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Tiho Brkan Profile picture
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5 Sep, 5 tweets, 2 min read
One of our favorite strategies is a bridging or mezzanine loan as a 2nd registered lien, yielding over 15% pa (we did even up to 22%).

These are very attractive investments benefiting from experienced sponsors, great locations & collateral asset backing.

Few examples. 👇
The projects we've chosen over the years were often in distress, offered great entry points with a meaningful margin of safety, and had only slight construction risk (finishing cosmetic work only).

One key characteristic was debt-like risk compensated by equity-like returns.
A thread I did on all sorts of mezzanine financing a while back, worth reading if this sort of capital allocation is new to you.

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More from @TihoBrkan

Tiho Brkan Profile picture
16 Sep
Evergrande should have defaulted years ago, so this isn't a surprise.

As an investor, I do hope the Chinese don't follow the footsteps of the West, especially the Europeans, who bailed everything and everyone out — creating a zombie economy.

Market pain creates opportunities.
Risks haven't been there for only a month, they have been there for a long time.

If the Chinese economy goes through a property market de-leveraging, it will be very painful in the short term, but create a fantastic buying opportunity.

These are the sort of headlines (back in 2012) you can expect near the market lows — exactly when you should be buying.

The worse the news gets for Chinese equities in the short term, the more bullish we become over the long term.

Read 4 tweets
Tiho Brkan Profile picture
15 Sep
Alibaba and Tencent have been our focus in the public market as of late.

Here is what is important right now:

Successful retest or even a slight dip below August lows, despite the continued news, will be a sign most of the bad news has been discounted.

$BABA $TCEHY Image
If the price doesn't stop at the August low, and a retest fails, we expect both companies to sell off towards the next support level.

That could mean Alibaba at $130 and Tencent at $40.

Neither of these tweets is a prediction, just our simple probabilistic thinking approach. Image
Further downside remains a possibility considering S&P 500 $SPX is acting weak right now.

The index breadth is deteriorating and the $VIX is making equal & higher lows since July, not confirm the S&P's rise.

Being prepared for multiple outcomes doesn't hurt a prudent investor. Image
Read 5 tweets
Tiho Brkan Profile picture
14 Sep
Trying to make a video of that amazingly famous blood orange sunset in the #Mediterranean.

No filters needed here!
Maltese cliffs and that amazing sunset 🌅
Good food with good wine and a good view = good times!

🌊 ☀️ 🦞 🐟 🏝 🍷
Read 7 tweets
Tiho Brkan Profile picture
10 Sep
To become a great investor, focus on a multidisciplinary mindset (become a generalist).

"Most of us study something specific and don’t get exposure to the big ideas of other disciplines. We don’t develop the multidisciplinary mindset that we need to accurately see a problem."
"An engineer will often think in terms of systems by default.

A psychologist will think in terms of incentives.

A business person might think in terms of opportunity cost & risk-reward.

Through their disciplines, each of these people sees part of the situation."
Applying a "multidisciplinary mindset" forces inspiring portfolio managers to have knowledge in psychology & human behavior, ancient & modern history, fundamental securities analysis, accounting, macroeconomics, experience in negotiating, running a business, and so much more.
Read 10 tweets
Tiho Brkan Profile picture
7 Sep
Our portfolio allocation is somewhat planned, but to a great extent very much accidental, as it's based upon "value" offered in different assets, regions & capital stack positions at any given time in the cycle.

In other words, it is more of an art than science.
It can be added that many other market participants do not behave under such mandate, since they are far more authoritarian in their allocation approach.

Rather than searching for value currently on offer, they'll keep buying overpriced assets as it's within their comfort zone.
Flexibility & patience are our edges to mitigate risks & outperform.

As public equities become overpriced we're likely to sidestep into real estate. And when it becomes overpriced, we'll consider special niches like litigation funding, mezzanine debt, or distressed PE deals.
Read 5 tweets
Tiho Brkan Profile picture
5 Sep
US gov subsidies mortgage lending. At that point, rates drop meaningfully. Credit is extremely easy to get. It leads to constant boom & bust cycles.

In the AU, UK, Singapore, NZ & parts of the EU, private lenders fill the funding gap & demand appropriate levels of compensation.
Furthermore, the tax code dictates how capital allocators behave in the real estate market in general.

In the US, equity is the preferred way of playing because it has exemptions on CGT via 1031. Plus depreciation advantages, too.

No other country has that...
...so many sophisticated players, who try to gauge the risks (and not just the rewards), switch between equity & debt allocations.

Equity has more upside but comes with more risk & higher taxes (unlikely in the US). Debt has less upside, more downside protection & lower taxes.
Read 4 tweets

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