What to look for in an investment?
As a global investment house it is important that we are always looking at new ways in which we can maximise our capital. We are constantly keeping our ears to the ground for new deals, and interesting investment opportunities all over the world. Whether it be coal mines, a football team or investing in a private venture, we will always take a similar approach to analysing the risks and advantages of each investment.
Most of our deals come via recommendations from our advisors or business associates and we receive at least 10 new investments/projects to look at on a monthly basis, so we are never short of ideas and opportunities.
The main factors we look at when considering an opportunity for co-investment or joint ventures are the individuals and/or management team involved, as these people will ultimately be responsible for the business being a success or a failure. What is their work ethic? What experience do they have? How much of their own cash are they investing? Are just some of the key questions we need to understand and be comfortable with at a macro level.
For investments that are direct acquisitions there are other considerations such as the price, performance of the market or sector, profit margins, risks inherent in the transaction (whether they are legal, market related, price related etc.). Deals have a tendency to change during the time of due diligence and even during the negotiation of the legal agreements. In light of this we have learned to keep an open mind on changes after a deal has been negotiated and agreed.
One of the advantages of having a varied portfolio of assets and investments is being diversified (which we touched upon in our 1st blog post). Centaur Asset Management is diversified across investments, sectors, regions, commodities, currencies, role (i.e advisory or principal), transaction structure, debt/equity ratios and project/investment life – which gives us a pretty broad appeal.
The other benefits are pretty straightforward, as diversification generally reduces investment risk. However, there are also times where diversification is not the best tactic, and concentration as opposed to diversification is preferred when we have decided commitment to a specific investment or sector is required. At Centaur we have the flexibility to be able to adopt the best strategy for the opportunity as we don’t have entrenched investment parameters in terms of exposure to an asset class or sector.
Centaur currently has a variety of products that can assist in diversifying portfolios, including a range of fixed income, and alternative investment vehicles.