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  • Ryan Reeves

The Launch of Infuse

I have some exciting news! On August 1st, we are launching Infuse Partners LP.



CORE VALUES


The name “Infuse” is an acronym for the core values of the fund:



These values aren’t just nice ideas – they informed every detail of how we structured the fund.


GOAL & PHILOSOPHY


The goal of the fund is to deliver world-class returns over the next several decades. And we intend to accomplish that goal by concentrating into the fastest-growing, highest-quality companies at reasonable valuations.


At the end of the day, fast earnings growth and multiple expansion are the key ingredients. Everything we do is in service of finding companies that are sustainably growing their earnings at faster rates with lower valuations than the current portfolio companies. We aren’t just growth, quality, or value investors. We’re all three.



An ideal investment for the fund would likely have these characteristics:

  • A dominant leader in an industry with large tailwinds

  • Founder led

  • Loved by employees and customers

  • Growing revenue over 50% and accelerating

  • Cash generative with evidence of strong operating leverage

  • Valuation allows us to get paid back in fewer than 10 years from free cash flow (we also have an internal hurdle rate that we look at over 5 years).

You can read much more about the overall process and philosophy here.


ALIGNMENT


Alignment is also very important for me.


Most of my family’s net worth will be invested in this fund and we thought deeply about the incentive structure. For early investors, it is 1% of AUM and 10% performance incentive over a 7% compounding hurdle. In fact, over a 12% annual return, this structure is more friendly than Buffett’s original partnership of 0%/25% over a 6% hurdle.



We have kept costs as low as possible so as to not penalize early investors. That is also why we are offering an early bird discount that is permanent for those LP dollars. We have also capped the expense ratio and will be amortizing it over a 3 year period. All in all, we are doing everything we can to be aligned with LPs while also charging enough to survive.


To force alignment, some funds use a lock-up period. We think that can work but we would rather have investors self-select into our strategy. In our view, it’s the investor's money – they should be able to do what they want with it! If they redeem, it’s most likely because:


  1. the performance wasn’t good enough over a reasonable period

  2. we didn’t do a good enough job of communicating our strategy and the risks involved

  3. we didn’t screen the investor well enough to see if they were a good fit


As you can see, each one of these is our fault. If returns are world-class and we have the right, long-term LPs, then redemptions likely won’t be a problem. That’s why we don’t have a lock-up. And speaking of the “right” LPs – this fund probably isn’t right for you if…



WHY NOW?


So why is now a good time to start this fund?


In short, we are more excited about forward returns than we have been in a long time. But I also want to give the journey to how I got here.


Four years ago, I wanted to start a fund after finishing school but I felt that might not be fair to investors. First of all, who would allow a 21-year-old to manage their money? Second, I wanted to go through a gut-wrenching drawdown to test myself.


Over four years later, I feel much more confident. Investing City was my way to show, rather than tell, people that I have what it takes. We scaled that to a 6-figure business serving hundreds of clients. And despite this latest drawdown, I've kept my composure.


BUSINESS PLAN


That also brings us to Investing City. A few months ago, I sent a detailed email to subscribers and nothing has changed since then.


I want to provide as long a runway as possible for the fund so Investing City will continue to operate to pay my family’s living expenses. Nothing changes for Investing City subscribers except that I will provide clear disclosures about what is owned in the fund.


In terms of my time, I have automated a lot of the back-office tasks for Investing City and the synergies are huge as the core portfolios will be very similar. I have also cut back in areas like the podcast and making videos.


We have grand plans for Infuse but right now, we are laser-focused on surviving. After all, you can’t thrive if you don’t survive. And this is how we intend on surviving:



SUMMARY


In summary, the goal of Infuse Partners is to deliver world-class returns over the next several decades. We intend on doing that by investing in the fastest-growing, highest-quality companies at reasonable valuations. Finding and studying the next generation of winners gets us up in the morning and we plan on doing this for a lifetime. We are looking for LPs that have a similar, long-term mindset.


If you want more details, you can find the full slide deck here.


And lastly, if you have any questions or would like to be an LP (must be accredited), reach out at ryan@infuse-am.com.

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