Absolute Resolution is an investment management company that was founded in 2013. It is based in New York and focuses on investing in distressed securities and assets. The company utilizes deep research and active engagement with stakeholders to unlock value in complex, stressed and distressed situations. Some of the key information about Absolute Resolution Investments includes:
Absolute Resolution is led by an experienced team including CEO AJ Murphy who has over 25 years of experience in distressed investing. The company takes concentrated positions in select opportunities and its flexible mandate allows it to invest across the capital structure. The firm has expertise across sectors including healthcare, energy, mining, transportation, media, real estate, and telecom. Some of the strategies Absolute Resolution uses include targeting discounted securities, employing proxy fights to replace underperforming management teams, and negotiating with debt holders. The firm has shown strong performance despite market volatility. Some of its notable investments include names like Dendreon, Breitburn Energy Partners, and Horsehead Holding. As a relatively new company, Absolute Resolution is still building its track record but shows promise in distressed and deep value investing.
Experienced Team Is Critical for Success in Distressed Investing
One of the key strengths of Absolute Resolution investments is its experienced investment team. The firm was founded by AJ Murphy who has over 25 years of experience in distressed investing, restructurings and deep value situations. He previously worked at companies like Goldman Sachs and Deutsche Bank. Several other members of the investment team also have 15+ years experience in distressed debt and equities.
This experienced team is critical because distressed investing requires specialized skills. The investment professionals must have expertise in analyzing and pricing distressed securities, assessing downside risk, and negotiating complex restructurings. Their experience in previous market cycles also allows them to maintain discipline even during periods of volatility. Given the heavily involved nature of distressed investing, the relationships and reputation of the team matters as well.
Overall, Absolute Resolution’s strong team helps inspire confidence that the firm can continue to generate strong risk-adjusted returns in this niche strategy.
Flexibility Across Capital Structure is Key in Distressed Investing
Unlike traditional investment firms which often focus on either debt or equity, Absolute Resolution has a flexible mandate which allows it to invest across the capital structure. This means the firm can take positions in secured and unsecured debt, convertible bonds, preferred stock, and common equity of distressed companies.
The flexibility to opportunistically allocate capital is key in distressed situations for several reasons. Firstly, it allows Absolute Resolution to calibrate the risk/reward of investments and build a margin of safety. Secondly, taking certain positions allows the firm to play a more active role through negotiating restructurings or proxy contests. Finally, capital structure flexibility allows them to pivot when recovery values change.
Absolute Resolution focuses primarily on the credit side but having the mandate to invest across asset classes expands their opportunity set and allows them to better capitalize on dislocations in stressed situations.
Concentrated Portfolio Gives Absolute Resolution More Influence
Unlike many asset managers, Absolute Resolution tends to concentrate its portfolio in its highest conviction ideas rather than diversifying broadly. While the firm engages in deep diligence, its portfolio has historically held 10 or fewer core positions.
This concentrated approach has some advantages in distressed investing. First, it allows the firm to dedicate more research resources to fully understand the intricacies of each complex situation. Second, it maximizes their influence over the restructuring process of their portfolio companies given their large position sizes.
However, concentration also comes with risks like volatility and liquidity challenges. Their investment thesis for each position needs to have an appropriate margin of safety. Overall, Absolute Resolution’s concentrated portfolio demonstrates its active approach of taking decisive positions in high upside yet complex special situations.
Proven Expertise Across a Wide Range of Sectors
Though a relatively young firm, Absolute Resolution’s investment team has experience across many sectors relevant to distressed investing. Some areas they have invested previously include healthcare, mining, transportation, construction, real estate, energy, and telecommunications.
Having expertise across sectors gives Absolute Resolution more opportunities to search for value. Distressed opportunities appear in various industries depending on the macro environment. Oil and gas was an area of stress in 2015-2016 whereas shipping, retail, and healthcare have been more distressed recently.
Expertise across sectors also allows Absolute Resolution’s team to better assess downside risks and estimate recovery values, which is critical in distressed investing. Overall, the firm’s broad knowledge base gives them an edge in researching complex situations and assessing risks.
In summary, Absolute Resolution Investments has a strong foundation to generate solid risk-adjusted returns. The experienced team, flexible mandate, concentrated approach, and sector expertise provide advantages in a challenging distressed investing landscape. However, as a newer firm, Absolute Resolution needs to continue building out its track record across market cycles to establish itself as a leading player in this space. With its active investment strategy and specialist focus, Absolute Resolution is a firm to watch in distressed securities investing.