Overlapping Circles Strategy
Build adjacent strategies that share research while preserving mandate-specific fit.
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 94%
The Overlapping Circles Strategy organizes adjacent business lines around shared expertise while preserving each mandate's structural limits. A firm first identifies a core capability, such as credit analysis, then develops complementary strategies that can reuse relationships, research, sourcing, or underwriting. Opportunities may appear in more than one circle, but an asset enters a particular fund only when it satisfies that strategy's investment criteria, especially liquidity and duration. This creates economies of knowledge without pretending every opportunity belongs everywhere. One circle can also reveal opportunities for another: financing work may expose a real-estate or operating-business investment, while a CLO platform can deepen knowledge useful to long-short credit. The output is disciplined synergy rather than unfocused diversification.
Origin
Brian Higgins used “overlapping circles” on Masters in Business to explain how King Street connects long-short credit, CLOs, drawdown funds, real estate, growth lending, and data-center investments.
Core principles
- 01Expand into adjacencies that reuse genuine expertise.
- 02Let each strategy retain its own liquidity and duration rules.
- 03Share rigorous analysis across compatible mandates.
- 04Use one business line to surface opportunities for another.
- 05Reject attractive assets that do not fit a fund's structure.
How to run it
- 1
Define the core capability
Identify the expertise, relationships, data, and underwriting processes that genuinely differentiate the existing business.
Pro tip Describe the capability independently of any single product or fund.
Watch out A broad label such as investing is too vague to establish a defensible adjacency.
- 2
Find a credible adjacent circle
Look for a strategy that benefits from the core capability while adding a distinct source of opportunity or insight.
Pro tip Start with areas already encountered through existing transactions and relationships.
Watch out Do not confuse a fashionable market with a strategically adjacent one.
- 3
Set mandate boundaries
Define the new strategy's duration, liquidity, return target, and eligible investments before allocating capital.
Pro tip Use separate structures when asset duration differs materially from the core fund.
Watch out Placing illiquid assets in a liquid vehicle can harm both investors and the strategy.
- 4
Share analysis selectively
Allow teams to reuse relevant company knowledge, sourcing relationships, and research while performing mandate-specific underwriting.
Pro tip Maintain one rigorous factual base but permit different portfolio conclusions.
Watch out Shared research should not become automatic approval across every fund.
- 5
Measure platform-level value
Evaluate whether the adjacency improves sourcing, analysis, financing flexibility, or investor outcomes across the platform. Expand only when the overlap produces demonstrable benefits.
Pro tip Track opportunities that moved between circles and why they fit one mandate rather than another.
Watch out Complexity can overwhelm the benefit if too many vehicles, vintages, and investor requirements accumulate.
In the wild
King Street examined GPU financing but was uncomfortable with rapidly depreciating chips. The work nevertheless highlighted durable demand for AI infrastructure. The firm then evaluated hyperscale data centers, rejected that highly competitive segment, and acquired a specialized liquid-cooling data-center business through the capabilities of its real-estate team and prior financing research.
→ A rejected lending idea generated knowledge that supported a more defensible adjacent investment.
A credit manager establishes a CLO strategy using its existing loan expertise. Shared issuer analysis supports both the CLO portfolio and the long-short credit business, but each loan or bond is admitted only when it meets the relevant vehicle's liquidity and duration requirements.
→ The platform gains research leverage while maintaining fund-specific discipline.
Common mistakes
Chasing unrelated growth
An opportunity is not adjacent merely because it is profitable or fashionable. It should reuse a real capability or strengthen another circle.
Ignoring fund structure
Shared expertise does not make an illiquid, long-duration asset appropriate for a liquid strategy. Match the opportunity to the correct vehicle.
Letting synergy override underwriting
An asset must independently satisfy the receiving strategy's criteria. Platform overlap is a sourcing advantage, not an investment thesis.
Is it for you?
Best for
It is best for multi-strategy firms with deep shared capabilities and clearly differentiated investment mandates.
Not ideal for
It is not ideal for firms using adjacency as a pretext for unrelated expansion or indiscriminate asset sharing.
From the transcript
“We describe our business in terms of overlapping circles”
“if they meet the investment criteria liquidity duration that we are looking for in that particular strategy”
“There's always a method to it that we evolve into.”
From the episode
King Street's Brian Higgins On Navigating Distressed Markets
Brian Higgins