Our Strategy

A Focus on Fundamental Analysis and Active Portfolio Management

We focus on delivering sustainable yield to our clients through our disciplined, research driven investment process. We believe security selection and active management in corporate credit is key to capturing alpha.

Investment Philosophy

Our objective is to generate superior risk adjusted returns, or alpha. For us, alpha is defined as capturing higher yields with less leverage than securities represented by widely used indexes. We mathematically measure alpha as yield per unit of leverage. We believe rating agency algorithms over-weight size and longevity of corporations which create opportunities for active credit investors.

 

Security Selection

We are cash flow based lenders looking for companies exhibiting low leverage, sufficient liquidity and credit metrics we believe will allow for a refinancing of the security we invest in. We are industry agnostic and our focus is on the future credit health of the business regardless of size or history. We are most interested in the future free cash flow generating ability of these companies. Our belief is that a business that can generate a true economic profit after all expenditures (free cash flow) creates a margin of safety for our investment. While EBITDA is a useful comparative valuation tool, it is not cash flow. We define free cash flow as cash from operating activities less capital expenditures measured over a cycle. While this process by itself is reasonably common among value investors, our competitive advantage lies in sourcing, analyzing and acquiring mis-priced securities. Our objective is not to avoid risk but to manage and price it effectively.