We believe in cycles – in credit, in countries, in sectors
thus our diversification across each.
Investors often desire liquidity, even if it’s fictional. In general, we believe that liquid assets are efficient priced and therefore it is hard to make an outsized return investing in them. The desire for liquidity also leads to poor investment structures that lead to asset liability mismatches and distress for companies and lender who raise capital in misaligned structures. Terra Incongita seeks to avoid these asset liability mismatches and also take advantage of opportunities created when other lenders and borrowers enter into such structures, yet have robust underlying businesses.
Phases of the Credit Cycle
Even in global crisis not every country is at the same place on the credit cycle. By not being overly focused in one geography or sector, Terra Incognita is not only able to take advantage of stable markets but also markets in dislocation to enhance returns for its investors. Lending isn’t something new, therefore we value rigorous process, improvement and integration over being on the bleeding edge of innovation. Technology may change, but often regulation and courts lag. We seek to lend to firms who take advantage of the latest innovations in technology, but also understand where technology intersects with the law, particularly when it comes to risk mitigation and loss reduction. me. It's easy.
Look for biases and desires
that create inefficiencies
Misperception of risk, created by out-of-date market information or unfamiliarity of structures that can be used to mitigate that risk leave open opportunities. Changes in regulation and technology are often the catalyst for a change in the underlying assumptions investors use when evaluating opportunities. We monitor and re-evaluate markets and opportunities when we see regulation and technological changes that can lead to catalytic change. At TI our seasoned investment professionals will look for confirmation of their theories of how changes have affected the market. Our belief is you don’t have to always catch the first wave to benefit from regulatory or other catalysts.
Operate where there are
few competitors and
high barriers to entry
So much of the investment world today is focused on the exact opposite of what you learn in business school. They focus on opportunities with low barriers to entry, many competitors and almost no pricing power all because of the desire for scale. We invest in developed and emerging markets for a reason. We learn lessons from how technology and regulatory changes effected each markets development and applied these lessons new geographies and sectors.
We believe in analyzing data to determine the risk of a loan or investment. However, data is not enough. Understanding risk is about testing your assumptions and ask WHY the data is leading you to a certain conclusion. One must always ask what else is going on that could cause your analysis, based on historical data, to be flawed.