Fourth Sail Capital, LP is a privately held boutique asset manager focused on investment opportunities throughout Latin America
Our team is comprised of an experienced team of investment and non-investment professionals
Our services
Fourth Sail Funds
We manage a Long/Short fund (Fourth Sail Long/Short) and an Absolute Return fund (Fourth Sail Discovery). We believe capacity discipline is critical to the proper management of both vehicles, ensuring that we can take meaningful exposures across the region and continue to focus primarily on small and mid-cap companies.
Fourth Sail Long/Short
(launched: February 1, 2014)
The fund strives to generate positive returns every year by carefully building asymmetry in the long and short book. Protecting capital and compounding returns carefully over time is the surest way to achieve this objective.
In general, the fund only takes meaningful net long exposure when we believe both domestic and global risks are low. This means the fund’s net exposure will be low in most years. In a normal market environment, we aim to have net exposure between +20% and +40%, and gross exposure between 150% and 300%. In unusual scenarios where valuations are extremely low, we may consider veering higher than 40% net.
Fourth Sail Discovery
(launched: March 1, 2019)
We believe that over a full cycle, there is excess return available to investors with an increased appetite for volatility and liquidity risk. The Discovery fund seeks to exploit those opportunities by running a concentrated portfolio of high conviction positions.
Still, we aim to protect capital in difficult environments. This is why the fund has the ability to draw down or return capital to our investors when warranted, hedge FX and invest across the capital structure.
The fund carries a net exposure of 85-100% in most market conditions.
HOW WE INVEST
Our investment process includes two components: Fundamental Analysis and Risk Management
Fundamental Analysis
We believe that in the long run, buying good companies at good valuations and shorting bad companies at bad valuations is the best way to generate outsized returns. Nothing is a substitute for in-depth financial analysis, management visits, and on the ground due diligence.
We run a concentrated portfolio of long positions and employ a team of sector specialists. This allows us to have organic relationships with the companies we cover. We rarely “discover” new companies or themes. Instead, we strive to know the assets and management teams in our coverage whether we currently have a position in the portfolio or not. In this way, we can separate true opportunities from day-to-day noise.
Our team relies on both public sources of information and proprietary bottom-up work to arrive at conclusions. Speaking to management teams and reviewing financial statements and models is just the first step of our process. We compliment that work by speaking with competitors, former employees and industry specialists. Additionally, we leverage our in-house data team to complement our understanding of the companies we study.
Risk Management
We believe that in Latin America, stock picking is not enough to generate a strong risk/reward on a USD basis. FX and country risk are the best way to generate outsized losses.
Equity investors in Emerging Markets sometimes forget that the biggest exposure risk they run in their portfolio is not necessarily specific stocks, but rather currencies. Often, the largest factor exposure of Latin America portfolios lies in single country macro risk and the underlying commodity exposure of a given country. That is why our risk management process is focused on assessing risk levels of different countries, and why we adjust our hedges so that our bottom-up decisions do not leave us overexposed to risky factors in the region.
To determine country risk, we follow macro variables and political developments. We complement this work with a network of political scientists and economists on the ground in every country that we invest in.
WHO WE ARE
Fourth Sail Capital, LP is a privately held boutique asset manager focused on investment opportunities throughout Latin America. Fourth Sail launched on January 1, 2019 as a spin-off from an established global emerging markets firm.
The Fourth Sail team is comprised of an experienced team of investment and non-investment professionals, some of whom worked together for many years prior to launch.
Process, People and Partners
Process
We firmly believe a disciplined, intellectually honest investment process is the key to generating consistent returns for our investors. We are constantly striving to refine and improve this process, with the hope that we can get a little better at what we do each year.
People
We seek people of the highest integrity, and add to our team selectively. We invest heavily in our people, and expect them to stay with us for the long haul. We believe a stable, focused and aligned team is a key source of long term alpha.
Partners
In a capacity constrained and volatile region like Latin America, we prioritize partners that share our focus on long term results. This allows us to ignore short term noise and focus on investing through the full cycle. In return, our LPs can expect that we will remain disciplined on capacity, and return capital if necessary.
For more information on Fourth Sail
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