Last month, Fosun International Ltd. was part of a consortium that agreed to purchase Quebec-based circus and entertainment behemoth Cirque du Soleil. Fosun is the top holding in Trimark International Companies Fund and Trimark Global Fundamental Equity Fund and a top-ten holding in Trimark Fund and Trimark Emerging Markets Class (as at March 31, 2015).
A 263%* return: Fosun International Ltd.
Our investment in Fosun began in early 2011 and has generated an approximately 263%* return for our unitholders. (Cumulative appreciation of the stock from initial purchase on April 11, 2011 to March 31, 2015 for Trimark Global Fundamental Equity Fund, Series A. Source: Invesco Canada.)
During my first meeting with the company that year, the CEO showed me a blueprint of the firm’s vision, and over the last four years we’ve watched that plan become a reality. The management team, led by Guo Guangchang, has demonstrated great vision and tremendous business savvy. During that period, Trimark became the largest minority shareholder after the four company founders. (Source: Bloomberg.)
Fosun is one of the largest diversified conglomerates in China. It’s sometimes referred to as the “Berkshire Hathaway of China.” The management team is a key element of our investment thesis. The founders are heavily involved in the business and their personal net worth is tied to that of the company. They have secured a number of lucrative investments, including the transformational acquisition of its Portuguese insurance subsidiary in 2013 during the European financial crisis.
We’ve seen remarkable earnings growth and continue to have a tremendous amount of confidence in the business. I spent two months in China earlier this year and spent considerable time on site with the founders and had extensive meetings with the broader management team. I also had direct access to a number of the firm’s underlying holdings while in China. Our research efforts begin long before we establish a position in a company and continue throughout our ownership and beyond.
The Cirque du Soleil deal
U.S. private equity firm TPG led the consortium and will be the new majority stakeholder, while Cirque founder Guy Laliberté, La Caisse de dépôt et placement du Quebec and Fosun will each hold a minority stake. Fosun, specifically, will work to expand Cirque’s reach into China.
The purchase agreement aligns with Fosun’s global strategy of “combining China’s growth momentum with global resources” and the overall view that the leisure and entertainment industry will benefit from robust demand from rising middle-class consumers in China.
According to Fosun, when Cirque-founder Guy Laliberté decided to sell the company, he knocked on Fosun’s door first because he felt it was the best partner for a key growth market. Cirque has attempted to grow into China in the past, through shows in the gambling hub Macau, but with limited success.
The Cirque deal follows Fosun’s recent acquisition of Club Med and investment in Thomas Cook – travel companies that fit nicely into Fosun’s focus on “happy lifestyle” industries.
The deal is making media headlines in Canada because Cirque is a high-profile, homegrown company with strong ties to the Canadian cultural scene. For us as investors, the purchase simply reaffirmed our thesis around Fosun and increased our confidence in the management team’s ability to execute on its ambitious global strategy.
*Cumulative appreciation of the stock from initial purchase in April 11, 2011 to March 31, 2015 for Trimark Global Fundamental Equity Fund, Series A. Source: Invesco Canada.
The companies discussed are selected for illustrative purposes only and are not intended to convey specific investment advice.
Trimark Global Fundamental Equity Fund, Series A provided the following performance returns as at March 31, 2015: 1 year, 16.82%; 3 years, 18.61%; 5 years, 13.25%; Since inception, 8.05%.
Trimark Emerging Markets Class, Series A provided the following performance returns as at March 31, 2015: 1 year, 14.24%; 3 years, 8.24%; Since inception, 0.97%.
Trimark International Companies Fund, Series A provided the following performance returns as at March 31, 2015: 1 year, 23.09%; 3 years, 19.68%; 5 years, 12.69%; Since inception, 3.48%.
Trimark Fund, Series A provided the following performance returns as at March 31, 2015: 1 year, 14.71%; 3 years, 17.42%; 5 years, 12.78%; 10 years, 5.29%.