April 2013 www.emergingmanagermonthly.com Vol. VIII, Issue 4

A Publication of Financial Investment News

Reprinted With Permission of Emerging Manager Monthly

300 North Capital, LLC isnot your average "emergingmanager." The firm has along history dating back tothe 1950s and up until thestart of the year was a sub-sidiary of Old Mutual (US)Holdings, Inc. but now sits100% employee-owned withapproximately $680 millionin assets.

The story is also uniquebecause despite the long history, the firm completelyrevamped its structure and investment processes in2008 when Rick Campagna became ceo of the firm.

"It was clear that the firm needed a new directionand a new strategy," Campagna said, explaining thatthe firm outsourced its back office functions and con-structed one research platform to service its variousproducts, whereas previously, for example, thesmall-cap strategy was run by multiple portfoliomanagers where four investment teams consisting ofa portfolio manager and analyst each managed aquarter of the product.

In eliminating that approach, the firm moved to astructure that Campagna, who also serves as thefirm's cio, was already using on a mid-cap strategyhe began managing in 2006 that divided the researchteam by sector coverage and allowed the team tocoordinate research together.

"We also put in a much more stringent risk man-agement process within the research formula," headded.

After the changes in 2008, the firm went into

"hibernation" and eliminated most of its marketingstaff. "The best thing for us to do was to prove whatwe just did worked," he explained, adding that aspart of the restructuring the senior managementbought back 25% of the firm's equity from OldMutual.

In 2011, the firm brought in Chris Vassilopoulos assenior v.p. of institutional sales to begin marketingthe firm's strategies. "Chris has been instrumental inre-launching us," Campagna said. "Even though weare a company with 60 years of history, we are real-ly something different. We are an emerging managernow."

The firm's ownership structure, however, was ahurdle for the firm when going to the institutionalspace. "We were neither fish nor fowl," he said,explaining that the firm was not considered anemerging manager because of its ownership by OldMutual but was restricted from many mandatesbecause of its asset base.

That led to the decision in May 2012 to buy backthe company from Old Mutual. The deal was final-ized in October and the transaction closed inDecember.

Campagna said the response from clients was pos-itive. "The client base and consultant base was muchhappier."

Vassilopoulos said the change was particularlybeneficial in the emerging manager space, wheremany of the managers-of-managers and consultantsinvolved in identifying emerging firms were previ-ously unable to make investments in the firm becauseof its ownership structure.

The firm offers domestic small-cap growth, small-

Rick Campagna

300 North Capital Brings Unique History To Emerging Space

Reprinted With Permission of Emerging Manager Monthly

to mid-cap growth, mid-cap growth, and all-capgrowth strategies, as well as a global macro alterna-tive strategy.

The firm's core philosophy is buying companiesthat have above average growth rates and aboveaverage operating metrics such as operating margins,return on capital and return on equity.

From there, the firm looks to identify mispricingsby Wall Street, either through valuation or internalresearch that shows earnings or revenue will be high-er than Wall Street estimates.

The firm's bottom-up fundamental analysis leadsto the six professionals in research holding an aver-age of 350 grassroots meetings per year where theyget to know the management team and learn moreabout the company. "Within any industry, we want tobe able to identify, here are the best companies" andfrom there, identify any mispricings that ultimatelylead to an investment.

For a company to be added to the portfolio, an ana-lyst covering that sector must make a formal presen-tation to the entire research team that covers the fac-tors that make the particular stock attractive, whichis followed up with a roundtable discussion thatinvolves the assumptions being challenged and an in-depth discussion of the mispricing quote and how theanalyst came to their conclusion. "If you actuallyhave to teach someone something, you really have toknow it well," Campagna said.

"Most managers spend a lot of their time lookingto pick their next great idea; however if you look atmost managers and ask for their best 5 or 10 posi-tions over the year and their worst 5 or 10 over thesame time, the aggregate contribution of the negativedetractors is often higher than the aggregate contri-

bution of the positive contributors," Campagna said,explaining that 300 North focuses on risk manage-ment and avoiding blow ups.

"You see a lot of growth managers focused onwhat is the next great thing and we freely admit wemay miss things," he added. "We are not going tochase the next great fad."

The firm's strategies are all relatively concentrat-ed, with the all-cap portfolio holding about 40 com-panies and the mid-cap strategy in the 50 namerange. When taking a position, the company will startoff with about a 1% stake and can scale up to about3%, with a hard cap at 5%.

While most companies have a sell discipline that isdesigned to respond after the fact when the stock hasalready lost money, 300 North spends time headinginto earnings season evaluating each holding andwhat has changed, Campagna said. "A lot of the dis-cussions we have are about how to handle risk man-agement proactively," he said.

The structure is also beneficial when evaluatingcurrent holdings as a group. "A lot of people fall inlove with their position. Stocks don't know you ownthem," he said.

Prior to earnings, the firm will rank each companyin the portfolios by risk and then highlight each ofthe riskiest companies and discuss why there areconcerns, and how the holding should be managed.

Each strategy has about $100 million to $120 mil-lion in assets and the firm is best known for its mid-cap growth strategy. The firm also has a global macrostrategy launched in 2010 that has about $200 mil-lion in assets and invests in liquid futures. The strat-egy was recently included in the Altegris MacroStrategy Fund via portfolio investment allocations.