Our funds have navigated a variety of market environments for a wide range of investors.
Building on a foundation established in 1975, RMB Funds offers distinctive mutual funds that have navigated various market environments for a broad array of investors by combining decades of experience with a specialized focus, intensive fundamental research, and an opportunistic approach.
Our Portfolio Management Team averages 25+ years of investment experience.
For more details on our team, please click here.
Life Cycle Approach
What Makes Us Different
- Economic Return Framework – Applying our team’s 20+ year depth of accounting and valuation expertise to measure corporate performance
- Life Cycle Approach – Innovative approach to investing
- Intellectual Independence – Tied to a proprietary value creation framework
We strive to identify companies that we believe are the best allocators of shareholder capital, invest in those companies when we believe they offer an attractive risk/reward profile, and manage portfolio risk by isolating stock selection as the main driver of excess return.
Identify Well-Managed Companies
We believe well-managed businesses are those that:
- Grow assets when their economic return on capital is above the cost of capital
- Shrink assets when economic return is below the cost of capital
- Seek to improve economic return when it is approximately equal to the cost of capital
We believe in assessing companies through the Life Cycle Framework.
The Life Cycle Framework
- Recognizes that all companies go through development, growth, maturity, and decline and some “re-birth”
- Helps uncover the right analytical questions and focus attention on the key issues likely to determine future excess return
- A company’s position on the Life Cycle depends on the level and change of its economic return and its reinvestment rate
- Value creation is driven by “innovation” for companies on the left side of the life cycle and “productivity” for companies on the right
Rockets: These are hyper growth, early stage companies which consume a lot of capital as they try to execute their business model. Typically, they are innovative with new products, new services or new business processes that may threaten the status quo of existing larger companies. Upside potential may be huge, but so is downside risk. Volatility is high, and results are often binary.
Golden Goodies: These are Rockets that have survived and proven that they have viable long-term business models. They have historically tended to grow faster than the overall market and need to beat the fade in returns by continuing to fend off competitive threats. These have a history of being classic asset compounders and will continue to create wealth for as long as they can beat that fade.
Falling Angels: These are Golden Goodies whose growth rates have slowed because they have become so large or their economic returns have been falling because of competitive threats or an inability to find reinvestment opportunities at current high rates of return.
Corks: These are mature companies where the economic returns approximate the cost of capital. Asset growth does not add or destroy value, so improving the level of economic return is critical to their success.
Turn Arounds: These distressed companies are the victims of overcapacity, weak competitive position, or poor capital allocation. In order to be successful, they must divest the lower return segments of their overall business.
How our RMB Small/SMID Cap team views Environmental, Social, and Corporate Governance
We believe that there are three principal factors in measuring the sustainability and societal impact of an investment in a business. We believe these criteria help to better determine the future financial performance of companies. We believe markets exist to allocate scarce capital to its most productive uses. As companies compete for capital, we believe only well managed stewards of capital will prosper over the long term. Good stewards of capital create value, not just for shareholders, but also employees, suppliers, customers and society while minimizing harm to the environment. The small/SMID cap team strives to invest in well managed stewards of capital that make the world a better place. Our investment framework identifies legitimate value creation, where standards of living increase for all, but shuns value transfer, where certain investors gain at the expense of others. The RMB small/SMID cap team views investments from environmental, social and governance perspectives as follows:
We believe good stewards of capital do not harm the environment therefore, we eliminate from consideration companies with big environmental lawsuits as they represent unforecastable liability. We also eliminate companies with what we consider to be weak competitive positions associated with “high regulatory risk” related to potential environmental liability. Many of the companies we invest in promote “green initiatives.”
We take a practical approach as we seek to own companies that consciously pursue a minimal impact on the environment. The definition of “environmentally responsible” is far from universal. For example, while electric vehicles are considered “environmentally friendly” by many, most of the world’s power to charge electric vehicles is generated by coal, which others argue is worse for the environment than the internal combustion engine. Additionally, the lithium battery technology may be as toxic to the environment as nuclear waste at the end of the battery’s useful life. So sometimes it is not always clear what is better for the environment over the long term. Maintaining a diversified portfolio means we will inevitably stray into some grayer areas of what is or is not considered environmentally responsible. Critical to our investment thinking is that well managed stewards of capital include environmental considerations in their capital allocation decision process.
We believe good stewards of capital operate in an environment where measurable governance and controls ensure that capital allocation, corporate values, and mission get executed faithfully by management. The strategy’s investment team has developed its own Corporate Governance Scorecard that evaluates corporate values, incentives, the board and ownership to monitor alignment with management and owners. Additionally, every company we invest in must demonstrate some effort to “make the world a better place” as we believe companies that do so will increase in value faster than those that do not.
Trust and integrity are the pillars on which an effective capitalist system is built. It is the role of the active investor to reward good stewards of capital and to punish those that undermine the role of capital markets. We believe the inclusion of thoughtful ESG principles as well as a deep understanding of social benefits of legitimate value creation enhances our investment process and incorporate them into the structure of the strategies.
The opinions and analyses expressed in this letter are based on RMB Capital Management, LLC’s (“RMB Capital”) research and professional experience and are expressed as of the date of our mailing of this letter. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future performance, nor is it intended to speak to any future time periods. RMB Capital makes no warranty or representation, express or implied, nor does RMB Capital accept any liability, with respect to the information and data set forth herein, and RMB Capital specifically disclaims any duty to update any of the information and data contained in this letter. The information and data in this letter do not constitute legal, tax, accounting, investment, or other professional advice. The information provided in this letter should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any securities transaction or holding discussed was or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.