Brookside Capital is an affiliate of Bain Capital that manages publicly-traded equity portfolios for them. While Bain Capital is well known as one of the world’s largest private equity and alternative investment firms that overall manages over 70 billion dollars, since the founding of Brookside Capital in 1996, Brookside itself manages close to 11 billion dollars today. Both of them are headquartered in the John Hancock Tower in Boston.
It is noteworthy that Bain Capital invests in the funds advised by Brookside Capital to align interest with investors. Many of the same investors that invest in Bain Capital and its other affiliates constitute the client roster of Brookside Capital. These tend to be large players such as ultra-net worth individuals, banks, pension and profit sharing plans, sovereign wealth, charitable organizations, university endowments, among others.
Brookside Capital follows a long-short investment philosophy with the principal goal of long term capital appreciation while investing in both the domestic and foreign markets. Their portfolios are allocated between long positions in stocks they deem meaningfully undervalued in the markets and short positions in securities they believe are overvalued.
The firm’s investment approach entails both strategic and financial analysis. On the financial crunching side, Brookside Capital applies various quantitative filters to focus on investments in securities at prices it believes to be below their intrinsic value. The firm pays special attention to the company’s normalized cash flow, growth potential and current asset value.
On the strategic analysis front, Brookside Capital goes beyond the spreadsheets’ to evaluate a company’s strategic position by conducting market research, customer and vendor interviews, product offerings and cost comparisons with a company’s main competitors, and direct interaction with management and even reference checks.
This dual analysis results in five parameters that determine whether they will open a position in the company’s stock and if so whether it will be long or short: (1) Industry attractiveness,(2) Competitive analysis, (3) Management strategy and capability, (4) Absolute and relative valuation versus competitors, and (5) Key risks and opportunities.
It is fair to assume that Brookside Capital relies on the extensive knowledge bank and relationships of Bain Capital to access and conduct cutting-edge research. Besides the renowned Private Equity division of Bain Capital, there are three more affiliates of Bain Capital. Sankaty Advisors, that focuses on credit markets and fixed-income investments; Bain Capital Venture Partners, which seeds early to late-stage growth equity investing in technology and healthcare; and Absolute Return Capital, which allocates assets in fixed income, equity and commodity to produce absolute returns while keeping a low correlation to traditional markets.
Brookside Capital boasts a research team of 22 analysts. This is spearheaded by an Executive Committee comprised of five Managing Directors. Below are the backgrounds of some of the Managing Directors, reflecting their emphasis on domain-specific industry expertise that they value in their research methodology.
Mr. Dewey John Awad is a Managing Director at Bain Capital and Brookside Capital. He moved to the firm in 2000 and he concentrates on the software sector. Prior to joining Bain, he was the V P of Internet Infrastructure at Soundview Technology. Previously, Mr. Awad was a Director of Applications and Middleware Consulting at Gartner Group and had spent several years in various roles at EDS in the United States and Asia. He graduated with a B.A. from Colgate University and an M.B.A. from Georgetown University.
Mr. Domenic Jay Ferrante is a Managing Director at Bain Capital and Brookside Capital. Prior to joining the firms in 1993, he served at Steinhardt Management Company, Brentwood Associates, and Morgan Stanley. He graduated with a B.A. in Economics from the University of Michigan and an M.B.A. from Harvard Business School.
Since 1998, Mr. Matthew V. McPherron has been with Brookside Capital, where he is currently a Managing Director. From 1997 to 1998, Mr. McPherron served as President and Chief Operating Officer for U.S. Carelink, Inc., a clinical information company. Mr. McPherron graduated with an M.B.A. from Harvard Business School and a B.S. from the University of Kansas.
Mr. John M. Toussaint is a Managing Director at Bain Capital and Brookside Capital. Prior to joining the firm in 1997, he spent several years at Bain and Company where he was a consultant to operating companies in the steel, automotive, airline, and real estate industries. Mr. Toussaint received a Bachelor of Business Administration degree from Southern Methodist University.