Special situation investing can be a complex and challenging investment strategy. The Principals at Drum Capital believe that a sector-focused allocation approach, managed by industry specialists, is the most effective way for investors to capture returns in a largely inefficient market. Drum Capital seeks to capture these deep value opportunities by:
- Sourcing, underwriting and driving value in direct and co-investment opportunities in operating businesses through a deep value-focused strategy; and
- Building a portfolio of managers who deliver strong returns through turnaround and special situation investments
Key Tenets of our Investment Philosophy are:
Drum Capital employs a specialized team of lower middle market operators with extensive experience in special situation investing. A strong understanding of capital structures, asset collateral value and properly identifying strategies most appropriate for a given economic cycle are essential attributes to create value.
We focus exclusively on deep value opportunities in the lower middle market, including special situations and operational restructuring opportunities. Our emphasis on these strategies provides access to direct equity and co-investment deal flow as well as visibility into a wide network of managers, and ensures our investors maintain consistent portfolio exposure to value-oriented investment strategies.
Risk Mitigation Through Diversification
Drum Capital’s portfolio construction centers on maximizing returns while mitigating risk. Our investment team constructs a diversified portfolio of direct equity, co-investments, and fund exposures representing a cross-section of special situation investment strategies. These value-orientated investments are often market neutral or counter-cyclical to the strength of the domestic economy and provide lower correlation to traditional asset classes and other alternative strategies.
Drum Capital employs a comprehensive screening process that considers both quantitative and qualitative metrics when assessing individual investments, taking into account investment-specific performance, stress-tested scenario analysis, track record and assessed levels of risk, as well as overall fit within the fund or separate account. Drum Capital’s goal is to add value by thoughtfully constructing diversified portfolios by making select investments direct company investment opportunities, co-investments, and in promising managers.
We seek to generate strong, broad-based performance across the portfolio through deep, detailed research and fundamental investment analysis. We seek asymmetric risk and return profiles, where our downside can be limited, with significant upside and a high likelihood of out-performance.