15 Aug

Mid-Quarter Update and EPIQ's Core Purpose

At EPIQ, we do not blog often. We prefer an audience that is engaged and interested when we communicate. Too much noise already exists in our e-mail inboxes and social media threads. Thank you for taking the time to read our missives. It means a great deal that you take the time to do so. Our goal is to share our thoughts in a concise, interesting and informative manner so that you continue to open our posts and take away something of value.

With that in mind, let us take a moment to discuss the current investment environment mid-way through the third quarter of 2017.

Equity valuations are at reasonable levels due to strong (and growing) corporate profitability. In addition, anticipated regulatory, infrastructure spending and tax reform stimuli remain possible even amidst unsettling domestic and international political headlines. In short, business is good and could get better. However, outsized returns (10%+ annually) are unlikely due to current valuations. On the balance, we continue to believe that equity exposure offers a better risk/reward presuming a longer-term investment horizon is appropriate.

Credit markets, which are much larger than the universe of equities, offer muted return expectations as interest rates and credit spreads remain historically low and narrow. Investors are simply not compensated adequately. There is little upside to putting a dollar to work in fixed income today. Many financial pundits speculate that U.S. interest rates will rise in the period ahead which would apply further pressure to current bond holdings. This has been a theme for some time as interest rates have been near current levels for almost a decade. Our belief is that rates will remain low along with inflation requiring fixed income investors to extend credit and/or duration in exchange for higher yields, this is a risky proposition for fixed income investors who expect safety.

Another investment category is hard assets, including real estate. While commodities will likely prove to be unrewarding in a low inflation environment, there are certain areas that may benefit from the structural changes occurring in the global economy. For example, lithium, the lightest of all metals, is a key element in the new energy paradigm. Real estate may also prove worthwhile, however, future returns, similar to equities, may lag behind historical norms.

If there is one tactical strategy to deploy at this time we feel a healthy reserve of cash holds redeeming characteristics and merit. Cash on hand offers the ability to:

  • Purchase equities in greater quantities on pullbacks and corrections
  • Purchase bonds that pay greater interest as conditions change
  • Buoy portfolio values during periods of market stress
  • Spend on other forms of utility and satisfaction

 

Speaking of satisfaction, when we launched EPIQ (nearly 5 years ago) a primary driver was to find success and happiness while understanding the link between the two. Many studies exist about one or the other but we are pursuing both for our partners and ourselves.

The research and science on happiness boils down to the quality of meaningful relationships you share in your daily life. In short, have love in your life. Success is obtained from enjoying what you do, having great focus on what you are trying to accomplish, measuring the results and not being afraid to fail and make improvements.

At EPIQ, we are investors because of the challenges and rewards that are available. We enjoy investing. We enjoy the people with whom we invest and it has brought us a degree of success as we define it. This journey has led to thoughtful discussion on who we are and why we are EPIQ. We recently spent time as a team to define our core purpose:

To invest wisely and improve lives by connecting people, ideas and capital.

We know investing is a challenge and likely to become more so in the uncertain period ahead. We pledge to not become complacent or rest on past success.

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EPIQ Happenings:

EPIQ Clambake - October 4th

This year's EPIQ Clambake will be held at the Theodore Wirth Pavilion and feature a conversation on "Civil Civics" with Minnesota Secretary of State, Steve Simon. Please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. if you would like an invitation. Seats are limited.


Solar Eclipse

Join us on Monday, August 21st to view the solar eclipse. We will be on our roof top patio for lunch (weather permitting). Eclipse starts at 11:43am, maxes at 1:06p and ends at 2:29p.

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Contact Us

2919 Knox Avenue South, Suite 200
Minneapolis, MN 55408

612.843.4800 office

EPIQ Partners is committed to building long-lasting relationships

Our managing partners believe client intimacy and professional advocacy are what makes this firm special and different from other investment firms. We bring a partnership approach to all of our relationships.

We offer a retainer-based, fee-for-service model to ensure the highest level of transparency and alignment.