Chris Heller - Weird Alternatives at Cordillera Investment Partners (Manager Meetings, EP.28)

Due Diligence

Chris Heller emphasizes the importance of thorough due diligence in managing risks associated with unconventional investments. He explains that while some skills are transferable from traditional investment practices, Cordillera seeks individuals with diverse backgrounds to bring fresh perspectives to the table. Heller highlights the advantage of having time to deeply understand new ventures, such as music publishing or alligator farming, before committing to them 1.

Oftentimes something comes to us that, quite frankly, we don't know a lot about. At the beginning, we first started looking at music publishing. Almost ten years ago, we didn't know a lot about music publishing, but we took a year and a half to understand the business.

--- Chris Heller

This approach allows Cordillera to assess both the opportunity and the operating partners involved, ensuring a comprehensive evaluation process 2.

   

Portfolio Strategy

Constructing a diversified portfolio of non-correlated assets is central to Cordillera's strategy. Chris Heller explains that while each asset may have unique risks, such as weather risks for boat marinas, these can often be mitigated through insurance and diversification 3. He stresses the importance of avoiding singular factor risks, like inflation or interest rate risks, by carefully selecting and combining assets.

We want to make sure that there's just diversification of those idiosyncratic risks and nothing, some universal risk that is running through the portfolio.

--- Chris Heller

Heller also notes that sourcing investment opportunities involves thematic exploration and leveraging a deep network, which has become more efficient over Cordillera's eight years in business 4.

   

Exit Strategies

Exit strategies are crucial for securing returns on unusual investments. Chris Heller explains that Cordillera requires a clear, viable market for exiting deals from the outset, ensuring that each investment has a probable exit path 5. He describes the preference for self-liquidating investments, where cash flows repay the initial investment over time, eliminating the need for a sale.

We have to know today, and our base case has to be an exit that exists today, and it is viable and probable.

--- Chris Heller

Heller acknowledges the challenges of extended holding periods, particularly in non-correlated assets, but notes that these can still provide steady returns despite market conditions 6.