Co-founder and Equity Portfolio Manager of Juno Mother Earth Asset
Management, Joseph Di Virgilio, recently departed Juno to team up with
Craig and Dermot Coughlan to establish Vertus Capital Partners.
Di Virgilio will be the Chief Investment Officer of Vertus Capital
Partners, which will manage The Vertus Sustineo Fund (Sustineo: Latin for
Sustainable), a global long/short equity hedge fund focused on alternative
energy, water, and food & agriculture. The objective of the Fund is to
benefit from the rapid worldwide expansion in the alternative renewable
energy sector and the increasing role of natural resources in economic
processes. These areas are experiencing enormous changes due to demand
pressure from emerging markets as well as the inevitable tightening of oil
and natural gas production and supply outlooks.
Di Virgilio was responsible for the creation of Juno Mother Earth Asset
Management in 2006 as well as the assembly of the partners to manage the
firm’s commodity portion of the funds. He was also responsible for
management of the equity portion of the firm’s assets, which equated to
30%. “Unlike my prior fund, this fund will not have a commodities
component. This will not be a hybrid product. Many investors appreciate
uncorrelated returns but are also learning that the commodity futures space
is crowded and highly leveraged, thus subject to significant contango,
backwardation, and the disruption in cost of carry rationales. This was a
major contributing factor in my decision to invest 100% in equities.”
“We are seeking consistent returns with minimal risk and volatility”,
says D Coughlan. “The volatility in commodity futures markets can be
extreme and often based on premature assumptions of weather patterns,
geo-political events and media coverage. What I am sure of is that Joseph
cannot predict the weather – but what he will do is continue to effectively
analyze competitive positioning and advantages, free cash flow, prospects
for sales and earnings growth, as well as the overall financial strength of
publicly traded companies. This way, our investors can benefit from the
emerging market demand story and the commodities super-cycle without direct
exposure to futures”.
Di Virgilio has pointed out that institutions are looking for ways to gain
exposure to alternative and clean energy, but some of the funds
participating are suffering from current market volatility. “Many funds
are participating in this sector”, says Di Virgilio, “but some are
betting on stocks going up all the time. It simply doesn’t work that
way.” Di Virgilio believes there are attractive opportunities within his
sectors on the short side as well as the long side. “We will assume short
positions in stocks and sub-sectors with weaker fundamentals and rich
valuations. In addition to our core long positions, we plan on being active
with short-term opportunities to protect positive performance, generate
alpha, and maximize returns”.
Institutional investors, particularly Fund of Hedge Funds (FoHFs), examine
asset allocation for a living, and C Coughlan explains that FoHFs are best
suited to decide the appropriate asset allocation between equities and
commodities. “From my experience, Fund of Hedge Funds managers want to
pick the best manager for each asset class. We simply cannot be the best at
everything. However, we will focus on being the best at one thing –
equities”, he added.
Some hedge funds participating in alternative energy, natural resources,
and commodities, experienced significant volatility last year.
“Institutional investors are telling me they can tolerate some
volatility, but only with very attractive returns. By avoiding direct
commodity exposure, and focusing on risk, I am confident I will bring
attractive risk-adjusted returns to our clients”, says C Coughlan.
In addition to traditional fundamental analysis, Di Virgilio will
incorporate his knowledge of the field of Behavioral Finance – the study of
how people make their investment choices. “Behavioral Finance examines
the role of the brain in the categorization of risks and rewards, the
evaluation of choices, and human interactions.” He said. “I believe
that an understanding of Behavioral Finance provides a competitive edge in
analyzing market movements and trends as well as what other managers are
thinking.”
Di Virgilio continued “One of the greatest challenges in investing, is
being able to control the emotional response attributed to either a
positive or negative outcome, and the corresponding effect on behavior as a
result of that emotion. Brain chemicals such as dopamine play a significant
role in how we feel and the feeling of loss is approximately 3 times more
intense than the feeling of gain. The most successful investors use their
emotions to their advantage without letting their feelings take over”.
Di Virgilio co-founded Juno Mother Earth in mid 2006. Prior to Juno he
spent over 14 years on Wall Street in roles including energy investment
banking and asset management. Di Virgilio left investment banking in 2002
to pursue his passion for fund management. He started working for Kenneth
L. Fisher, of Fisher Investments (a $45 Billion Money Management Firm), an
expert in the field of behavioral finance. This field captivated Di
Virgilio’s interest and he has been active in this discipline ever since.
Di Virgilio then joined Prudential Investment Management, working as part
of a team that managed Prudential’s Jennison Natural Resources Fund (the
top performing open ended investment fund in its category). In the years
2004 and 2005, while at Prudential Investment Management, Mr. Di Virgilio
gained further exposure to behavioral finance through another expert in the
field; Margaret Stumpp, the Chief Investment Officer for the Quantitative
Management Unit of Prudential, a group which manages $64 Billion Dollars in
assets.
Prior to Vertus Capital Partners, Craig Coughlan managed a fund of hedge
funds for two years focused on international managers and concentrated
portfolios. He also raised capital and managed operations and client
relations for a single strategy hedge fund launch in early 2007. Prior to
this, he served as Vice President, Equity Research & Sales, for JP Morgan
in London, where he headed distribution of US equity research to
institutions and hedge funds in Germany and also contributed to the firms
efforts in the United Kingdom, the Netherlands, and Spain. Prior to this,
he held similar roles with Merrill Lynch and UBS Warburg, building
distribution platforms into the Netherlands, Belgium, and Luxembourg. Mr.
Coughlan began his career in investment banking with BT Alex Brown and also
worked as a junior bond trader with Nikko Securities. C Coughlan will serve
as the Chief Executive Officer of Vertus Capital Partners.
Dermot Coughlan is Chairman and Chief Executive Officer of Derland Holdings
Inc., a private investment holding company. D Coughlan is a former
executive of the Rio Tinto Corporation, and also held positions in the U.K.
with Alcan Industries and Cavenham Foods. From 1970 – 1983, he was
President and CEO of Indal Limited. During that time, he built it into a
major corporation manufacturing products for worldwide engineering,
aerospace and construction markets. In 1984 he founded and was Chairman and
CEO of Derlan Industries Limited, a company with multiple operations in
North America and Europe in aerospace and industrial markets. He is a
member, and has served, on the International Board of the Chief Executives
Organization from 1994 to 2000, and is a member of the World Presidents
Organization. For the past seven years he has been providing mergers and
acquisition advice and has concluded several transactions in the Power
Transmission markets. Mr. D Coughlan will serve as Chairman of Vertus
Capital Partners.
The Vertus Sustineo Fund is due to launch in coming weeks and expects to
raise approximately $100 million by year-end.
Vertus Capital Partners has hired Goldman Sachs as Prime Broker and Concept
Capital as Fund administrator. Tannenbaum Helpern Syracuse & Hirschtritt
and Walkers represent Vertus Capital Partners in the US and the Cayman
Islands, respectively.
Vertus Capital Partners is a global asset management firm dedicated to
alternative energy and natural resources investing. Alternative energy and
natural resources are seeing significant changes due to the demand pressure
from emerging markets, the inevitable tightening of oil and natural gas
production and supply outlooks, immature infrastructure, and environmental
concerns. In addition to traditional fundamental analysis and research, the
firm is dedicated to being at the forefront of innovative capital markets
technology as well as the emerging field of Behavioral Finance. Vertus
Capital Partners is headquartered in New York and oversees financial assets
for family offices, prominent institutions, and high net worth individuals
globally.
