INVESTMENT PHILOSOPHY

At Cervantes Capital, we have a fundamental approach to investing. Due to the general short-term focus of investment banks and market participants, we believe a long-term view on value creation will help achieve excess investment returns. The main objective of our investment process is to create strong risk-adjusted returns for the assets we manage. As we invest for the long-term, we do not consider the volatility of returns to be a good measure of risk. Our definition of risk is rather the risk of permanent loss of capital, which is mitigated by our extensive research before entering a position, and through monitoring the performance of an investment over time. 

Returns may be lumpy due to idiosyncratic events and catalysts. Our long-term focus and willingness to exploit liquidity and time-arbitrage may lead to negative results in the short term. But we strive to think outside of the box and will always endeavour to do our own research.

Cervantes’ research process is focused on finding fundamentally undervalued companies with a clear potential for growth in earnings and cash flow at a high return on invested capital. Hence, we ignore marginal news flow and do not have a view on the economic cycle or the general investor sentiment.

We always intend to be long-term owners and want to grow together with our portfolio companies. In some instances, we may assess that a company needs to change its communication to investors or take other strategic measures in order to unlock value. Cervantes may then work actively and constructively with the company and its management team to benefit shareholders and other stakeholders in the long term.