Kenwood, CA (The Gold Report) –
The Gold Report: In broad strokes, how would you define your investment strategy at Freestone?
Jason Mann: Freestone manages an array of proprietary and open architecture investment solutions for our high net worth clients. We have long used non-traditional asset classes to help manage portfolio risk, but even within our proprietary equity strategies, we are generally risk averse. In equities, I’d characterize us as “value with a catalyst” investors. We’re definitely looking for investments that are cheap, but if there’s not some sort of corporate action, some sort of catalyst to really drive a stock above its fair value, then we’re not really interested
TGR: About one-quarter of the long-short strategy you manage are investments related to commodities, and you seem eager to add positions. There are not many asset management companies with that much exposure to commodities. Can you explain why Freestone’s proprietary managed strategies have so much exposure?
JM: Part of that is our macro view. We expect at least moderate inflation as the eventual result of the massive government stimulus and this will drive commodity prices higher. But our exposure is really driven from our bottom-up process of finding cheap stocks with catalysts-we just happen to find a lot in the commodity space. It helps that we have a constructive view on commodities in the long term.
TGR: Many large asset management companies and funds stay away from commodities because there can be so much inherent risk. How do you account for those kinds of risks?
JM: One way is by holding companies that have a tremendous history of success in that space. We sort of ride their coattails, and that’s worked out well.
Another way is to make sure that the discount to our estimate of intrinsic value is so large that we’re compensated for taking that risk.
The third way is to limit the amount of risk that we take. In each of these three cases, we are gaining commodities exposure in a very different way than simply buying a basket of commodities.
TGR: This year, you’ve added positions in silver and gold companies. Are you bullish in the long term on precious metals?
JM: I think a better way to state our view is: we’re bearish in the long term on paper currencies. We think gold is interesting as a hedge against currency devaluation. Silver can act in a similar way, but it has its own dynamic. We like exposure to silver and gold companies with an idea that it’s a proxy for our bearish bet on paper currencies.
One thing that’s making us cautious is that there seems to be a consensus in the investment community that gold is going up indefinitely. It’s like in 2007, when people thought that real estate was going up indefinitely. That made us cautious, too. But given our near-term outlook on money printing worldwide, we’re bullish on metals in the near term. We’re not sure how long they’ll continue to act as the proxy for our bearish bet on paper currencies, however.
TGR: There tends to be a bit of summer weakness, and a rally in the fall, for precious metals. Will your investment strategy change at all in the summer months?
JM: Our strategy is the same. If we can find companies trading below intrinsic value with catalysts to drive the stock prices higher, and a couple of free options, then we’ll buy them-whether it’s June or December. We’re aware of the seasonality of metals and mining, but we come to work every day looking for great values whether it’s summer or not.
Metals and mining are an interesting space. There are a lot of risks, but there are values out there if investors look hard enough. So, if you’re willing to do the work and find promising companies, you can be rewarded over time.
TGR: Thanks, Jason.
Jason Mann began his career with Freestone Capital Management in 2005 as an analyst with the alternative investments group. Using his knowledge of alternative investment strategies, Mann has provided analytical support and generated investment ideas for Freestone’s long-short equity and long-only equity strategies since 2007. Jason holds the Chartered Alternative Investment Analyst (CAIA) designation, and has a BS in economics and psychology from the University of Washington and a Masters degree in financial economics from the University of Toronto. He enjoys spending his free time with friends and family, traveling and surfing.
Article published courtesy of The Gold Report – www.theaureport.com