We wanted to provide an update on how we are adapting to the rapidly changing environment. These are challenging times with a tremendous amount of uncertainty, but also different from past experiences in that it is impacting us all personally in our day-to-day lives. We know that many of you are concerned not only about your health, but also about your portfolios during this period of market volatility.
The Cambridge team wants you to know that we are here to support you through this time of uncertainty. We are closely monitoring the situation and have taken the necessary steps to protect the health and safety of our team, while remaining diligently focused on executing our investment process to deliver on our goal of investment excellence.
As part of that process, we are reviewing each investment thesis and stress testing the businesses we own under the new reality. The environment has changed, and we need to adapt our assumptions to meet these changes. As part of our process, we have been in regular contact with management teams. This is a very fluid situation and we want to hear from management in as close to real time as possible. This helps us better understand the direct impact of a dramatic slowdown in activity on their business and the steps they’re taking in response. These discussions help inform our financial models where we are stress testing the businesses under varying degrees of punitive scenarios. Understanding a businesses’ operating leverage, financial leverage and debt maturity profiles are critically important. Cash flow has always been at the centre of our analysis and that is even more vital in today’s environment. We want to ensure our businesses have the capacity to weather the storm and participate in the eventual recovery.
These are truly unprecedented times and we take our job to protect and grow our clients’ capital seriously. Although no one has seen anything quite like this before, markets do go through cycles and this is no different. We appreciate that recent market activity may create investor uneasiness. The entire Cambridge team is doing everything we can to support everyone’s investment portfolios, and we continue to stay true to our disciplined investment process.
We appreciate your support and confidence in Cambridge as we work through this together.
Should you have any questions related to your portfolio, please do not hesitate to reach out.
Institutional Portfolio Manager
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Published April 6, 2020