Risk Management

 

We believe the best way to manage risk is to build high conviction and stick with our positions as long as they make sense to us. High concentration therefore decreases our risk and improves our return potential. Another important factor is the quality of management and their ability to reinvest the cash flows of the business profitably. We also hope to be able to assess the likelyhood that those managers will return the profits to investors rather than themselves. While we're OK with price volatility we don't like managerial volatility. We prefer mangers that stick to a clear strategy and expect them to be able to explain it to us. 

 

Research Driven

 

Sometimes situations can be difficult to understand but they should never be complicated. Research in this context really means bringing clarity to a situation. With clarity we can better understand the business dynamics and the intentions and quality of management. Many investors rely on third party research such as broker reports to do exactly that. For us this seems like a contradiction. It is like outsourcing the part of your business that your investors are paying for. Those who rely on third party research to make investment decisions are much better off buying an index fund, they will save on commissions and fees and do better than most money managers. For those who intend to outperform the general index, proprietary research is essential.

 

Transparent returns

 

We don't like complicated investments and we therefore expect to deliver the same clarity to our own investors. When you call us you should be able to quickly understand where we invest your money, why it is there and how we intend to get it back to you. Our approach to risk management is simple. As long as we understand what is going on we stay. If for some reason our investments start behaving in a way we don't understand, we choose to part from them. This type of investment approach saves a lot of trading commissions and allows us to communicate to our investors what is going on. Unfortunately good investment ideas don't come along very often but that's OK. We are happy holding a concentrated portfolio with a few well understood investments that we can monitor in a cost efficient manner.

 

 

Our investors

 

We strongly encourage people who are interested in doing business with us to talk to some of our investors and partners. Most of them have made their money by taking entrepreneurial risk. They are in diverse businesses and they share our focus on transparency and clarity in investments. By far the toughest investors are the fund managers themselves. We have most of our net worth in the fund which consists of around 20% of assets under management. Why should we invest our money somewhere else when we are building an operation that is expected to produce better risk adjusted returns than any other investment we know (if you know something please let us know so we can also invest in that vehicle).