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-- Posted Monday, 4 April 2011 | | Source: GoldSeek.com
Jared Sturdivant, portfolio manager and managing partner of O-Cap Management, LP, likes to find special-situation investment opportunities, which include companies that have "good assets and bad balance sheets." When he finds them, he digs deep to ascertain their value and looks for the catalyst that will turn them into attractive investment opportunities.
The Gold Report: Jared, welcome to your first interview with The Gold Report. Could you share how O-Cap Management works?
Jared Sturdivant: We are an investment fund, really a hybrid between private equity and a traditional hedge fund. We take a long-term approach to investing in public equities and pre-IPO private situations, as well as distressed debt or structured financings. Our investors have to be qualified.
TGR: Because you delve into private equity, do investors have to commit for a predefined period of time?
JS: Yes, we basically have a three- and five-year class. Generally, anything we own that is private is on its way to becoming public within 12 months or so; or in the case that it's a debt security, matures within roughly 24 months.
TGR: So, you don't commit to liquidate the fund at some future point?
JS: No. It's an open-ended fund structure.
TGR: How did you get interested in private equity?
JS: My background is in bankruptcy and distressed investments. When the world started melting down in 2008 and 2009, we saw a real opportunity to buy great assets ahead of what we thought would be the perfect storm for an inflationary environment down the road. We decided to focus on hard, tangible assets—metals and mining, energy, real estate and infrastructure.
A lot of the traditional folks who invest in public markets typically can't do illiquid investments. We wanted to structure a fund that could capture what we saw as a big part of the value chain, which is to own something that may be a little illiquid (quasi-private) or pre-IPO.
We also structure credit investments. A lot of times that involves structured, one-off financing that requires the ability to hold something illiquid. That's really how O-Cap has gotten to my areas of interest. I've always had a fascination with investing and kind of cut my teeth on the distressed side, where we looked at companies that may have great assets but a bad balance sheet.
TGR: One more question about private equity before we move on. Is the main advantage the fact that these firms don't have to report to investors every 12–13 weeks?
JS: Yes, it's a big advantage. When a company is public—for better or worse—Wall Street's always knocking on the door. It always has to be aware of what Wall Street is saying. They have to hold conference calls. Some public companies take on the burden of giving guidance, which is a bit of a distraction when it comes to running a business. We like it when we have great management teams that can really focus on operating assets instead of meeting the latest Wall Street estimates.
TGR: As I understand it, distressed opportunities could appear either as private or public equity. Do you have a favorite type of distressed asset?
JS: We love what we call "good assets, bad balance sheets" companies. When you restructure or recapitalize these companies, you can really garner a lot of value. You can right-size the company's balance sheet with its assets. We've seen, over time, that you can create a lot of economic value for shareholders. Part of it has to do with timing. We really like to be the last dollar or financing before a mining company moves from exploration to production and, therefore, self-funding.
TGR: Those are stories where you have to go in and create the value. Is that right?
JS: Yes. You buy deep-value assets that wouldn't have value if you weren't restructuring the balance sheet. But a big part of the value-creation process is how the debt is restructured.
TGR: Do you short stocks?
JS: We do short stocks. I'd say the predominance of what we do is long biased.
TGR: Do you use derivatives?
JS: We do a little bit. Not a whole lot.
TGR: What's the first thing you do when you're beginning to perform due diligence on a new company?
JS: When we come across a company that we think is interesting, we do a data dive. We read the 10K and the Q and read as much as we can about the company. We read all the analyst reports, and then we set up a call with the management team. That's our basic approach.
TGR: How often do you get to that point and realize you'd like to replace a company's management?
JS: Unfortunately, we do come to those situations. I'd say 10%–15% of the time you come across situations where management is sort of the issue. From that point, you have to decide whether to go ahead with a bad management team, try to effectuate change or pass.
TGR: You have a very interesting business model, Jared. I hope we get another opportunity to speak with you in the future.
Jared Sturdivant is portfolio manager and managing partner of O-Cap Management, LP, an opportunistic investment vehicle focused on special situations investing in both public and private markets. The firm has ownership interests in the U.S., Canada, Brazil and Western Europe, with a particular focus on hard-asset industries, including energy, metals and mining, infrastructure and real estate. Previously, Mr. Sturdivant was a managing director at JANA Partners, a multibillion-dollar investment fund, where he focused on global special situations and distressed investing. He graduated with a BA in finance from the University of Texas at Austin. Streetwise - The Gold Report is Copyright © 2011 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part. The Gold Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported. Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734. Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.
-- Posted Monday, 4 April 2011 | Digg This Article | Source: GoldSeek.com
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