Exception Capital is a boutique investment firm based in London and Los Angeles. We spoke to Adrian Fairbourn about the firm and their innovative flagship fund, The Family Fund.
Exception Capital was born out of a family office structure, and as such our work revolves exclusively around the management of The Family Fund and ensuring we generate the best risk managed returns possible for investors.
Launched in 2012, the Family Fund is a unique global multi-strategy portfolio that is designed to mimic the asset allocation of a classic Family Office. As such the fund invests globally in public equities, private securities, direct lending structures as well as external niche alternative managers.
Diversified by geography, asset class and positions it has, since inception in Q3 2012, outperformed all benchmarks and indices but with lower volatilities and reduced correlations.
The fund seeks to uncover ‘below the radar’ investment opportunities which our competitors misprice, misunderstand, overlook, disregard or simply cannot access. Since inception the fund has appreciated over 51% and has average annualised returns of approximately 14%. In 2015 the fund returned an impressive 12.4%
We consider this fund to be completely unique product in the marketplace, as no one else as of yet has developed such a hybrid structure.
Another means by which we differentiate our business from that of our competitors is our strong returns. This business is a performance business and the risk-adjusted returns are how we are all measured against our peers and, where applicable, benchmarks.
As a company we stand out on all those measures, and our ability to consistently generate returns for our clients from multiple sources has been particularly satisfying over recent years. In Q4 of 2014 it was adding to oversold positions in the downturn that got us through a tough October; last summer we took one of our private positions public on the London market; in 2015 our basket of Argentinian ADR’s has produced excellent returns, as have our UK smaller company names and external managers.
With regards to risk we take a view that you have to take some degree of risk in order to create returns. We don’t put ourselves forward as risk-free as we would not be able to generate the returns we have if we were. However, we do operate robust risk management controls, the main driver of which is diversification of the portfolio by strategy, geography, number and size of positions. This strategy has proved very effective and provided us with minimal correlation with the markets.
The fund operates on a global basis and it is the team’s experience of living and working in Asia, Europe and the US and the networks developed that have come to bear on the portfolio.
The opportunities available within these markets provide us with an exciting challenge. When you have a global universe as your opportunity set it is important to develop the skill to rapidly cut the wheat from the chaff. Developing and maintaining networks, finding and researching opportunities and realising the value in those opportunities is what drives us.
This is reflected in our mission statement: "We aim to deliver consistent mid-teen returns with upside volatility supported by a corporate culture underpinned by integrity and trust." These principals pervade everything we do, and ensure that we are always on the best possible terms with our investors and delivering strong returns.
Moving forward we intend to continue with our current strategy. We have proved over a number of years that our repeatable process works and we will stick with that. The year ahead means more hard work finding and working on opportunities and turning those opportunities into hard performance numbers.
From a business perspective we will be looking to grow the assets under management and, in tandem, the infrastructure of the firm. I have sat across from too many hedge fund managers over the years with say $50m under management but with an all encompassing infrastructure – numerous analysts, a good sized office in an expensive part of town and multiple Bloomberg screens etc. A few poor months of performance and it becomes impossible to raise the AUM and as result, with those overheads, they soon go out of business. We have flipped that model on it’s head and I have always said I would grow the infrastructure as we grow the AUM. I consider this to be prudent business practice and it considerably de-risks an investment in the Family Fund. We are excited about building out our business over the course of 2016 and also for the opportunities we are seeing in the markets.
Company: Exception Capital LLP
Name: Adrian Fairbourn
Web Address: www.exceptioncapital.com