BrightGate Focus Fund

Fund’s Objective and profitability

ES0114904008 (A) | ES0114904016 (I)

BrightGate Focus is a long-only fund with the objective, throughout an exhaustive and independent study of firms’ fundamentals, of constructing a concentrated portfolio of issues with a better risk/return binomial than the market. The fund has total investment discretion in terms of geography, asset class (equities, bonds, preferreds), currency hedging, and ratings of its fixed income issues. The strategy does not follow any benchmark.

Concentration philosophy

Our philosophy pursues a concentrated portfolio of 20-25 undervalued securities, with very little turnover. For this, we study the whole capital structure and decide if it makes more sense to invest in the equities, the preferreds or in the debt of a particular firm. In any case, we utilise a strict investment process in which we verify the security’s current valuation, the sector in which the company operates, and the quality (and incentives) of its executive team. Having determined a valuation according to the returns on capital that we expect to obtain, we then assign probabilities to each of the potential outcomes. Finally, the final weight for each position is not simply determined by its potential return, but also by its downside risk.

The Portfolio

The portfolio is divided into three asset classes:

I. The compounders are firms operating in profitable sectors that we understand, trading at attractive valuations, with foreseeable profits in the coming years and that we expect to keep in the portfolio for long periods of time as long as our investment thesis meets our expectations.

II. The special situations are any type of security (equities, preferreds or bonds) in which we expect an imminent catalyst (uncorrelated with the market), and in which we can calculate the maximum possible impairment in an objective way.

III. Finally, our high yield portfolio is comprised of credits with attractive returns (above 8 per cent, euro hedged), solid collaterals and that operate in sectors that we both know and have little risk of technological disruption.

The allocation between the three asset classes is conducted in a “bottom-up”, opportunistic and discretional manner.

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