We grow our wealth by participating in the long-term success of great businesses.
Fratres is the investment advisor of our public and private investments. We invest in teams and businesses we respect and focus on high-quality companies that are leveraged to the future
The best businesses have a long runway of growth ahead, generate superior returns, and increase their moat. Our investments have strong technology at their core. We are attracted to businesses that appear to have a high price. We think the valuation is fair because various qualitative factors drive the earnings power.
Great businesses can generate most of their value after the public offering. We have an advantage over many private equity and venture funds because we are not forced to sell our winners and have the opportunity to react if prices swing widely based on sentiment.
Guardian Private Investments
Our personal interest in technology and friendships with people working at the frontier of machine learning have led to several private investments in young talented teams. We co-founded these businesses and support the entrepreneurs with strategic, financial, legal, and fiscal decisions and encourage the teams to make bold bets. We give our Guardian Fund investors the opportunity to co-invest with us in these exciting ventures.
A Strong History of Growing Your Capital
What is a realistic average return?
You can expect an average annual return of about 6% by owning a S&P 500 index fund.
What is our personal opportunity cost of capital?
We view Berkshire Hathaway as the superior index. Investors can realistically expect its intrinsic value to compound at around 8-9% per year for the next decade or two. Any commitment needs to have a significantly better risk-adjusted return than what one can get without doing any work.
What investors do we respect?
There are a few investors we would entrust our private capital. Some are our peers with whom we share ideas. Some of our businesses are led by people who have a better track record than us of allocating capital. For example, Brad Jacobs at XPO Logistics or John Malone at the Liberty companies. Both are billionaires. We are still on our way.
Is this a good time to invest?
We like to think that it’s never a good time to invest. It’s never easy and one always has to own the right businesses. The valuations of the companies we own range from fair to attractive. We are fully invested because we like the expected returns.
Do we diversify?
Usually we own around ten to fifteen businesses. It is not our job to manage volatility. Market volatility declines proportionate to the square root of the number of positions you have. Owning four positions gives half the benefit of having an infinite number of positions. We only care about a permanent loss of capital.
What has been our biggest mistake?
Selling ownership of our best performing companies because the valuation looked somewhat rich.
How do we select investors?
It’s a priority to keep the quality of our partnership high. Therefore, we only admit investors who understand that our wealth grows because the value of the businesses we co-own increases over time. Our investors are individuals, families, and endowments.