Our Perspective | COVID

May 14, 2020

One of Bayshore’s founding principles is to be nimble and ahead of the herd. That does not change even in the most extraordinary circumstances like we are experiencing today with COVID. As masters of the “pivot,” we adapt and move forward.

As we navigate this together and send our best wishes for every person’s health and safety, we want to express our commitment to keeping you informed and empowered with the knowledge to keep investing for the long term.

Below is a quick interview with our Chief Executive Officer, Tready Smith, and Chief Investment Officer, Patrick Stutz, detailing Bayshore’s outlook for weathering the storm. Please do not hesitate to reach out to us. We welcome the opportunity for partnership during this unprecedented time in history.

1. Can you briefly describe the measures that Bayshore has taken in response to the COVID pandemic thus far? How is Bayshore ensuring that operations continue at the same high level as it did before the COVID outbreak?

Patrick: With the opening of our London office in 2016, the use of technology became central to the way we operate on a daily basis. We have been working with the tools that many companies are just now adopting for years. Video conferencing via Zoom and inter-office collaboration via Slack are how we conduct business daily anyway, therefore our internal communication has not changed at all since the outbreak. To me, this pandemic has necessitated adoption of these tools by others, which allows all of us to be more efficient.

Tready: We are most concerned about our most valuable asset as a firm: our people. We closed the office when appropriate but have already reopened as our offices are well equipped to handle the social distancing guidelines.

I believe that we will all benefit ultimately from the switch to online communication. It is an efficient tool to stay close to people—more efficient than jumping on a plane. Everyone in financial services is very technologically savvy, so it was not hard for the industry to switch online.

2. How are the funds poised to weather the storm? How are we managing this differently than the 2008/2009 financial crisis?

Patrick: For the last three years, we have expected a reset in the markets. We challenged every investment we made against its ability to withstand a market correction. No investment will escape this crisis entirely untouched—that is part of the “game.” But as we some may be positively impacted in the long run. We seek resilient investments and we’re very purposeful in our allocation for this reason.

Tready: Practice makes perfect. In 2008, we all had to go through the education on what the Federal Reserve could and could not do in terms of stimulus and bail outs. Now it is in the general knowledge bank. We are better equipped than we were a decade ago just because as a generation of professionals we have more experience.

Additionally, our investment team leadership is in our prime now. We are literally one call away from any person or strategy we want to consider. Our 20-year history as a careful but open-minded investor puts us on the call list for many, many opportunities. Our throughput of ideas is in incredible.

3. How, specifically, are we pivoting to adapt and stay ahead of the herd? How are we viewing the distressed market?

Tready: I do not believe we are doing anything differently now than before. We have the latitude to pivot as the opportunity set changes, where other firms do not. It takes the right culture to keep an open mind. We like niche opportunities—the market disruptors, the mispriced risk, and new consolidations—led by purpose-built teams. Our best investments are usually not accessible by larger, institutional competitors.

Patrick: We expanded Bayshore’s investment universe over the last ten years where most of the industry works in silos where one side does not share knowledge with the other. We tore down all the walls between asset classes and the buckets that our industry is so good at creating. We have trained our team not to self-select based on any specific biases. This gives us an incredible ability to move where others cannot. It is a culture that must be purposely nurtured. Our opportunity set has always been everything- we are looking for value and only invest in a tiny fraction of deals we see. We have an inquisitive culture- we have more idea flow because we have no hesitation to learn about something new.

The pandemic triggers a huge amount of change, and change means new risks and new opportunities. We are currently spending most of our time considering exactly how these changes will affect our world. The sudden stop of our daily lives will create distressed situations where our capital can be part of the solution. We also see a crop of winners from this shift, and they will mostly be in areas that we have been active in for a while, such as technology, alternative proteins, agriculture technology, food delivery and de-globalization.

4. Why is it a good time to invest now? Specifically, why is it a good time to invest with Bayshore? What are your return expectations in the near and long term?

Patrick: If you have available capital now, you will be paid nicely for investing it. Make no mistake, investing during a crisis is riskier because of the uncertainty so the investor must demand a higher return for doing so.

Tready: We question everything as information and situations change—even things we believed in yesterday. In our world, legacy thinking is a liability. To be able to pivot, you must have a culture where it is ok to speak up and question conventional thinking. We have trained ourselves to view risk differently. If you know how to look at risk, you can make really good decisions in times of change.

The best return for investors happens at times when money is deployed during times of distress. Usually markets overshoot in these times when there is always a shortage of capital. When assets move from weak hands to financially strong hands, good things can happen for investors.

Most importantly though, our alignment with our families is unique in the industry. Your money is invested with our money—and this alignment produces a strong partnership.

Real revolutions are the ones that no one sees coming. The future is faster than you think. The world likely will not look the same for a very long time. The only thing constant in this world is change—and adaptation is necessary to survive and thrive. We will put our time and energy into growing and investing wisely and be ready for what happens next.