Niche Markets. High Risk Adjusted Returns.
Our Investment Strategy
We focus on niche markets and assets that offer exceptionally high risk adjusted returns stemming from statutory cash flows. We target niche markets to ensure our team has a strong comparative advantage relative to other investors in terms of our capital base, technology, and people. The result is that our portfolio is uncorrelated to public equity and real estate markets, and our returns grow in a stable manner over time.
Bronson Lee primarily invests in distressed tax receivables where underwriting and operational expertise are paramount because returns are fixed. As such we are fanatical about driving down costs and eliminating inefficiencies from our operations. While our target markets have existed for decades, their relatively small sizes and irregular investment periods make them unwieldy for the largest financial institutions to access. We like it that way.
The disruption of the housing market and its associated credit markets during the Great Recession has increased the relative isolation of these niche markets. Increased regulation has resulted in a concentration of capital availability to larger borrowers through the issuance of public bonds or syndicated loans. Our track record has made us a strong borrowing candidate and capital partner for the most prestigious lenders and capital providers.
The assets in the distressed real estate and delinquent tax receivable markets offer a superior risk adjusted return to other private or public credit opportunities due to their safety and current yield. We base this hypothesis on the following characteristics of these investments:
Uncorrelated Assets: Income–producing private investments have historically been less correlated with public markets.
Valuable Collateral: Bronson Lee targets only asset-backed investments with low loan-to-values (“LTVs”) or deep purchase discounts
Senior Lien Debt: Bronson invests only in senior lien debt that affords the Company the right to foreclose in the case that the Company's debt is not redeemed.
Current cash flow: The vast majority of our total return can be attributed to current cash flow from statutory fees and interest.
Short duration: Most of the underlying assets in our portfolios amortize over fewer than 3-6 months with an average duration of only 4 months.
Statutory Returns: We target assets with cash flows stemming from fees and interest that are set by statute.
We began our journey in these niche markets when we sought out channels to access foreclosures in 2008. Today, we still underwrite each asset assuming that we will take the deed to that property. Though we only foreclose on 2% of our loans, we still earn healthy profits when we do. This principal combined with our formative experience during the Great Recession helps us stay focused on mitigating risk and investing only in the most credit worthy assets.