Buying Irreplicable Assets with Irreplaceable Capital

This article by MOI Global instructor Soumil Zaveri is excerpted from a letter of DMZ Partners Investment Management, based in Mumbai, India.

In thinking about our purpose and approach in managing our families’ capital over the past few months we’ve come to appreciate a phrase that would be well suited as a motto for us – Buying irreplicable assets with irreplaceable capital ^[*]. To provide some context, we like this phrase as it retains focus on two key points.

1) Own the right stuff – own companies that operate assets/ brands/ processes/ technologies/ cultures that are irreplicable (very difficult/ nearing on impossible to replicate by competitors) – such companies are usually capable of compounding our capital at compelling rates of return over very long periods of time. This retains our focus on the quality of businesses we own and the qualities of people we partner with.

2) The money we manage is finite – unlike many large asset managers, in our case the investor base is clearly defined and largely static – this makes the capital we manage irreplaceable. If I were to permanently lose say 30% of a family member’s capital due to poor investing decisions – this will likely have possibly-permanent and decision-altering consequences for that family. In doing so, we will have also meaningfully shrunk the capital that we manage as we do not have or want an endless supply of clients and capital that an army of relationship managers can keep generating.

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