Finding Value in Today’s Market Environment

Where is the Value?

Investments with meaningful intrinsic value remain scarce with public markets still overvalued and a recent influx of volatility.

International public equities have had lackluster returns during the past five years while US markets appear to have stalled out as well over the past twelve months.

Our investment team continues to see pockets of value in both alternative private assets and select publicly-traded categories  (see public update below).

In several sectors,  private assets can still be purchased at significant discounts to their public market counterparts while also offering some recession-resilient characteristics.

Of course, due diligence for alternative investments can be complex, including both standard baseline questions as well as quantitative analytical assessments.

Outside of the many hours of due diligence on a fund’s operations, investment strategy, etc…… we have found that the biggest success factor may lie within the fund’s management team.

Management team background checks, site visits and reference checks have always been important steps in our process.

We have recently added steps to evaluate a potential management team’s character, transparency, accountability, ethics and integrity.

Even if the ship looks great… someone still has to sail it through good times and bad.

Public Investment Update

On the public side, we continue to position non-indexed portfolios as follows:

  • Lower-risk / lower-volatility equities (e.g. utilities, insurance)
  • Diversification into gold as a hedge against global currency depreciation
  • Select emerging markets with deep value (e.g. Hong Kong as it decouples from China)
  • Yield opportunities in real estate sectors

This conservative positioning results in a reduced beta for portfolios (e.g. lower volatility relative to public market indexes) and would be deemed as defensive.

Occasionally, we also receive signals to hedge our positions against volatility in tactical portfolios, with the objective of further blunting major potential declines.

While there have been periodic tremors (e.g. Q4/18), market participants appear to have forgotten that equities do indeed have dark periods.

As such, we are prepared for when those declines occur, and subsequently will be ready to pounce on lower valuation opportunities as they arise.

Private Investment Update

Our private program continues to grow and develop:

  • Continued consistent cash flows and payouts – among extensive market volatility
  • Strongly positive return profiles for both of LotusGroup’s homegrown offerings (see below for more info)
  • Addition of a Policy Underwriting Manager  to the LotusGroup Capital team

The majority of our client’s private investments continue to generate positive returns despite public market volatility.

For two that recently struggled, we have been working towards the launch of a mass-action lawsuit on one and continue to monitor a hopefully improving situation with the other.

Finally, our investment team recently finished up a site-visit in Portland and is planning to introduce our first private interval fund recommendation (private investing with improved liquidity).

 

LGA IncomePlus ($18.7MM Fund-of-Funds with final close date Sept 30th!)

IncomePlus Fund’s uncorrelated investment mix has continued to produce solid results in both up and down markets*:

  • Investment commitments are up to $18.7MM (more scale = better deal flow and lower overall costs).
  • We recently issued our fifth fully-covered quarterly distribution to investors
  • Additional NAV returns have posted above and beyond the distributions

IncomePlus is nearing its final close date Sept 30ththis will be your last chance to allocate funds.

*Please contact your LGA private client Advisor for a more detailed fund update or if you are interested in considering the final close.

LotusGroup Longevity Fund – “LLF” ($22MM Direct Life Settlements Fund)

LLF has sustained its initial success and continues to be a growing winner:
  • The $20 million Founder Share round was raised ahead of plan
  • Portfolio diversification targets are being met and purchase discount rates are above target
  • The fund has posted strong initial performance results*
  • We have launched the Investor Share class with lower $100K minimums

Please contact your LGA private client advisor for a more detailed 2-3 page update.

By |2019-09-03T13:14:59+00:00September 1st, 2019|Investment Strategy, Lotus Club|

About the Author:

Louis Frank