We evaluate investment strategies from a fundamental perspective, seeking an attractive combination of price and quality. Price and quality drive future returns and determine the margin of safety of an investment. Sound research and underwriting provide the framework to know when to stay the course during difficult markets or to make a change when an investment has sufficiently deviated from the underlying thesis.
We know that principles, investment strategies, and even the most talented managers will fall out of favor at times. Patience and a long-term investment horizon are required to weather such periods and allow intrinsic value to be appreciated by the market. Asset classes, markets, strategies, and managers all tend to mean revert.
Search for Inefficiencies
Despite the prevalence of the efficient market hypothesis, pricing inefficiencies can be found in less competitive, less liquid, and unloved markets, as well as in times of market stress. Taking advantage of such inefficiencies provides the potential for outsized returns.
We look for ways to mitigate the risk of permanent capital impairment, both at an individual investment and total portfolio level. Strategies we employ include fundamental research and due diligence, diversification, and the use of uncorrelated strategies. We also prefer strategies where the manager has considerable influence over the outcome of their investments.
Partnering with the Right People
Hiring the right manager to execute a strategy is as important as identifying the strategy itself. We seek talent including the ability to adapt and innovate along with a thoughtful alignment of interest in terms of size, fees, business practices, team structure, and character. We also seek to partner with like-minded clients who share our principles as a foundation for a long-term relationship.