We create a fund that leverages our insights into investment management: leveraging what we believe is sound investment practices, and avoiding or actively betting against, what we believe are bad practices. As the investment management industry overall, has not historically delivered a good product to investors, we seek to design a fund that does.
Our Distinguishing Characteristics/ Competitive Advantage
Long-term orientation: we are both focused on 1) buying companies that have a long-term thesis, and 2) designing our investment process to be long-term-oriented form a process standpoint itself. Professional investment managers examine their portfolios everyday; financial advisors go into their offices each day. To not do so would be considered a dereliction of duty. We intentionally choose not to work everyday. While we scan the headlines and keep a tab on the markets on a semi-daily basis, we rarely look to make changes. Our action timeline is more on a monthly to quarterly, rather than on a daily basis. We allow the important news to filter down to us. As a consequence, we are slower to react; we will miss the day-to-day moves; we are not the manager to call for a short-term market outlook. We believe this helps us avoid knee-jerk reactions to news, simplify to our core essentials, and guards us from an action-oriented process. We believe in the the counterintuitive maxim warren Buffet advises: “don’t just do something, sit there!” Paradoxically, doing less and thinking long-term has been shown to produce better results.
Liquidity: the vast majority of investors prefer to avoid illiquidity. Quant hedge funds and day traders are in and out of stocks by the minute; mutual funds must manage to inflows by the day; even “patient-money” investors like pensions and endowments evaluate their managers on a 1 to 3 year basis. Valedictory II actively seeks illiquidity, as a source of return premium. Since most investors pay to gain liquidity, we believe it is competitive advantage for the long-term oriented investor to sell it– i.e. being deliberately illiquid because we don’t need it. We will happily get paid the return premium to give up the luxury of getting in and out of stocks day-by-day, in return for accepting that the liquidation timeframe for our fund will be closer to a quarterly, rather than a daily basis.
Higher risk to achieve higher returns: aggressive strategy willing to trade off short- to medium-term volatility and drawdown for higher potential longer-term returns and positive skewness. Appropriate only for volatility-tolerant investors and only for a small portion of their portfolio.
Evidence-based: strategy built upon well-founded, time-tested, expert-approved investment factors that drive return, increasing likelihood, while minimizing the chance of ruin.