About
When we started working together in the commodity division of Bear Stearns, little did we know that the financial industry would go through an existential crisis within three years. Our experience at Wall Street banks through the Global Financial Crisis did as much to educate us and frame our investing philosophy as the regular boom/bust cycles we experienced in the commodity markets. As our careers in finance & commodities advanced, we kept in place a commitment to develop and analyze investment ideas, help each other solve business challenges, and stay friends. We formed Esoterica to build a structured platform to invest our proprietary capital in the public markets according to the following shared principles for portfolio management, risk management, and asset selection.
Portfolio Management
- Objective is maximum compound growth.
- Measure performance on an absolute return basis rather than relative to indexes.
- Target identifiable paths to high payouts realizable in cash over a reasonable time horizon.
- Make loss avoidance first priority due to disproportionate impact of losses on compound growth.
Risk Management
- Invert loss avoidance from a defensive to offensive strategy through tail risk hedging.
- Highest quality assets are available at lowest prices during crises. Perfect timing is intractable, but tail risk insurance provides excess liquidity precisely when the opportunity set is largest.
Asset Selection
- Leverage our experience in the commodity & finance sectors and apply that skill set to other industries as appropriate.
- Distressed and special situations often exhibit the investment characteristics we seek; limited downside, high return paths, and identifiable cash realization.
- Scan for opportunities encumbered by complex business structures, legal or regulatory issues.
- Examine headline grabbing situations for unconventional sources of deep value such as mispriced event probabilities and bets against outcomes priced for path certainty.