Exclusive Interview With VNB Wealth Management: Catalyst-Driven Value InvestingVW Staff
Exclusive Interview With VNB Wealth Management: Catalyst-Driven Value Investing by John Mihaljevic, Beyond Proxy
We had the pleasure of interviewing Mark Meulenberg and Jimish Gandhi of VNB Wealth Management recently. The firm operates as a subsidiary of Virginia National Bank and is based in Charlottesville, Virginia. The team is led by Glenn Rust, President, and Mark Meulenberg, Chief Investment Officer. Since 2000, VNB Wealth Management has provided families and institutions with investment services focused on long-term results.
Please tell us about the investment mandate of VNB Wealth Management within Virginia National Bank.
The main product offering is our Enhanced Core Strategy which has an absolute return focus. The secondary investment objective is to provide an annualized after-fee return 5+% above the S&P 500 over every rolling 3-year period. VNB Wealth offers a fee structure for separately managed accounts that includes a fixed fee plus incentive fee, typically 0.75% and 20% of the profits, respectively, so we are intensely focused on trying to avoid losses, particularly those that are permanent. We operate under the mantra of “putting capital to its highest and best use” which charges us with finding securities throughout the capital structure with the most favorable risk/reward. It has always seemed intellectually distasteful to have to invest in a certain security, say the common equity of a company, due to some artificial mandate, while the bonds of that company may be offering the best risk-adjusted return.
For any investment we make we are targeting a 15+% internal rate of return (IRR) via a combination of current free cash flow or earnings yield plus growth, along with any projected increase in multiple, as well as any dividends accrued. If we can’t get to the 15% IRR number with a high degree of confidence, we don’t invest. Unofficially, we are looking to double our clients’ money every 5 years which ties in with the 15% IRR target.
How would you describe your value-based, catalyst-driven investment discipline?
What are your key stock selection criteria, and what types of businesses have you favored historically?
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