ESG: A Data-Driven Definition
A company is not creditworthy if it is behaving in a way that is not long-term sustainable for its business. Especially within credit, every company is dependent on its access to capital markets. If a management team puts future capital raising at risk because it behaves irresponsibly and sets the stage for unexpected liabilities down the road, we believe that is likely to be disqualifying behavior. In this way, we don’t view success as a binary battle between “good” vs. “bad.” We define success the same way we always have as fundamental investors – mitigating risk without compromising performance.
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Just Because You Can Doesn’t Mean You Should
Everywhere we turn, we seem to be faced with behavior which models: If you can get away with it, you should do it. This amoral acorn doesn’t fall far from the Machiavellian oak tree, which extolls that the ends justify the means. Moreover, we don’t just see this behavior modeled; it seems to be deliberate much of the time. While there are investors who send this “win at all costs” message to their managers intentionally, we believe the conventional wisdoms and traditional methods of asset allocation may be inadvertently and erroneously making this a rule of the markets. The hardest thing for a manager to do in today’s investing environment is to stay disciplined. This discussion is for that subset of investors who care about risk and reward.
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History In The Making
Can we learn from history? Or has the past just set the table for what’s to come? Is the future determined by the past? Or are the two unrelated? We suggest that the answer to all of these questions is yes.
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Tailored Brands: A Casualty Of Covid
Retail companies don’t usually find themselves in the advantageous liquidity position that Tailored Brands, the largest specialty menswear retailer in the United States, had at the start of 2020. Then COVID-19 changed everything in an instant. What follows is a transparent and open reflection of this specific situation; what we have learned so far; and how we are thinking about and positioning in the current environment.
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