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Arbiter Partners Capital Management’s Returns, AUM and Holdings

Jelena Martinovic

Paul J. Isaac's Arbiter Partners Capital Management LLC is an employee-owned, New York-based hedge fund, founded back in January 2001. Besides managing client focused portfolios, the firm provides its services to pooled investment vehicles and insurance companies. In the current climate of uncertainty, the fund’s CEO and founder Paul J. Isaac looks for value while investing in financials and foreign securities. He’s an investor with a preference for tax efficiency who’s prone to taking short positions and buying stressed fixed-income securities.

After obtaining a B.A. from Williams College with Highest Honors in Political Economy in 1972, he continued his family's legacy by pursuing a value investing approach for more than four decades. In 1999 he joined Cadogan Management, LLC, where he served as its CEO, and also as its Managing Director and Director. While there, he gained vast investment experience by managing value equity and debt portfolios and dealing with a wide range of opportunistic strategies. He had also been involved in researching and employing outside managers as well as providing investment strategy consulting to investors.

Arbiter Partners Capital Management's Returns, AUM and Holdings

As for his sell-side experience, he acquired it during 18 years spent at Mabon, Nugent & Co. and its successor firms, while serving as its Chief Economist. At the time, his focus was on the securities industry. He also spent a term as Chairman of the Securities Industry Association Capital Rules Committee. He’s a Co-Owner of Isaac Brothers, LLC, while he also serves as a director of Irex Corporation. In addition, Mr. Isaac is a board member of the American Jewish Historical Society and Treasurer, Trustee and a member of the Executive Committee for PEF Israel Endowment Funds Inc.

Besides using external research when analyzing investments, Arbiter Partners Capital Management utilizes a bottom-up investing approach, while focusing its attention on specific companies rather than on the company's industry. The long/short fund invests in public equity and fixed income markets, and it's one of the better known activist hedge funds. Although Arbiter Partners Capital Management is recognized as a wildly successful hedge fund, some of its individual funds have been subject to fluctuating returns over the years.

For example, its Arbiter Partners Class C fund did return 26.54% in 2013, however, 2014 was a down year for the fund, with it having lost 1.91%. This trend continued in 2015 as well, when it lost 5.58%. The fund’s returns recovered in 2016 to 11.43% gains, followed by 6.33% positive returns in 2017. Unfortunately, this year through October, the fund had lost 14.25%. Arbiter Partners Class C had a total return of 1108.68%, a compound annual return of 15.3%, while its worst drawdown was 41.46. As of March 2018, Arbiter Partners Capital Management managed $806.6 million of assets of pooled investment vehicles, $284.4 million of high net worth individuals’ assets and $30.4 million of insurance companies’ assets.

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After adding 8 new positions, and dumping 6 companies, Arbiter Partners Capital Management’s 13F portfolio was valued at around $1 billion at the end of the third quarter. Among the stocks in the fund’s portfolio are some of the 25 Stocks Billionaires Are Piling On, such as Devon Energy Corp (NYSE:DVN), in which the fund's stake remained unchanged, owning 64,090 shares of the company worth $2.81 million at the end of September.

More about the fund’s most intriguing investment moves in the third quarter can be found on the next page.

Based on Arbiter Partners' latest 13F filing with the SEC, some of the largest positions it held were in Cowen Inc. (NASDAQ:COWN)an asset management holding company, and McKesson Corporation (NYSE:MCK), a healthcare company serving more than 50% of U.S. hospitals; the value of its holdings in those stocks amounted to 2.72% and 1.58% of its 13F portfolio respectively. The fund increased its stake in both companies by 10% during Q3. As of September 30, Arbiter Partners Capital Management owned 1.68 million shares of Cowen Inc. (NASDAQ:COWN) and 119,800 shares of McKesson Corporation (NYSE:MCK), valued at $27.31 million and $15.89 million, respectively.

Meanwhile, on the list of top newcomers to the fund's portfolio during the third quarter, the most notable positions were in Lincoln National Corp (NYSE:LNC), a Fortune 500 financial services company, and Walgreens Boots Alliance Inc. (NASDAQ:WBA), which operates as a pharmacy-led health and wellbeing company. The fund purchased 117,398 shares of Lincoln National Corp (NYSE:LNC) during Q3, valued at $7.94 million at the end of the quarter, as well as  11,000 shares of Walgreens Boots Alliance Inc. (NASDAQ:WBA) worth $802,000.

When it comes to the fund increasing and lowering its stakes in companies during the third quarter, the most significant changes also involve finance and health stocks, the fund's specialties. It seems Arbiter Partners Capital Management is quite optimistic regarding Paratek Pharmaceuticals Inc. (NASDAQ:PRTK)a clinical-stage biopharmaceutical company, as it raised its stake in the company by 28% during Q3, to 992,146 shares worth $9.62 million. Quite the opposite was the case with real estate investment trust JBG Smith Properties (NYSE:JBGS), in which the fund lowered its stake by 59% to 110,476 shares valued at $4.06 million.

Lastly, some of the biggest positions Arbiter Partners Capital Management decided to say goodbye to were its Pitney-Bowes Inc. (NYSE:PBI) and Antero Resources Corp (NYSE:AR) holdings, which had counted 874,639 shares and 11,000 shares, respectively, back on June 30.

Disclosure: None.

This article was originally published at Insider Monkey.