Plainly speaking, public equities bore investing elites and amateurs alike, both convinced there is more to be done and dollars to allocate in the clever and convoluted than the straightforward, liquid and historically compelling. With an ongoing record valuation gap between smaller and larger market capitalization peers, “growth” and “value”, and the unmistakable skew to cap-weighted equity and passive products in general, the dynamics are in place for regular periods of exaggerated market, and more importantly, stock-specific volatility down the cap spectrum.  

We believe there is substantial, de-correlated alpha to be delivered when investing at points of market, sector and/or company stress, without sacrificing the core tenets of capital discipline that defined the public investing careers of Royal Elk principals. Namely, a focus on improving ROIC and better articulating capital allocation priorities of high-quality underlying assets to drive improved market realization of minority equity value. This can be achieved by deploying significant capital (2-9% ownership positions) to draw appropriate management and Board-level attention to fresh and constructive engagement around financial, investor relations and/or internal operating issues.

Naturally, more cyclically-geared sectors and sub-sectors are more likely to lend themselves to the type of price and valuation disconnect that affords timely and attractive risk-reward dynamics. Royal Elk principals have spent careers in industrial, transportation, fintech, restaurants and retail end markets that have evidenced multiple periods of dislocation where more traditional, long-only 1940 Act fund structures can be more restricted from capturing maximum IRR cost and time efficiently. Royal Elk Capital is structured to address this opportunity for select partners.