Solution Oriented Long/Short & Event-Driven Equity
Our Mission/Focus
Hedge funds exist to provide alpha and diversification benefits to investors' broader portfolios. In an industry that has shifted to concentrate in the largest fund managers that can't scale up in smaller, off-the-run situations, we're bringing it back to the original - old school hedge fund (boutique and nimble with the ability to concentrate in smaller more alpha generative opportunities). Our objectives are the simple thesis for having a hedge fund allocation at all: produce consistent alpha, be uncorrelated/diversifying to traditional stock/bond portfolios and protect capital during market dislocations...to be a high value-added (return and/or risk reducing) portfolio component instead of providing redundant exposure with leveraged/hedged exposure to the same old mega/large cap names you already own for a few basis points (and probably in higher concentrations than ever before). We traffic primarily in small & mid-cap companies and opportunistically in large-cap names that are small components of the mega/large cap-weighted indices.
Philosophy: Value / Growth /Catalysts
VALUE: We seek to invest in free cash flow (FCF) generative businesses trading at a discount/(margin of safety) to longer-term intrinsic value estimates. Conversely, we'll short companies that are overvalued with deteriorating fundamentals and/or require highly dilutive access to capital in order to fund operations/growth.
GROWTH: We seek to invest in growth at a reasonable price (GARP) - these are companies with strong fundamental growth tailwinds, solid barriers to entry and an identifiable/clear path to FCF (if not yet achieved). We tend to steer clear of investments in/shorting of high-momentum growth stocks because they are driven by investor emotion/enthusiasm, completely detached from valuation/fundamentals, and it's a fool's errand to bet on "popularity." Our fundamental valuation discipline is a lynchpin in everything we do.
CATALYST/EVENT: We often invest in "event-driven" names in which corporate change: Mergers & Acquisitions, divestitures/spin-offs, new management/corporate governance, capital structure optimization/restructuring, etc. can unlock shareholder value. All else equal, these investments become even more compelling to us when broad market multiples (valuations) are stretched...idiosyncratic catalysts/events can create value when there's little room for broad industry/market multiple expansion and can also offset periods of multiple contraction.
Dynamic Exposure & Risk Management
Portfolio exposure/risk is rigorously monitored in real-time in the context of both bottom-up company fundamentals and top-down macro views. We are disciplined in our valuation focus, we obsess about risk and creating asymmetric return/risk profiles. Net delta-adjusted exposure can be nearly market-neutral when we are bearish and more directional when we are bullish (historical net delta-adjusted exposure has ranged from ~10 - 60% net long).
The portfolio is always a high-touch reflection of our evolving assessment of the market environment and opportunity set, the potential return/risk of portfolio holdings, the correlation of factors that drive them, as well as competing uses of capital.