KG Funds manages a high conviction, best ideas equities portfolio that looks to generate alpha over the long-term by focusing on companies with high quality businesses and/or assets, trading at material discounts to their intrinsic values. We seek out companies that have the potential to generate higher rates of return than their peers and the market, without the material use of leverage.
We concentrate on companies that we believe can compound returns at 20% per annum or greater, given our entry prices to the stocks, and by taking a three-to-five year view on achieving these returns. Also, we look to identify and short companies with poor quality businesses and/or assets, where investors are likely to generate little or no return over a multi-year holding period but where the marketplace valuation indicates rapid and sustained growth over many years.
Our risk management protocol includes excluding particular industries from our investable universe, and sizing each investment so that, during our expected holding period, it should not cost the portfolio more than 1%.