Hey guys,
Just a quick one.
As you’ve probably gathered from the title, I’m considering starting a fund around the new year. I formalised the idea about a week ago and now have some time to give it proper thought. Completely arbitrary timeline, but I figured if I start getting my head round things now I’ll be in a good position by March, the Tax YE.
I’m not dead set on it - but I want to assess if there’s an opportunity there. If not, I’m happy to have avoided a mistake.
My main concern: market conditions. I don’t own anything tech-related or included in any indexes, so my exposure to the bubble is limited, but systematic factors remain. Hard to raise in a bear market, though I hope we get one. Would rather wait a few years.
The rough structure: free mandate; would focus on special sits / deep value; raise $30-50mn, keep low opex (don’t need bloombergs or anything like that); open to activist angle; wouldn’t do it alone; litigations would be a small part of the portfolio (likely filled thorugh private placements / block sales); performance fee only; work on delivering a tax efficient return stream, 3-5 year lockup.
A little about me as an investor (the gist): been investing for seven years, 21, advise funds on special sits. Never worked at fund and don’t intend to, but met managers through VIC (one of youngest ever admitted) and Substack. I think not being institutionalised has been a tremendous advantage. Spent most of school days watching investing-related youtube like every other device-addicted kid. No family in finance. Just graduated from a degree but hated it - was all derivatives and overcomplex DCFs. The classic stuff. Anyway, started out doing classical value, realised I should take advantage of my lack of capital, so moved to deep value / special sits in microcaps (the smaller the better, provided liquidity) is my bread and butter really, but I generally dislike the generic net-net plays - I prefer the value to be off the balance sheet - often a contingent asset, such as a legal case. Deep value with a special situation, basically. Helps as it doesn’t turn up on screens. Anyway, that sort of thing. If the value driver is completely disconnected to the nature of the business, so shareholders can’t understand what’s going on, and it takes time but not intelligence to figure out how things will go, even better. If there is data provided on the average outcomes, to get a rough idea of the risk profile, that’s better too, though not a requirement. I don’t think about economics or anything like that, so I stick to developed economies for simplicity, though I look everywhere in case I see any simple monopolies. I spend most of my time reading or writing out my thoughts. Appreciate screening and finding ideas that way, but I prefer going for a type of situation (like legal cases) where a database exists already. Of course more to it than that but that’s the gist. I don’t see much utility in having a specific strategy, as especially with special sits, different considerations are to be made / different mental models used, so I have no ‘blueprint’ that people seem to search so longingly for. I just select what’s useful to me at the time. I’m flexible, but if I’ve seen a situation before and I can go through the same process then no complaints.
Any advice and criticisms would be greatly appreciated. Feel free to be as harsh as possible!
Best,
Oliver
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