Investment Strategy
Investment philosophy
Babcock & Brown will only make an investment after rigorous research and analysis, appropriate structuring to mitigate risk and optimise financing, and the identification of a comfortable margin of safety between the investment price and intrinsic value. Return hurdles for investments are risk-adjusted, taking full account of the downside risk and liquidity of any investment situation as well as Babcock & Brown's ability to enhance the return in the future.
In principal investment activities, Babcock & Brown has a mindset of treating its investors' capital as if it were its own. Babcock & Brown Executives continue to be significant investors alongside the Group's clients in its transactions and investment products, deploying their personal capital on the same terms as other third-party investors. This mindset underpins Babcock & Brown's investment philosophy.
Identifying investments
Babcock & Brown uses its capital across its four operating divisions to generate investment returns, to secure assets for its investment-management activities and to co-invest with its clients.
Babcock & Brown generally seeks to identify investments that it believes have some or all of the following characteristics:
- Within the areas of expertise and experience of Babcock & Brown's Business Groups
- Mispriced or undervalued in their market
- Predictable cashflows and/or asset values
- Value can be added through more efficient financing, more active management and/or strategic repositioning
- In sectors in which Babcock & Brown has developed relationships with strong management teams and other operating partners
- Risk can be mitigated through appropriate financial, legal, tax and accounting structures
- Significant opportunities for financial and structural optimisation
Babcock & Brown frequently invests in opportunities originated from its longstanding relationship network. It is also prepared to acquire interests in listed vehicles where it believes there is inherent value that can be added or is not recognised by the public markets.
Babcock & Brown's key investment criterion is that the proposed investment meets risk-adjusted return hurdles that are determined by taking into account all identified downside risks and the liquidity and potential return of the investment.