Dear Reader,
I initially started AozoraStep as a blog whilst being a student at Keio University, researching how the European economy could follow the "lost decade" of Japan with Prof Naoyuki Yoshino. Since then, the pleasure of researching difficult topics, finding solutions, and ultimately applying the outcome to an investment idea in financial markets, has since then transformed into a career as a trader and the foundation of AozoraStep. In 2021, I left the hedge fund I was working for, to focus full-time on AozoraStep, build out the track record and find investors, with whom I could partner up and scale this into something bigger and more meaningful.
I’m still very small and very far away from my dreams and goals, but at the same time, this gives the advantage of being agile and ambitious to continue improving and enhancing. The investment strategy focuses on UK Equity Turnarounds and Special Situations, finding deep-value opportunities, where the return manifests itself within 6 months. This is often achieved by aligning external factors with the attractive valuation of the target company and can be described as “love the business we invest in, but don’t fall in love with the business”. This philosophy enforces constant re-evaluation of current investments vs. opportunities and leads to concentrating the capital to the opportunity with the highest return/risk ratio. In summary, it is all about maximising returns by finding the pivot points of when deep valuations move to fair valuation, targeting short-term business cycles.
Moreover, I really believe that, as herd animals, we humans often follow a certain thought or idea without really knowing whether this thought or idea is 100% correct, but like the fact that everyone agrees. I believe we do this, because otherwise we will never all agree on something, and hence will never achieve harmony. However, acting against this “harmony” and constantly seeking 100% truth and knowledge is key in achieving excellent and market beating returns, which is something I learnt while working with some of the world's best portfolio managers at BlueCrest Capital.
This pleasure of knowing, which I like to call “really knowing”, is in the DNA of AozoraStep – even if we often don’t get it right. And that is why 10% of the 20% performance fee (2%) and any potential profits made from the management fee (unless the investor wants to have it back) will be used to help other entrepreneurs start up with the constant pursuit of finding true knowledge. Admitting mistakes is embraced, because this is the only way of avoiding future mistakes. During my first job as a trader at UBS, the Managing Director implanted the 4 C’s on us (not the diamond 4 C’s, but “Command, Control, Correct, Consequence”). I continue to implement these 4 C’s at AozoraStep.
"Aozora" is Japanese and means blue sky. AozoraStep hence translates into "step into blue sky".
Sincerely,
David Herrmann
