Private Equity Approach

“We want to know how much cash is coming back to investors, how predictable that cash flow is going to be and how would I value that relative to the risk-free rate of return. So we’re trying to look at a business as you would look at a bond or as a private equity investor might look at a private entity.” Chris Mittleman

“We have often described our strategy as the implementation of a private equity approach to the public markets – with nearly all of the control-oriented benefits of private equity without the negatives, i.e., the requirement to pay large premiums for control, the necessity of using large amount of leverage in order to win competitive auctions, and the inherent illiquidity of private investments.”  Bill Ackman

“In many ways, our approach is more comparable to how private equity (PE) invests than to the strategies of most public equity managers. Southeastern’s similarities to PE start with the basic view that we own businesses, not tradeable pieces of paper. We concentrate in our best ideas and, as a result of our deep dive research and engagement, know our companies intimately and work closely alongside our management partners. What we own is based on the bottom up fundamentals of a business without regard to the sectors or countries that are in a market index. We underwrite our appraisals in the same manner as PE, using discounted FCF and sum-of-the-parts valuations-calculations based on in-depth research that includes knowledge of competitors, key suppliers, major customers and company management. We own companies where we believe that the value will grow over the minimum 3-5 year time horizon we have for being owners.” South-Eastern Asset Managment

“A private-equity approach focuses on how business values could change over several years. That’s a very different way of thinking from most investors who are trying to outguess each other on next quarter’s or next year’s earnings. We try to apply a private-equity approach to public-equity investing.” Bill Nygren

“Our edge is to look at our investments as a private equity investor would. The beauty of private equity is that people don’t get a price on it every day, quarter, or even year. The value of the investment is looked at over a 3‐7 year period of time when the investment is monetized. Then the manager reports that they made you an acceptable rate of return and everyone is happy. In between, you are not seeing the price go up and down.” Stephen Errico