02 Dec Interview with Miguel Ángel Temprano – Sector Ejecutivo magazine
The investment company was founded in early 2008. Orfeo Capital was born to manage a large financial patrimony resulting from the first major sale of a company of the so called ‘new economy’, Arsys. For this, Miguel Ángel Temprano, current CEO and Investing Manager, began to create the team that has taken them to where they are today.
What process have you followed until becoming an Investing Firm?
I have to say that the decisions to become, no only a managing firm, or even in the previous step, an EAFI, were not in our roadmap. Like many of the important decisions that are made in life, they have been made fundamentally by necessity rather than by desire.
Portrait of Miguel Ángel Temprano, Investment Manager of Orfeo Capital
We had never considered opening our doors to other investors, but at the insistence of some of them, you ask yourself, why not? We received constant requests from other families to manage their investments, but we always rejected them, at first because we did not want to and then because we could not due to the lack of a license from the CNMV.
In the end we constituted EAFI. And when it was already operational we discovered that this license did not allow us to commercialize our investment vehicles. So we had no choice but to become agents.
From their origins they invest “under solid criteria of preservation of the wealth” of their clients. Tell us about your investment method, key in its operation.
Our style is defined by who we are. Before managers we are savers, that is, we the managers have invested almost all of our financial assets in the vehicles we manage. It has been shown that there is a clear asymmetry between the happiness that the benefits produce and the unease caused by the losses. So before thinking about winning you have to think about not losing.
It is common to hear that investments should be made in the long term -five, six or seven years- and it is probably true. But nowhere is it said that 40% of the capital invested can be lost along the way. But this is what happens many times. Managers do not think that the investor cannot see without great suffering, that along the way his money is evaporating.
I, as an investor value as the most, but an investor should not tolerate losing 40% of the value of his portfolio just because the manager believes that the market is imperfect and is not recognizing the intrinsic value of his positions, and that therefore it must recover. And I always ask the same question. What if the market does not recognize that intrinsic value? Or what if it takes a long time and on the way I need to get my money back? The preservation of wealth is our first objective and to prove it we co-invest with our investors large quantities of money.
With what criteria do you select the assets in which you invest and in which sectors?
The third pillar of investment is fidelity to the investment method, which begins by not investing in what we do not know. But the ones who should know it is us, not the analyst of an American bank, to whom the analysis has been purchased, and to whom we most likely have not seen or spoken in our lives. This obviously diminishes our management universe, but it makes us know by heart the fundamentals of each of our values.
We look for what we call “the rule of the two fives”. All potentially invertible securities must have five competitive advantages and must lack five intrinsic risks, in both cases previously defined.
And on the securities invested, the manager must follow a list of obligations when buying or selling the value. List we call “the manager’s decalogue”.
What can you tell us about your three funds: Camera, Universum and Talentia?
These are three funds with a different risk profile, but with the same investment and management strategy, absolute returns.
What other services do they provide?
We invest in Private Equity and advise on mergers and acquisitions processes, but in both cases with certain particularities. In the case of advising, we only accept sales mandates, never for purchases. We can advise the buyer in an M&A operation, but we do not accept mandates that involve searching for companies to be purchased. And in relation to Private Equity, we only invest in companies that not only that we understand their business, like their sector and see value in it, but also that their level of development is sufficient to allow us to value it without having to use “esoteric methods” because they lose money. In turn, we only invest in controlling majorities.