River Road Investments is an asset management firm based in Louisville, Kentucky. Founded in 2005, the firm manages equity and fixed income investments for institutional and individual clients. River Road takes a fundamental, bottom-up approach to investing, focusing extensively on valuation and business quality. Its investment philosophy centers around the key concepts of business, people, price.
With over $13 billion in assets under management, River Road invests primarily in small and mid cap stocks in the United States. Its flagship small cap value equity strategy has outperformed its benchmark over the long run. The firm also offers emerging markets equity, international equity, global equity, and high yield bond strategies to clients.
river road’s investment philosophy and process relies on understanding businesses and people behind them
River Road’s investment philosophy is centered around what it calls the three Ps – Business, People and Price. Its analysts strive to develop an in-depth understanding of a company’s business model, competitive environment, growth opportunities and risks. Additionally, significant emphasis is placed on assessing the quality, experience and incentive structure of management teams.
Once River Road’s analysts have developed conviction around the sustainability of a business and its management, valuations are analyzed to determine upside/downside potential. Their approach leads to concentrated portfolios of their best ideas, built from the bottom-up.
river road utilizes a proprietary price discipline model to determine buy and sell decisions
A critical component of River Road’s investment process is its proprietary Price Discipline Model. This quantitative model compares a stock’s current trading price to its reference price – i.e. the price that River Road’s fundamental analysts believe is justified by their estimate of fair value.
If a stock is trading sufficiently below its reference price, it may be considered for purchase. And if the market price rallies well above the reference price, the position may be trimmed or sold entirely. This buy low/sell high discipline is strictly enforced by River Road’s portfolio managers.
river road’s small cap value equities have generated market-beating long term returns
River Road’s flagship investment strategy is Small Cap Value Equity. With a fundamental, bottom-up approach focused on valuation, this portfolio has generated strong long term returns in excess of its benchmark.
According to River Road’s website, its Small Cap Value Equity Composite has returned 13.51% annualized (net of fees) since its inception in January 2006. This exceeds the Russell 2000 Value benchmark return of 11.25% over the same timeframe. Investors looking for active small cap exposure may find River Road’s offering attractive.
beyond small caps, river road offers strategies in emerging markets, international, global equities
While small cap value equities represent River Road’s largest asset base, the firm offers investment strategies across a range of vehicles. Its Emerging Markets Equity portfolio focuses on purchasing growing businesses in emerging markets at steep discounts to intrinsic value. The strategy aims to benefit from the rising consumer classes in markets like China, India, and Brazil.
The International Equity strategy takes a similar approach in foreign developed markets such as Europe and Japan. And the firm’s Global Equity portfolio provides investors broader exposure across emerging and developed markets outside the United States.
river road also manages a high yield corporate bond strategy
In addition to its array of stock investments, River Road offers a High Yield Fixed Income strategy for qualified institutional investors. With a fundamental approach focused on credit analysis and risk management, the portfolio invests primarily in U.S. corporate bonds rated below investment grade.
According to River Road’s website, the High Yield Composite has returned 6.83% annualized (net of fees) since its inception in December 2009. This outperforms its benchmark Bloomberg U.S. Corporate High Yield index by 87 basis points over the same timeframe.
In summary, River Road Investments is a Kentucky-based asset management firm with $13 billion under management. It takes a fundamental, valuation-driven approach to investing primarily in U.S. small and mid cap equities. River Road’s investment process centers on analyzing businesses, assessing management teams, and disciplining itself to buy low and sell high based on a proprietary reference price model.