Our mission is to generate above average returns on capital for our clients and shareholders. To achieve this end, we aim to build a unique platform. One that is nearly as old as finance itself. A traditional merchant bank. Merchant banking first arose in the Italian states of Medieval Europe. Where small, family-owned, commodity trading businesses, started deploying their own excess capital to finance foreign trade expeditions. Investments that were usually high risk, long-term and illiquid. These merchant bankers were not just traders – they were “entrepreneurs par excellence”.
At Whig Capital, we believe true business solutions require a merchant banking approach. A long term partnership mentality, where we seek to understand every aspect of a business – from the ground up. Ultimately, we aim to invest alongside our clients and play an active role in the value creation process.
At Whig Capital we believe there are three core elements to investing: identification of potential opportunities; critical evaluation of those opportunities; and the strategic allocation of capital.
Market Research & Analysis
“The best opportunities are usually found among things most others won’t do.” – Howard Marks
“What important truth do very few people agree with you on? …Good answers are as close as we come to looking into the future” – Peter Thiel
Scoping investments opportunities is a daunting task. Scores of fund managers scour the market for under-priced assets, durable franchises and arbitrage opportunities. We seek a less crowded path. A more fulfilling means of creating value. Rather than compete for small stakes in over scrutinised assets, we look for opportunities where none have been created. We not only want great businesses, we want great business problems. We seek innovative value propositions that better serve a variety of needs.
This demands a contrarian mindset. A search for hidden secrets, truths and injustices of the world. In this, we draw on classical liberal philosophy to decipher the deeper workings of our political economy. A great truth of which is the tendency of government to systemically misallocate capital. Unlike Adam Smith’s ‘invisible hand’, the ‘benevolent hand’ creates all manner of speculative bubbles, rent seeking, and unsolved problems. We believe a fertile hunting ground awaits the investor who is willing to challenge conventional wisdom – of government’s outsized role in economic affairs.
Financial Statement & Security Analysis
“Knowing what you don’t know is more useful than being brilliant.” – Charles T. Munger
“Since one small observation can disprove a statement… disconfirmation is more rigorous than confirmation” – Nassim N. Taleb
At Whig Capital, we look for opportunities that exceed our required rate of return. Not a precise estimate of business value, but investments that will adequately compensate us for the risk being borne. We start by reverse engineering the implied rates of growth and return contained in market prices. And then seek to challenge Mr. Market, through critical bottom-up analysis of a company’s management, strategy and competitive environment.
Confirmation bias is the greatest enemy of every investor. For what a man wishes, he also believes to be true. We think the best way to gain confidence in a business, is to first recognise the limits of our competency, and then to seek out disconfirming evidence. To steel man – not straw man – opposing viewpoints. As a buyer of long term value, we aim to think like short sellers. To be skeptical and rational. And to distill a business down to its simplest form – clearing away the complexity, to find the most important variables of success. Ultimately, we aim to see a business for what it really is, not what we hope it to be.
Strategic Capital Allocation
“Investing is most intelligent when it is most businesslike.” – Benjamin Graham
“I am a better investor because I am a businessman, and a better businessman because I am an investor” – Warren E. Buffett
The first goal of every investor is to avoid permanent loss of capital. By controlling the downside of an investment, we increase the potential upside. It’s as much about avoiding bad decisions, as making good ones. But in a world of winner-take-all effects, concentration is the only route to out-performance. Such high-conviction ideas are few and far between. So, we see cash as our default asset. And believe that only by exercising deep reservoirs of patience, discipline and resourcefulness may we discover those high-probability insights of success.
We see investing as more than just passive capital allocation. It’s about playing an active role in the value creation process. We strive to invest like a 100% private owner. To act like an entrepreneur, not a fund manager. To maintain long-term partnerships – where we help shape the people, strategy and culture of an organisation. And to invest with like-minded problem solvers – those interested in serving a million people, not making a million dollars. Ultimately, we aim to build great businesses, not a great portfolio. To be a trusted custodian of long term value.