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FACT Approach
The FACT investment strategy is one of concentrated global best ideas, absolute returns. Our style is GARP quality compounding (many physical/geographical, technological, regulated, and/or network oligopolies with strong pricing power and durable moats), and we take a micro-thematic approach to ideation to focus on sub-sectors seeing positive inflections and sustained industry growth. We are not generalists, but rather, focus on becoming supply chain experts in these very specific 10-12 themes where we anticipate durable alpha outperformance. Our long checklist scores companies across 8 key categories including (1) strong revenue / earnings growth, (2) favorable market structure driving consistent market share gains with return on scale and high moats, (3) robust revenue/earnings revisions compared to consensus expectations, (4) reasonable valuation / margin of safety, (5) favorable management capital allocation and underlying business ROI, (6) governance, (7) forcastability, (8) cyclical and downside, with the latter 2 categories informing sizing.
For shorts, our core framework is variant perception + catalyst, with information asymmetry a key requirement. We have a multi-year investment horizon for our longs and absolute return, single name shorts.
We have both a Long Short and Long Only product for our investors.
1
Transparency is the T in FACT
Our ethos is to show rather than tell the depth of our work by providing investors full access to our portfolio. Transparency creates an additional layer of accountability to replicable process. We think edge differs by stock and believe in treating our LPs as true partners in bringing them "under the hood".
2
Concentration in Microthemes
Our microthematic approach to portfolio construction is designed to combine a generalist's creativity with subsector specialists' depth. With microthemes, we focus on neighborhoods where there is high rate-of-change and structural market growth and focus that drives higher rerating potential. We first identify multi-year microthemes and then try to distill out what we consider to be the best stock within the associated value chain or, in other words, the "best house in the best neighborhood."
3
Investigative Research and Intellectual Honesty
With over 600+ channel checks every quarter, our due diligence process is conducted with an investigative approach. Trust nothing, verify everything. We have a no-pitching, blame-free post mortem learning culture focused on evidence and probabilistic outcomes, with intellectual honesty our first and foremost important cultural value.
4
Incentive Alignment, Internally and Externally
Internally, we have an ownership compensation model to prioritize portfolio objectives for long-term compounding, not individual interest for short-term. Externally, our investor terms are designed for long term incentive alignment with a high compounded hurdle.