“In principle, there are no bad companies, only bad prices. In other words: For every risk there is an appropriate return. However, we don’t have the right investment vehicle for every return profile available.”
Robus base investment selection on the following key values:
Risk-Return: Based on a holistic risk assessment (macro, market, company, legal / process), we ensure perceived risk is reflected in the asset’s running yield.
Relative value: In view of numerous investment opportunities at any given time, existing and potential investments are constantly compared on a risk-return basis. This ensures we only hold the “best” debt investments in our funds.
Valuation: Despite our focus on debt investments, an understanding of the enterprise value of the target companies is extremely important in order to understand the safety margin (“asset coverage”) of the company’s debt (“value approach”).
Investment thesis with multiple catalysts: In addition to outstanding risk-return profiles, triggers such as upcoming maturities, changes in ownership, or other legal / structural aspects like covenant breaches or rating upgrades are also taken into consideration.
“Robus is an active investor who puts an emphasis on detailed analysis and invests in particular in senior and secured instruments.”
The following aspects complete Robus’ investment philosophy:
Field research: In addition to on-site visits to companies and their production facilities, industrial and trade fairs are a frequent destination for Robus’ analysts.
Legal and structural analysis: To understand the risk of a debt investment, it is essential to understand the legal structure of the company and its cash flows as well as the legal provisions in the instruments’ issuing documentation.
Focus on senior and secured debt instruments: Debt capital ranks higher than equity capital, i.e. in the event of insolvency, senior and secured debt capital is serviced first, followed by subordinated creditors and the equity holders. Robus prefers the security aspect of debt instruments and investing at the top of the capital structure, as in the event of an unexpected development of the portfolio company, an agreement between management and the secured debtors must be reached. Furthermore, the recovery rates of secured debt instruments are significantly higher than those of subordinated securities.
Active investor: Any potential issue with covenants or interest payments in a portfolio company is discussed with its management teams. This way, possible remedies can be discussed at a very early stage.
“Our investment process is driven by deep due diligence and requires a rigorous analysis of investment opportunities and their underlying companies.”
The following points describe the key points of our investment process:
Market monitoring: Constant monitoring of the primary and secondary markets, the most important industries and industry trends as well as the companies on the shortlist.
Idea generation: Exploiting long-standing contacts with banks, brokers, lawyers and consultants as well as management teams to generate investment ideas.
Bottom-up due diligence: Establishment of detailed, integrated and forward-looking financial models with scenario analyses, discussions with industry experts, management and (where possible) with competitors, customers and suppliers.
Performing and Non-Performing Debt Investments: Robus generally offers two different strategies to investors across various collective investment funds: 1) Performing Debt with the main goal of generating yield income and 2) Distressed Debt with the main goal of achieving a going-concern turnaround with businesses.
“We believe that with complex products such as loan agreements, ‘more eyes’ can detect more stumbling blocks and therefore rely on consensus decisions via our Investment Committee.”
Additional aspects of our investment process are the following:
Multi-Lateralism: Robus is among the few debt funds to explicitly welcome co-investors in its financings and debt investments. However, Robus also manage closed-ended funds where Robus can hold 100% of an issue and acts as sole lender.
Portfolio company monitoring: Holistic industry monitoring, taking into account secondary market insights from brokers and banks about e.g. motivated sellers, constant updating of financial models and frequent meetings with management teams.
Exit: Strict sell discipline when the risk-return ratio becomes unattractive (i.e. the target price is reached because the return has fallen or the risk assessment has changed), creativity in exits when secondary markets do not allow an ‘easy’ exit.
Market agnostic: Robus is active in secondary markets and buys instruments at a discount to the nominal value or acts as anchor investor in primary market issues. The returns of our funds are driven by both interest income and capital gains.
“Statistical risk models does not really work with portfolios of less liquid credits – this is why our risk management builds on every single company in our portfolios.”
Robus closely monitors the investment risk on several levels:
Investment Committee: Unanimous decisions are taken in the Investment Committee on the basis of rigorous analysis and in-depth discussion.
Liquidity: Investments are mainly made in liquid instruments. If the risk-return profile is appropriate, smaller positions are also invested in less liquid instruments, provided the investment restrictions of the respective fund allow this. Additionally, Robus also manages closed-ended funds that don’t require any liquidity at all.
Diversification: The portfolios Robus manage are highly diversified. The average size of the instruments in the liquid Robus funds (in % of NAV) is between 1% and 2%.
Monitoring: The corporate development of the portfolio companies is followed very closely and the financial models prepared by Robus at the time of the investment decision are continuously updated. This makes it possible to identify and sensitize emerging trends such as declining profitability that leads to a reduced probability of a proper refinancing at maturity. Measures are taken as soon as there is a sustained shift in risk or return.
Hedging: In times of strong market distortions Robus will try to reduce the investment level of Robus funds as well as to use hedging strategies. The hedging concepts implemented include market indices. Robus does not short sell individual securities.
Robus Capital Management Limited
9 Percy Street
London W1T 1DL
t +44 203 7946 270
f +44 203 7946 269
Robus Capital Management Limited is authorized and regulated by the Financial Conduct Authority in the United Kingdom.
Robus Capital Management GmbH
Bockenheimer Landstr. 51-53
60325 Frankfurt am Main
t +49 69 6770 174 0
f +49 69 6770 174 59
Robus Capital Management GmbH is authorized and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in Germany
Please note that your calls to Robus Capital may be monitored and recorded.