The uncertainties people are experiencing in normally stable parts of the world like the U.S. are pervasive. To understand how the current uncertainties are impacting people, we can look at another domain where pervasive uncertainties are the norm, and that is in warfare. Clausewitz, the military strategist, describes friction in war as “the force that makes the apparently easy so difficult”. Friction is the force that resists all action. The most pervasive source of friction is uncertainty. This friction is not only of the physical type, as in terrain obstacles for example but also psychological, as in indecision over a course of action which at this time is plaguing many decision-makers. All actions in war take place in an atmosphere of uncertainty, the so-called fog of war. While people try to reduce the unknowns, they cannot be eliminated. The very nature of such environments makes certainty impossible; all actions are based on incomplete, inaccurate, and even contradictory information. This perhaps provides a sobering glimpse into decision-makers' minds in today’s environment, including investment decision-makers.
The tsunami of uncertainties is enormous. COVID-19 is infecting and sickening vulnerable people in ways the medical profession is only beginning to understand; and the prospects for when there will be a vaccine are uncertain. The economic carnage from the pandemic has been likened to the Great Depression; and all that is creating uncertainty on jobs and livelihoods. Humankind is a social animal and all the social distancing, isolation, and quarantining are abnormal and resulting in a mental health crisis. Remote working and education are uncharted waters for most. Add to the mix a highly polarized U.S. presidential election with a nation divided, civil rights protests, rioting and unrest, and a toxic media, and you start to feel sick in the pit of your stomach.
Nonetheless, as in war, we must take prudent action despite the friction. The means to overcome the effects of friction is the will; we must prevail over friction through persistent strength of mind and spirit. We can determine probabilities as a standard for decision making. By its nature, uncertainty involves the estimation and acceptance of risk. But risk is also related to gain; normally, greater potential gain requires greater risk. Furthermore, risk is equally common to action and inaction. Consequently, we should view the uncertainties not only as a threat but also as an opportunity, which we should be ready to seize. As the saying goes, fish in troubled waters. And that goes for investing as well.
Old Hill Partners’ investment team has demonstrated the strength of its underwriting in these extraordinary times and the firm’s operational preparedness was successfully tested. We continue to closely monitor all credits in our portfolios and we see an opportunity in the increased deal flow as other lenders pull back and government liquidity programs mainly focus on large companies. The fundraising period for the Fund will be coming to an end on September 30, 2020, when it will have a remaining life of 24 to 36 months. This represents a timely opportunity to allocate to the Fund and take advantage of its shorter investment horizon.
We encourage you to take advantage of these confusing times; fishing in troubled waters generally pays off, in life as well as in investing.