At DaVinci, we feel combining traditional with alternative investments is the most prudent way to achieve our exposure objective.
We manage five distinctly different strategies, usually through a pool. We customize portfolios for each of our clients by combining the appropriate allocation of each of the strategies/pools based on the client's risk rating.
Asset Classes Managed by DaVinci
DaVinci Capital North American Large Cap Fund
Through the DaVinci Capital North American Large Cap Fund, DaVinci will invest in shares of publicly listed companies that have obtained a market capitalization of $1 billion and up. The focus is on US and Canadian businesses that generate above average cash flow returns on their deployed capital. The fund aims to diversify across different industry sectors and businesses, with approximately 15 to 25 names in the fund at different times generating dividend income and capital appreciation. No single position will make up more than 10% of the portfolio based on cost. The fund will not use leverage and will not enter into short positions, and will not use derivatives, other than to periodically hedge its foreign currency exposure at the discretion of DaVinci.
DaVinci Capital Alternative Income Fund
Through the DaVinci Alternative Income Fund, DaVinci takes participating interests in private real estate and mortgages across Canada and the United States. The mortgages are a combination of Firsts, Subordinated Firsts, and Seconds, and have a typical loan to value ratio of 50-75%. Yields typically range from 8 to 14% annualized. These are not sub-prime mortgages, but instead tend to be high quality situations that are non-standard in terms of traditional bank financing. We are often lending to seasoned real estate owners/developers who put up their substantial personal net worth as a guarantee.
On the real estate side, we typically look for special situations where a property is substantially undervalued, and there is a management team and a plan in place to unlock that value and realize on the investment in the short to medium term. A current cash yield is also a typical criteria for investment.
In the case of either mortgages or real estate, DaVinci only deals with Institutional grade originators.
DaVinci Capital Private Opportunities Fund
Through DaVinci's Private Opportunities Fund, DaVinci invests in private equity, infrastructure, various hedge funds and other alternative strategies that are not correlated to the fixed income and equity markets. Hedge funds cover a very broad area of the investment spectrum from strategies that are fully hedged to movements in the underlying market, to strategies that place highly leveraged directional bets. We are focused on strategies that for the most part, are not correlated to the markets in general. Although not as intuitive as some of the other strategies, there is an opportunity to access investments with a high return-low risk profile. The pool also allows to access investments outside of Canada and with high minimum amounts that would not normally be available to retail clients. We think that adding these strategies to DaVinci's other investment strategies will lower portfolio volatility by adding diversification.
DaVinci Capital Private Debt Fund
Through the DaVinci Private Debt Fund pool, DaVinci makes direct asset backed loans to private small and medium sized companies. These loans are short term, usually 6 weeks to 12 months, and are in first position and are fully secured by the assets of the company, which are typically receivables, inventory, equipment, tax credits etc. It is also typical to have a GSA against the company, as well as having a second position against any corporate owned real estate, and personal guarantees from the principal shareholders/managers. These loans carry a high coupon, usually 11-14%, as well as up front and discharge fees. Like the private mortgages, these are not sub-prime loans, but rather "special sits" where the company's situation does not fit with traditional bank financing. The landscape in Canada is particularly ripe for this lending activity, especially in the sub-$5 million loan size, which is too small for traditional banks.