Intrinsic value makes a good goal

The Irish Times - February 26th 2010
Pat Kilduff in conversation with Caroline Madden

Before joining boutique investment firm Appian Asset Management, based on Dublin's Upper Mount Street, in 2003, Pat Kilduff gained stockbroking experience in Goodbody and ABN Amro.  He now manages Appian's Value Fund, targeted at high net worth individuals. 

What is your investment approach? 
Essentially what we look for is intrinsic value, with the aim of delivering longer term risk adjusted returns.  We don't have a fixed mandate, and this gives us the flexibility to invest only when we perceive assets to be undervalued.

Currently, our equity exposure is 45 per ant of the fund's assets, although this can range from 40 to 70 per cent.  We hold 50 per cent in cash and 5 per cent is split between gold and short dated bonds.  There is no leverage within the Value Fund. 

Since the fund ws set up in November 2005, we have never held any property, even though it was the asset class of choice in 2006.  We felt there was too much risk associated with it. 

However, we don't get too arrogant about that - markets have a way of making you look foolish.

How has your fund performed?
Since its inception, the Value Fund is down 0.49 per cent on a compounded basis.  In the first 13 months, it delivered a return of 7.28 per cent, but then fell 2.82 per cent in 2007.  In 2008, it lost a further 16.1 per cent, but last year recovered by 11.43 per cent.

What is your outlook?
Equity markets have probably got a little bit ahead of themselves.  To see the next leg of recovery in markets, we need to see an improvement in employment figures, which will improve consumer confidence. 

Cash has worked well for us on the basis that Irish institutions are paying three month deposit rates of 3-3.25 per cent but, post Nama, those rates will probably come down significantly over time. 

We have only a small exposure to the bond market as we think a bubble may be forming.