How I Invest with David Weisburd
E114: Brockenbrough $4.3 Billion Investment Edge
Nov 22, 2024
Chris Dion, Co-Chief Investment Officer at Brockenbrough, shares insights from managing over $4 billion in assets. He discusses why small buyout funds often outperform larger ones, emphasizing the critical role of deal leaders. Chris explains the importance of a client-first approach and how operational focus enhances returns in shifting economic conditions. The conversation also covers the evolution of investment strategies, highlighting the growing interest in small buyouts and the benefits of tailored management practices.
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Quick takeaways
- Small buyouts provide superior risk-adjusted returns due to lower volatility, appealing pricing, and stable cash flows from predictable businesses.
- The success of larger endowments is driven by their access to alternative investments and strong relationships with high-quality fund managers.
Deep dives
Three Ways to Profit in Buyouts
There are three primary strategies to generate profits in buyout investments. The first involves growing the business itself by increasing revenues, EBITDA, and cash flow. The second strategy, which includes two avenues of multiple expansion, is partially out of the control of the general partner, specifically through the impact of decreasing interest rates on valuations. The controllable aspect of this strategy is professionalizing the business, enhancing growth rates, reducing customer concentration, and improving overall market appeal, all of which increase the business's attractiveness to potential buyers.
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