Idea Brunch with Christian Putz of ARR Investment Partners

Welcome to Sunday’s Idea Brunch, your interview series with great off-the-beaten-path investors. We are very excited to interview Christian Putz!

Christian is the founder and Chief Investment Officer of ARR Investment Partners, a London-based investment boutique. He launched the ARR Global Long/Short Equity Strategy in January 2015. Before establishing ARR Investment Partners, Christian worked as a portfolio manager at Kazimir Partners, a Moscow-based investment management company specializing in Russia and frontier markets. Before his time in Russia, he served as an analyst at Man Investments.

Since its inception, its best monthly performance occurred during the COVID-19 crash in March 2020, while its strongest annual performance was achieved in 2022, a year marked by significant corrections in both bond and equity markets. In 2024, ARR Investment Partners was honored with the With Intelligence HFM European Performance Award in the category "Global Equity Under $500M."

Christian, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch ARR Investment Partners?

Thank you for the opportunity to share my story! My background is perhaps a bit unusual. I’m originally from Austria and grew up in a middle-class family. My father was a bus driver, my mother a housewife, and we had a small farm near Salzburg. At the age of 16, I was fortunate to attend an extracurricular course on financial markets. With about 5,000 euros in savings, I became probably the only participant in the course who began investing at 17, in 1997.

My second investment was Qualcomm, which yielded an extraordinary 1,500% return by 1999. This initial success was transformative, shaping my career aspirations. It not only financed my university education but also instilled in me the belief that anything is possible in life.

I was also lucky to have a teacher who shared my passion for investing. He offered me a 30% profit share in exchange for good investment ideas. Between my own investments and these success fees, I had accumulated around 100,000 euros by the age of 19.

After graduating from university, I began my career at MAN Investments in Switzerland and London as a Rotational Analyst, gaining exposure across Fund of Hedge Funds, Venture Capital, and Credit/CLOs. These experiences, especially in credit markets, proved invaluable. In crisis it is all about return of capital rather than the return on capital. However, during the Global Financial Crisis (GFC), the credit division I worked for was effectively shut down, leaving me unemployed at the bottom of the market.

What came next was a bold and unconventional move. Since high school, I’d been fascinated by Russia, and unemployment gave me the freedom to pursue that interest. I relocated to Moscow, learned Russian, and eventually joined Kazimir Partners, an American-owned investment boutique. I managed their Russian Long/Short Equity Fund, navigating the tumultuous Russian bear market from 2011 to 2014—a period marked by a 70% collapse in the RTS Index due to falling oil prices and sanctions.

This challenging environment offered an intense learning curve, sharpening my skills in risk management and short-selling. These experiences proved invaluable during subsequent market crises, enabling us to achieve double-digit returns during events like the March 2020 COVID crash and the 2022 market sell-off. Reflecting on this journey, I’m reminded of Steve Jobs’ words: “You can’t connect the dots looking forward; you can only connect them looking backward.” Moving to Russia was a step I couldn’t have foreseen shaping my core strengths, but it undoubtedly did.

By 2014, it became clear to me that a single-country hedge fund was not the right model for generating consistent absolute returns. Limited investment opportunities often lead to suboptimal outcomes, and the best opportunities rarely come from the same region year after year.

In 2015, I launched the ARR Global Long/Short Equity Strategy with $1 million—comprised of one high-net-worth individual (HNWI) investor’s capital and my own savings. My motivation was twofold. First, I wanted to create an investment strategy aligned with my personality, one where I could invest all my own capital. My reasoning was simple: even generating a modest 10% return would allow me to live comfortably. Second, I sought to build a team and a client base comprised of individuals I genuinely enjoy working with—people I find inspiring or, at the very least, interesting. One of the greatest privileges of entrepreneurship is the ability to choose your employees.

Can you tell us a little more about your research and investment process? What makes you different than other funds?

In our investment process, we adopt a “quantamental” approach by combining quantitative and fundamental analysis.

In the first step, we screen for investment opportunities on both the long and short sides with either extreme valuation or growth characteristics. On the long side, we focus on stocks with either extremely low valuations and a clear trigger or companies with very high sustainable growth rates, ideally at an inflection point. On the short side, we have made most of our money with price or earnings bubbles and structural losers with very negative growth rates.

Such opportunities tend to present exceptional asymmetric risk-reward potential, as it can take considerable time for the market to price in the normalization of those extreme values or reflect those extreme growth rates, whether high or negative.

Our research process starts with a quantitative screening of over 7,000 stocks from across the world. We created our proprietary Portfolio and Risk Investment System (PARIS) which allows us to customize our screens according to back tested fundamental and technical criteria.

Since we have an unconstrained mandate, this screening provides us with a wealth of investment ideas that we then analyze qualitatively. In our qualitative analysis, we ensure that these ideas make sense, that there are no red flags, and that we understand the underlying drivers behind them. If a stock ranks high on both our quantitative and qualitative assessments, we add it to our watchlist.

As a final step, we aim to optimize the implementation by using technical analysis and avoiding common mistakes, such as buying overbought stocks. We want to invest in opportunities where the upside is at least 30%. We always place stop-losses when a position is opened, typically at 5–10%, and hence maintain a risk-reward ratio of at least 3x.

I think our process is quite straightforward. We screen our 7,000-stock universe for certain criteria, analyze the resulting 200–300 stocks per year, and implement the 50–100 names that end up on our watchlist if the technicals align and we have a very attractive risk-reward entry point. So we are definitely quite trading-oriented.

Which international markets are most interesting to you today? How do you get comfortable with investing in the management teams in developing countries?

On the short side, several European markets, specifically certain French stocks, offer attractive risk-reward opportunities given weak economic growth, tax increases, unsustainable debt levels, overregulation, potential tariffs, and other factors.

On the long side, we have many investments in the US but also maintain exposure to several stocks from emerging markets, such as Kazakhstan. These stocks crashed after the start of the war, and their valuations never fully recovered despite strong revenue and earnings growth. For example, Halyk Bank, trading at a P/E of 3x, offers a great risk-reward opportunity, especially if you believe peace talks between Russia and Ukraine could begin under a Trump presidency. I never understood why Kazakh banks crashed by more than 60% at the start of 2022. Did people really think Putin would start a war on two fronts?

This September, we also generated attractive returns with Chinese stocks. Currently, we have several Chinese stocks on our watchlist and are waiting for the right entry point, contingent on the implementation of necessary fiscal and monetary stimulus.

In terms of management teams, their performance can often be judged by their past track record. While I don’t have exact statistics, I wouldn’t necessarily say there are more instances of fraud in developing countries compared to developed markets. Let’s not forget infamous cases in developed countries like Enron, Theranos, and Wirecard.

What is more challenging is accurately assessing political risks. After my investment experience in Russia, I concluded that one should only invest in emerging markets when valuations are not just attractive but super attractive to compensate for the political risks. Additionally, we focus exclusively on liquid investments to ensure we can exit positions in a worst-case scenario.

I honestly never expected the Russia-Ukraine war to happen, but when it did, we quickly repositioned our portfolio for a new world order and ended up delivering +16% in March 2022. According to BarclayHedge, we achieved the best performance of all long/short equity strategies globally during that period.

In your most recent letter to investors, you mentioned Tesla as a major performance contributor. It’s a very controversial stock, with no shortage of critics. What makes you bullish about Tesla?

First of all, it is generally a good sign if a stock is highly controversial. Often, the best returns are generated from such stocks. Consider, for example, Carvana, which was extremely controversial two years ago but has since increased by more than 2,000% from its bottom.

Secondly, Tesla has been among the top-performing stocks of the past 15 years. As investors, we all rely on mental models to assess companies. You have several choices in how to approach this:

• On one hand, you can stick to a single mental model and avoid investing in anything that doesn’t align with it. For example, Tesla would not be a first choice for traditional value investors.

• On the other hand, you can use multiple mental models.

In our case, we don’t focus on being “right” or “wrong”; our goal is simply to generate returns for our investors. When we see a stock like Tesla delivering returns of several thousand percent, we ask ourselves whether it would have been possible to predict those developments and, if so, how effective those predictive criteria might be for future opportunities.

Over time, we have developed specific investment criteria for different types of opportunities, and Tesla met the criteria for one of those categories. That was the reason we invested in it. However, we remain clear-eyed—we wouldn’t fall in love with the stock or the company.

What is an exciting idea on your radar now?

We always have an abundance of ideas, and the most crucial part is focusing on the best opportunities. For our investment bucket, "dynamic profit growth," where we target companies with extremely high growth, we strive to stay on top of technological developments globally, as breakthroughs in technology often create the best risk-return opportunities.

One such example is: