INVESTING WITH A COMMON GOAL

INVESTING-WITH-A-COMMON-GOAL

Nobody likes road and freeway construction. It’s loud, annoying and slows traffic.

How many times have you cursed while waiting for a road worker to turn his sign from STOP to SLOW? And how many times have you passed the same construction site for months on end wondering when it was ever going to be completed and why so many workers were standing around. The glacial pace of road construction can be attributed in part to the compensation structure of the contractors hired by the various state departments of transportation (“DOT”) or county or local public works offices around the country. Because many road construction projects are awarded based on low bid price, contractors have little incentive to finish a project ahead of schedule. Compare this common fixed pay compensation structure vs. the following case study of compensation-based structure.

In 1994, the Northridge earthquake in Southern California damaged four bridges on the Santa Monica Freeway (western segment of I-10) in Los Angeles, the busiest thoroughfare in the country at the time. The closure of the freeway was estimated to cost the economy of the area as much as $1M per day. Tasked with repairing the Freeway quickly, the California Department of Transportation (“Caltrans”) sprang into action and awarded the contract to a local contractor, C.C. Myers, Inc.

The contract had a twist not found on most road construction contracts. Besides the common deadline provision specifying that the work had to be completed in 140 days, the contract added a bonus provision, offering a $200,000 per day bonus for each day prior to the 140 days that the bridge opened. C.C. Myers completed the job in 66 days, a full 74 days ahead of schedule without compromising quality. The company received a $14.8M bonus. Everybody came out a winner. Residents were able to get back to work, Caltrans was applauded for its quick response and the owner of C.C. Myers was able to buy a bigger plane.

Wouldn’t it be nice if the people you put in charge of your investments were performance-based like C.C. Myers? Makes you wonder why do so many people trust their money to stockbrokers, financial advisors, and hedge fund managers who get paid no matter how your portfolio performs. Many make money based on the amount of money under management or based on the volume of trades, with little compensation based on performance. In other words, they make money even if you don’t. Why don’t we insist that these brokers, advisors and hedge fund managers be compensated based on performance? That’s because, in the volatile world of stocks, many of these so-called experts wouldn’t make any money. Just look at hedge fund mogul Bill Ackman who has suffered three straight years of losses at his $9 billion fund Pershing Square. Despite the losses, Ackman still made millions in management fees. So while his investors lost money in a historic bull market, Ackman still enjoyed life in his Upper West Side home.

If the Fund doesn’t make money and our investors don’t make money then we don’t make money.

Who would you rather entrust your money with? Someone who gets paid whether you get paid or not or someone who’s motivated to make you money because they only get paid if you get paid? That’s why at Four Peaks, our compensation structure is based completely on the profitability of our Fund.

If the Fund doesn’t make money and our investors don’t make money then we don’t make money. This has been our philosophy and approach from the beginning. From the outset of our Fund, our first priority was to invest only in something that would be profitable. And that asset class had to be recession-resistant, where we could continue to make money for investors in good times and bad. We immediately looked to alternative investments because of their hedging qualities against the broader markets and Wall Street volatility. This is how we ended up targeting real estate for our alternative investment class and specifically, mobile home communities (“MHC’s”).

As a productive real estate asset, MHCs offer the very best attributes of alternative investments and within the real estate subclass of alternative investments, the very best attributes of real estate investing. As an alternative investment, income-producing real estate like MHCs offer both regular wealth accruing income distributions as well as protection from recessions with demand for affordable real estate like MHCs actually increasing in downturns. That is why we invest in MHC’s. With our background and expertise in real estate and mobile homes, we felt they offered the best chance for success and profitability.

Here at Four Peaks, we have a vested interest in your success. As an investor, you have the confidence of knowing your hard-earned funds are with seasoned experts with a singular purpose and that is to make you money. That’s because we only make money if you make money. Unlike brokers, advisors and hedge fund managers who can take undue risks with your money because they make money no matter what and blame drops in your portfolio on market volatility, here at Four Peaks we won’t make excuses.

In fact, we won’t use market downturns as excuses. We anticipate market downturns and recessions and have actually planned for them to ensure consistent, recession-resistant returns for our investors. Who would you rather trust with your money?

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