Our philosophy and investment process targets or seeks to emphasize capital preservation:

EFE sources its investment ideas first by identifying companies showing early signs of various forms of corporate restructuring, including announcements of succession planning, explorations of strategic alternatives, or changes to priorities in allocating shareholder capital. This screen is overlaid with ongoing assessments of both cyclical and structural trends within industries and the market’s recognition of these factors. After identifying companies EFE believes will benefit from company-specific initiatives and broader trends, the EFE considers the market’s current perception of these dynamics and the likelihood these factors will drive earnings growth and shareholder value over time.

For each company under consideration, historical, current and future cash flows are analyzed with an emphasis on measuring the company’s ability to generate excess free cash flow that it can deploy to fund growth or return to shareholders. EFE’s research process includes comprehensive primary industry research, extensive proprietary data gathering and analysis, and regular interviews with various industry participants. Company valuations, supported by extensive financial modeling across stressed, base case, and upside scenarios are reviewed regularly by senior Eos members.

Though EFE seeks to invest in balanced exposure across industries, the top ten holdings usually account for more than half of the net exposure. EFE takes a holistic approach to managing risk by seeking to invest in highly liquid securities with what we believe are defensible business models and strong balance sheets while also evaluating each position’s impact on EFE’s overall risk profile, liquidity, sector and geographic exposure. As part of its risk management strategy, EFE takes short positions in companies or indexes it believes will depreciate in value as companies earn declining returns on invested capital, experience balance sheet stress, and face incremental end-market headwinds the market has yet to appreciate. EFE does not use leverage and has historically maintained a conservative net market exposure of 70-95%.