At a time when the herd is moving to passive for mid- to large-cap US equity exposure, investors need complementary active- management strategies designed to deliver large excess returns. This is more likely to come from boutique investment managers with business models that can stay small, simple, and focused.
Inflection Capital Management, LLC (ICM) was founded in February, 2017. Prior to ICM, its founder, Thomas Paulson, worked as the consumer analyst on the large-cap growth equity teams at Cornerstone Capital Management and Alliance Capital Management.
The ICM business is structured to serve its clients first. ICM will only prosper if our clients are rewarded with significant outperformance. The most important lessons that our founder took away from his experiences at Alliance and Cornerstone, are the importance of focus, simplicity, and the alignment of interests. Too large of a business creates too much complexity, distraction, and the misalignment of interests. We are a boutique and will remain a partner-owned boutique. We align our interests with our investors through firm structure and significant personal equity invested in the Inflection strategy.
ICM is a singularly focused manager, having just one product—Inflection. Inflection is a long-only concentrated US core equity strategy. We believe that Inflection can produce over +250 bps in net "alpha" per year through superior stock selection and a tight management of the reward-to-risk in the strategy. Inflection is an alpha generating product versus a broader market mandate.
ICM has structured its product to be novel in its simplicity. Such a disciplined focus allows ICM to generate significant investment alpha without absorbing the costs and complexity of a larger team. As such, ICM can keep the fees low, produce excellent investment results, and have a business that does not require significant assets under management and revenue to be a profitable business. Having fewer "masters" in turn allows our investment professionals the ability to devote a competitively advantaged amount of time to producing superior investment results.
ICM operations are novel in their simplicity. Trading, middle-office, and back-office functions are done by technology providers. ICM has just one experienced trading and operations professional who oversees the process flow. As such, the business has little operations variable cost as it grows. Having few employees in turn, allows management (i.e. ICM's investment professionals) the ability to devote time to producing superior investment results.
ICM always leaves the client in control. The client creates a separately managed accounts (SMA) at its custodian. The client then gives ICM discretionary authority to trade within that account. The client can restrict ICM's access to the account at any time.