Equity Group Investments Focuses on Old-Economy Ventures Amid Economic Uncertainty
Equity Group Investments (EGI), a private investment firm backed by the family of the late billionaire Sam Zell, is strategically diversifying its portfolio with a focus on traditional, asset-heavy businesses. This includes a variety of holdings such as a John Deere dealership, a bluefin tuna fishery, and a pedestrian bridge linking San Diego to Tijuana International Airport.
Mark Sotir, president of EGI, emphasizes the firm’s investment philosophy centered on long-term stability. “We tend to put our capital to work for a longer duration than most private equity firms. If you’re thinking out 10 years, 12 years, you have to start with picking a company in an industry that you know will be around,” he stated. This approach leads EGI to shy away from technology startups, which are often perceived as more volatile and susceptible to rapid changes driven by advancements in artificial intelligence and other technologies.
The emerging trend on Wall Street, known as the “HALO” trade—an acronym for “heavy assets, low obsolescence”—has gained traction among family offices. These investors are increasingly drawn to old-economy businesses that provide reliable cash flow and are less likely to face disruption. Sotir notes that economic uncertainty and recent tax reforms have made these asset-heavy companies more appealing for investment.
Traditional private equity investors typically aim for shorter investment horizons of three to seven years, which allows family offices like EGI to capitalize on discounted acquisitions. “Everybody gets so enamored with asset-light, but I like to say, ‘If you’re paying an asset-light premium, then I’m not sure where the advantage is,'” Sotir remarked.
Recent tax legislation, dubbed the “one big beautiful bill,” has also played a significant role in enhancing the attractiveness of these investments. The law has renewed bonus depreciation, allowing businesses to deduct the full cost of qualifying assets, such as machinery and vehicles, in the first year of use. Brian Hans, head of tax efficiency strategies at UBS, highlighted that family offices are increasingly adopting proactive tax planning strategies, focusing on after-tax returns when making investment decisions.
Auto and equipment dealerships are particularly well-positioned to benefit from bonus depreciation, offering families reliable cash flow alongside tax advantages. Joe Mowery, head of dealership investment banking at Stephens, remarked, “It’s very simple. They like a tax-advantaged income stream.” Despite inflation and other economic pressures potentially affecting consumer purchasing power, the parts and service segments of these businesses remain resilient, characterized by high margins.
While old-economy businesses are not immune to disruption, they often possess geographic advantages that limit competition. For instance, EGI’s ownership of John Deere and Kenworth dealerships is protected by franchise agreements, which prevent other dealerships of the same brand from opening nearby. Similarly, EGI’s bluefin tuna fishery benefits from stringent quotas that create significant barriers to entry.
Unlike traditional private equity firms, EGI is not under pressure to deploy capital quickly, allowing for a more measured investment approach. The firm typically engages in one to two deals per year and has noted an increase in inquiries from business owners facing challenges related to tariffs and inflation. “The amount of uncertainty that people are dealing with has oddly turned into a benefit for us,” Sotir explained.
The agricultural sector presents particularly attractive opportunities, as many farms are currently under significant financial stress. While rising costs for essential inputs like fertilizer and fuel pose challenges, EGI is prepared to wait for favorable conditions to materialize. “People are worried about the space, and that’s the perfect time for us to step in to buy,” Sotir concluded. “Even if the value doesn’t come in the first two, three years, that’s okay, as long as we know it’s coming, because we’ve got that duration.”
In conclusion, EGI’s strategic focus on old-economy businesses, combined with favorable tax conditions and an ability to endure economic fluctuations, positions the firm well for long-term success in an unpredictable market landscape.
