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HMI Capital’s Returns, AUM and Holdings

Jelena Martinovic

Mick Hellman’s HMI Capital is a San Francisco-based, private investment management firm established during the Great Recession, in November 2008 with a mission “to invest in the highest-quality businesses when capital markets put pressure on their valuations”. Its founder, Marco (Mick) Hellman, who's also its managing partner, comes from a family of financiers -- his great great grandfather was Isaias W. Hellman, one of the first bankers on the Pacific Coast, while his grandfather Isaias Warren Hellman was one of the presidents of Wells Fargo Bank. So, it comes as no surprise that he continued his family’s legacy and pursued a career in investment management.

After receiving a B.A. in Economics with High Distinction from the University of California at Berkeley and an M.B.A. with Distinction from Harvard Business School, he worked as a Financial Analyst at Salomon Brothers Inc in San Francisco. In 1987 he joined Hellman & Friedman, and shortly after established its Hong Kong office, besides launching the software and logistics (ports and container terminals) verticals. He was instrumental in the company’s investments and a senior adviser in the company since 2009, focusing on software and information services as well as on specialized aspects of transportation.

Mike Hellman HMI Capital

From 1999, he was the Chairman of Blackbaud Inc. for ten years, where he also served as a Director. He has been a Director of Hall Capital Partners, LLC since 2015, and LPL Financial LLC since 2016, as well as a Director of Hongkong International Terminals and Mitchell International. For two years he served as a Director of LPL Financial Holdings Inc., until May 2018. During years he was a board member of numerous profit and nonprofit entities, including Asia Alternatives Management, LLC and Osterweis Capital Management, Inc. as well as the Hellman Foundation, the Rosenberg Foundation, the UC Berkeley Foundation, etc. His bike-racing career peaked in 2007 when he won the US National Championship for men 45-49 in the individual pursuit. In the same event, he was placed second at the Masters Track World Championship.

HMI Capital's investment strategy is focused on five industry sectors including information and data services, software, media and marketing services, specialized business services and financial services. It has a concentrated portfolio of 10 to 12 companies with outstanding business models. The fund is searching for the best opportunities on a global level, predominantly in public equities and, at times, distressed credit. It invests in companies that can generate real cash flow and deliver high risk-adjusted real returns, in a time span of 5 to 10 years.

Its HMI Capital Partners, L.P. fund generated a return of 39.94% in 2013, followed by 14.36% in 2014. The 2015 and 2016 returns amounted to 6.04% and 10.91%, respectively. The year 2017 was more favorable for the fund, when it returned 24.81%, while through October 29, 2018, the fund returned only 9.07%. HMI Capital Partners, L.P. fund's total return amounted to 249.30% for a compound annual return of 13.81%. Its worst drawdown was 24.34. As of December 31, 2016, HMI Capital managed around $836.47 million in assets on a non-discretionary basis.

Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014 (through early November), our flagship strategy generated a cumulative return of 96.9%, beating the S&P 500 ETF (SPY) by over 40 percentage points (see the details here).

As per HMI Capital's latest 13F filing with the SEC, during Q3 the fund made several changes to its portfolio valued at $782.55 million -- the fund didn't add new stocks to its portfolio, while in a majority of companies it actually lowered its stake. On September 30, the fund held a total of 9 positions. Although the stocks in which the fund invests, aren't exactly the most popular stocks among hedge funds in 2018, Mick Hellman definitely knows smart investing is more than chasing latest trends. More details regarding those changes are on the next page.

It's interesting to note that the fund decided to cut its stakes in the companies which were the most valuable positions it held at the end of Q3. The first one is Apollo Global Management Llc (NYSE:APO), a public equity firm in which the fund lowered its stake by 5%, to 4,402,975 shares worth $152.12 million. While this firm occupies 19.43% of the fund's portfolio, Tableau Software Inc (NYSE:DATA), a software company headquartered in Seattle, occupies 18.11%, as its second biggest position. After decreasing its stake in the company by 3%, the fund owns 1,268,726 of its shares valued at $141.76 million.

Meanwhile, the fund made an investment in Ellie Mae Inc (NYSE:ELLI), a software company that processes U.S. mortgage applications, buying 479,917 shares that were valued at $45.48 million on September 30.  In addition, it's the only position in the portfolio the fund decided to boost (by 1%).

HMI Capital did seemingly start to lose faith in most of the companies in its portfolio during Q3 -- it decreased its holdings in 7, out of a total of 9 companies. The most significant cuts are recorded in Autodesk Inc (NASDAQ:ADSK), a design software and services company, and Summit Midstream Partners Lp (NYSE:SMLP) a company focused on owning, developing, and operating midstream energy infrastructure assets, in which the fund decreased its stakes by 26% and 25%, respectively. As of September 30, the fund owns 554,220 shares of Autodesk Inc (NASDAQ:ADSK) worth $86.51, and 4,076,087 shares of Summit Midstream Partners Lp (NYSE:SMLP) valued at $58.28 million.

Disclosure: None. This article was originally published at Insider Monkey.