Philosophy

Philosophy: Stewards of the Assets of Society

To give value to our work, we'd like to "Make the World a Better Place."

The great Peter Drucker, in his treatise, "Management" defined how we could do just that. He described that the men and women of business are the "Stewards of the Assets of Society." If we do a good job applying capital, labor and assets in an effective and efficient way, society will grow and flourish. If we squander those assets, our economy and life will flounder.

Letting thousands of home loans at 105% of value, plowing huge sums into hollow internet companies, succumbing to long-term unsupportable union demands, harvesting monopolistic profit, and slicing off one-third of all funds raised by society for the money changers have all cost America and the world dearly.

But, it takes courage to stand against the short-term gain that others are harvesting. It may take special insight to see that majority is heading lemming-like over a financial cliff.

We have identified an area where a vast swath of the assets of society are inefficiently allocated. That area is the availability of financing for companies and funds that are between $5 to $100 Million in revenues or assets. The corollary to this, is the prohibition of ordinary people from making a meaningful investment in business.

We aim to provide efficient access to public capital to smaller hedge funds and businesses, and to make these attractive investments available to the ordinary investor. By helping to make the allocation of capital more efficient and targeted toward effective businesses we will do our small part to make the world a better place. By working to make those high return investments more open to the smaller investor, we hope to more equitably spread the rewards of our capitalist system throughout society.

We believe a perfect free market system does as perfect a job as is possible of allocating goods and services to the members of society. The problems occur when monopolies, unions (a monopoly of labor), and regulations distort the market. We are doing a small part in smoothing out a step discontinuity in the cost and availability of capital. Public companies trade at 14x earnings and private companies sell at a 5 to 7 year payback, which is 5x to 7x - that is half.

The difference creates a large-pent-up demand for capital. We can meet that demand by supplying capital at 9x and raising money at 14x. A similar situation exists for smaller vs. larger funds. On the flip side, institutions try to get a return of 25%, while a regular investor is happy to see 8% per year. The average investor can buy a $500,000 house, but he cannot invest $500 in the stock of a non-public company. By providing public capital to smaller hedge funds and businesses and carefully and correctly passing on the investment returns to smaller investors, we feel we will do well -- and at the same time, we will be doing a social good.

We will do our small part to make the world a better place by being effective stewards of the assets of society.