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Creative Destruction

Creative Destruction 2.2019 2.0.jpg

The image above is of 3100 West Lake Street - EPIQ Partners’ original address. The 496 square foot office we once occupied is a distant memory and in its place, a fancy, new apartment complex will be completed and open in about 12 months. Witnessing the demolition in progress stirred enough emotion to prompt a blog about our origins, observations since 2012, and what the future could bring.

Creative Destruction describes capitalism’s constant sorting of the best and highest use of capital. New and innovative ways of doing business arrive to displace old, less efficient models and though this can be painful in the short-term, over the long-term it improves productivity and keeps the economy moving forward. If you are not creative, challenging how you do things and looking to improve, the likelihood of falling behind increases. In modern parlance, the term ‘disruptor’ comes to mind.

For EPIQ, the physical destruction of our first office serves as an important reminder to keep being intentional and creative in what we do and how we do it. It is important that we continue to explore ways to differentiate ourselves from the hoards of providers that offer products targeting our partners’ capital.

From the beginning, we wanted to develop a partnership model that would provide an unparalleled level of alignment. We determined that a transparent, static, annual, retainer fee made a tremendous amount of sense. Several factors go into setting the fee (scope of the relationship, asset mix, number of accounts, number of expected meetings/calls, etc.), however, the result is that there is never any question about what is paid to EPIQ. This arrangement resonates with our partners.

Next, we maintain an investment philosophy that emphasizes areas where a measurable difference can be made and work to construct a ‘best-of-what-is-possible’ portfolio. In practice, this requires a great degree of care and humility. Large public markets (both equities and fixed income), though not always rational in the short-term, are extremely efficient. As such, we believe exposure to inexpensive, index funds have merit. Passive index funds are often found as a material part of EPIQ PRESERVATION, INCOME and APPRECIATION portfolios.

There are also areas of the investment universe the are less efficient and with proper perspective, insight, pricing and execution, rewarding returns can be achieved while limiting risk. We have determined our strengths to be:

-          Identification of high-quality businesses that should survive and thrive in the future regardless of ‘market’ conditions

-          Recognition of income producing positions that may not have a large natural buyer, resulting in attractive pricing

-          Prepared to do the necessary work and dive into non-public investments where, often, better opportunities and pricing exist

Meaningful customization results from a high degree of partnership and teamwork. Partners of EPIQ are clients of the entire firm and we communicate openly and effectively.  We incorporate long-term objectives, and take the time to understand and appreciate our client’s values, incorporating that into capital deployment.  

A potential pitfall often studied in behavioral finance (particularly amongst professional investors) is overconfidence: an exaggeration of one’s ability to successfully perform a task. Overconfidence manifests itself in portfolios as too much trading/turnover, which leads to high friction costs (taxes and commissions). We do our best to check this inclination at every opportunity.

Lastly, and perhaps our biggest ‘disruptors’ are the core purpose, values and culture we uphold each and every day. We believe it is these concepts that will make or break every organization.  Our core purpose is to invest wisely, improve lives and create opportunities by connecting people, ideas and capital. Our core values are authenticity, curiosity, partnership and empathy. And our culture is, well, EPIQ.

The office building at 3100 West Lake Street had a good run, however, the time has come for a higher and better use of the space. We are pleased that we found our new home a half mile to the east with a much better view. The point of this missive is to remind us all to stay sharp and avoid complacency. Investing is rarely easy. We constantly look forward by gleaning from what has happened in the past. Our aim is to stay true to who we are, striving for improvement and staying relevant and creative to avoid destruction.

Contact us to continue the conversation.  

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EPIQ Happenings

EPIQ growth – We are thrilled to welcome Mollie Grey to the EPIQ team as our Manager of Partnerships, Events, Operations and Administration. Mollie’s first day is February 25th.

EPIQ in the News - Bruce Langer was a guest on WCCO Radio to discuss the topic of investing in women-owned businesses. Click here to listen.

 

EPIQ Partners

 

Bruce Langer, CFA                           Daniel Aronson, CFA                       Ben Frey, CTP

Ben Frey