The portfolio will consist of approximately 20-30 positions primarily in companies that are generally characterized as micro cap in nature. Our conviction is that the sub-$400 million market capitalization segment of the U.S. equity market is dominated by information gaps or inefficiencies that we intend to exploit using a fundamental, bottom-up approach. Candidates will possess a proven and incentivized management team, meaningful improvement in operational metrics, and a substantial disconnect between the stock price and intrinsic valuation, as measured by our analysis. The average holding period of investments within the partnership is anticipated to be 18-36 months.
Ownership will primarily be through common equity, but the fund will also seek to provide the final round of financing via privately placed senior and/or secured convertible notes and PIPEs that fund target companies through an anticipated near-term positive inflection in free cash flow. In addition to growth capital we also seek to replace prohibitive preferreds and/or debt facilities to simplify the capital structure and thereby enhance investor interest and growth opportunities.
The Partnership may also, from time to time, assume a constructive activist strategy due to significant ownership of the common equity with respect to enhancement of the executive team, capital structure, strategy, or other matters relevant to increased shareholder value.
The objective is to generate outsized returns by building a portfolio of highly idiosyncratic investment opportunities possessing above average growth and profitability prospects, with meaningful exposure to the smallest and most inefficient segment of the U.S. equity market. We define risk as loss of capital. Strict attention will be paid to volatility within the partnership to limit downside capture and reduce correlation to underlying market trends.
We believe limited opportunities for trading commissions and banking revenue have led to the continued neglect of U.S. micro cap companies from both a research and financing perspective, creating a lack of information and the resulting inefficiency that can be exploited by a research-intensive process. The Managing Partner has dedicated a 20+ year career to U.S micro cap companies and brings unique capabilities in terms of researching, investing, financing, and trading in this segment of the market.