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What We Do

Manifesto

Invest in companies with solid growth potential either start-up or mature. Find opportunities through a multi-layered, 3 person due diligence team. Diversify our portfolio among sectors of the economy, stages of companies growth, time durations, and risk to reward ratios. Support our ecosystems current portfolio companies through capital raising, revenue growth, and valuable introductions within our network.

Our core belief in investment management and research is to adapt to financial markets by leveraging technology, research, and risk management. This can be maintained by stayed true to a few very important investing rules.

1. Liquidity:

Trumping all portfolio management rules is liquidity. Cash levels maintained equal 10-40% of portfolio. This allows us to take advantage of market dislocations that come about unexpectedly, while also allowing us to exit positions smoothly. Private Investments must be laddered properly. We work to understand the timing of liquidity events and the importance of dividends, allowing cash flows from these investments to be consistent and more predictable.

2. Technical Analysis:

Technical Analysis shows the daily phycology of investors and institutions. We use this analysis to predict upside and downside potential alike, and give glances to nearly all barometers of a markets. This gives us granular analysis throughout global markets. Adapting to new markets requires strong technical research. As high frequency and program trading take over, the relevancy of chart analysis is more important than fundamental analysis. The fundamentals of a company reflect in a chart regardless. This can hold true in the private markets if numbers are extracted properly. Investing in private markets must be done by using not only fundamental analysis, but phycology as well. That said, daily companies in the private market are using big data to extract useful technical analysis in business trends, revenue trends, etc.

3. Time risk:

The risk of time is the single most important variable in trading securities. Even in private markets, time risk is absolutely crucial. How long can a start-up maintain there burn before they run out of money? Public markets suffer from time as well. Duration is talked about in bonds but not in the equity markets. Imagine all of the things that could happen to each security or the market as a whole on any given day, month or year. There is too many variables that can affect the markets and particular companies, to not pay attention to time value and time risk. This is one reason why we favor private equity, as their is little perceived volatility and intervention by systematic trading and unfair operational standards.

4. Reduction of volatility drag:

Avoid losing money on an intra-day, daily, monthly, or yearly basis. We would rather take smaller profits to compound our portfolio than hit for home runs. In private markets, spreading your risk from stronger cash flow companies to early stage companies help reduce volatility.

5. Dislocations:

Dislocations among markets and companies are always out there and very mis-priced because of brand powering or unforeseen earnings potential. These opportunities need to be exploited.

6. Psychology:

A asset manager must understand their ability to manage the size of each position and understand how the size effects your emotions and abilities to make choices going forward. This same thought process goes for the type of security, the risk of a security, and the leverage used. Everything aspect of investing changes the investors psychology.

7. Market Heartbeat:

The market heartbeat can be felt if you are an avid ‘tape watcher’. It is important to feel the movement of stocks and the intraday buy and sell programs that can help predict future prices. “Tape Watching” also allows for first mover advantages when mispricing and mistakes occur in the markets. G&B watches the market like a hawk. On a micro level, visiting companies and getting a hands on feeling of the management and energy amongst employees is crucial to understanding your investment. It is like feeling a pulse. We visit all our private investments often.

Management and Advisory Power:

The power of having proven successful entrepreneurs and powerful investors in deals in priceless. Investing in companies that have proven managers is crucial to success. This may not always hold true but understanding deeply who will execute an investment is vital. Powerful investors can make phone calls that help in various ways for a company, offer advice, and find more powerful investors to come along for a success story.

Risk Strategies

G&B aims to generate superior risk-adjusted returns and exceed expectations in any market for our families. We believe, as market history has shown time and again, that by mitigating losses sustainable returns are achieved.

Focusing on allocation of risk, usually defined as volatility, rather than allocation of capital can help achieve higher Sharpe ratios, and make an investment more resistant to market downturns than traditional portfolios.

When trading, we place controls on our actions that use quants, systematic, and algorithmic trading. Generally we allocate capital towards private companies with innovation and growth potential.

Our mantra is not akin to traditional financial advisors. We believe that missing the worst days in market far outweighs the importance of capturing the best ones.

Investment research driven by emotion is risky and can lead to a bad investment. G&B takes a systematic, program-assisted approach to investments involving both value and momentum factors applied to various asset classes. Our 3 person multi layered due diligence allows for emotion to take a side step.

  • VOLATILITY DRAG
  • Time Risk
  • TECHNOLOGY RISK
  • General Risks

WHAT IS VOLATILITY DRAG?

Suppose you have a $100,000 portfolio that experiences a -15% return this month and a 15% rebound next month. The easy math is that your average return is zero. The painful math is that your portfolio went down to $85,000 with the 15% drop and then rebounded to $97,750 with the 15% rebound. Meet Volatility Drag, the $2250 loss you incurred from having your portfolio drop 15% and then rebound 15%, while having an average return of zero.

Or in the opposite simple example, if you gained 100% the first month followed by negative 50% you would have an apparent average gain of 25%, but the wealth compounded is actually zero.

Volatility occurs throughout the year, month, day, minute, and even second. All of the fluctuations in price create volatility. These price fluctuations create a continual drag on your portfolio growth: the difference between the average return of your portfolio and the rate at which your wealth compounds.

What is volatility doing to my portfolio?

For simplicity, if you assume that your average return is zero, volatility drag represents the rate at which your wealth dissipates. The example above is an intuitively simple way to grasp volatility drag, but the dynamics are more complicated,the amount of wealth destruction for different levels of volatility.
As volatility increases, the drag imposed by volatility accelerates , making it more destructive at higher volatility levels.

What can I do about volatility drag?

Given the implications of volatility on the growth of your wealth, you are likely wondering how to mitigate this drag. The simple answer is to avoid high levels of volatility. Portfolio volatility is determined by the volatility of the assets held in the portfolio and their correlation to one another. By measuring volatility and correlation, you can position your portfolio to maintain a desired volatility level.

When you position your portfolio more conservatively, such as including more fixed income than equity, you may give up some additional forecasted performance, because higher risk assets generally have higher expected returns. But you need to determine whether the additional expected return will compensate for the additional drag. In the current environment, you need an additional 5.8% in expected return to justify the increase from 14% volatility to 37% volatility. That’s a lot to expect.

G&B believes that time is one of the biggest functions of risk. We are in a continuous state of tactical and strategic rebalancing. The underlying strategies are diverse and exploit a variety of opportunities, the over ridding objective being absolute returns.

GB_CHART_TIME_RISKS

The reduction of time risk is vital in modern portfolio management. Time risk exists in every security and should be at the top of a portfolio manager’s mind.  This counts in trading or investing in public securities as well as the private markets. You always want to be able to understand your exit time table, and what time can do to your investments.

Avoiding time risk takes a dedicated approach involving strong technical analysis and constant monitoring of the markets. In a nutshell, given all the events that can occur in a flash of a second, it is necessary to constantly monitor the markets tick by tick in order to reduce unforeseen risks. The flash crash is a perfect example where time risk proves its relevance.

We like private equity because things like a flash crash cannot occur. But understanding liquidity events in Private Equity makes time more important than ever. This is probably the single toughest variable in Private Equity, so we focus on exit strategies and management teams that know how to execute.

GB TECHNOLOGY RISK CHART

Technology helps reduce risk in several capacities. Technology is fabulous from a sheer ability to monitor markets moving in fractions of a second, from your iPhone or your Work Station. Technology also gives us the ability to place conditional orders, allowing G&B to capture securities at certain prices, exit positions at specific prices, all without letting emotions take charge and without buying and selling at improper points. Cloud infrastructure is another benefit that reduces technology risk. G&B’s information is backed up on several secure clouds and our trading systems have both direct plug in and cloud connections allow for superior flexibility. Our systems allow for low latency trading to get the best trade execution for our clients.

GB_CHART_GENERAL_RISKS

Investment risk comes in many forms, and each can be used as a tool in pursuing your financial goals. The key to dealing with investment risk is learning how to manage it. Many risks present great investment opportunities.

  • Market risk is the likelihood that a security’s value will move in tandem with its overall market.
  • Interest-rate risk is the risk that the price of a bond or the price of a bond fund will fall with rising interest rates.
  • Inflation risk is the chance that the purchasing power of an investment will be eroded by inflation.
  • Credit risk comes into play with bonds and bond funds. It refers to a bond issuer’s ability to repay its debt as promised when the bond matures.
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