We use our acumen and our extensive network to select the strategies and teams that we believe have the highest potential for outperformance and low correlation to major markets. We do not seek to solely provide exposure to a broad set of strategies.
Hedge Fund Strategies
SILVER CREEK APPROACH
We seek to deliver returns that are not dependent on major market asset classes and are diversifying to investor portfolios. Managers with the skill and resources to consistently deliver alpha are few and far between, so we allocate to a small number of managers that we believe are most likely to perform in the future.
Our approach includes both multi-manager and single manager strategies.
INTRODUCTION TO PRIVATE CREDIT
Private credit investing is a necessary component of high functioning capital markets and economies. Capital can stagnate and economies could grow below their long run potential without mechanisms for financing smaller companies, clearing bad debt, and unlocking value in distressed companies. Private credit provides credit, throughout market cycles, to areas where large banks and credit providers are unable or ill-equipped to go. They also play a vital role through bidding processes that allow prices to reset and distressed markets to clear. The massive build-up of credit in the middle ‘00s and the subsequent 2008 crash has caused substantial regulatory change, the decimation of securitization, and a fundamental shift in the business model of a primary market financing mechanism: commercial banking. It is our belief that an extraordinary potential to invest in above-normal risk versus reward propositions in private credit is likely to persist far longer than in times past, potentially for even a decade or more.
SILVER CREEK APPROACH
The underlying private credit investments in our funds are evaluated according to the following criteria, developed over our 25+ year history of experience in private credit investing:
- Underwrite investments to a flat/down economic environment
- Prefer assets that are cash flowing and self-liquidating
- Ensure mandate is met unlevered, may use low leverage in certain strategies
- Remain senior in capital structure, have effective control, or structure investments to minimize downside
- Favor complex, process-driven strategies that require activism to unlock value
As investors look to alternatives to help enhance their returns and diversify their portfolios, the timberland asset class has become an integral portion of many institutional real asset allocations. Timberland investment portfolios can provide investors with historically attractive risk-adjusted returns, a hedge against inflation, and the ability to meet cash flow and appreciation objectives while preserving capital. At the same time, forestland investments can be managed with a strong focus on sustainability.
Silver Creek’s strategy has been to partner its institutional clients with an experienced operating company who is also a significant co-investor. Green Diamond Resource Company, whose roots date back to 1890, is such a partner and the timberland manager for Silver Creek’s timber portfolio which spans the Southern U.S. and Pacific Northwest. The complete portfolio is certified under the Sustainable Forestry Initiative Standard, the world’s largest forest certification system.
Silver Creek’s timberland fund has entered into an agreement to sell carbon offsets on a portion of its property and continues to seek additional opportunities for carbon monetization. Our partner is one of the national leaders in forestry carbon initiatives.
Aggregates (hard rock, sand and gravel) are essential building blocks in the U.S. economy. Demand is expected to range between 5 and 10 tons per American per year. Demand grows as population grows. 50% of that demand is driven by public infrastructure (roads, rail beds, seawalls, tunnels, bridges) and 50% in commercial and residential construction. Aggregate reserves refer to the rock beneath rock quarry operations. They are extracted by an operator, crushed, cleaned, sized and sold to customers.
Silver Creek’s strategy is to purchase reserves beneath operating quarries with long term track records and 35-50 years of remaining capacity. The quarry operator (typically a large multi-national company) would be obligated to continue its work and pay the fund a royalty on each pound of rock that is sold. Silver Creek believes this strategy has the ability to create predictable cash flow, a hedge against inflation, and strong risk adjusted returns.
Manufactured homes provide affordable housing to 22 million Americans. Today’s manufactured homes are constructed in climate-controlled factories to federally regulated standards and cost approximately 50% less than the average single-family home. Even though the U.S. is short approximately four million homes, virtually no new manufactured housing communities are expected to be built over the next few years.
Manufactured housing communities have several attractive investment attributes: a long history of stable occupancy and rent growth; low ongoing capital and maintenance needs; and limited resident turnover. As such, manufactured housing has historically outperformed other sectors within real estate, including industrial, apartments, office, and retail.
Silver Creek’s intended strategy is to acquire undermanaged, low-occupancy manufactured housing communities, and grow profitability through capital improvements. Silver Creek has formed a joint venture with Cambio Communities, an experienced operator that stabilizes and improves manufactured housing communities in the U.S. A key component of our strategy is to install new homes on vacant sites and rent or sell these homes to new residents. This strategy revitalizes communities and improves the resident experience, while increasing occupancy in an efficient manner. Our goal is to produce an attractive return for investors while providing critical new affordable housing supply.
1. Silver Creek Capital Management LLC (“Silver Creek Capital”) was organized in 1999 to manage private investment funds in addition to the original fund established by Silver Creek Capital’s founders in 1994. Silver Creek Capital’s affiliated management company, Silver Creek Advisory Partners LLC (“Silver Creek Advisory Partners”), was organized to manage private investment funds and accounts launched after March 19, 2010 as well as one private investment fund that was managed by Silver Creek Capital prior to January 1, 2014. Silver Creek Capital and Silver Creek Advisory Partners have certain common control persons.
2. Calculated from historical crushed stone, sand and gravel production data provided by U.S. Geological Survey combined with population data from U.S. Census Bureau through March 31, 2023.
3. Vulcan Materials Company February 2020 Investor Presentation.
4. As of August 2022, per Manufactured Housing Institute.
5. As of June 2022, per U.S. Census.
6. As of October 2022, per Fannie Mae.