Altron Capital Management manages client investment portfolios with a focus on long-term capital appreciation. We are value investors who search global markets for investment opportunities that provide a margin of safety and strong potential for compounding returns. With backgrounds in private equity, we invest in public companies in the same way that we would invest in private companies by focusing on business fundamentals rather than day-to-day price movements.
Risk Management
While many market participants view price volatility as a primary measure of risk, we take a slightly different approach. We believe that volatility, while readily observable and measurable, is an inadequate measure of risk for long-term oriented investors. Rather, the difference between price paid for a security and its intrinsic value, also known as the “margin of safety,” is the primary determinant of risk to an investor. As any security will generally tend to trade toward its intrinsic value over time, the larger the margin of safety, the lower the risk to the investor.
We further manage investment risk by favoring the purchase of securities in exceptional businesses. A business that has a durable competitive advantage is likely to compound its earnings over the long-run, and an investment in such a business is likely to follow suit. Even if an investor overpays for an excellent business, downside is protected by earnings that are compounded over the long-term.
Our Process
With the “margin of safety” principle at the core of our investment philosophy, we search across geographies, industries, and market capitalizations for attractive investment opportunities that we can purchase at a sizable discount to our estimate of intrinsic value. While our investment universe is broad in scope, we narrow down opportunities to those that fall within our circle of competence. We must be able to understand a business in order to form a reasonable opinion on the long-term value of that business. As potential future owners, we conduct thorough due diligence on both quantitative and qualitative aspects of a business to obtain an understanding of future cash flows.
While we are not long-only investors, we strongly favor long equity investments where time is on our side. While we will occasionally invest in special situations or certain short opportunities, the barriers to making those types of investments are unusually high.
Fees
We believe a large portion of the investment management industry has divorced their fee structure from the interests of their clients by charging AUM-based management fees and performance fees that are primarily measured on short time frames. While these fee structures provide steady, recurring cash flows to the manager, investors can find themselves paying for subpar performance or paying fees to managers who are not providing long-term value to client portfolios.
We better align clients’ interests with the interests of portfolio managers by doing away with management fees for accredited investors. Our fees for accredited investors are solely performance oriented. We also implement a high water mark and annual hurdle rates for our client accounts, meaning that accredited investors will not have to pay for periods when low investment returns are achieved or when returns are simply recovering losses from previous periods.
Essentially we believe that investment managers should only be compensated when they add sufficient value to our clients’ investment portfolios over the long-term.
If you have questions about our approach or are interested in having a portion of your capital managed by Altron Capital Management, please contact us.