Attached, please find a copy of Khrom Capital’s quarterly letter.
In the first quarter ending March 31st, 2013, the fund returned 30.4% gross, or 23.0% net of fees and expenses. Below are the net annualized returns of the fund over different time periods.
Last 3 years: 30.5%
Since inception (March 2008): 23.3%
We ended the quarter with 64% of the fund’s assets in cash–a historical high for us. This balance may soon shift. We are investigating new opportunities, which we cannot yet disclose. Hence, this letter will be short, as we adhere to Benjamin Franklin’s advice: “Either write something worth reading, or do something worth writing.”
Though this quarter we have chosen the act of doing instead of writing, we still wish to remind Partners of our investment philosophy and how it differs from that of most market participants. Funds that invest in equities can be divided into two groups: traders and investors. Traders focus on the cash someone will eventually pay for an asset; investors focus on the cash that the asset will eventually payout. The investing frameworks within which the two groups operate–even if they have the same IRR hurdle–lead to vastly different underwriting processes.