Investment Strategy
Our Investment Philosophy
We have always taken an idiosyncratic approach to investing, and finding opportunity well off the beaten path is a primary driver of capital deployment. We seek to benefit from our size and scope, sourcing and sifting through a great many prospective opportunities to find the ones with the best risk-adjusted returns. We are decidedly not trying to buy the hottest high-flyers hoping they will continue to soar. Rather, we are always anchored to valuation and focused on business fundamentals, attempting to make investments that will earn good returns across a wide spectrum of future market and economic scenarios. We strive to safely grow client capital over the next three to five years, not next week or next quarter. Our experience is that opportunity regularly migrates across markets, industries, and geographies, as capital flows inflate the prices of some investments while leaving others orphaned. To navigate the natural evolution of markets, we employ an investment approach that is fixed in its general principles yet flexible in its implementation. Our portfolio is painted with a wide palette. Sometimes, this means originating an urgently needed, well-covered financing at a compelling yield. Other times, we come across a mispriced stock (sometimes catalyzed, sometimes not), an attractive private equity.
Our approach to value investing is to search for mispricing. Mispricing can exist for many reasons, including situational complexity, institutional constraints, investor error or irrationality, short-term disappointments, disparate time horizons, the urgent unwinding of leverage, turmoil driven by financial distress, and investor indifference or neglect.
Both the public and private markets have generally become more competitive over the years. And yet, both hold the prospect of significant mispricing that investors can uncover if they are patient, disciplined, relentlessly curious, and agile. Many investors, by charter or regulation, can invest only within narrow silos and thus are unable to view opportunity from a sufficiently wide lens.
Finding value in today’s market, as is often the case, involves a combination of factors: knowing where to look, moving quickly, operating with a flexible investment mandate, having the ability to take the long view, and possessing the legal and negotiating skills to structure investments to meet the particular requirements of a counter-party. Creative structuring may provide us with significant one-way optionality, enabling us to maintain exposure to most or all of the upside of an investment with far less exposure to the downside. Our nimble investment process lets us act rapidly; we can swiftly close transactions of virtually any type or size. We can provide debt or equity capital, or both. We can take control of a business or hold a minority stake.
We strive to achieve
PROTECTION
LIQUIDITY
STRONG YIELD
PREDICTABLE PERFORMANCE
Private Credit
Bay Point is primarily a Private Debt issuer. Private Debt (Private Credit) is an asset class that commonly involves non-bank institutions making loans to private companies based on cash flows of the respective business, hard assets, or acquiring loans on the secondary market.
Since the global financial crisis, private debt has received increased attention and growth for a variety of reasons, not the least of which include an ongoing low interest rate environment, elevated equity valuations, and investors seeking diversification as well as yield enhancement to traditional listed fixed income. Private Credit consistently ranks in the highest return generating asset classes, while giving investors far more downside security than other divisions of the economy.
Structural changes in the financial services industry since the global financial crisis have generated demand for non-bank loans. Although banks still dominate corporate lending, they have pulled back from the lower end of the middle market, reducing their exposure to these loans in response to industry consolidation and increased regulation.
Bay Point maintains the highest lending standards, well-developed lending relationships and sourcing channels, and manages portfolio risk with intricately structured investments.