Chairman's letters

01 October 2011

Words from Guy's Rome speech

First, it must be asset-backed.  This helps to protect the value of our investments and limits downside risk.  At present there is an increasing focus on investing in hard assets.  We are lucky as this has always been a core focus of the Terra Firma approach.

Second, it must be in what we term an 'essential industry'.  An industry in which there is fundamental demand; an industry that will tend to generate steady revenues.  In these uncertain times, stable demand is a very attractive backdrop as it reduces our risk.

Companies in these industries – for example, infrastructure, commodities, energy, real estate – can often be grown to be strategically attractive.  We also have particular expertise in managing these types of business.

Third, it must be under-managed.  This provides us with the opportunity to create value through transforming its operational performance or by repositioning it in a market.The combination of these three criteria - asset-backed, essential industry and under-managed - has been a consistent focus of our analysis over the last 17 years.

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