Callodine Capital Management, LP (“Callodine”) was formed by James Morrow in 2018. Callodine manages investment products with a long/short strategy, which target the dividend paying equity universe. This opportunity set focuses on cash-generative, mid to large cap companies across a diverse set of industries. In addition to core dividend paying equities, this universe includes differentiated equity income niches like Business Development Companies (BDCs), Master Limited Partnerships (MLPs), Real Estate Investment Trust (REITs), and special situations like Mergers & Acquisitions (M&A), spin-offs, convertibles, preferreds, and high yield. This target universe also has a distinct investor base, characterized by high retail-ownership and siloed active investors which can create predictable behavioral biases and stock dynamics.
Callodine believes that equity income investing is not about chasing yield. It is about seeking total return by paring dividend yield with a strong valuation discipline, earnings growth and an understanding of the key sentiment drivers that creates powerful alpha generation on long and short investments.
Callodine's investment strategy combines a quantitative approach, with a deep fundamental research process and a behavioral bias overlay. Callodine seeks a total return strategy, with alpha-driven equity upside combined with current income, downside protection, and a low correlation to typical long/short strategies.
This piece focuses on the scarcity of cash yield globally, the challenges this creates for asset allocators, and the opportunity we believe this leads to within the yielding equity universe.
Specifically, it covers the following: