Management of Key Risks

Management of Key Risks

GP Alignment

Red Oak Partners employs a rigorous governance process, including:

  • Branded Providers, Audited Track Record: Branded providers since inception: prime broker Goldman Sachs, auditor Rothstein Kass. The PM comes from a highly credible background, previously managing a $500mm Fund at JH Whitney with numerous well-known institutional LPs (Templeton, Duke, etc.). The PM has a 16+ year track record with Tier 1 auditors.
  • Skin In Game: Red Oak’s PM (and immediate family) represents more than 50% of Red Oak’s AUM, invested alongside LPs, representing a majority of his net worth. This drives an aligned view of risk and return versus Fund managers with reduced personal skin in the game (and thus a greater willingness to gamble “with house money”).
  • Portfolio Manager Is Last Money Out: Any month where LP redemptions or withdrawals occur, the PM’s redemptions will be honored last. As the PM intends to maintain at least 50% of his net worth invested in Red Oak at all times and to be a sizable percentage of AUM, this ensures priority liquidity for all LPs.

Liquidity Management

  • Portfolio Balancing: New investments typically undergo a 6 to 18 month “gestation” period until identified catalysts occur and liquidity is achieved. As investments appreciate and approach target prices, position sizing is actively monitored and adjusted.
  • Best in Class Portfolio Analytics Systems: Proprietary Value at Risk Models; Strict asset allocation and risk controls.
  • Activism: Selectively employed to ensure that excess cash is returned to shareholders, that M&A is considered to achieve liquidity, and for other reasons. Numerous portfolio companies have returned significant capital to shareholders (and to Red Oak, as a shareholder).
  • Never Denied A Redemption: Importantly, Red Oak has never denied a redemption or effected a gate on any LP. Red Oak has also never been “stuck” in a stock it didn’t wish to own.

Short Exposure Limits

Exposure monitored daily, individual positions capped at 3% at all times.

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