A guide to Cantillon Capital Management’s investment strategy

Market Realist

Cantillon Capital Management's 4Q 2013 positions (Part 1 of 6)

Cantillon Capital Management 

The New York–based Cantillon Capital Management is a hedge fund manager founded in 2003 by William von Mueffling. Before founding Cantillon, Mueffling headed Lazard Asset Management’s hedge fund group, where he was known to have averaged annual returns of over 30% from 1998 to 2003 by shorting technology stocks. At its peak, the firm managed more than $10 billion long/short hedge funds. In June 2009, the firm announced it was shutting down its long/short strategies, which included the Cantillon World, Cantillon Europe, Cantillon U.S. Low Volatility, and Cantillon Pacific funds. Von Mueffling returned $3.5 billion to investors, with Cantillon managing $1 billion in long-only assets. A 2010 article in the Wall Street Journal stated that Cantillon’s strategy is to find companies that produce higher-than-average returns on shareholder equity but are priced cheaply relative to their earnings streams.

In an interview in Columbia Business School’s newsletterGraham & Doddsville, von Mueffling said:

  • “One can broadly divide value investing into two camps. The first camp is the Graham & Dodd style which is buying assets at a discount or cash at a discount. The second camp is the Buffett style, which I characterize as buying financial productivity at a discount. We fall into the second camp. We believe that there are many different types of moats to be found, and that a moat around a business should allow it to produce outsized margins and wonderful returns on capital. The trick is being able to buy this stream of cash flows at a discount. Unlike Graham & Dodd investing where you might look at low price-to-book value companies or net-net companies, we are trying to buy high financial productivity at a discount to its intrinsic value.”

Born in Munich to a German father and an American mother, von Mueffling moved to New York City when he was a year old. Before founding Cantillon, von Mueffling was a Managing Director for hedge funds at Lazard asset Management, where he managed their European Opportunities and Lazard Worldwide Opportunities hedge funds. Prior to Lazard, he was employed at Gabelli & Company and the Deutsche Bank in Germany and France. He earned a BA from Columbia College and an MBA from Columbia Business School in 1995.

William von Mueffling’s Cantillon Capital Management filed its 13F for 4Q 2013 this week. Cantillon’s ~$$4.22 billion portfolio saw its number of holdings down to 19 from 21 in 3Q 2013.

New positions include MSC Industrial Direct (MSM) and Ambev S.A (ABEV). Cantillon sold positions in Banco Bradesco (BBD), Open Table (OPEN), and Philip Morris (PM).

Continue to Part 2

Browse this series on Market Realist:

Rates