Buffett is not Wrong

The legendary Warren Buffett has famously said he is against diversification. “Diversification is a protection against ignorance,” Buffett once said. “[It] makes very little sense for those who know what they’re doing.”  But then again Buffett has a huge capacity to read and interpret company public disclosures, analyst information, and financial statements that most professional and non-professional investors can do.  And due to his constant cash positions, as he digests so much market information, he can act on that information more quickly and nimbly than most investors.  More importantly, as opportunities are presented to most investors, as they tend to seek deployment strategies and rebalancing efforts of their portfolios, it becomes difficult for folks to take advantage of any non-diversified “best of breed” investments in each sector.  

Buffett is not wrong… but how do today’s investors seek and find stallions among the herds of donkeys.  

Let’s use that herd analog for the current ETF marketplace and the hugely diversified fund portfolios that so many investors have loaded up in their portfolios.  Sure, there are some great companies in State Street Global Advisors’ SPDR S&P 500 ETF, which is one of the largest and most heavily traded ETFs in the world, who offer exposure to one of the most well-known equity benchmarks the Standard & Poor 500 Index.  But even in this elite group of companies, there is at any given moment the #1 performing stock and the #500 worst-performing stock.  Just because you bought an index fund that is a mirror of the entire group of companies, does not take away from the fact that these stocks tend to be correlated and move in similar directions and there is no ability to flow money into the “best of breed”, in the entire group.  This is similar to every broad-based overly diversified investment, and just because the financial industry touts diversification as safe, it has only been the Alternative Investment community who has created hedges geared to cover when these correlated markets move adversely to their investors.

Capital Q Ventures finds the “best of breed” companies by following a strict disciplined approach when sourcing viable Venture Partners. From our intensive charrette process to our imbedded analysts within every Venture Partner, along with our steadfast requirements of twenty-five years successfully doing business with ten years of verifiable success, a need for capital on a long term, consistent basis, and Venture Partner exclusivity, among many other factors, allows Capital Q Ventures to provide an above market, risk adjusted return to the investors at an arguably lower risk factor than others in the same asset class.

While we understand the everyday investor may not have the time or knowledge to find the “best of breed” companies to invest in, we believe the Tri-Party Venture Fund® approach, that Capital Q Ventures has established, gives every investor the ability to have a true non-diversified, non-correlated hedge which does not move due to market sentiment and maintains a less volatile nature, as opposed to the broad stock market ETFs and indexes.      

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