Businessman Investor

Touching base with the rational business psyche of stock market investors

Wednesday, October 12, 2011

A Filipino Hedge Fund

Legally, our fund is a private investment firm organized as a limited partnership (wherein you are the limited capitalist partners, and I am, while also being a contributing capitalist partner, the designated general industrial partner) whose primary purpose is to invest in various investment instruments, particularly shares of corporate stocks, without acting as a dealer in securities.
This is Part 1 of a Series.

When I started that hedge fund which I first mentioned here, I wrote my partners a preliminary letter trying to state and address the operating principles behind the private investment partnership. Below is that letter which I would like to share to everyone. I come back reading it from time to time just to remind psyching myself into that rational business paradigm behind the stock market.

January 6, 2011

DEAR FELLOW PARTNERS:

While it is too early to talk about fund returns and performance, I write and send this letter (along attached financial reports) to ground-break our partnership’s investing operations—to start this capitalist tradition of wealth-consciousness, transparency, and passion for business-perspective investing.

Legally, our fund is a private investment firm organized as a limited partnership (wherein you are the limited capitalist partners, and I am, while also being a contributing capitalist partner, the designated general industrial partner) whose primary purpose is to invest in various investment instruments, particularly shares of corporate stocks, without acting as a dealer in securities. It essentially operates as a holding company having no trade or business but to buy and hold shares in businesses.

Despite possessing a separate juridical personality, the partnership serves but a mere conduit, with us, the partners, being the ultimate recipients and principals. We should therefore think of ourselves as part-owners of an investment vehicle whose pooled fund has been deployed in wealth-generating assets—that is, alive, real businesses (with financial and operational dilemmas), just the same as your family business, should you have one, or a profit-making venture which you have personally undertaken; the difference only being: in the partnership, we are purely passive investors and the businesses we invest in, with their respective able managements in place, run by themselves.

With this simple, convenient arrangement—easily overlooked or intentionally brushed off by other sophisticated market timers or traders—we are able to conservatively ride the success of growing, profitable enterprises with little or no participation at all in the nitty-gritty details of their operations; there is also no need to closely monitor daily price movements as one may initially perceive. We are investors bearing nothing but the intellectual challenge of capital allocation, passively benefiting from the economic appreciation of our chosen companies, and very mindful, instead, of their long-term sustainability and profitability as real businesses. Continue to Part 2: Business Perspective Attitude and Owner Mentality

2 comments:

  1. Very well written sir BI, I really enjoyed reading it! :D I also want to start my own hedge fund some day hehe, just wondering, what's the name of your Hedge fund? :)

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  2. Hey Kenny, thanks for dropping by and sorry it took me a long while to respond to your comment. I just moved-in here in Canada so you can just imagine all the adjustments I've been going through lately, hehehe... As for your question, let's just leave it to being anonymous (and I hope you'd respect that). As for starting a hedge fund locally there, it's still a bit risk afaik because of the fact there isn't really a clear legal framework set in the Philippines to facilitate the regulation of its operations. I started to realize this when I liquidated it.

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The information presented here is for educational purposes only. Under no circumstances should it be construed as a recommendation to buy, sell, or hold any stocks. If you choose to use this information, you do so at your own risk.

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