team, which is critical in an asset class where volatility and a lack of efficiency provide an opportunity for active investors.

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  1. Risk Disclosures

  2. All investments involve the risk of loss of principal.

  3. The value and liquidity of portfolio holdings may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the United States or abroad. During periods of market volatility, the value of individual securities and other investments at times may decline significantly and rapidly. The securities of small and micro-size companies can be more volatile in price than those of larger companies and may be more difficult or expensive to trade.

  4. There are risks associated with investing in securities of foreign countries, such as erratic market conditions, economic and political instability and fluctuations in currency exchange rates.

  5. A principal risk of investing in value stocks is that the price of the security may not approach its anticipated value or may decline in value. “Value” investments, as a category, or entire industries or sectors associated with such investments, may lose favor with investors as compared to those that are more “growth” oriented.

  6. Disclosures

  7. The First Eagle U.S. Smid Cap Opportunity Strategy is new and may not be successful under all future market conditions. The Strategy may not attract sufficient assets to achieve investment, trading or other efficiencies.

  8. These are not investment guidelines or restrictions and will be subject to change. Actual portfolio will differ.

  9. FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor, but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy, or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy, or product.

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  • Suzanne Franks Headshot

    Suzanne Franks

    Associate Portfolio Manager
    Industry start:  
    2004
    Year joined:  
    2021
  • Bill Hench Headshot

    Bill Hench

    Head of Small Cap Team and Portfolio Manager
    Industry start:  
    1992
    Year joined:  
    2021
  • Rob Kosowsky Headshot

    Rob Kosowsky

    Associate Portfolio Manager
    Industry start:  
    2002
    Year joined:  
    2021
  • Adam Mielnik Headshot

    Adam Mielnik

    Senior Research Analyst
    Industry start:  
    2014
    Year joined:  
    2021

Our Process

The team uses a bottom-up process, building the portfolio stock-by-stock.

  • 01

    Narrow the Universe

    The team narrows the approximately 4,000 US small and midcap stock universe using their historical investment experience, by attending management meetings, conference calls, investment conferences, and by following industry trade journals.

  • 02

    Conduct Fundamental Research

    The team aims to identify companies that have low multiples and a potential catalyst for improvement.

    Low Multiples

    • The team seeks to uncover companies that they believe are trading at a significantly discounted price/book or price/sales.
    • Holdings typically fall into at least one category below:
      • Inefficiently valued assets
      • Turnarounds
      • Accelerating growth
      • Overlooked leaders

    Catalyst for Improvement

    • Utilizing the team's analysis and deep institutional knowledge of competitors, industry and existing holdings used for comparisons, they seek to determine the likelihood of execution success.
    • Some potential catalysts the team look for that could lead to a company's return to normalized earnings are:
      • New management
      • More favorable business cycle
      • Product innovation
      • Margin improvement

  • 03

    Construct Portfolio

    • Diversified with approximately 70-100 positions
    • Typical holding has a market cap of $4-$7B
    • Annual turnover expected to be 15-25%

Competitive Advantage

  • Seasoned team, experienced in identifying value in companies' life cycles through all markets
  • Time-tested, catalyst-driven value approach
  • Experience to find opportunity in short- and long-term dislocations due to volatility
Risk Management Portfolio Level
ESG Considerations

  1. Risk Disclosures

  2. All investments involve the risk of loss of principal.

  3. The value and liquidity of portfolio holdings may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the United States or abroad. During periods of market volatility, the value of individual securities and other investments at times may decline significantly and rapidly. The securities of small and micro-size companies can be more volatile in price than those of larger companies and may be more difficult or expensive to trade.

  4. There are risks associated with investing in securities of foreign countries, such as erratic market conditions, economic and political instability and fluctuations in currency exchange rates.

  5. A principal risk of investing in value stocks is that the price of the security may not approach its anticipated value or may decline in value. “Value” investments, as a category, or entire industries or sectors associated with such investments, may lose favor with investors as compared to those that are more “growth” oriented.

  6. Disclosures

  7. The First Eagle U.S. Smid Cap Opportunity Strategy is new and may not be successful under all future market conditions. The Strategy may not attract sufficient assets to achieve investment, trading or other efficiencies.

  8. These are not investment guidelines or restrictions and will be subject to change. Actual portfolio will differ.

  9. Environmental, social and governance (ESG) issues may be factors, among many, that are considered as part of our fundamental research process. We do not seek to invest in companies based on ESG criteria.

  10. FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor, but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy, or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy, or product.

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