Rules-based Investing: Targeting Direct Investments

bullseye1Rules-based investing:
A “how to guide” for targeting & assessing direct investment opportunities

In previous whitepapers, we have discussed how family offices and high-net worth individuals should limit their direct investments to opportunities (e.g. industry, asset class, etc.) where they exhibit a comparative advantage.  In sticking to their proverbial ‘sweet spot’ investors are more likely to avoid poor outcomes and ultimately generate superior returns by proactively contributing to the value creation process rather than just writing checks.

While this message has resonated with investors, we have discovered that it is practically difficult to remain disciplined to prospective opportunities as they actually present themselves.  In fact, the search for the right deal can often feel a lot like the challenge of keeping a healthy diet in the face of your dessert of choice.  (Not an easy task, indeed.)  In light of this opportunity to improve self-restraint, we introduce an rules-based investment selection framework to help investors keep their “eye on the prize.”   Specifically, we present herein a cost effective mechanism for screening out investments outside of your sweet spot, while still preserving the flexibility to capitalize upon opportunistic deals.

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