Quayside adopts a rigorous screening process to select potential portfolio companies. The four screens are: high return on capital, attractive industry, clean and outstanding entrepreneur, and an asymmetric risk-reward trade-off.
High return on capital: The Company must have a consistently high return on capital because return on capital is a very good indicator of the quality of the management team and the competitive advantage of the business.
Attractive industry: The industry structure, the conduct and performance of the companies therein is analyzed to determine the long-term prospects for value creation.
Quality management with good credentials: The entrepreneurs must be clean and transparent and have an outstanding track record. Also, the management must be open to external ideas, discussion and debate.
Risk-reward ratio: We will perform well only if it ends up getting disproportionately rewarded for the level of risk it assumes. This involves assessing the probability and quantum of various outcomes through a rigorous financial modelling process, and a thoughtful qualitative analysis of the industry and the management team.