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One of the best-performing American fund managers this year is betting on property and cryptocurrencies as a way to protect its investors against rising inflation.
Horizon Kinetics, the $ 7 billion counter-investment firm co-founded and led by veteran managers Murray Stahl, Steven Bregman and Peter Doyle, has three of the top 10 performing mutual funds this year, according to Morningstar.
“There is no going back after the pandemic and globally there is a debt problem and that means defaulting or debasing the currency,” Doyle told the Financial Times.
The rapid rise of debt levels Over the past decade, accelerated by the vast fiscal response of governments in the wake of the pandemic, it has spurred an effort by investors to protect their portfolios against inflation. This ranges from owning a mix of quality commodities, real estate, cryptocurrencies, and companies with strong business models.
The property ranks high among the top holdings of Horizon Kinetic’s best performing funds. It has interests in Texas Pacific Land, the large landowner, Howard Hughes Corp, Dream Unlimited, the Canadian real estate developer, and Brookfield Asset Management. There is also a preference for the owner-operators, Icahn Enterprises and Liberty Broadband, controlled by John Malone, which are considered satisfactory to shareholders.
“The best long-term investors tend to have concentrated portfolios and low position turnover as they allow companies to own, grow and compose returns,” said Doyle.
Examples of their long-term buying and holding spirit is their massive stake in Texas Pacific Land, which they have owned since the asset manager was created in 1994. The approach also applies to bitcoin.
An initial 1 percent stake in 2016’s Grayscale Bitcoin Trust has risen to one-tenth of its Paradigm fund. “People should have exposure to the asset class,” said Doyle, citing how the supply of bitcoin is limited and has a scarcity premium at a time when there is concern that the coins will lose value.
Even after the recent crypto crash, the asset manager has three of its funds near the top of the performance chart in 2021. The kinetics Business spin-off and restructuring other Small cap Opportunity funds generated returns of more than 50 percent in 2021.
Completing the top 10 list, the Paradigm background, has registered a gain of almost 48 percent. Over the past year, their respective performances place them in the top 10 percent of their category rivals, according to Morningstar.
A significant driver of the funds’ performance this year is a 100 percent gain in Texas Pacific Land, a large landowner in the state that receives royalties from oil and gas drillers in the Permian Basin. The asset manager owns a fifth of TPL’s outstanding shares and expects the lack of investment in the energy sector in recent years to keep oil prices high. West Texas is also suitable terrain for wind and solar farms, as a long transition to renewables will unfold over the next several decades.
“The prospects are more attractive now than when we made our first investment,” said Doyle, referring to the firm’s first investment in 1994. TPL has grown into a massive holding, accounting for more than half of its top three funds. performance at this time. The investment firm led activist shareholder pressure for a modern corporate structure that was announced in 2019 and Stahl is a board member by TPL.
After such a strong performance streak this year, Doyle admitted that “there is price risk in our portfolios.”
“We are not for everyone and we are looking for investors with a time horizon of three to five years in our funds,” he added.
“Our investment philosophy is to own companies that are managed with a long-term focus and we want investors to think the same way.”