RockBottom Capital is the brainchild of Hank Sherman, a former Wall Street CDO trader and self-titled 'serial entrepreneur'.
How low can we go?
"The problem with the fund management industry is that it doesn't have the courage of its convictions," he is bound to say at a City of London capital introduction event that will take place later this morning. "We all know that contrarian investing in the long term makes money – but most managers wimp out too early. We are value managers. Deep value managers. Ultra-deep value managers. We should have called ourselves Mariana Trench Capital! But we didn't, just to be clear."
The basic principle of RockBottom is to look for stocks that have been the most brutally downgraded by the markets. The more disliked the stock, the more appealing it is to Sherman.
"We hold stocks that are so hated that our traders won't admit to holding them in public. Companies that have been stripped of value by their management; companies under investigation by the police; companies whose industries are under threat. We still have a substantial holding in Betamax, for instance. That is one hell of a bounceback waiting to happen."
Under many rocks lurk many gems
They also take pride in their active shareholder ownership, going so far as to block moves by the company that might increase the share price.
For example, one of their holdings is New-Orleans-based fast-food franchise 'There's One Prawn Every Minute'.
"They threatened to bring in a trained accountant to be FD," explains Sherman heatedly. "Over my dead body, I said. We blocked it at the AGM and, as a warning to the company, forced the board to fire all client-facing staff. It's on the edge of bankruptcy now. We're very pleased."
RockBottom is planning to hit the UK hard with a series of network television adverts where famous fund managers are captured on hidden cameras while RockBottom employees try to give them tens of thousands of pounds in free money – no strings attached – taunting them with the line 'How much of a contrarian are you really?'
"It's been a very expensive process," says Sherman. "But I think our point has been proven."
Too many contrarians create consensus
Its inaugural Contrarian Approach Fund, a long-short, multi-asset offshore mandate seeded with £1bn of “wealthy friend and family money” proposes to invest in growth companies with a bias towards overseas-ownership that is largely ignorant of its new domestic market.
"UK-based football franchises are a great example," Sherman bellowed. "We want exposure to the glut of highly contrarian and very sticky oil and gas money contually coming out of Russia but for obvious reasons we don't want too direct an exposure. Who knows when they might want it back? What is put in may not stay too long." [Geddit? Put in? Putin? Stay with it…]
The launch is still subject to regulatory approval but a spokesperson for the FCA was overheard, probably, to say: "At this stage I can see no problem with this all being rubber-stamped at our next meeting and we can only stand up and applaud such a forward-thinking approach to what is otherwise a very technical proposition. It is one of the very few specialist investment themes that Joe Public should be getting ready access to.
"Seriously."
In terms of fund distribution, Sherman confirmed that those with less than enough investable money would not be considered as, in his words, "the cost in terms of time, effort and whatever really isn't worth our bother."
Wealth managers are our friends
The director of marketing at private client investment firm InPCIS, Apryl Phool, who revels in working only with individuals of the highest worth, said: "One of our many, many USPs that single us out from every single wealth management firm operating up and down the breadth of the UK is that we are contrarian investors. It is a boon for us to now be able to outsource our entire client bank to a single fund group, with one point of contact, using just the one platform, with a single charging structure. Given the huge emphasis on costs right now, the pounds-and-pence savings will be astronomical."
She added: "Given the emphasis right now on excellent customer service this is something we will also offer by outsourcing to an excellent customer service provider."
The FCA's director of countering criminal intent added: "Further to my spokesperson colleague's earlier, highly presumptive comments, and pursuant to our Risk Outlook 2014 published yesterday, I fear we may have identified our eighth key risk for the year ahead."
