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Sid Malhotra, Chief Investment Officer, Kactus Capital Management

Institutional Investor • 29 August 2023
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Alpha Edge Recognition - Family Office of the Year

This year, Allocator Intel is recognizing leaders in the allocator community, acknowledged by their peers, for exceptional leadership in the key areas of portfolio construction in the Alpha Edge Recognition Awards.
At Kactus Capital Management, nominated as Family Office of the Year, Chief Investment Officer Sid Malhotra has increased the single-family office’s allocation to smaller and first-time funds across both public and private markets.
He is a graduate of the University of Michigan, where he received his bachelor’s degree in economics. He earned an MBA in Analytic Finance and Economics at the University of Chicago Booth School of Business. Sid entered the investment management industry on the GP side, including stints at Citadel and Pacific Alternative Asset Management Co. (PAAMCO Prisma). In early 2008, he joined the Pritzker Group, a family office in Chicago, before joining Kactus Capital in late 2014.
The following is edited for length and clarity.

Can you share an overview of what your portfolio looks like today?

The portfolio is well diversified across various asset classes spanning public and private markets. We have been measured and thoughtful in building out our private investments exposure and continue to be focused on increasing our exposure.
We also have a healthy cash cushion that is generating an attractive return while we patiently look for compelling new investment opportunities. 
What have been the most significant changes over the last few years?
Over the last few years, our appetite for smaller funds and first-time funds, across both public and private markets, has increased. We believe these managers can be nimbler and hungrier than their larger peers.
Additionally, we have built out a robust portfolio of uncorrelated investments, which helps offset market risks in the aggregate Kactus Capital portfolio. 

What factors influence you most when evaluating opportunities in your investment space?

We have a broad and unconstrained mandate that allows us to look at all types of investments, spanning fund investments, co-investments, and direct investments, across public and private markets. Every investment is different, which means we bring a flexible and bespoke approach to our diligence. Our process is a dynamic mix of experienced qualitative judgment backed by and augmented with rigorous quantitative analysis. We are always thinking about risk/reward for each investment, including absolute return potential and the risk of principal impairment.
We also focus on the role and correlation of each prospective investment to existing investments and exposures in the broader portfolio. Lastly, we focus a lot on alignment of interests between the GP and LPs, team dynamics, and fund size. 

When looking to form a strategic partnership with an asset manager, what are the key areas on which you focus? 

We seek to partner with asset managers for the long term given our long-term capital base and long-term investment horizon. Some of the key areas that we focus on include best-in-class and differentiated investment capabilities, very strong alignment of interests, and a culture of high integrity, transparency, and treating LPs as true partners.
We also look for ways in which we can be value-add partners. We believe that every partnership is a two-way street, and we strive to be attractive partners for our GPs.

What investment opportunities are you focusing on over the next 12 to 18 months?

Over the next 12 to 18 months, we are focused on a few different areas, including lower middle-market buyouts, special situations, private credit, real estate lending, distressed credit, and distressed real estate.
Our approach to investing is primarily bottom-up while being mindful of the macro environment and risks – this means we are open-minded as to where the most compelling opportunities may present themselves in the near to medium term. We can quickly pivot our focus given our lean and efficient investment decision-making process. Fortunately, we have ample dry powder/cash to play offense in the coming months and quarters.

What challenges do you anticipate for your team over the next few years?

Change is the only constant in this business. A lot of the post-global financial crisis tailwinds over the past decade-plus have turned into headwinds such as higher levels of inflation, higher interest rates, and growing geopolitical issues with China, among other things.
That being said, these challenges should result in some compelling future investment opportunities over time. Having a growth and flexible mindset embedded in our team culture should position us well to adapt to different investment environments and challenges.

What would you say is your office’s greatest accomplishment since you joined?

I am most proud of the investment team we have been able to attract and retain. The team consists of self-driven, high-performing individuals who have different investment backgrounds. This leads to a rich diversity of thought as we internally debate various ideas and investments, and very little group think. The investment team consists of half women and half men, which further leads to a diversity of perspectives.
Everyone on the team is a generalist, as we employ a total portfolio approach, or “one portfolio” approach, as we like to call it internally. This helps ensure everyone on the team is aligned and rowing in the same direction. This also helps align interests between the entire investment team and the family since we are all focused on the total portfolio.

What do you like to do outside of work?

I enjoy playing tennis and golf with family and friends. I also enjoy giving back to the next generation through my involvement with Columbia University’s Master’s in Wealth Management program.


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