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Breaking Free

April 16th, 2021

Quarterly Commentary

We have a lot of ideas to share, so sometimes it takes a good tune (full blast of course) to inspire and drive focus when both are in scant supply.  Queen’s lyrical I Want to Break Free reminded us how, coming out of the Great Financial Crisis, we broke free:  We left the herd and traditional alternative investment management behind to start a business grounded in independent thought, data, and foresight.

At a time when numerous powerful forces were at play simultaneously – systematic trading, low-fee and efficient ETFs, stifling banking regulation, shrinking yields, demographic pressures, explosive smartphone adoption, and shifting social online behavior, we broke free to look ahead and imagine the future of alternative investments.

We broke free from the old model and embraced a future of what we believed to be the irreversible and inevitable digitization of financial services. We honed in on the emerging asset class that we now call digital credit – small balance, short duration amortizing credit originated through Fintech.  Going into the second decade of digital credit, HCG is one of the longest-tenured investors in this asset class… no longer emerging.

We believe we were able to break free of market risk due to a clearly articulated investment philosophy: We specialized in non-traded, private assets that exhibit low correlation to public markets.

Rather than being drawn into the siren song of quick, short-term gains, we were able to break free to focus on evaluating and managing risks we could understand and control…risks specific to our asset class.  We mitigated the only risk we could not foresee – event risk or “black swans” – by seeking to maximize position diversification.

We broke free from chasing momentum by sticking to our mandate.  In this asset class, investors buy credit assets and receive the cash flows and economics tied to those credit assets. We have avoided trendy structures and deals that may have introduced additional risk (e.g., market & liquidity) and shadow leverage.

We broke free from short-term thinking to prioritize the long game, relationships over transactions, and managed growth over growth “at any cost.” With our compass north set, we have been able to stay the long-term course, particularly through turbulent times.

Feels good to break free.  Thanks Freddie!

Confidentiality and Non-solicitation: No information herein constitutes an offer or a solicitation to buy or sell any securities or any interests in any product or investment strategy managed by HCG Fund Management LP (“HCG”).  Any offer or solicitation relating to any such investment will be made only by means of confidential offering documents relating to a particular fund  or investment contract and only in those jurisdictions where permitted by law.
Reliance: This information may not be relied upon for investment decision-making purposes. It does not contain all the information necessary to make an investment decision, including the risks, fees, and investment strategies of investment products advised by HCG. Eligible investors are described in official offering documents, all of which must be read in their entirety and will supersede the information contained herein.  No offer to purchase any securities or interests by a prospective investor will be made prior to receipt of all official documents, and no offer to purchase any securities or interests will be accepted without receipt of all official documentation that has been completed to HCG’s satisfaction.
Opinions — No obligation to update:  The information contained herein represents the views and opinions of HCG.  It is intended solely for informational purposes and is not intended to constitute investment, legal, tax or accounting advice.  The views about digital finance investing and estimated future investment opportunities expressed herein reflect those of HCG management as of the date herein and are a reflection of our best judgment at the time.  They are subject to change based on market and other conditions, and we have no obligation to update.  Actual results, however, may prove to be different from our expectations.  No warranty is given to the completeness or the accuracy of the information contained herein.
Suitability and Risks:  Any investment in products managed by HCG is appropriate only for financially sophisticated investors capable of analyzing and assessing the associated risks fully disclosed in the Private Placement and/or Information Memoranda. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The Private Placement and/or Information Memoranda contain this and other information about the investment. A prospective investor should have no need for liquidity with respect to its investment and should view it as long-term and not a trading vehicle.  Additional risks are disclosed in the Private Placement and/or Information Memorandum including, including, limited liquidity and restrictions on transfer of the securities, dependence on HCG’s principals, and short operating history of certain productsAs with all private investment funds, investments are deemed speculative and involve risk of loss.
Third Party Data: We do not verify third party data used in certain calculated metrics shown here.