Investment Approach

We are event-driven value investors.


Our approach is systematic, risk averse and event-driven. Our funds make debt and equity investments based on specific screening of corporate dislocation events, with a focus on cash flow generation and sustainable value creation.

Our process aims to identify the best risk/reward relationships within a company’s capital structure for long positions and the worst risk/reward relationships for short positions. We bring a disciplined, cash flow-oriented and credit-focused approach to investing across a given capital structure to achieve the best risk-adjusted return.
Vigilant risk management is a key component of our approach to creating long-term wealth.  Risk is managed through position size limits, options protection, market hedges and limits on leverage in our portfolio and our underlying investments.

 

Asset Classes

Event-driven Equities:

Our equity investments consist primarily of common stock of public companies in one or more of the following broad categories:

  • Event-driven situations: Equities of companies involved in corporate spinoffs, financial restructurings, recapitalizations, or forced seller situations.
  • Special situations: Equities of industries or companies where Gates Capital has a distinct competitive advantage from prior work or relationships.
  • Credit-focused equities: Equities where a company's cost of debt capital is significantly increasing or decreasing.
Credit:

We have an actively managed "total return" approach to credit. Our investments tend to be larger issues that are relatively senior in the capital structure with low equity risk and short duration.

  • Distressed Securities: Our investments in distressed securites consist of debt securities of companies that are generally senior or senior secured claims where, upon reorganization, our recovery would typically be a new debt instrument.
  • Bank Debt: We have an actively managed "total return" approach to our bank debt investments. These investments consist primarily of first lien positions.
Note that we typically do not invest in depletable energy, high technology companies, or banks and insurance companies.