Which manager is most likely to get caught in a value trap?

A. Furlings B. Asgard C. Tokra James Leonard is a fund-of-funds manager with Future Generation, a large sovereign fund.
He is considering whether to pursue more in-depth due diligence processes with three largecap long-only funds proposed by his analysts. Although the funds emphasize different financial metrics and use different implementation methodologies, they operate in the same market segment and are evaluated against the same benchmark. The analysts prepared a short description of each fund, presented in Exhibit 1.

When Leonard’s analysts met with Asgard, they inquired whether its managers engage in activist investing because Asgard’s portfolio frequently holds significant positions, because of their large asset size, and because of their emphasis on strong governance and their ability to model sources of cash-flow strengths and weaknesses within each business. The manager indicated that Asgard engages with companies from a long-term shareholder’s perspective, which is consistent with the firm’s low portfolio turnover, and uses its voice, and its vote, on matters that can influence companies’ long-term value.
Leonard wants to confirm that each manager’s portfolios are consistent with its declared style. To this end, Exhibit 2 presents key financial information associated with each manager’s portfolio and also with the index that all three managers use.

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EXHIBIT 1 Description of Each Candidate Fund Fund Furlings Description Furlings Investment Partners combines sector views and security selection. The firm's head manager uses several industry and economic indicators identified from his own experience during the last two decades, as well as his personal views on market flow dynamics, to determine how to position the fund on a sector basis. Sector deviations from the benchmark of 10% or more are common and are usually maintained for 12 to 24 months. At the same time, sector managers at Furlings use their expertise in dissecting financial statements and their understanding of the corporate branding and competitive landscape within sectors to build equally weighted baskets of securities within sectors. Each basket contains their 7 to 10 highest-conviction securities, favoring firms that have good governance, strong growth potential, competitive advantages such as branding, and attractive relative valuations. The Furlings master fund holds approximately 90 securities.