On October 1, 2012, Callinan Asset Management launched Emerging Growth Partners, L.P. On November 30, 2016, Osterweis Capital Management re-launched the adopted hedge fund as Osterweis Emerging Opportunity Fund.
Manager James Callinan screens the growth universe, including both IPOs and mature growth companies, for companies and stocks that meet his criteria. He says, in general, that
We want to find an undiscovered or misunderstood company that should have sustainable and open-ended revenue growth of at least 20% for three to five years. Finally, we’re looking for rising margins which may include companies that are losing money and then will break into profitability.
That generates a watch-list of about 150 names from which he selects about 30 for the portfolio. The largest weighting for a single stock might be 5%, while a lot will occupy 2-3% of the portfolio.
Without question, the chief attraction of the fund is manager James Callinan. Mr. Callinan was one of the great growth managers of the 1990s and is one of the few growth managers left from that era. He managed Putnam OTC Emerging Growth Fund from 1994 to 1996 and RS Emerging Growth Fund (RSEGX) from 1996 until 2010. His stint with RS Emerging Growth coincided with his founding of the RS Growth Group LLC at Robertson Stephens Investment Management. Mr. Callinan closed the fund to new investors in 2000 after posting 183% returns in 1999 and drawing $1.6 billion in new money over three months. While the fund, like all its growth peers, was crushed in the 2000-02 bear market, unlike most of its peers it rebounded and remained a competitive offering through the first decade of the 21st century.
After leaving RS, Mr. Callinan managed the Emerging Growth Partners hedge fund, whose record is now incorporated into OSTGX’s. The fund far outperformed the average small-growth fund in 2013 with a gain of 54% to its peers’ 40%. In the following three years it was mostly a bit above average, but not stunningly so.
Mr. Callinan claims to have learned a lot about managing in the challenging markets that followed the 1990s. He professes to be more value conscious and to be running a more concentrated portfolio than he did in the 90s. He’s also go over half of his own net worth invested in the $40 million fund.
Investor shares of the fund carry 1.50% expense ratio, after waivers. The minimum initial investment is $5,000.
The fund’s website is Osterweis Funds.