Russ Kinnel: Hi, my name is Russ Kinnel. I'm director of mutual fund research for Morningstar, and I'm joined today by Ian Lapey, manager of Third Avenue Value. Thanks for joining us.
Ian Lapey: Thank you for having me, Russ.
Kinnel: You've just recently been named lead manager, though you've obviously been with Third Avenue for a while. Can you give us a little bit of background on when you joined Third Avenue and what you have done up to this point?
Lapey: Sure. I joined Third Avenue 11-and-a-half years ago. Prior to that, I had been a sell-side analyst at Credit Suisse First Boston following the housing industry. I was really driven to Third Avenue, by reading an interview with Marty Whitman, in which we talked about the Third Avenue safe-and-cheap investing philosophy, and that really resonated with me. And fortunately for me, Curtis Jensen, who is the chief investment officer now, went to the same college that I attended, Williams College, so I was lucky enough at the time, 11-and-a-half years ago that they were looking for a senior analyst, and I joined by initially contacting Curtis.
At Third Avenue, over 11-and-a-half years, I have been a generalist. I have managed several subadvised funds. I have been comanager of the Third Avenue Value Fund since mid-2009 and now started managing as a sole manager in March.
Kinnel: Third Avenue made it clear that you are going to be taking over the fund. So obviously you had some long preparation time for that, and you made some changes to the portfolio pretty early on. Can you tell us a little bit about that?
Lapey: Sure. The strategy and really I planned to manage the fund using the same long-term, bottom-up, buy-and-hold, safe-and-cheap philosophy that Marty developed. The one difference is that the fund will be and already is a little bit less concentrated. So, the top 10 holdings in the fund in the beginning of March, when I took over, accounted for about 70% of the fund. Now it's about 61%.
Most of that has been in modest reductions in Hong Kong exposure, where we had a couple positions bigger than 10%, and we've brought those down to 10% or lower. Hong Kong is now about 36% of the fund compared with 50% beforehand. The area we have been adding to is actually in the United States. Really it's four areas: energy, where we have been adding to a position in Devon Energy; property and casualty insurance, where we have been adding to White Mountains Insurance and Allegheny; regional banks where we have been adding to KeyCorp and Comerica; then finally high tech, where we have been adding to our Applied Materials position.