1 00:00:02,200 --> 00:00:06,800 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:07,240 --> 00:00:10,200 Speaker 1: This week on the podcast, I have an extra special guest. 3 00:00:10,520 --> 00:00:13,280 Speaker 1: His name is Adam Carr, and he is head of 4 00:00:13,400 --> 00:00:18,960 Speaker 1: Orbis US and portfolio manager at the company's global equity strategy. 5 00:00:19,120 --> 00:00:23,480 Speaker 1: The firm manages over thirty seven billion dollars in assets. 6 00:00:24,079 --> 00:00:29,760 Speaker 1: Orbis has just an absolutely fascinating history. Their founder was 7 00:00:29,840 --> 00:00:34,200 Speaker 1: a portfolio manager at Fidelity for a while. His name 8 00:00:34,240 --> 00:00:37,839 Speaker 1: is Alan Gray, and he went out and launched Alan 9 00:00:37,880 --> 00:00:43,720 Speaker 1: Gray Limited in three eventually becoming South Africa's biggest private 10 00:00:43,760 --> 00:00:48,519 Speaker 1: investment manager. They expanded in in nineteen nine to be 11 00:00:48,640 --> 00:00:53,720 Speaker 1: more international, and that's when Orbis was created. The firm 12 00:00:53,840 --> 00:00:57,800 Speaker 1: is really quite fascinating for so many reasons. Their track 13 00:00:57,880 --> 00:01:02,600 Speaker 1: record has been outstanding. Their fee structure is fairly unique 14 00:01:02,600 --> 00:01:07,200 Speaker 1: in the industry, very much aligning client's interests with the 15 00:01:07,240 --> 00:01:11,640 Speaker 1: firm and the employees of the firm's interest I know 16 00:01:11,760 --> 00:01:15,240 Speaker 1: everybody sort of pays lip service to that. These guys 17 00:01:15,440 --> 00:01:18,959 Speaker 1: really do that. You pay for alpha and nothing else, 18 00:01:19,480 --> 00:01:23,959 Speaker 1: and if the firm underperforms its benchmark, you get refunds 19 00:01:24,000 --> 00:01:27,560 Speaker 1: on your fees and then some It's really very very 20 00:01:27,680 --> 00:01:32,320 Speaker 1: unique and very interesting. In addition, their their structure. What 21 00:01:32,360 --> 00:01:35,959 Speaker 1: Alan Gray did with his original shares is quite fascinating. 22 00:01:36,080 --> 00:01:39,840 Speaker 1: All told, this is really quite an intriguing conversation. I 23 00:01:39,880 --> 00:01:43,640 Speaker 1: think you're gonna find it quite interesting and unique in 24 00:01:43,640 --> 00:01:47,080 Speaker 1: the world of investing. So, with no further ado, my 25 00:01:47,280 --> 00:01:53,480 Speaker 1: conversation with Adam Carr of Orbits Investments. This is Masters 26 00:01:53,480 --> 00:01:58,040 Speaker 1: in Business with very Ridholts on Bloomberg Radio. My special 27 00:01:58,040 --> 00:02:00,880 Speaker 1: guest this week is Adam Carr. He is the head 28 00:02:00,960 --> 00:02:05,440 Speaker 1: of Orbis US and portfolio manager for Orbis Investments, a 29 00:02:05,560 --> 00:02:09,200 Speaker 1: firm which runs about thirty two billion dollars in assets. 30 00:02:09,680 --> 00:02:15,400 Speaker 1: The firm's flagship global equity strategy has outperformed its benchmark 31 00:02:15,680 --> 00:02:21,480 Speaker 1: m s c I World Index. Since it'sption, Orbits brings 32 00:02:21,520 --> 00:02:26,959 Speaker 1: a unique fee structure to clients who only pay when 33 00:02:27,000 --> 00:02:34,000 Speaker 1: the firm out performs. Adam Carr, Welcome to Bloomberg. Very 34 00:02:34,080 --> 00:02:36,799 Speaker 1: thank you, Thank you for having me. I'm looking forward 35 00:02:36,840 --> 00:02:40,880 Speaker 1: to it same here. So so let's let's start with 36 00:02:40,960 --> 00:02:44,239 Speaker 1: your background before we work our way to Orbis. How 37 00:02:44,240 --> 00:02:48,160 Speaker 1: did you first get interested investing? I read something that 38 00:02:48,320 --> 00:02:51,839 Speaker 1: used to help your grandfather clean up banks at night, 39 00:02:51,960 --> 00:02:55,040 Speaker 1: and you started reading docs that were lying around that 40 00:02:55,120 --> 00:02:57,480 Speaker 1: led to an interest in finance. Give us a little 41 00:02:57,480 --> 00:03:03,040 Speaker 1: background on that. I wish I was that precocious, UM. 42 00:03:03,120 --> 00:03:07,400 Speaker 1: So taking it back, I first became captivated with the 43 00:03:07,400 --> 00:03:10,119 Speaker 1: investing in middle school. I guess it was the late 44 00:03:10,160 --> 00:03:13,560 Speaker 1: seventies early eighties. I grew up in Illinois, the South 45 00:03:13,560 --> 00:03:17,359 Speaker 1: suburbs of Chicago, and I spent a lot of time 46 00:03:17,400 --> 00:03:20,840 Speaker 1: with my grandfather. He was a janitor and a caretaker 47 00:03:20,960 --> 00:03:23,600 Speaker 1: for our local savings and loan and I used to 48 00:03:23,600 --> 00:03:25,840 Speaker 1: go with him every night to help clean the bank 49 00:03:26,200 --> 00:03:29,600 Speaker 1: UM and I would mot florid and dump out waste 50 00:03:29,639 --> 00:03:34,200 Speaker 1: paper baskets. And there was this really interesting newspaper in 51 00:03:34,240 --> 00:03:37,480 Speaker 1: the garbage UM that looked different than anything that we 52 00:03:37,520 --> 00:03:39,960 Speaker 1: had at home, or school or anywhere else. And I 53 00:03:40,080 --> 00:03:44,520 Speaker 1: had these odd looking dot matrix photos on the cover. UM, 54 00:03:44,640 --> 00:03:48,080 Speaker 1: and of course I was the Wall Street Journal, and 55 00:03:48,400 --> 00:03:52,440 Speaker 1: I just was fascinated by looking at the paper trying 56 00:03:52,480 --> 00:03:54,800 Speaker 1: to follow the stories. I can't say that I really 57 00:03:54,840 --> 00:03:58,880 Speaker 1: understood it. I certainly wasn't reading bank documents, UM. But 58 00:03:59,000 --> 00:04:02,320 Speaker 1: it was it was that that really started me and 59 00:04:02,400 --> 00:04:05,400 Speaker 1: the journey of getting really interested in the market. On 60 00:04:05,400 --> 00:04:08,880 Speaker 1: on Friday night, Um, we didn't have to go to 61 00:04:08,920 --> 00:04:11,840 Speaker 1: the bank because we could go on Saturday. And we 62 00:04:11,960 --> 00:04:16,200 Speaker 1: used to watch Louis Rukaiser's Wall Street Week every Friday night. 63 00:04:16,240 --> 00:04:19,039 Speaker 1: In the beginning, you know, I would just I did 64 00:04:19,040 --> 00:04:20,520 Speaker 1: it because it was a way to spend time with 65 00:04:20,560 --> 00:04:25,880 Speaker 1: my grandfather. But over time I really came to enjoy it, um. 66 00:04:26,040 --> 00:04:27,960 Speaker 1: And I think that was really just the genesis for 67 00:04:28,000 --> 00:04:32,360 Speaker 1: me getting quite interested in markets and companies. The fascinating 68 00:04:32,440 --> 00:04:36,440 Speaker 1: thing about that period is the pace of Wall Street 69 00:04:36,640 --> 00:04:40,479 Speaker 1: Week and the pace of Rukaiser was so different than 70 00:04:40,520 --> 00:04:45,200 Speaker 1: what we experienced today. Do you look back at that 71 00:04:45,279 --> 00:04:49,240 Speaker 1: period as sort of a kindler, gentler era or was 72 00:04:49,279 --> 00:04:55,320 Speaker 1: that just part of the inevitable evolution of finance? I mean, 73 00:04:55,640 --> 00:04:58,280 Speaker 1: to be Ernest Perrea, I was nine or ten years old, 74 00:04:58,279 --> 00:05:01,280 Speaker 1: so I can't say that I I could credit in 75 00:05:01,400 --> 00:05:04,920 Speaker 1: contacts in full construct um, But it was just for 76 00:05:04,960 --> 00:05:09,320 Speaker 1: whatever reason, it was just fascinating to me. Um. And 77 00:05:09,480 --> 00:05:13,320 Speaker 1: UH really planted the seeds earnly. So so let's fast 78 00:05:13,360 --> 00:05:17,160 Speaker 1: forward a little bit to your current philosophy. Not that 79 00:05:17,200 --> 00:05:20,279 Speaker 1: when you were nine years old you talk about having 80 00:05:20,760 --> 00:05:27,120 Speaker 1: four core pillars of your beliefs, thinking like a business owner, contrarian, thinking, 81 00:05:27,839 --> 00:05:32,599 Speaker 1: long term perspective, and being unconstrained. Tell us about those 82 00:05:32,640 --> 00:05:38,960 Speaker 1: four and and how that belief system developed. Yeah, so, um, 83 00:05:38,960 --> 00:05:41,320 Speaker 1: it's probably helpful. And I'll dive in on the pillars 84 00:05:41,440 --> 00:05:43,839 Speaker 1: just to give a little bit of context on Orbits. 85 00:05:43,839 --> 00:05:48,640 Speaker 1: So Orbius is in its thirtieth year. We founded by 86 00:05:49,120 --> 00:05:51,720 Speaker 1: a gentleman by the name of Alan Gray, South African. 87 00:05:52,680 --> 00:05:55,880 Speaker 1: Um so what is Orbits were global equity specialists. Today 88 00:05:55,880 --> 00:05:58,680 Speaker 1: we manage about thirty seven billion in a u M 89 00:05:58,720 --> 00:06:02,080 Speaker 1: across the globe through a handful of long only, absolute 90 00:06:02,120 --> 00:06:05,880 Speaker 1: return and multi asset strategies. Um Or of his Global 91 00:06:05,920 --> 00:06:10,680 Speaker 1: Equity is our flagship strategy and it represents our total 92 00:06:11,440 --> 00:06:14,520 Speaker 1: a UM. We're mostly institutional, with the exception of some 93 00:06:14,640 --> 00:06:18,760 Speaker 1: retail and Australia in the UK. Our investment approach is 94 00:06:18,760 --> 00:06:21,920 Speaker 1: pretty simple. At the end of the day, UM we 95 00:06:22,040 --> 00:06:26,680 Speaker 1: stribed to by assets at a meaningful discount to intrinsic value. UM. 96 00:06:26,760 --> 00:06:30,760 Speaker 1: I think the key term there is intrinsic value. We're 97 00:06:30,800 --> 00:06:35,320 Speaker 1: not deep value managers who simply buy didactically based on 98 00:06:35,400 --> 00:06:38,320 Speaker 1: low price to book UM. We try to think much 99 00:06:38,400 --> 00:06:42,320 Speaker 1: more holistically about the true value of each business as 100 00:06:42,360 --> 00:06:45,000 Speaker 1: an owner UM, and we try to go after it 101 00:06:45,080 --> 00:06:49,400 Speaker 1: when there's some kind of dislocation. UM. We've got a 102 00:06:49,440 --> 00:06:52,279 Speaker 1: deep team of analysts about thirty five all around the 103 00:06:52,320 --> 00:06:55,760 Speaker 1: world in local markets. UM, and we're really of the 104 00:06:55,800 --> 00:06:58,000 Speaker 1: mind that if you if you want to generate an outfit, 105 00:06:58,040 --> 00:07:01,080 Speaker 1: you've got to go against the crowd and thinking act differently. 106 00:07:01,839 --> 00:07:05,600 Speaker 1: Our strategies are equity strategies are all unconstrained, so they're 107 00:07:05,640 --> 00:07:08,800 Speaker 1: gonna look very different to the benchmark, and we tend 108 00:07:08,800 --> 00:07:12,120 Speaker 1: to run pretty concentrated. Our global strategy has got about 109 00:07:12,200 --> 00:07:17,800 Speaker 1: sixty positions with our active share running over UM. Now, 110 00:07:17,840 --> 00:07:21,320 Speaker 1: there's a couple of aspects about orbits that are pretty unique, 111 00:07:21,720 --> 00:07:25,160 Speaker 1: one of which is how we think about fees. All 112 00:07:25,200 --> 00:07:28,960 Speaker 1: of our structures are performance based. UM. We can dive 113 00:07:29,000 --> 00:07:31,400 Speaker 1: into that more deeply, but in a in a nutshell, 114 00:07:31,480 --> 00:07:35,640 Speaker 1: we're contrary and intrinsic value equity managers now in terms 115 00:07:35,640 --> 00:07:39,640 Speaker 1: of the pillars and how they interact. I think it's 116 00:07:40,480 --> 00:07:42,880 Speaker 1: it's worthwhile to say, you know, sort of our d 117 00:07:43,000 --> 00:07:44,760 Speaker 1: n A of who we are is deeply rooted in 118 00:07:44,800 --> 00:07:48,400 Speaker 1: our founder UM and his view. This is going all 119 00:07:48,480 --> 00:07:51,240 Speaker 1: the way back to South Africa when he first launched 120 00:07:51,240 --> 00:07:54,120 Speaker 1: our sister firm is that if you want to generate 121 00:07:54,280 --> 00:07:57,520 Speaker 1: an alpha, you have to go against the crowd. UM. 122 00:07:57,560 --> 00:07:59,840 Speaker 1: And I can still hear Allen to this day say, 123 00:08:00,600 --> 00:08:02,920 Speaker 1: you know, if you want to be good, work hard, 124 00:08:03,400 --> 00:08:05,040 Speaker 1: but if you want to be exceptional, you have to 125 00:08:05,040 --> 00:08:07,240 Speaker 1: come at the problem completely differently. You got to you 126 00:08:07,280 --> 00:08:10,680 Speaker 1: got to turn it on its head. UM. And so 127 00:08:10,800 --> 00:08:13,520 Speaker 1: this really kind of informs the pillars, and I think 128 00:08:13,520 --> 00:08:16,160 Speaker 1: of it kind of the way that Jim Collins talks 129 00:08:16,200 --> 00:08:19,640 Speaker 1: about Flywheel, like there's no one silver bullet, it's the 130 00:08:19,680 --> 00:08:23,880 Speaker 1: way that they interact together. UM. And so the first 131 00:08:24,720 --> 00:08:29,440 Speaker 1: is this concept of independent thinking. UM. You have to 132 00:08:29,480 --> 00:08:35,880 Speaker 1: attract and retain highly independent minded people, people that love 133 00:08:36,000 --> 00:08:39,480 Speaker 1: and relish having a view that's different to others. That's 134 00:08:39,520 --> 00:08:42,520 Speaker 1: the heart and soul I think of of how we 135 00:08:42,600 --> 00:08:47,840 Speaker 1: try to construct our model UM. And then two, you 136 00:08:47,920 --> 00:08:50,680 Speaker 1: have to structure the firm and the values and the 137 00:08:50,760 --> 00:08:57,160 Speaker 1: culture that rewards independent minded people like to do things 138 00:08:57,240 --> 00:08:59,320 Speaker 1: that are different. You have to create a structure that 139 00:08:59,360 --> 00:09:01,160 Speaker 1: allows them to do that. One of the things that 140 00:09:01,200 --> 00:09:05,720 Speaker 1: we do, all of our analysts manage their own paper portfolios, 141 00:09:06,559 --> 00:09:08,960 Speaker 1: and so that it's quite different than a lot of shops. 142 00:09:08,960 --> 00:09:11,160 Speaker 1: And I not picking on any shop, but in many 143 00:09:11,200 --> 00:09:13,880 Speaker 1: places the analysts will, you know, in air quotes, pitch 144 00:09:14,480 --> 00:09:20,480 Speaker 1: names to pms um for us. The analysts are putting 145 00:09:20,520 --> 00:09:25,400 Speaker 1: forward what they would buy themselves and be accountable for objectively. UM. 146 00:09:25,440 --> 00:09:28,720 Speaker 1: And it's interesting because when I talk about this in 147 00:09:28,840 --> 00:09:32,400 Speaker 1: recruiting to prospective analysts, you can see some of some 148 00:09:32,400 --> 00:09:35,440 Speaker 1: some analysts are really drawn to that. You can see 149 00:09:35,480 --> 00:09:39,120 Speaker 1: them lean in, they're excited about it, and some lean 150 00:09:39,200 --> 00:09:41,800 Speaker 1: back and like oh um, and you can tell that 151 00:09:41,880 --> 00:09:44,760 Speaker 1: it it kind of intimidates them. And the point there 152 00:09:44,880 --> 00:09:47,760 Speaker 1: is that it's it's it's a self reinforcing system that 153 00:09:47,800 --> 00:09:51,640 Speaker 1: attracts people to us and helps us retain the individuals 154 00:09:51,760 --> 00:09:57,720 Speaker 1: that are most aligned with that. And then is let's 155 00:09:57,760 --> 00:10:00,320 Speaker 1: let me jump in right over here U before we 156 00:10:00,360 --> 00:10:04,480 Speaker 1: get to the other pillars. I recall reading an article 157 00:10:04,760 --> 00:10:09,000 Speaker 1: about you and the firm some time ago, um maybe 158 00:10:09,000 --> 00:10:13,920 Speaker 1: it was and Barons, where one of the analysts was 159 00:10:14,000 --> 00:10:20,840 Speaker 1: pitching Nike, which was rolling out this new fangled direct 160 00:10:20,920 --> 00:10:27,920 Speaker 1: to consumer Nike dot Com idea and pitched to everybody 161 00:10:27,920 --> 00:10:30,200 Speaker 1: in the firm, all called in from around the world, 162 00:10:30,880 --> 00:10:38,160 Speaker 1: and was fairly savaged in in various critiques and counter 163 00:10:38,280 --> 00:10:42,560 Speaker 1: arguments and pushback, but ultimately the firm ends up buying 164 00:10:42,640 --> 00:10:45,800 Speaker 1: half a billion dollars worth worth of Nike, which has 165 00:10:45,840 --> 00:10:49,400 Speaker 1: been a giant home run ever since. Um. Is that 166 00:10:49,600 --> 00:10:55,280 Speaker 1: typical for the process? Is that how that usually runs? Yes, 167 00:10:55,520 --> 00:10:57,440 Speaker 1: So that's a I mean, that's a great example there 168 00:10:57,559 --> 00:11:00,960 Speaker 1: in the sense that you know any firms and again 169 00:11:01,040 --> 00:11:04,400 Speaker 1: not a critique, but many firms will manage their portfolios 170 00:11:04,520 --> 00:11:08,280 Speaker 1: on a committee basis, UM. And our beliefs is that 171 00:11:08,360 --> 00:11:13,760 Speaker 1: the best decision, particularly contrarian decisions, are not made by committees. 172 00:11:13,920 --> 00:11:16,160 Speaker 1: They're made by individuals have done the work and have 173 00:11:16,240 --> 00:11:20,280 Speaker 1: a conviction and they're willing to be accountable for those decisions. UM. Now, 174 00:11:20,320 --> 00:11:23,640 Speaker 1: we obviously don't put people in positions to move capital 175 00:11:23,679 --> 00:11:26,320 Speaker 1: for clients right away. It's based on a demonstrative track record. 176 00:11:27,160 --> 00:11:31,760 Speaker 1: But our capital allocators have demonstrated those track records. UM. 177 00:11:31,800 --> 00:11:33,880 Speaker 1: And it's not a committee decision. And so in the 178 00:11:33,960 --> 00:11:38,600 Speaker 1: Nike situation, it was a very contentious investment committee. UM. 179 00:11:38,720 --> 00:11:41,720 Speaker 1: And in fact, you know myself and the analyst, UM, 180 00:11:41,760 --> 00:11:45,480 Speaker 1: I would say we're on one side relative to the 181 00:11:45,559 --> 00:11:49,040 Speaker 1: rest of the investment team. And the core issue there. 182 00:11:49,080 --> 00:11:51,320 Speaker 1: I mean, nobody would would dispute that Nike is a 183 00:11:51,360 --> 00:11:55,079 Speaker 1: great company and has great content and it's very creative 184 00:11:55,120 --> 00:11:58,000 Speaker 1: and great athletes. But they were making a big pivot 185 00:11:58,120 --> 00:12:01,400 Speaker 1: to go online and go direct, and the key question, 186 00:12:01,480 --> 00:12:04,640 Speaker 1: the burning question, was will that be better and more 187 00:12:04,720 --> 00:12:08,360 Speaker 1: profitable for Nike going forward. In our thesis was that 188 00:12:09,400 --> 00:12:13,160 Speaker 1: in cutting out wholesale, you eliminate that margin and they'll 189 00:12:13,200 --> 00:12:14,800 Speaker 1: be able to retain it. And there's a lot of 190 00:12:14,800 --> 00:12:16,920 Speaker 1: other reasons why we think it's going to be better. 191 00:12:16,960 --> 00:12:18,720 Speaker 1: I thought it was going to be better, but it 192 00:12:18,760 --> 00:12:22,200 Speaker 1: was a very contentious issue. Um. We had the investment 193 00:12:22,240 --> 00:12:25,079 Speaker 1: committee great discussion and debate. I mean, there were points 194 00:12:25,160 --> 00:12:27,760 Speaker 1: raised that we step back and spend time on. But 195 00:12:27,760 --> 00:12:29,640 Speaker 1: at the end of the day, as a portfolio manager, 196 00:12:29,679 --> 00:12:33,360 Speaker 1: that I made a decision to take a position, UM, 197 00:12:33,440 --> 00:12:37,400 Speaker 1: And that's the core premise of how we invest, of 198 00:12:37,520 --> 00:12:42,439 Speaker 1: allowing individuals to express themselves where they have conviction. So 199 00:12:42,520 --> 00:12:49,040 Speaker 1: that raises a second, somewhat related issue as to the 200 00:12:49,080 --> 00:12:54,160 Speaker 1: difference between traditional value. You you very disdainily mentioned price 201 00:12:54,240 --> 00:12:57,160 Speaker 1: to book, which has done quite poorly the past I 202 00:12:57,160 --> 00:13:00,360 Speaker 1: don't know twenty years. Um, certainly the past that cade. 203 00:13:00,760 --> 00:13:04,920 Speaker 1: But you keep bringing up intrinsic value, and I'm wondering 204 00:13:05,400 --> 00:13:10,360 Speaker 1: how much of that intrinsic value allows that definition allows 205 00:13:10,400 --> 00:13:15,840 Speaker 1: you to embrace more of a posture that includes some 206 00:13:16,240 --> 00:13:23,360 Speaker 1: out of favor growth stocks for sure. So, UM, I 207 00:13:23,400 --> 00:13:26,839 Speaker 1: think we we've got a thirty year track record. If 208 00:13:26,880 --> 00:13:31,240 Speaker 1: you look across those thirty years, it's across many different 209 00:13:31,280 --> 00:13:37,400 Speaker 1: cycles and market environments growth value UM. And we by 210 00:13:37,440 --> 00:13:40,720 Speaker 1: far we tend to do best in you know, classic 211 00:13:40,920 --> 00:13:45,240 Speaker 1: value markets. UM. I think where we differ from our peers, however, 212 00:13:46,000 --> 00:13:52,160 Speaker 1: is that we we do okay in growth markets. UM. 213 00:13:52,200 --> 00:13:57,079 Speaker 1: And why is that? We're not didactic? Um? First of all, 214 00:13:57,080 --> 00:14:00,160 Speaker 1: what is value? We're not didactic around what value is 215 00:14:00,200 --> 00:14:02,800 Speaker 1: in the sense that it's a it's a hard parameter 216 00:14:02,920 --> 00:14:08,120 Speaker 1: around price to book or a specific pe metric above 217 00:14:08,160 --> 00:14:11,320 Speaker 1: which we won't buy. What we really think about holistically 218 00:14:11,640 --> 00:14:16,240 Speaker 1: is the business, the quality of the business, the durability 219 00:14:16,240 --> 00:14:18,560 Speaker 1: of the cash flows, the ability of those cash flows 220 00:14:18,600 --> 00:14:21,960 Speaker 1: to grow over time, the mode UM. And then we 221 00:14:21,960 --> 00:14:25,800 Speaker 1: look at the price and we go after situations when 222 00:14:26,280 --> 00:14:32,520 Speaker 1: we see a meaningful gap excuse me between those two UM, 223 00:14:32,600 --> 00:14:34,720 Speaker 1: that's what we are as a manager, and I think 224 00:14:34,920 --> 00:14:37,800 Speaker 1: you know, everybody likes to put you in a box, um, 225 00:14:38,040 --> 00:14:40,680 Speaker 1: Morning Star, others. And the way we like to say 226 00:14:40,680 --> 00:14:42,760 Speaker 1: it is our dot moves around, you know, don't put 227 00:14:42,800 --> 00:14:45,400 Speaker 1: us in any one box. The dot moves around. And 228 00:14:45,400 --> 00:14:47,920 Speaker 1: I think it's because the areas of the market that 229 00:14:47,960 --> 00:14:52,040 Speaker 1: are offering the most value move around over time, UM. 230 00:14:52,080 --> 00:14:55,520 Speaker 1: And that's something that we've always lived to UM and 231 00:14:55,560 --> 00:14:59,000 Speaker 1: hopefully has been beneficial for our clients over time. So 232 00:14:59,000 --> 00:15:01,520 Speaker 1: so you get to run the US segment of what 233 00:15:01,520 --> 00:15:06,120 Speaker 1: what is a global portfolio. Obviously, the US market has 234 00:15:06,160 --> 00:15:09,360 Speaker 1: been pretty dramatically out performing the rest of the world, 235 00:15:09,920 --> 00:15:14,080 Speaker 1: not just in but pretty much since the end of 236 00:15:14,080 --> 00:15:18,200 Speaker 1: the financial crisis and in oh nine. How long do 237 00:15:18,240 --> 00:15:23,360 Speaker 1: you think this relative outperformance of US versus overseas is 238 00:15:23,440 --> 00:15:26,080 Speaker 1: going to last? Are we ever going to see any 239 00:15:26,120 --> 00:15:30,280 Speaker 1: form of mean reversion or have things aligned in such 240 00:15:30,320 --> 00:15:33,480 Speaker 1: a way that hey, this could go on for who 241 00:15:33,520 --> 00:15:40,840 Speaker 1: knows how long? Yeah? Um, sixty four thousand. Another question, 242 00:15:40,840 --> 00:15:42,400 Speaker 1: I mean, to your point, Beer, I think you know, 243 00:15:42,400 --> 00:15:44,800 Speaker 1: the returns in the US, which is where I live 244 00:15:44,800 --> 00:15:49,120 Speaker 1: and breathe, have been sensational relative and historic context into 245 00:15:49,280 --> 00:15:55,200 Speaker 1: SMP since two thousand nine is compounded at the nasdas 246 00:15:55,280 --> 00:16:00,040 Speaker 1: compounded at two to three x the long term and 247 00:16:01,160 --> 00:16:05,800 Speaker 1: seven to average UM. In some ways, it's surprising, in 248 00:16:05,880 --> 00:16:09,880 Speaker 1: some ways not UM, and I'm not studied it empirically, 249 00:16:10,560 --> 00:16:12,840 Speaker 1: so ticket with a grain of stalt, but you know, 250 00:16:12,840 --> 00:16:15,000 Speaker 1: in speculating some of the drivers. I mean, I think 251 00:16:15,480 --> 00:16:19,080 Speaker 1: the most dominant force in the market globally and in 252 00:16:19,080 --> 00:16:23,480 Speaker 1: the US over the past decades been monetary intervention. UM 253 00:16:23,880 --> 00:16:27,920 Speaker 1: has truly been unprecedented and by and large, and I'm 254 00:16:27,960 --> 00:16:31,080 Speaker 1: sure others would would disagree, but I would say leadership 255 00:16:31,120 --> 00:16:34,920 Speaker 1: for Nankee Yell and now pow UM has been pretty constructive. 256 00:16:34,960 --> 00:16:37,920 Speaker 1: So I think that's been the context within which this 257 00:16:38,040 --> 00:16:42,040 Speaker 1: has been enabled UM. But there's really been an insatiable 258 00:16:42,080 --> 00:16:47,880 Speaker 1: appetite for growth, non cyclical growth, secular growth UM. And 259 00:16:47,920 --> 00:16:51,240 Speaker 1: if you look at the market structure today, what do 260 00:16:51,280 --> 00:16:53,720 Speaker 1: you see. I mean, the top five companies now six 261 00:16:53,760 --> 00:16:59,680 Speaker 1: if you include Testla in there, in SMP, or of 262 00:16:59,760 --> 00:17:02,840 Speaker 1: the of the SMP, which by historical standards is now 263 00:17:02,920 --> 00:17:07,760 Speaker 1: quite concentrated, there's now over fifty stocks that traded more 264 00:17:07,840 --> 00:17:10,720 Speaker 1: than ten times revenues UM. And that's just in the 265 00:17:10,840 --> 00:17:13,239 Speaker 1: SMP and there's all kinds of stocks outside of it, 266 00:17:13,320 --> 00:17:16,920 Speaker 1: like Snowflake and Door to Ash and Zoom that traded 267 00:17:17,320 --> 00:17:22,880 Speaker 1: pretty heavy multiples UM. And so it's been underpinned by 268 00:17:23,040 --> 00:17:31,280 Speaker 1: exceptional revenue and earnings growth and exceptional UM multiple expansion UM. 269 00:17:31,320 --> 00:17:35,280 Speaker 1: And it's been that mix that's created this this cocktail 270 00:17:35,359 --> 00:17:39,080 Speaker 1: combined with lower taxes and lower regulation and following wage 271 00:17:39,119 --> 00:17:44,919 Speaker 1: burden UM, that's created a pretty powerful cocktail UM. So 272 00:17:45,000 --> 00:17:48,040 Speaker 1: the most important question is where too from there? UM? 273 00:17:48,040 --> 00:17:53,920 Speaker 1: Where to from here? And UM. You know, by historical constructs, 274 00:17:54,119 --> 00:17:59,600 Speaker 1: spreads are quite wide, UM, quite wide. And you know, 275 00:17:59,720 --> 00:18:03,760 Speaker 1: we don't make forecast and there's not a prediction as 276 00:18:03,840 --> 00:18:08,720 Speaker 1: to when it will turn or why it'll turn UM, 277 00:18:08,880 --> 00:18:12,439 Speaker 1: but we're of the beliefs that that will and should 278 00:18:12,520 --> 00:18:17,800 Speaker 1: normalize in time UM. And I think sympatistically that's around 279 00:18:17,800 --> 00:18:22,600 Speaker 1: the fact that it's unsustainable for the market to compound 280 00:18:23,320 --> 00:18:28,840 Speaker 1: at that rate UM. And when you look back, looked 281 00:18:28,840 --> 00:18:33,440 Speaker 1: at orbits is history go all the way back to you. 282 00:18:33,560 --> 00:18:37,560 Speaker 1: I think Japan was something like of the World Index, 283 00:18:38,320 --> 00:18:43,120 Speaker 1: and we had zero exposure to Japan on the view 284 00:18:43,160 --> 00:18:46,679 Speaker 1: that that was extreme and grossly over valued. You go 285 00:18:46,800 --> 00:18:51,040 Speaker 1: to two thousand Um. You know, there was an area 286 00:18:51,040 --> 00:18:54,600 Speaker 1: of the market technology and we were on the other 287 00:18:54,640 --> 00:19:00,359 Speaker 1: side of that and Tobaccos whatnot. Um. And and you 288 00:19:00,400 --> 00:19:03,119 Speaker 1: look at today and those spreads are just as wide, 289 00:19:03,160 --> 00:19:06,480 Speaker 1: if not wider. And we do, as we said today 290 00:19:06,480 --> 00:19:09,840 Speaker 1: we have a pretty meanful underway to the US. I 291 00:19:09,840 --> 00:19:12,920 Speaker 1: think the US is now sixty five sixty six of 292 00:19:12,960 --> 00:19:17,439 Speaker 1: the World index and we are about half that in 293 00:19:17,480 --> 00:19:20,680 Speaker 1: our global strategy. UM. So we're on the other side 294 00:19:20,680 --> 00:19:26,919 Speaker 1: of that. UM. And it's interesting because, UM, you know, 295 00:19:26,920 --> 00:19:28,399 Speaker 1: when you look at it, when you look at the 296 00:19:28,480 --> 00:19:33,720 Speaker 1: data and you think about it, it seems like, you know, 297 00:19:34,160 --> 00:19:37,360 Speaker 1: it's clear what one should think about doing. But when 298 00:19:37,359 --> 00:19:40,600 Speaker 1: you're in the moment and it's been painful in getting there, 299 00:19:41,200 --> 00:19:44,080 Speaker 1: it's hard to do. And I think that really speaks 300 00:19:44,119 --> 00:19:46,840 Speaker 1: to the behavioral side of investing, which is one of 301 00:19:46,880 --> 00:19:50,600 Speaker 1: the aspects of investing that it's always attracted me the most, 302 00:19:50,680 --> 00:19:53,280 Speaker 1: is that it's most difficult when you're in those moments. 303 00:19:53,560 --> 00:19:57,240 Speaker 1: And I think now it is one of those times. Huh, 304 00:19:57,359 --> 00:20:02,399 Speaker 1: quite quite intriguing. Last s and about these topics. So 305 00:20:03,160 --> 00:20:06,400 Speaker 1: you run the US segment of what is a global 306 00:20:07,160 --> 00:20:10,879 Speaker 1: investment company? What is your day to day job, like, 307 00:20:11,080 --> 00:20:14,960 Speaker 1: what what is your actual title? What are you responsible for? 308 00:20:15,440 --> 00:20:17,880 Speaker 1: Are you running the team? Are you running the portfolio? 309 00:20:18,160 --> 00:20:24,120 Speaker 1: Tell us exactly, UM, what what your job entails? Sure? 310 00:20:24,960 --> 00:20:30,040 Speaker 1: So UM, I've been investing for about five years of 311 00:20:30,280 --> 00:20:34,520 Speaker 1: public and private markets, last eighteen years at ORBITS. I 312 00:20:34,600 --> 00:20:37,119 Speaker 1: joined Orvice in two thousand and two, and so today 313 00:20:37,119 --> 00:20:41,639 Speaker 1: I'm responsible for the US efforts of the firm UM in. 314 00:20:41,640 --> 00:20:45,120 Speaker 1: Our US team is is based in San Francisco. I'm 315 00:20:45,160 --> 00:20:48,840 Speaker 1: one of the five capital allocators UM or PMS for 316 00:20:48,920 --> 00:20:52,480 Speaker 1: the flagship global strategy. So I'm the PM for the 317 00:20:53,000 --> 00:20:55,960 Speaker 1: U S strategy. That's my day to day, which is 318 00:20:56,000 --> 00:20:57,960 Speaker 1: a lot of reading and a lot of interacting with 319 00:20:58,200 --> 00:21:01,960 Speaker 1: my investment team UM in terms of sourcing and thinking 320 00:21:02,040 --> 00:21:07,760 Speaker 1: about ideas. I also sit on our global Management Committee, 321 00:21:07,760 --> 00:21:11,760 Speaker 1: which i've done for it's about fifteen years UM. But 322 00:21:11,880 --> 00:21:14,000 Speaker 1: I think at the core, you know, I started as 323 00:21:14,119 --> 00:21:16,440 Speaker 1: an analyst as a generalist in Bermuda, which is where 324 00:21:16,440 --> 00:21:20,800 Speaker 1: the firm's headquartered UM and today I do the same thing. 325 00:21:20,800 --> 00:21:23,760 Speaker 1: I picked up a lot of other responsibilities along the way, 326 00:21:23,800 --> 00:21:27,240 Speaker 1: but first and foremost, you know, we're bottoms of fundamental 327 00:21:27,280 --> 00:21:31,240 Speaker 1: stock pickers. As analysts understanding businesses. And that's what I've 328 00:21:31,280 --> 00:21:35,560 Speaker 1: been the majority of my time doing. Huh, quite fascinating. 329 00:21:36,119 --> 00:21:40,440 Speaker 1: You only take a fee when your funds outperform your benchmark, 330 00:21:40,920 --> 00:21:46,600 Speaker 1: and not only that, you return fees when you underperform. 331 00:21:46,600 --> 00:21:50,200 Speaker 1: Explain the genesis of this and how it works in 332 00:21:50,480 --> 00:21:55,600 Speaker 1: the real world. So genesis, UM, And to do that, 333 00:21:55,720 --> 00:21:57,399 Speaker 1: I'm just going to tie you back quickly buried to 334 00:21:57,440 --> 00:21:59,440 Speaker 1: the kind of the four pillars to round that out. 335 00:21:59,480 --> 00:22:05,560 Speaker 1: So pillar one people independent minded, to structure give them 336 00:22:05,560 --> 00:22:08,280 Speaker 1: a space to be independent minded and express themselves. And 337 00:22:08,359 --> 00:22:14,119 Speaker 1: the third pillar is around alignment UM. Is to seek 338 00:22:14,119 --> 00:22:21,320 Speaker 1: aligned clients in a way that our incentives are truly aligned. UM. 339 00:22:21,359 --> 00:22:24,080 Speaker 1: And then the forest pillar is to structure the firm's 340 00:22:24,119 --> 00:22:28,040 Speaker 1: ownership to promote putting us in a position to take 341 00:22:28,080 --> 00:22:30,960 Speaker 1: a long term view and differentiated actions. And just on 342 00:22:31,040 --> 00:22:34,560 Speaker 1: that last point, you know, the firm is privately held, 343 00:22:35,359 --> 00:22:41,439 Speaker 1: our founder vested interest into a charitable trust, so that 344 00:22:41,520 --> 00:22:46,159 Speaker 1: charitable trust uniquely will own orbits in perpetuity UM. And 345 00:22:46,320 --> 00:22:50,240 Speaker 1: significant to that is it allows us to take actions 346 00:22:50,680 --> 00:22:53,199 Speaker 1: that are longer term and they're differentiated. And that that 347 00:22:53,280 --> 00:22:56,840 Speaker 1: relates to the fees and I'll tie it so specifically 348 00:22:56,840 --> 00:22:59,320 Speaker 1: on the fees UM. The genesis goes all the way 349 00:22:59,359 --> 00:23:02,639 Speaker 1: back to the beginning in the core value around alignment. UM, 350 00:23:02,720 --> 00:23:05,840 Speaker 1: we've only had performance fees in the history of the firm. 351 00:23:05,880 --> 00:23:09,080 Speaker 1: Our original fee, if you go back to was a 352 00:23:09,160 --> 00:23:11,520 Speaker 1: base fee of a hundred and fifty basis points, with 353 00:23:11,720 --> 00:23:17,520 Speaker 1: a hundred basis points fulcrumkee up and down fully symmetrical. UM. 354 00:23:17,640 --> 00:23:20,679 Speaker 1: There are structures evolved UM as the markets evolved and 355 00:23:20,720 --> 00:23:23,679 Speaker 1: I think improved. So let me let me touch on 356 00:23:23,720 --> 00:23:27,320 Speaker 1: the principles of any and I'll talk specifically. So in 357 00:23:27,359 --> 00:23:30,879 Speaker 1: the perfect world, the client wouldn't pay any fees until 358 00:23:30,920 --> 00:23:34,280 Speaker 1: they redeemed, at which time they would just pay based 359 00:23:34,320 --> 00:23:38,200 Speaker 1: on the value that you added. UM. Obviously that's impractical 360 00:23:38,520 --> 00:23:42,600 Speaker 1: because managers need to pay bills. But the principle of 361 00:23:42,640 --> 00:23:47,720 Speaker 1: alignment around that is the key to our approach UM, 362 00:23:47,800 --> 00:23:49,680 Speaker 1: and so we try to do that in two ways. 363 00:23:49,680 --> 00:23:52,600 Speaker 1: The first is just management staff co invest in the 364 00:23:52,640 --> 00:23:55,480 Speaker 1: same vehicles with the same fees and were the largest investor. 365 00:23:56,119 --> 00:23:58,720 Speaker 1: And the second is that all of our fees of 366 00:23:58,800 --> 00:24:03,480 Speaker 1: performance based fully metrical and we refund the fees when 367 00:24:04,000 --> 00:24:07,800 Speaker 1: we underperform, so they only pay a fee if we're 368 00:24:08,480 --> 00:24:11,480 Speaker 1: add anxiety and to the best example is what we 369 00:24:11,520 --> 00:24:14,880 Speaker 1: call our zero based THEE option, which is for institutional 370 00:24:14,920 --> 00:24:18,320 Speaker 1: clients of size and so they pay no base fee 371 00:24:18,800 --> 00:24:21,920 Speaker 1: and they only pay a performance fee if we deliver 372 00:24:22,040 --> 00:24:25,520 Speaker 1: alpha UM, and on that alpha the sharing ratios two 373 00:24:25,560 --> 00:24:28,320 Speaker 1: thirds to the clients and one third to us as 374 00:24:28,359 --> 00:24:35,280 Speaker 1: the manager UM. If we subsequently underperform, then those fees 375 00:24:35,320 --> 00:24:38,840 Speaker 1: are refunded UM and they go into a trust account 376 00:24:38,920 --> 00:24:43,400 Speaker 1: which fits there for the client in future. UM. It's 377 00:24:43,400 --> 00:24:48,159 Speaker 1: important to think about the incentives there, because we you know, 378 00:24:48,200 --> 00:24:50,159 Speaker 1: our incentives or not to grow a u M. We 379 00:24:50,200 --> 00:24:55,639 Speaker 1: don't survive unless we generate alpha and add value UM. 380 00:24:55,680 --> 00:24:58,359 Speaker 1: Which isn't to say that we can guarantee that we 381 00:24:58,480 --> 00:25:01,879 Speaker 1: will do such. We can say that we'll fully align 382 00:25:01,960 --> 00:25:06,840 Speaker 1: and we feel the pain when we don't deliver UM. 383 00:25:06,920 --> 00:25:11,080 Speaker 1: What's interesting about this is we first introduced this respundable 384 00:25:11,119 --> 00:25:16,320 Speaker 1: fee structure in two thousand and four UM, and I 385 00:25:16,359 --> 00:25:18,879 Speaker 1: think you care to say that clients were pretty skeptical 386 00:25:19,600 --> 00:25:21,800 Speaker 1: UM of the structure. I think there was a lot 387 00:25:21,840 --> 00:25:24,560 Speaker 1: of questions around, you know, well, why would you do this? 388 00:25:24,680 --> 00:25:27,480 Speaker 1: There must be some kind of got you in here. UM, 389 00:25:27,600 --> 00:25:30,240 Speaker 1: this just has to be better for you and UM. 390 00:25:30,359 --> 00:25:32,560 Speaker 1: But I think now we've had well over a decade 391 00:25:32,840 --> 00:25:37,480 Speaker 1: of of history with the structure thing viewers speak to clients. UM, 392 00:25:37,520 --> 00:25:42,119 Speaker 1: it's been it's been a wonderful alignment vehicle. UM. What 393 00:25:42,200 --> 00:25:45,080 Speaker 1: we've seen in practices that when we go through periods 394 00:25:45,080 --> 00:25:51,200 Speaker 1: of underperformance, which we inevitably do, UM, clients are reluctant 395 00:25:51,560 --> 00:25:55,320 Speaker 1: to redeem because they've got fees sitting in that UM 396 00:25:55,520 --> 00:26:00,000 Speaker 1: reserve account. And number one, it dampens that relative underperformance 397 00:26:00,119 --> 00:26:03,359 Speaker 1: because you have those fees being credited back into You 398 00:26:03,480 --> 00:26:07,199 Speaker 1: see an asset there and you're reluctant to crystallize it 399 00:26:07,240 --> 00:26:10,160 Speaker 1: because you know it's there. Now for us as a manager, 400 00:26:10,720 --> 00:26:14,080 Speaker 1: that ideal, because it means that we don't have lock 401 00:26:14,200 --> 00:26:17,399 Speaker 1: ups or any restrictions that the clients are speaking with 402 00:26:17,520 --> 00:26:20,720 Speaker 1: us is exactly the time when it's most critical for 403 00:26:20,880 --> 00:26:24,680 Speaker 1: us as a manager, such that we're not fighting redemptions 404 00:26:24,720 --> 00:26:26,399 Speaker 1: at that time when we have a draw down and 405 00:26:26,480 --> 00:26:31,280 Speaker 1: allows us to lean into those positions UM when potentially 406 00:26:31,320 --> 00:26:35,280 Speaker 1: it's most attractive to do so. And so that's UH, 407 00:26:35,359 --> 00:26:40,680 Speaker 1: it's been a very powerful alignment between us and our clients. 408 00:26:40,680 --> 00:26:43,119 Speaker 1: And one of the things that we we measure ourselves on, 409 00:26:43,200 --> 00:26:45,639 Speaker 1: which I think doesn't get talked about enough in the 410 00:26:45,720 --> 00:26:51,320 Speaker 1: industry is the behavioral penalty UM. And you can look 411 00:26:51,320 --> 00:26:55,159 Speaker 1: at a manager with phenomenal track record UM, but what 412 00:26:55,240 --> 00:26:59,320 Speaker 1: did the clients actually realized? And oftentimes that gap is 413 00:26:59,400 --> 00:27:02,720 Speaker 1: quite why we obsess over fees and the lowest cost fees. 414 00:27:03,080 --> 00:27:05,119 Speaker 1: But if you look at the actual data, the behavioral 415 00:27:05,119 --> 00:27:09,199 Speaker 1: penalty blows away. In many cases the relative difference that 416 00:27:09,280 --> 00:27:12,440 Speaker 1: you see UM in terms of wear manager strike fees, 417 00:27:12,520 --> 00:27:15,679 Speaker 1: and what we've seen in practice over the past decade 418 00:27:15,720 --> 00:27:19,359 Speaker 1: plus is that that behavioral gap has to come down considerably, 419 00:27:19,800 --> 00:27:23,960 Speaker 1: which is act is directly tied to what we're trying 420 00:27:23,960 --> 00:27:27,680 Speaker 1: to do in terms of our premise UM. So it's 421 00:27:27,760 --> 00:27:31,040 Speaker 1: something that we've we've been very pleased with. Now I 422 00:27:31,040 --> 00:27:35,720 Speaker 1: guess the other side of it is, you know, why 423 00:27:35,840 --> 00:27:38,080 Speaker 1: why don't more people do it? But before we get 424 00:27:38,119 --> 00:27:40,639 Speaker 1: to why more people don't do that, I want to 425 00:27:40,680 --> 00:27:44,440 Speaker 1: make sure I fully get the details of the fault 426 00:27:44,480 --> 00:27:47,960 Speaker 1: on fee. So institutional account I'm gonna assume a hundred 427 00:27:48,000 --> 00:27:52,080 Speaker 1: million and up no base fee meaning no annual fee, 428 00:27:52,560 --> 00:27:56,040 Speaker 1: so you outperform in a given year, and you take 429 00:27:56,160 --> 00:28:00,439 Speaker 1: some of your fee, which is based on the alpha 430 00:28:00,480 --> 00:28:04,800 Speaker 1: that's generated, and that goes into a trust that sits 431 00:28:04,840 --> 00:28:08,560 Speaker 1: and waits for the eventual under performance and is then 432 00:28:08,640 --> 00:28:12,760 Speaker 1: used to reimburse some of clients losses or or at 433 00:28:12,840 --> 00:28:15,840 Speaker 1: least client under performance. Am I getting that more or 434 00:28:15,880 --> 00:28:20,320 Speaker 1: less right? Yeah? Directionally, so UM two fees. So our 435 00:28:20,400 --> 00:28:24,040 Speaker 1: ourdo base which is for institutional accounts above a hundred million, 436 00:28:24,880 --> 00:28:28,280 Speaker 1: no base fee, a two thirds one third sharing ratio, 437 00:28:28,640 --> 00:28:31,960 Speaker 1: and then we have our core which is for clients 438 00:28:32,040 --> 00:28:37,399 Speaker 1: less than that institutional clients UM base fee, management fee 439 00:28:37,840 --> 00:28:42,960 Speaker 1: with sharing ratio UM. Now use that as an example 440 00:28:43,040 --> 00:28:47,000 Speaker 1: going forward. So we we generate alpha, it goes into 441 00:28:47,200 --> 00:28:51,200 Speaker 1: what we call our reserve account. From that reserve account, 442 00:28:51,200 --> 00:28:54,000 Speaker 1: it doesn't flow out to us as a manager until 443 00:28:54,160 --> 00:28:57,120 Speaker 1: we accrue more than three of N a V in 444 00:28:57,200 --> 00:29:00,520 Speaker 1: the reserve account, and once it goes above that threshold, 445 00:29:00,560 --> 00:29:03,880 Speaker 1: it can flow out to us at a ratio at 446 00:29:03,920 --> 00:29:08,680 Speaker 1: at a rate of one per annum um. So we're 447 00:29:08,720 --> 00:29:12,160 Speaker 1: building up the reserve account before anything goes to us 448 00:29:12,600 --> 00:29:17,160 Speaker 1: as the manager. That reserve account is actually invested reinvested 449 00:29:17,240 --> 00:29:20,160 Speaker 1: in the funds, and so that that's what it shits 450 00:29:20,200 --> 00:29:23,800 Speaker 1: in in the reserve account, and then in periods of underperformance, 451 00:29:24,560 --> 00:29:27,880 Speaker 1: that underperformance at the same sharing ratio in this case 452 00:29:29,280 --> 00:29:33,120 Speaker 1: is credited back to the nav of the client. The 453 00:29:33,160 --> 00:29:36,760 Speaker 1: other thing that's important to mention here is that the 454 00:29:36,840 --> 00:29:40,560 Speaker 1: client fee is the sorry. The fee is bespoke to 455 00:29:40,600 --> 00:29:44,440 Speaker 1: the individual client and their experienced from inception, so they're 456 00:29:44,440 --> 00:29:47,600 Speaker 1: not taking on the characteristics of the pool. It's specific 457 00:29:47,680 --> 00:29:52,160 Speaker 1: to their individual experience. Makes sense. It's set up as 458 00:29:52,200 --> 00:29:55,640 Speaker 1: an SMA, not as a fund. Is that what you're saying. 459 00:29:57,040 --> 00:30:00,840 Speaker 1: It's a pooled vehicle, but the fee is got individual 460 00:30:00,960 --> 00:30:04,320 Speaker 1: to them. I got it. It's very specific. So my 461 00:30:04,520 --> 00:30:07,800 Speaker 1: firm we build quarterly and it's like a big deal. 462 00:30:08,680 --> 00:30:11,200 Speaker 1: We're recording this the first week of the new year. 463 00:30:11,960 --> 00:30:17,320 Speaker 1: Sometime this week. We're running uh different billings at Fidelity 464 00:30:17,680 --> 00:30:21,280 Speaker 1: tuab A TD on clients and and it's a whole 465 00:30:21,360 --> 00:30:26,800 Speaker 1: process to do you guys assess performance fees twice a month. 466 00:30:27,600 --> 00:30:33,240 Speaker 1: How complicated is that? And what's the thinking behind that 467 00:30:33,440 --> 00:30:37,080 Speaker 1: sort of performance fee assessment? What are the advantages and 468 00:30:37,120 --> 00:30:41,400 Speaker 1: disadvantages of that? So we strike twice a month or 469 00:30:41,400 --> 00:30:45,600 Speaker 1: when the client transacts um so it's an either or, 470 00:30:45,720 --> 00:30:52,080 Speaker 1: and the reasoning and benefit is the see is is 471 00:30:52,120 --> 00:30:55,640 Speaker 1: individual and to bespoke to the client, that's that's what 472 00:30:55,720 --> 00:30:59,680 Speaker 1: it brings them UM. And you can imagine from a 473 00:30:59,720 --> 00:31:03,800 Speaker 1: client perspective, there's you know, there's a lot of value 474 00:31:03,800 --> 00:31:07,000 Speaker 1: in that UM. I think the disadvantage from a firm 475 00:31:07,040 --> 00:31:10,479 Speaker 1: perspective is I think what you are alluding to is 476 00:31:11,000 --> 00:31:15,880 Speaker 1: there's a there's an operational burden and complexity behind that UM. 477 00:31:15,920 --> 00:31:18,640 Speaker 1: And when we launched this, going back to two thousand 478 00:31:18,680 --> 00:31:23,040 Speaker 1: and four, you know, it was a meaningful investment operationally 479 00:31:23,040 --> 00:31:25,960 Speaker 1: in capital to build out the infrastructure to to be 480 00:31:26,040 --> 00:31:29,800 Speaker 1: able to support it. Quite interesting. So I first learned 481 00:31:29,800 --> 00:31:33,840 Speaker 1: of you guys, and you in particular via a Wall 482 00:31:33,920 --> 00:31:37,880 Speaker 1: Street Journal article written by Jason's Wage that was one 483 00:31:37,960 --> 00:31:43,520 Speaker 1: of the first UM mainstream pieces really delving into the 484 00:31:43,600 --> 00:31:47,080 Speaker 1: details of the fault room fee. And we're in our 485 00:31:47,160 --> 00:31:49,880 Speaker 1: i A so we can't really do the same sort 486 00:31:49,960 --> 00:31:53,720 Speaker 1: of UM symmetrical fee sharing that you guys do. The 487 00:31:54,360 --> 00:31:58,320 Speaker 1: complications make it all about impossible. But but we were 488 00:31:58,440 --> 00:32:01,480 Speaker 1: very much inspired by what you do it and created 489 00:32:01,760 --> 00:32:05,080 Speaker 1: UM what we call milestone rewards, which is simply if 490 00:32:05,120 --> 00:32:09,320 Speaker 1: you're an individual investor and you exhibit good behavior, meaning 491 00:32:10,000 --> 00:32:13,560 Speaker 1: you complete your financial planning, you do an annual update, 492 00:32:13,720 --> 00:32:17,600 Speaker 1: and you don't dabble with I don't like emerging market, 493 00:32:17,680 --> 00:32:23,400 Speaker 1: so I'm gonna jettison that from my portfolio. UM, unbeknownst 494 00:32:23,560 --> 00:32:27,800 Speaker 1: us to us on a random sort of thing, will 495 00:32:27,920 --> 00:32:34,040 Speaker 1: end up dropping people's fees. After three years of good behavior, Hey, 496 00:32:34,120 --> 00:32:37,080 Speaker 1: you've learned. We've helped to teach you the right way 497 00:32:37,120 --> 00:32:41,120 Speaker 1: to do this, and now you're you're exhibiting better behavior. 498 00:32:41,160 --> 00:32:44,200 Speaker 1: And besides, most of the heavy lifting is really in 499 00:32:44,240 --> 00:32:48,000 Speaker 1: the first couple of years, so we'll we'll reduce UM 500 00:32:48,040 --> 00:32:53,560 Speaker 1: your fees. So that was our response to your media coverage. 501 00:32:54,040 --> 00:32:57,480 Speaker 1: What sort of response did you get to that media coverage? 502 00:32:58,120 --> 00:33:00,840 Speaker 1: What did clients say, and what did press effective clients 503 00:33:00,840 --> 00:33:05,880 Speaker 1: have to say. It's interesting from a client perspective because 504 00:33:06,080 --> 00:33:12,000 Speaker 1: it's UM. You know, it's complex. So I think if 505 00:33:12,040 --> 00:33:16,440 Speaker 1: you are an agent and you have to go and 506 00:33:16,520 --> 00:33:20,920 Speaker 1: represent it to the board, it's it's viewed as complex 507 00:33:20,960 --> 00:33:26,880 Speaker 1: and different UM. And you know, we know the appetite 508 00:33:26,920 --> 00:33:33,680 Speaker 1: for those UM. The the clients that have been with 509 00:33:33,800 --> 00:33:37,760 Speaker 1: us and have experienced it, I think tend to be 510 00:33:37,920 --> 00:33:42,600 Speaker 1: our greatest advocates UM. And in a way this speaks 511 00:33:42,600 --> 00:33:45,719 Speaker 1: a little bit to one of the points I mentioned 512 00:33:45,720 --> 00:33:48,560 Speaker 1: earlier around the pillars is that it creates a bit 513 00:33:48,600 --> 00:33:53,080 Speaker 1: of a self reinforcing mechanism. UM. What I mean by 514 00:33:53,080 --> 00:33:56,800 Speaker 1: that is that clients that sort of intuitive intuitively understand 515 00:33:56,840 --> 00:34:01,400 Speaker 1: this UM and can appreciate the bend if it's are 516 00:34:01,480 --> 00:34:06,640 Speaker 1: drawn to us UM, whereas others aren't UM. And so 517 00:34:06,720 --> 00:34:10,520 Speaker 1: we're not being shopped for the lowest fee, but for 518 00:34:10,560 --> 00:34:14,640 Speaker 1: the best alignment UM, and and that works for us. 519 00:34:14,680 --> 00:34:18,000 Speaker 1: We're not trying to be everything to everybody. And that 520 00:34:18,320 --> 00:34:21,040 Speaker 1: sort of self selection aspect, I think is something that 521 00:34:21,120 --> 00:34:24,160 Speaker 1: we've seen play out in practice. And then if you 522 00:34:24,239 --> 00:34:26,040 Speaker 1: just look at the numbers in terms of the behavioral 523 00:34:26,120 --> 00:34:31,360 Speaker 1: penalty over time, UM, I think you know that speaking 524 00:34:31,360 --> 00:34:34,840 Speaker 1: to it objectively, be curious Berry, since you mentioned you 525 00:34:34,840 --> 00:34:37,799 Speaker 1: know your own actions, what have you seen from your 526 00:34:37,800 --> 00:34:40,360 Speaker 1: clients and what kind of have you seen a difference? 527 00:34:40,400 --> 00:34:43,239 Speaker 1: Do you look at the behavioral penalty side, what has 528 00:34:43,280 --> 00:34:46,280 Speaker 1: it done in your business? So it's done a couple 529 00:34:46,320 --> 00:34:50,839 Speaker 1: of things. UM. One is, Hey, the whole industry is 530 00:34:51,040 --> 00:34:55,000 Speaker 1: under fee pressure. UM. And like you, I'm a student 531 00:34:55,040 --> 00:34:59,840 Speaker 1: of behavioral finance, and so rather than nearly lower fee 532 00:35:00,080 --> 00:35:05,279 Speaker 1: is and get no behavioral result out of it, we 533 00:35:05,360 --> 00:35:10,920 Speaker 1: try to craft a fee reduction program that you know, 534 00:35:11,040 --> 00:35:14,240 Speaker 1: we make a big deal about telling prospective clients about 535 00:35:14,320 --> 00:35:19,480 Speaker 1: it and reminding clients regularly, Hey, you have to you 536 00:35:19,520 --> 00:35:22,759 Speaker 1: have to do your annual review, you have to you know, 537 00:35:22,880 --> 00:35:25,960 Speaker 1: do your financial plan. We want to cut your fees 538 00:35:26,000 --> 00:35:29,320 Speaker 1: fift but you got to check these boxes. And so 539 00:35:29,920 --> 00:35:35,080 Speaker 1: it's more than just competing on price, because you know, 540 00:35:35,120 --> 00:35:37,120 Speaker 1: I'm not I don't want to compete with Vanguard who's 541 00:35:37,120 --> 00:35:39,800 Speaker 1: gonna or black Rock who's gonna. Who's going to compete 542 00:35:39,800 --> 00:35:43,279 Speaker 1: with their four BIP funds. We use both of their 543 00:35:43,320 --> 00:35:47,440 Speaker 1: funds because they're so inexpensive. But instead we want to 544 00:35:47,480 --> 00:35:50,799 Speaker 1: do what we can to create I mean, I I'm 545 00:35:50,840 --> 00:35:54,600 Speaker 1: not a fan of all the cutesy versions of Alpha tax, 546 00:35:54,640 --> 00:35:59,360 Speaker 1: Alpha Advisor, Alpha Behavioral Alpha, but but there is something 547 00:35:59,400 --> 00:36:04,160 Speaker 1: to the accept that if you can get people to 548 00:36:04,200 --> 00:36:07,959 Speaker 1: think about their investments in a way that helps lead 549 00:36:08,000 --> 00:36:12,799 Speaker 1: to better behavior, ultimately that's going to have as big 550 00:36:12,840 --> 00:36:16,200 Speaker 1: an impact as anything else you can possibly do. So 551 00:36:16,360 --> 00:36:19,399 Speaker 1: net net, it's been a giant positive even though it's 552 00:36:19,520 --> 00:36:24,839 Speaker 1: it's definitely like you, it's an administrative UM project. There's 553 00:36:24,880 --> 00:36:29,279 Speaker 1: a whole lot of organizational alpha that goes behind this. 554 00:36:29,360 --> 00:36:32,319 Speaker 1: There's just a lot of moving parts, and it took 555 00:36:32,400 --> 00:36:35,400 Speaker 1: us a couple of years to really polish that up 556 00:36:35,480 --> 00:36:37,839 Speaker 1: and and get it well. We've only been doing it 557 00:36:37,880 --> 00:36:39,279 Speaker 1: for I don't know, I want to say four or 558 00:36:39,280 --> 00:36:42,080 Speaker 1: five years. You guys are a decade and a half 559 00:36:42,080 --> 00:36:44,560 Speaker 1: into it, so I have to think that you have 560 00:36:44,719 --> 00:36:48,319 Speaker 1: pretty much worked all the bugs out that that might 561 00:36:48,360 --> 00:36:51,000 Speaker 1: have appeared in the early days. What what sort of 562 00:36:51,560 --> 00:36:54,759 Speaker 1: issues arose when you first rolled this out. I mean, 563 00:36:55,360 --> 00:36:57,200 Speaker 1: when we first rolled it out, you know, it's sort 564 00:36:57,239 --> 00:36:59,840 Speaker 1: of I'm a graduating a little bit, but it was 565 00:37:00,000 --> 00:37:03,640 Speaker 1: on a cricket UM. What's interesting, as you said, is 566 00:37:03,800 --> 00:37:05,799 Speaker 1: you know, the industries evolved quite a bit, and it's 567 00:37:05,800 --> 00:37:07,680 Speaker 1: going to need to continue to evolve, and so I 568 00:37:07,680 --> 00:37:11,880 Speaker 1: think the the appetite for this kind of discussion UM 569 00:37:12,200 --> 00:37:17,000 Speaker 1: has changed pretty meaningfully. UM. And you know, we feel 570 00:37:17,000 --> 00:37:18,680 Speaker 1: good about it because this is something we've done for 571 00:37:18,719 --> 00:37:22,360 Speaker 1: a decade plus and we've done all the operational stuff. 572 00:37:22,920 --> 00:37:25,239 Speaker 1: But there's another side of this too, which is think 573 00:37:25,280 --> 00:37:27,880 Speaker 1: about it from the firm's perspective and from the partnership 574 00:37:28,440 --> 00:37:31,120 Speaker 1: in that, you know, it makes for a much more 575 00:37:31,280 --> 00:37:37,160 Speaker 1: volatile earning strength UM and we had to go through, 576 00:37:37,560 --> 00:37:40,480 Speaker 1: you know, a multi year period where we were reserving 577 00:37:40,560 --> 00:37:44,319 Speaker 1: on our own balance sheet by distributing less than we 578 00:37:44,360 --> 00:37:48,000 Speaker 1: would otherwise do so that we could build up reserves 579 00:37:48,080 --> 00:37:51,040 Speaker 1: to manage the volatility that would come to the firm 580 00:37:51,120 --> 00:37:55,799 Speaker 1: because of this structure UM and many years to do 581 00:37:55,880 --> 00:37:59,640 Speaker 1: that another form of investment outside of just the operational side. 582 00:38:00,200 --> 00:38:03,200 Speaker 1: We have that in place now, but you know that's 583 00:38:03,239 --> 00:38:05,520 Speaker 1: that's not for every firm is going to want to 584 00:38:05,560 --> 00:38:09,399 Speaker 1: do that, UM and so it'll be interesting to see 585 00:38:09,400 --> 00:38:13,160 Speaker 1: how the industry evolves over time, because it even if 586 00:38:13,160 --> 00:38:14,640 Speaker 1: you want to do it as a firm, I think 587 00:38:14,680 --> 00:38:20,239 Speaker 1: doing it in practice is a non trivial initiative, to 588 00:38:20,280 --> 00:38:24,239 Speaker 1: say the very least. So you describe yourself as a 589 00:38:24,280 --> 00:38:32,239 Speaker 1: contrarian value investment manager. Was certainly a outlier of a 590 00:38:32,320 --> 00:38:36,240 Speaker 1: year in so many ways. How do you describe where 591 00:38:36,280 --> 00:38:39,840 Speaker 1: we are in the market cycle? What do you think 592 00:38:40,000 --> 00:38:44,280 Speaker 1: is going on in that battle between value and growth? 593 00:38:45,239 --> 00:38:50,839 Speaker 1: So I'm I'm reminded of the Jesse Livermore quote UM 594 00:38:51,160 --> 00:38:54,160 Speaker 1: in reminiscence of the stock operator where one of his 595 00:38:54,239 --> 00:38:56,480 Speaker 1: customers asked, you know, what should I do and he 596 00:38:56,480 --> 00:38:57,960 Speaker 1: looks at him, He's like, well, you know, it's a 597 00:38:58,000 --> 00:39:02,120 Speaker 1: bowl market. UM, and I feel like, you know, kind 598 00:39:02,120 --> 00:39:08,160 Speaker 1: of like the music is playing for sure. UM, it's uh, 599 00:39:08,400 --> 00:39:13,279 Speaker 1: it's it's been quite robust, surprisingly so I mean I UM. 600 00:39:13,320 --> 00:39:16,520 Speaker 1: I think also of the Templeton line, where you know, 601 00:39:16,680 --> 00:39:21,279 Speaker 1: boat markets start on pessimism, go to skepticism, mature on optimism, 602 00:39:21,280 --> 00:39:23,719 Speaker 1: and diere in euphoria. I wouldn't say that we're in 603 00:39:23,800 --> 00:39:30,319 Speaker 1: euphoria right now, but we're approaching UM and they're they're 604 00:39:30,719 --> 00:39:34,480 Speaker 1: definitely some speculative signs. UM. I think if you look 605 00:39:34,480 --> 00:39:37,600 Speaker 1: at what's happening in this back market, if you look 606 00:39:37,640 --> 00:39:41,040 Speaker 1: at the I p O market, because it's a cover 607 00:39:41,120 --> 00:39:43,160 Speaker 1: story and Barons a couple of weeks ago around the 608 00:39:43,200 --> 00:39:45,600 Speaker 1: I p O frenzy, if you look at the level 609 00:39:45,680 --> 00:39:51,400 Speaker 1: of retail engagement, UM margin, debt levels, the robin Hood 610 00:39:51,440 --> 00:39:55,160 Speaker 1: tribe UM. I mentioned earlier the number of stocks that 611 00:39:55,200 --> 00:40:00,160 Speaker 1: are trading in the SMP above ten times revenue, and 612 00:40:00,200 --> 00:40:03,480 Speaker 1: then look at some of the company's recently Snowflake and 613 00:40:03,640 --> 00:40:11,960 Speaker 1: Zoom and Pelican. Um. There's definitely some speculative elements UM 614 00:40:12,640 --> 00:40:17,760 Speaker 1: today that I see relative to my time as an investor. 615 00:40:18,120 --> 00:40:22,040 Speaker 1: While it being said, I think you know, now is 616 00:40:22,080 --> 00:40:29,000 Speaker 1: a incredibly exciting time to be a fundamental active investor. UM. 617 00:40:29,000 --> 00:40:32,120 Speaker 1: You know, we as an active investor, you you live 618 00:40:32,239 --> 00:40:36,920 Speaker 1: for dispersion, UM, and the dispersion in the market is 619 00:40:38,160 --> 00:40:42,480 Speaker 1: is pretty wide by all accounts. UM. I I hate 620 00:40:42,480 --> 00:40:44,960 Speaker 1: getting drawn into the value versus growth because I think 621 00:40:44,960 --> 00:40:48,120 Speaker 1: it it oversimplifies a lot. But kind of any way 622 00:40:48,160 --> 00:40:51,920 Speaker 1: you go at it, UM, you know, the gap between 623 00:40:52,520 --> 00:40:56,239 Speaker 1: kind of one side of the market that the you know, 624 00:40:56,239 --> 00:40:59,760 Speaker 1: the growth of secular growth winners, the defensive growth names 625 00:41:00,080 --> 00:41:03,799 Speaker 1: story stocks like tesla UM, and then everything else on 626 00:41:03,840 --> 00:41:07,040 Speaker 1: the other side, any any company that's got some perceived 627 00:41:07,640 --> 00:41:12,040 Speaker 1: degree of uncertainty or cyclicality. There hasn't been a real 628 00:41:12,120 --> 00:41:16,319 Speaker 1: bit or appetite for until recently. And if you look 629 00:41:16,320 --> 00:41:19,640 Speaker 1: at the gap between those two sides of the market, 630 00:41:20,320 --> 00:41:22,359 Speaker 1: you know, it's just it's is wide as it's been 631 00:41:22,400 --> 00:41:27,920 Speaker 1: in some time, UM, perhaps ever. And UM, you know 632 00:41:28,000 --> 00:41:31,960 Speaker 1: that creates interesting opportunities. UM. It's not a call. You know, 633 00:41:31,960 --> 00:41:38,160 Speaker 1: evaluations are horrible timing mechanisms, UM, but they are very 634 00:41:38,280 --> 00:41:43,440 Speaker 1: telling with regard to future returns. UM. And I think 635 00:41:43,960 --> 00:41:46,759 Speaker 1: the side of the market, the winners that have really 636 00:41:46,760 --> 00:41:49,440 Speaker 1: been bit up, I think the expectations in those stocks 637 00:41:49,560 --> 00:41:53,600 Speaker 1: are are pretty full. UM. And I think there's an 638 00:41:53,640 --> 00:41:57,839 Speaker 1: opportunity for them too to disappoint. And when they turn. 639 00:41:57,960 --> 00:42:02,160 Speaker 1: If you look back historically, when it turns, it tends 640 00:42:02,280 --> 00:42:08,440 Speaker 1: to be reasonably sharp. UM. And I mentioned, you know, 641 00:42:08,480 --> 00:42:11,280 Speaker 1: going back to thirty year track record of orbists Japan 642 00:42:11,440 --> 00:42:16,480 Speaker 1: and the nineties UM, early two thousand's UM. And now 643 00:42:16,640 --> 00:42:20,520 Speaker 1: is another of those times. UM. The opportunity to lean 644 00:42:20,560 --> 00:42:25,200 Speaker 1: in on the other side looks looks pretty compelling. Now 645 00:42:25,200 --> 00:42:29,000 Speaker 1: it's difficult to do because you you're underperforming and you're lagging, 646 00:42:29,040 --> 00:42:31,840 Speaker 1: and what he wants to tell you that you've missed 647 00:42:31,840 --> 00:42:35,560 Speaker 1: the boat and when you're crazy and the world's changed. UM. 648 00:42:35,600 --> 00:42:40,720 Speaker 1: But that's exactly why those opportunities exist UM. Over time, 649 00:42:41,480 --> 00:42:44,319 Speaker 1: UM And I think we're starting to see, you know, 650 00:42:44,360 --> 00:42:47,880 Speaker 1: there's some interesting signs recently. UM. You know, if you 651 00:42:47,880 --> 00:42:52,560 Speaker 1: look at saying them relative to the S and p UM, 652 00:42:52,600 --> 00:42:57,080 Speaker 1: it's not rolled over, but it's started to tow plateau. 653 00:42:57,160 --> 00:42:59,200 Speaker 1: It's not leading you know, our our founder used to 654 00:42:59,200 --> 00:43:02,000 Speaker 1: always say, look at the lead steers, the market bulls. 655 00:43:02,200 --> 00:43:05,800 Speaker 1: The bulls are losing steam. Um, they're not demonstrating the 656 00:43:05,880 --> 00:43:08,640 Speaker 1: leadership they have in the past. You look at the 657 00:43:08,719 --> 00:43:11,719 Speaker 1: Russell two thousands of broader based index well tip, the 658 00:43:11,960 --> 00:43:15,520 Speaker 1: s and p UM. You're seeing the same thing on 659 00:43:15,560 --> 00:43:19,319 Speaker 1: a relative basis. So there's some interesting signs recently. All 660 00:43:19,320 --> 00:43:21,160 Speaker 1: that's just it's not a forecast that we're going to 661 00:43:21,280 --> 00:43:26,960 Speaker 1: roll over. Um. But you know, these things don't UM 662 00:43:27,200 --> 00:43:30,880 Speaker 1: go forever. I'm of the belief that there are cycles 663 00:43:30,960 --> 00:43:34,160 Speaker 1: to markets. All the things that you're seeing now, like 664 00:43:34,719 --> 00:43:39,800 Speaker 1: value is dead, um. These are the characteristics UH and 665 00:43:39,960 --> 00:43:44,680 Speaker 1: elements that you see at these late stages in the cycle. UM. 666 00:43:44,719 --> 00:43:47,680 Speaker 1: And I think they're on the other side. You know, 667 00:43:47,719 --> 00:43:51,440 Speaker 1: the move the most crowded trade the last ten twenty 668 00:43:51,520 --> 00:43:56,720 Speaker 1: years has been the move to passive investing indexation. UM. 669 00:43:56,920 --> 00:44:02,120 Speaker 1: These industries have gotten very concentrated. There's you know, there's 670 00:44:02,239 --> 00:44:05,520 Speaker 1: risk embedded in them. UM. You look at the concentration 671 00:44:05,560 --> 00:44:08,879 Speaker 1: in those stocks, you look at the cross holdings UM 672 00:44:08,920 --> 00:44:14,520 Speaker 1: of individual stocks across those indusices and ets. You have 673 00:44:14,640 --> 00:44:18,239 Speaker 1: a turn there. UM. It could be quite powerful UM, 674 00:44:18,239 --> 00:44:21,719 Speaker 1: and so as an investor, when you look forward, and 675 00:44:21,760 --> 00:44:25,719 Speaker 1: most importantly is looking forward, I think having some exposure 676 00:44:25,800 --> 00:44:29,799 Speaker 1: on the other side is is is warranted makes a 677 00:44:29,800 --> 00:44:33,560 Speaker 1: lot of sense. You mentioned the Russell two thousand, which, 678 00:44:33,880 --> 00:44:38,000 Speaker 1: for I don't know, the first three quarters of dramatically 679 00:44:38,120 --> 00:44:42,400 Speaker 1: under performed all of the momentum and big cap growth. 680 00:44:43,080 --> 00:44:46,759 Speaker 1: But the last couple of months of SO are a 681 00:44:46,800 --> 00:44:51,640 Speaker 1: pretty robust catchup, especially for small cap value. What does 682 00:44:51,680 --> 00:44:54,040 Speaker 1: that tell you, I think it's a bit to the point. 683 00:44:54,080 --> 00:44:56,239 Speaker 1: I mean you just let's go back. Let's backtrack for 684 00:44:56,280 --> 00:45:01,560 Speaker 1: two thousands. I mean, coming into the year January early February, UM, 685 00:45:01,719 --> 00:45:06,360 Speaker 1: you know, there was a view of accelerating growth UM, 686 00:45:06,480 --> 00:45:10,720 Speaker 1: and you you were seeing that in the small caps UM, 687 00:45:10,760 --> 00:45:14,399 Speaker 1: and then COVID hit UH, and we had a very 688 00:45:14,400 --> 00:45:19,239 Speaker 1: meaningful draw down UM. And then more recently the last 689 00:45:19,320 --> 00:45:22,759 Speaker 1: three months and certainly most recently with news of the 690 00:45:22,840 --> 00:45:26,840 Speaker 1: vaccine UM, you you started to see that recovery. And 691 00:45:26,880 --> 00:45:32,960 Speaker 1: I think it's there's an expectation looking forward of UM, 692 00:45:32,960 --> 00:45:37,040 Speaker 1: you know, cyclical recovery UH, and in particular those names 693 00:45:37,120 --> 00:45:42,360 Speaker 1: that were disproportionately hit, just the smaller companies UM through 694 00:45:42,719 --> 00:45:45,160 Speaker 1: the COVID drawdowns. So I think you're you're seeing that 695 00:45:45,200 --> 00:45:51,440 Speaker 1: manifestation if you look at you know, the existing positioning um, 696 00:45:51,480 --> 00:45:54,560 Speaker 1: you know, it's so lopsided that you know it could 697 00:45:54,600 --> 00:45:57,160 Speaker 1: have We'll see where things go from here. Obviously they've 698 00:45:57,200 --> 00:46:00,200 Speaker 1: actually news more recently it's not been that encouraging, but 699 00:46:00,920 --> 00:46:03,440 Speaker 1: we try to take a longer term view. We'll see 700 00:46:03,480 --> 00:46:04,719 Speaker 1: where it goes from here. But it could, you know, 701 00:46:04,760 --> 00:46:06,399 Speaker 1: it could have a decent way to go. I mean, 702 00:46:06,400 --> 00:46:10,240 Speaker 1: that's certainly what the data would tell you. Quite interesting. 703 00:46:10,920 --> 00:46:15,360 Speaker 1: So let's talk about the ORBITS Global Equity Funds. Since 704 00:46:16,800 --> 00:46:21,800 Speaker 1: that has crushed its benchmark. How have you guys managed 705 00:46:21,840 --> 00:46:27,080 Speaker 1: to accomplish this in an era of relative underperformance by value? 706 00:46:27,640 --> 00:46:31,640 Speaker 1: And what is your role at ORBITS Global Equity Funds? So, 707 00:46:32,440 --> 00:46:37,480 Speaker 1: I mean, going back to inception, it's been across many 708 00:46:37,520 --> 00:46:42,360 Speaker 1: cycles and we are proud of that track record, but 709 00:46:42,480 --> 00:46:44,359 Speaker 1: it's been I mean, let's be clear, Berrier, it's been 710 00:46:44,360 --> 00:46:48,319 Speaker 1: a difficult decade the last ten years for us, and 711 00:46:48,560 --> 00:46:52,880 Speaker 1: you know we haven't performed the level of expectations that 712 00:46:52,920 --> 00:46:55,080 Speaker 1: we that we hold out for ourselves. I think if 713 00:46:55,080 --> 00:46:58,160 Speaker 1: you look back in history, and that's across you know, 714 00:46:58,160 --> 00:47:01,799 Speaker 1: a number of different mark and environments. You know, we 715 00:47:01,880 --> 00:47:04,280 Speaker 1: tend to do best in what would be our quotes 716 00:47:04,400 --> 00:47:07,440 Speaker 1: value market and we kind of hang in there in 717 00:47:07,480 --> 00:47:10,359 Speaker 1: the growth market. So that's exactly what you've seen kind 718 00:47:10,400 --> 00:47:14,560 Speaker 1: of this last three five seven years, certainly relative to 719 00:47:14,600 --> 00:47:17,560 Speaker 1: our value peers, I mean our value peers, peer value peers. 720 00:47:17,640 --> 00:47:21,719 Speaker 1: Have you gotten really punished during this? And I think 721 00:47:21,840 --> 00:47:25,240 Speaker 1: the difference there for us is that when I touched 722 00:47:25,280 --> 00:47:27,800 Speaker 1: on this a little bit earlier, is we're intrinsic value, 723 00:47:27,840 --> 00:47:30,200 Speaker 1: So we're not we're not didactically going after just a 724 00:47:30,280 --> 00:47:32,640 Speaker 1: little price to book. We have a more much more 725 00:47:32,640 --> 00:47:35,920 Speaker 1: holistic view of what we think value is and we 726 00:47:35,960 --> 00:47:38,560 Speaker 1: go after those gaps and that can be you know, 727 00:47:38,719 --> 00:47:41,200 Speaker 1: a dirty industrial company, or it can be it could 728 00:47:41,239 --> 00:47:44,960 Speaker 1: be a technology or internet based company. UM. And that's 729 00:47:45,000 --> 00:47:48,759 Speaker 1: allowed us to be more flexible over time, but they're 730 00:47:48,840 --> 00:47:53,360 Speaker 1: also tend to be bigger periods. And I mentioned this 731 00:47:53,440 --> 00:47:57,960 Speaker 1: if you go back to Japan in the index, it's 732 00:47:58,000 --> 00:48:00,239 Speaker 1: just important is what you don't own. We did known 733 00:48:00,280 --> 00:48:03,360 Speaker 1: anything in Japan and then in two thousand's and I 734 00:48:03,360 --> 00:48:06,799 Speaker 1: think today would be similar UM in that you know, 735 00:48:06,800 --> 00:48:09,440 Speaker 1: it's been painful getting here. We have a pretty meaningful 736 00:48:09,480 --> 00:48:13,080 Speaker 1: underway to the US as we sit today, and we'll 737 00:48:13,120 --> 00:48:15,319 Speaker 1: see where it goes from here. But you know, when 738 00:48:15,360 --> 00:48:18,520 Speaker 1: those when those pockets turn, when they get to those 739 00:48:18,560 --> 00:48:22,240 Speaker 1: extremities like we see now, they tend to be pretty fruitful. 740 00:48:22,280 --> 00:48:25,480 Speaker 1: And that's one of the reasons that you know, I'm 741 00:48:25,520 --> 00:48:28,920 Speaker 1: pretty constructive as we look forward again, not not calling 742 00:48:29,000 --> 00:48:31,480 Speaker 1: the timing, you know, because it's not what we do, 743 00:48:31,560 --> 00:48:34,000 Speaker 1: but you know, based on where we're at now and 744 00:48:34,040 --> 00:48:35,880 Speaker 1: how our position, I think, you know it could be 745 00:48:35,960 --> 00:48:38,880 Speaker 1: could be meaningful. So you you hit upon something that 746 00:48:38,920 --> 00:48:42,839 Speaker 1: I want to address because I'm intrigued by the concept 747 00:48:43,480 --> 00:48:48,400 Speaker 1: you mentioned. As a contrarian, You're you're constantly looking for 748 00:48:48,480 --> 00:48:52,200 Speaker 1: things the crowd has overlooked. But one of the things 749 00:48:52,239 --> 00:48:56,279 Speaker 1: we tend to notice over longer market cycles is that 750 00:48:56,400 --> 00:49:00,720 Speaker 1: the crowd tends to be right much of the time. 751 00:49:01,440 --> 00:49:05,000 Speaker 1: It's at those major turning points with a crowd completely 752 00:49:05,000 --> 00:49:08,080 Speaker 1: loses their minds and gets it totally wrong. But what 753 00:49:08,120 --> 00:49:12,800 Speaker 1: are the challenges of being a contrarian When you're leaning 754 00:49:12,920 --> 00:49:17,240 Speaker 1: into the winds and you know it's an uphill battle 755 00:49:18,000 --> 00:49:21,040 Speaker 1: most of the time, how do you manage around that? Yeah, 756 00:49:21,400 --> 00:49:24,160 Speaker 1: so I think you're exactly right, and I would just 757 00:49:24,200 --> 00:49:29,239 Speaker 1: observe that now is one of those times that all 758 00:49:29,239 --> 00:49:33,720 Speaker 1: of those behavioral characteristics are in play. You know, the 759 00:49:33,520 --> 00:49:39,160 Speaker 1: the chorus is calling for it's dead, it's over. UM. 760 00:49:39,239 --> 00:49:43,720 Speaker 1: I still believe in cycles. UM. The price evaluations don't matter. 761 00:49:44,160 --> 00:49:47,880 Speaker 1: I still believe in price evaluations, not as a timing mechanism, 762 00:49:47,960 --> 00:49:53,120 Speaker 1: but fundamentally. UM. I believe it's unlikely and unsustainable that 763 00:49:53,320 --> 00:49:57,960 Speaker 1: returns will continue to compound it. I don't see any 764 00:49:58,000 --> 00:50:02,319 Speaker 1: reason why structurally it should have changed or shift from 765 00:50:02,520 --> 00:50:05,480 Speaker 1: kind of the long term cross that goal returns and seven. 766 00:50:06,800 --> 00:50:11,320 Speaker 1: Yet the popular chorus is on the other side of that. UM. 767 00:50:11,400 --> 00:50:16,800 Speaker 1: And so all of the behavioral elements are in play today. UM. 768 00:50:16,880 --> 00:50:19,160 Speaker 1: In terms of how you manage it, I think it 769 00:50:19,160 --> 00:50:23,920 Speaker 1: it starts with yourself as an individual, as a decision maker. UM. 770 00:50:23,960 --> 00:50:25,759 Speaker 1: I think one of the most difficult things in this 771 00:50:25,920 --> 00:50:30,080 Speaker 1: business is knowing yourself and managing yourself, particularly in those 772 00:50:30,600 --> 00:50:34,360 Speaker 1: situations when you know you're underperforming in a position or 773 00:50:34,360 --> 00:50:38,960 Speaker 1: in a portfolio, and you look wrong and other people 774 00:50:38,960 --> 00:50:42,680 Speaker 1: are telling you you're wrong. UM. Clients might be hackling 775 00:50:42,760 --> 00:50:46,440 Speaker 1: you and telling you are wrong. UM. And how do 776 00:50:46,480 --> 00:50:50,560 Speaker 1: you make decisions in that situation is one of the 777 00:50:50,600 --> 00:50:54,719 Speaker 1: most important characteristics so of what we do UM. And 778 00:50:54,760 --> 00:50:58,120 Speaker 1: then the other side of it is, you know, you 779 00:50:58,160 --> 00:51:01,440 Speaker 1: want to try to put in place things that allow 780 00:51:01,560 --> 00:51:05,080 Speaker 1: you to stay true to your process UM. And that 781 00:51:05,120 --> 00:51:07,080 Speaker 1: gets to the elements that I was touching on a 782 00:51:07,120 --> 00:51:08,680 Speaker 1: little bit in terms of the kind of people you 783 00:51:08,760 --> 00:51:13,760 Speaker 1: put in your team, the kind of culture that you create, UM, 784 00:51:14,040 --> 00:51:15,960 Speaker 1: how you manage your day to day, what do you 785 00:51:16,080 --> 00:51:18,839 Speaker 1: look at and importantly the kind of clients that you have, 786 00:51:19,760 --> 00:51:23,000 Speaker 1: what what expectations do they have for you? And then 787 00:51:23,080 --> 00:51:25,840 Speaker 1: lastly your own ownership structure, and I touched on that 788 00:51:25,880 --> 00:51:28,239 Speaker 1: a little bit. Those are all things that you can 789 00:51:28,360 --> 00:51:31,279 Speaker 1: try to put in place structurally to allow you to 790 00:51:31,360 --> 00:51:33,759 Speaker 1: be in a position to make the best decisions when 791 00:51:33,760 --> 00:51:37,320 Speaker 1: behaviorally it's most difficult. And to clarify, are you guys 792 00:51:37,440 --> 00:51:41,000 Speaker 1: long only or long short Our main strategy, Our flagship 793 00:51:41,080 --> 00:51:44,040 Speaker 1: is long only because it's one thing to be long 794 00:51:44,080 --> 00:51:46,600 Speaker 1: and wrong as the market goes up, or to be 795 00:51:46,680 --> 00:51:49,880 Speaker 1: long and underperformed. But I can't imagine what sort of 796 00:51:49,920 --> 00:51:54,560 Speaker 1: agony it would be to be short Tesla as it 797 00:51:54,600 --> 00:51:59,600 Speaker 1: goes up. Six there's contrain is UM. And and then 798 00:51:59,640 --> 00:52:03,399 Speaker 1: there's just that that that's a type of pain that 799 00:52:03,400 --> 00:52:06,200 Speaker 1: that it's hard, hard to imagine. UM. But let's stick 800 00:52:06,400 --> 00:52:10,279 Speaker 1: with the bottoms up stock picking because a lot of 801 00:52:10,320 --> 00:52:15,320 Speaker 1: what we're discussing is very much the macro environment. You 802 00:52:15,680 --> 00:52:20,520 Speaker 1: mentioned monetary policy, we talked about COVID. There are so 803 00:52:20,560 --> 00:52:26,040 Speaker 1: many broad macro issues. How do you, guys, UM think 804 00:52:26,080 --> 00:52:30,200 Speaker 1: about the macro situation? It seems unavoidable at least in 805 00:52:31,640 --> 00:52:34,319 Speaker 1: is macro part of your process if you're bottoms up 806 00:52:34,320 --> 00:52:37,560 Speaker 1: stock picker or do you have to try not to 807 00:52:37,640 --> 00:52:42,080 Speaker 1: think about what's going on in the broader sense? Yeah? 808 00:52:42,160 --> 00:52:44,040 Speaker 1: I think. I mean the short answer is you have 809 00:52:44,239 --> 00:52:47,600 Speaker 1: to write, are you we're not we're bottoms up fundamental 810 00:52:47,640 --> 00:52:51,880 Speaker 1: stock pickers were owning businesses in their cash flows. That 811 00:52:52,040 --> 00:52:55,759 Speaker 1: being said, UM, you have to have an eye to 812 00:52:55,840 --> 00:52:58,799 Speaker 1: the context that you're in. I think one of the 813 00:52:58,800 --> 00:53:01,319 Speaker 1: things very clear going back to two thousand seven, two 814 00:53:01,719 --> 00:53:05,200 Speaker 1: and eight, UM, you know, the value tribe got crushed 815 00:53:06,160 --> 00:53:12,960 Speaker 1: buying financials at increasingly lower price to book multiples into 816 00:53:13,360 --> 00:53:17,759 Speaker 1: a macro environment that was not conducive. UM. And I 817 00:53:17,760 --> 00:53:20,600 Speaker 1: think if you were only looking at the company and 818 00:53:20,680 --> 00:53:26,040 Speaker 1: didn't have construct for the context. Um, you got punished. Um. 819 00:53:26,080 --> 00:53:29,840 Speaker 1: And we were not immune to that to be clear. Um. 820 00:53:29,880 --> 00:53:31,920 Speaker 1: But there's an important lesson in there and that you 821 00:53:32,120 --> 00:53:34,920 Speaker 1: you have to have an eye to the context. Um. 822 00:53:34,960 --> 00:53:36,719 Speaker 1: You know, we don't have strategists in the house, we 823 00:53:36,760 --> 00:53:40,120 Speaker 1: don't have economists. We're not making forecasts on GDP or 824 00:53:40,120 --> 00:53:42,440 Speaker 1: anything of that nature, which we don't believe in. But 825 00:53:43,200 --> 00:53:45,840 Speaker 1: you do have to have a construct of the environment 826 00:53:45,960 --> 00:53:49,080 Speaker 1: which you're in. What I what I say to the 827 00:53:49,160 --> 00:53:52,400 Speaker 1: team is, you know, you could have a great house 828 00:53:53,080 --> 00:53:56,359 Speaker 1: in a bad neighborhood and it doesn't matter how good 829 00:53:56,400 --> 00:53:59,480 Speaker 1: that house is. Sharre in a bad neighborhood, and so 830 00:53:59,600 --> 00:54:02,239 Speaker 1: you have to understand what neighborhood you're in. And a 831 00:54:02,320 --> 00:54:06,400 Speaker 1: specific example for me where I've gotten really you know, penalized, 832 00:54:06,640 --> 00:54:09,759 Speaker 1: is you know, had a very stock specific pieces in 833 00:54:09,920 --> 00:54:12,400 Speaker 1: an oil and gas company, US oil and gas company 834 00:54:12,400 --> 00:54:15,640 Speaker 1: and called Apache. It was stock specific and idiots and 835 00:54:15,680 --> 00:54:18,400 Speaker 1: credit that I really believed in. And a number of 836 00:54:18,400 --> 00:54:21,160 Speaker 1: those elements have played out. But it's in the context 837 00:54:21,800 --> 00:54:24,600 Speaker 1: of an energy space and a w T I is 838 00:54:24,719 --> 00:54:28,720 Speaker 1: at ninety versus thirty, It doesn't matter what the company's 839 00:54:28,719 --> 00:54:32,120 Speaker 1: specific videos and credit factors are you have to have 840 00:54:32,160 --> 00:54:35,080 Speaker 1: a view to the context. That's a that's a very 841 00:54:35,080 --> 00:54:39,240 Speaker 1: specific example, but I think it it covers across the board, 842 00:54:39,280 --> 00:54:41,279 Speaker 1: and I think that's how we as teams, how we 843 00:54:41,320 --> 00:54:44,160 Speaker 1: interrogate and think UM to make sure that we have 844 00:54:44,200 --> 00:54:47,040 Speaker 1: an eye to the context. We were just discussing the 845 00:54:47,120 --> 00:54:51,400 Speaker 1: exact same thing with despite for the past four years 846 00:54:51,480 --> 00:54:57,880 Speaker 1: having the most pro coal presidents in history, it didn't 847 00:54:57,920 --> 00:55:02,280 Speaker 1: matter which coal company you own, UM, The question was 848 00:55:02,280 --> 00:55:05,279 Speaker 1: was it ugly or uglier? So I totally get the 849 00:55:05,760 --> 00:55:08,440 Speaker 1: even a good house in a bad neighborhood isn't isn't 850 00:55:08,480 --> 00:55:12,040 Speaker 1: going to help you. But sticking with the macro issue, 851 00:55:12,320 --> 00:55:18,239 Speaker 1: you mentioned monetary policy and you also mentioned valuation. Let's 852 00:55:18,320 --> 00:55:23,319 Speaker 1: let's tie all three of those together. How responsible is 853 00:55:23,400 --> 00:55:30,040 Speaker 1: today's effectively zero interest rate lower for longer policy affecting 854 00:55:30,200 --> 00:55:37,480 Speaker 1: today's relatively high historical valuations. I mean it's you can't. 855 00:55:38,040 --> 00:55:41,839 Speaker 1: I can't quantify it empirically, verybody you. I mean, when 856 00:55:41,880 --> 00:55:45,920 Speaker 1: you're your history rate of zero UM and arguably your 857 00:55:45,920 --> 00:55:51,520 Speaker 1: real rate is negative, that will influence UM in a 858 00:55:51,600 --> 00:55:57,640 Speaker 1: non trivial way. How you price cash flow streams UM 859 00:55:57,760 --> 00:56:01,240 Speaker 1: and we've seen that UM and to the point on context, 860 00:56:01,280 --> 00:56:02,920 Speaker 1: I think one of the things I've been more critical 861 00:56:02,920 --> 00:56:08,359 Speaker 1: of myself is not being more fully cognizant of that 862 00:56:08,400 --> 00:56:12,399 Speaker 1: at the environment to my analogy before the neighborhood over 863 00:56:12,440 --> 00:56:17,280 Speaker 1: the past decade and so it's it's been a meaningful driver. 864 00:56:18,000 --> 00:56:23,839 Speaker 1: The more interesting question as investors is where are we 865 00:56:23,920 --> 00:56:27,959 Speaker 1: today and what does the future look like from where 866 00:56:27,960 --> 00:56:31,440 Speaker 1: we sit today? And I try to spend more time 867 00:56:31,440 --> 00:56:36,400 Speaker 1: thinking about about that. But quite interesting, and we talked 868 00:56:36,400 --> 00:56:40,080 Speaker 1: about ownership and thinking like an owner. I want to 869 00:56:40,120 --> 00:56:44,840 Speaker 1: have you clarify something about Alan um Gray. So when 870 00:56:44,840 --> 00:56:49,279 Speaker 1: when he launched Alan Gray Limited in he was a 871 00:56:49,320 --> 00:56:55,080 Speaker 1: former Fidelity manager and Alan Gray became South Africa's biggest 872 00:56:55,120 --> 00:57:00,880 Speaker 1: private investment manager. You mentioned he put his equity stake 873 00:57:01,080 --> 00:57:05,880 Speaker 1: in orbits and a trust and that's now perpetual. What 874 00:57:06,080 --> 00:57:10,319 Speaker 1: is the is that the entire ownership structure or our 875 00:57:10,400 --> 00:57:14,640 Speaker 1: employees also owners of the firm. UM employees are owners 876 00:57:14,640 --> 00:57:19,720 Speaker 1: of the firm UM and so Allan uh put his 877 00:57:19,840 --> 00:57:25,560 Speaker 1: in his family, UM put his entire interest into a 878 00:57:25,680 --> 00:57:30,080 Speaker 1: charitable trust which will be held is the controlling shareholder 879 00:57:30,200 --> 00:57:33,920 Speaker 1: in perpetuity UM. I think there are a couple of 880 00:57:33,920 --> 00:57:36,000 Speaker 1: elements to this. One is just I mean, it's a 881 00:57:36,000 --> 00:57:38,240 Speaker 1: phenomenal thing what he's done, and I think it gives 882 00:57:38,880 --> 00:57:41,040 Speaker 1: a degree of purpose to what I do in my 883 00:57:41,080 --> 00:57:44,840 Speaker 1: own work, knowing UM that there's a set of beneficiaries 884 00:57:44,880 --> 00:57:47,720 Speaker 1: behind that in terms of what we do. But from 885 00:57:47,760 --> 00:57:51,040 Speaker 1: a business standpoint, I think it's interesting on a couple 886 00:57:51,080 --> 00:57:55,440 Speaker 1: of levels. First is, you know, the issue of succession 887 00:57:55,520 --> 00:57:59,920 Speaker 1: investment firms is a pretty storied track record, UM if 888 00:58:00,040 --> 00:58:04,160 Speaker 1: you look at how investment firms managed continuity over time, 889 00:58:04,960 --> 00:58:07,120 Speaker 1: and he did it in a way that was really 890 00:58:07,800 --> 00:58:12,080 Speaker 1: it was very thoughtful but quite seamless UM to manage 891 00:58:12,080 --> 00:58:14,840 Speaker 1: the long term continuity of the firm and the leadership 892 00:58:15,400 --> 00:58:19,120 Speaker 1: UM employees are owners of the firm UM and have 893 00:58:19,160 --> 00:58:21,600 Speaker 1: a meaningful stake and the combination of the family and 894 00:58:21,720 --> 00:58:25,160 Speaker 1: executives and and staff with the largest investors in the fund, 895 00:58:25,480 --> 00:58:29,920 Speaker 1: which gets back to thinking investing like an owner UM. 896 00:58:29,960 --> 00:58:35,000 Speaker 1: But it also allows us to make decisions that are 897 00:58:35,120 --> 00:58:39,840 Speaker 1: driven by what we believe in for the long term. 898 00:58:40,000 --> 00:58:42,640 Speaker 1: You know, I couldn't imagine running an investment firm that 899 00:58:42,760 --> 00:58:48,360 Speaker 1: was publicly traded that had quarterly subjectives UM, and so 900 00:58:48,520 --> 00:58:53,520 Speaker 1: you take something like our fee structure and refundable fee reserves. UM. 901 00:58:53,600 --> 00:58:57,560 Speaker 1: You know that that's a difficult decision. It's not without 902 00:58:57,560 --> 00:59:01,120 Speaker 1: consequence for the firm, the partnership. But having a structure 903 00:59:01,240 --> 00:59:03,440 Speaker 1: like ours allows you to take those kind of long 904 00:59:03,520 --> 00:59:07,720 Speaker 1: term decisions, UM, which allows you and reinforces you to 905 00:59:07,840 --> 00:59:11,080 Speaker 1: take those decisions that are contrary in to what most 906 00:59:11,120 --> 00:59:13,440 Speaker 1: other people might be doing, and at times that the 907 00:59:13,560 --> 00:59:18,200 Speaker 1: most difficult. UM. And so it's uh, it's a it's 908 00:59:18,200 --> 00:59:21,440 Speaker 1: a powerful reinforcing mechanism, if that makes sense. Totally does 909 00:59:21,600 --> 00:59:24,360 Speaker 1: quite interesting. I know I only have you for a 910 00:59:24,400 --> 00:59:27,560 Speaker 1: finite amount of time, so let me jump to our 911 00:59:27,680 --> 00:59:31,680 Speaker 1: five favorite questions that we ask all of our guests, 912 00:59:32,360 --> 00:59:34,840 Speaker 1: starting with what are you streaming these days? Give us 913 00:59:34,840 --> 00:59:39,120 Speaker 1: your favorite Netflix or Amazon Prime shows or or podcasts. 914 00:59:39,120 --> 00:59:43,800 Speaker 1: What what's keeping you entertained during lockdown? You show we 915 00:59:43,840 --> 00:59:48,160 Speaker 1: have more time during COVID times. UM. So when I 916 00:59:48,240 --> 00:59:54,160 Speaker 1: mentioned uh, Matflix is unorthodox um the story of a 917 00:59:54,240 --> 00:59:56,240 Speaker 1: young girl at the civic routs in Brooklyn, and just 918 00:59:56,720 --> 00:59:58,800 Speaker 1: I just really love the story. I thought the lead 919 00:59:58,880 --> 01:00:07,120 Speaker 1: characters just terrifically well portrayed. UM. Guilty Pleasure, um, the 920 01:00:07,280 --> 01:00:12,080 Speaker 1: Jinx the life and death of David Durstum just as 921 01:00:12,080 --> 01:00:17,400 Speaker 1: the one who loves to study human behavior, what motivates people. 922 01:00:17,520 --> 01:00:20,640 Speaker 1: Just a fascinating character study. And I'm not giving anything away, 923 01:00:20,720 --> 01:00:26,360 Speaker 1: but the last kind of seconds of the series is 924 01:00:26,400 --> 01:00:32,200 Speaker 1: just priceless. UM. Just wait for it. It's really good. UM. 925 01:00:32,240 --> 01:00:36,520 Speaker 1: I love documentaries. UM American Factory. I'll mentioning which one 926 01:00:36,560 --> 01:00:42,240 Speaker 1: the oscar Um story of Chinese billionaire open Factory GM 927 01:00:42,600 --> 01:00:49,760 Speaker 1: abandoned GM Factory in Ohio. UM. Pretty thought provoking, UM 928 01:00:49,960 --> 01:00:54,080 Speaker 1: documentary by Eva du Verney. UM. I think you know, 929 01:00:54,120 --> 01:00:57,520 Speaker 1: really zeroing in on the history of racial inequity in 930 01:00:57,560 --> 01:01:03,320 Speaker 1: the US and specific remination's prison system. UM. I think 931 01:01:03,960 --> 01:01:05,520 Speaker 1: you know in our times and what's been going on 932 01:01:05,560 --> 01:01:10,520 Speaker 1: in this country. There's a real message there. UM. And 933 01:01:10,560 --> 01:01:17,040 Speaker 1: then from podcast present Company included included Verry. UM. I 934 01:01:17,160 --> 01:01:19,960 Speaker 1: enjoy Shane Parish and the Knowledge Project quite a bit. Yeah, 935 01:01:20,000 --> 01:01:22,600 Speaker 1: that's that's a great part. I'm a fan. Tell us 936 01:01:22,640 --> 01:01:25,960 Speaker 1: about some of your early mentors who helped guide your 937 01:01:26,000 --> 01:01:29,320 Speaker 1: career and bring you to where you are today. So 938 01:01:29,600 --> 01:01:32,480 Speaker 1: I have to just start with my grandfather. UM, it's 939 01:01:32,520 --> 01:01:37,520 Speaker 1: really my hero. UM. He you know, just the value 940 01:01:37,520 --> 01:01:41,320 Speaker 1: of hard work and generosity. Um. You talked about growing 941 01:01:41,360 --> 01:01:43,840 Speaker 1: up under his wing, and a lot of who I 942 01:01:43,840 --> 01:01:48,480 Speaker 1: am today is cultivated by him. UM. I also mentioned 943 01:01:48,480 --> 01:01:53,280 Speaker 1: to other UM individuals there's a program called Sponsors for 944 01:01:53,400 --> 01:01:58,840 Speaker 1: Educational Opportunity, which focuses on UM first generation, low income 945 01:01:58,920 --> 01:02:01,600 Speaker 1: kids of color, gets them to Wall Street. And so 946 01:02:01,680 --> 01:02:04,560 Speaker 1: when I was nineteen, when I was in college, I 947 01:02:04,640 --> 01:02:06,480 Speaker 1: got an opportunity to go work at d l J 948 01:02:07,200 --> 01:02:10,680 Speaker 1: UM Bill Donaldson, Mufkin and Jenrette. And it was because 949 01:02:10,720 --> 01:02:14,960 Speaker 1: of his program, Sponsors for Educational Opportunity. And one of 950 01:02:15,000 --> 01:02:18,120 Speaker 1: the individuals there's a general named Saban Street who ran 951 01:02:18,240 --> 01:02:22,720 Speaker 1: their venture capital group which is called Sprout UM. And 952 01:02:23,400 --> 01:02:27,720 Speaker 1: at the time, SEO was just starting to build out 953 01:02:28,320 --> 01:02:32,200 Speaker 1: with kids outside of the Ivy League. And Saban came 954 01:02:32,240 --> 01:02:34,160 Speaker 1: to Chicago when he met me, and not only did 955 01:02:34,240 --> 01:02:37,080 Speaker 1: he check me to the program, but he said, you know, 956 01:02:37,160 --> 01:02:38,520 Speaker 1: I want you to work at my firm at d 957 01:02:38,640 --> 01:02:40,760 Speaker 1: l J. And just he was just a great mentor 958 01:02:40,880 --> 01:02:44,680 Speaker 1: to me then big believer in me. UM when I 959 01:02:45,000 --> 01:02:50,360 Speaker 1: questioned myself, UM, just a phenomenal individuals whom a junct 960 01:02:50,440 --> 01:02:53,479 Speaker 1: professor at Colombia, and not just me, but so many 961 01:02:53,480 --> 01:02:59,880 Speaker 1: people he's influenced. Um have been uh, phenomenal inspiration for me. 962 01:03:00,200 --> 01:03:04,680 Speaker 1: Quite interesting. Let's talk about everybody's favorite question books, what 963 01:03:04,720 --> 01:03:07,000 Speaker 1: are you reading now? Or tell us about some of 964 01:03:07,520 --> 01:03:12,320 Speaker 1: your favorites. So one thing I mentioned before going specifically 965 01:03:12,320 --> 01:03:17,480 Speaker 1: to books, just on the question of mentors. This flungs 966 01:03:17,480 --> 01:03:20,120 Speaker 1: in the category of something that I believe that maybe 967 01:03:20,560 --> 01:03:23,360 Speaker 1: a lot of other people don't, is that I feel 968 01:03:23,400 --> 01:03:26,800 Speaker 1: like I have a lot of mentors who are individuals 969 01:03:26,800 --> 01:03:29,120 Speaker 1: that I've never met. What I mean by that is 970 01:03:29,200 --> 01:03:32,440 Speaker 1: books like books have always been mentors to me. I 971 01:03:32,440 --> 01:03:35,320 Speaker 1: think you can you can read about somebody and really 972 01:03:35,360 --> 01:03:40,280 Speaker 1: come to understand them, um and actually never have met them, 973 01:03:40,280 --> 01:03:43,920 Speaker 1: and you understand how they think. And you when you 974 01:03:44,000 --> 01:03:45,920 Speaker 1: understand how they think, you can ask yourself in the 975 01:03:45,920 --> 01:03:48,000 Speaker 1: same way that you will go see a mentor and say, 976 01:03:48,560 --> 01:03:50,880 Speaker 1: you know, I'm having a challenge with this, or how 977 01:03:50,920 --> 01:03:53,920 Speaker 1: would you think about this? But just ask yourself, well, 978 01:03:53,920 --> 01:03:57,800 Speaker 1: what would they say? And oftentimes you can answer the 979 01:03:57,880 --> 01:04:01,960 Speaker 1: question for yourself. Uh. And So there's been so many 980 01:04:02,360 --> 01:04:07,040 Speaker 1: individuals that I consider mentors who I've never met, um, 981 01:04:07,200 --> 01:04:11,600 Speaker 1: but have been cultivated through books. UM. And so I 982 01:04:11,600 --> 01:04:14,000 Speaker 1: say that just to say, the universe of potential mentors, 983 01:04:14,000 --> 01:04:15,560 Speaker 1: I think is so much bigger than a lot of 984 01:04:15,600 --> 01:04:20,520 Speaker 1: people acknowledge. And when I give credit to now to 985 01:04:20,560 --> 01:04:25,120 Speaker 1: the concept of books, the actual physical book that I've 986 01:04:25,120 --> 01:04:29,360 Speaker 1: probably gifted more than any other is The Art of 987 01:04:29,480 --> 01:04:35,520 Speaker 1: Learning UM by Josh Waitskin UM. He Josh chess prodigy. 988 01:04:36,120 --> 01:04:38,600 Speaker 1: I think he was the UM. He is the character 989 01:04:38,720 --> 01:04:41,600 Speaker 1: for searching for Bobby Fisher. And the thing that I 990 01:04:41,880 --> 01:04:43,960 Speaker 1: really strikes me I love about it is just he 991 01:04:44,200 --> 01:04:48,400 Speaker 1: Josh is all about pursuing excellence UM. And he's done 992 01:04:48,440 --> 01:04:51,640 Speaker 1: it in chess and push hands and boiling, which is 993 01:04:51,760 --> 01:04:56,360 Speaker 1: he obsesses on the craft and process of becoming world 994 01:04:56,400 --> 01:05:00,680 Speaker 1: class at something UM. And I personally a geek out 995 01:05:00,680 --> 01:05:04,000 Speaker 1: on process UM and trying to, you know, just push 996 01:05:04,040 --> 01:05:07,560 Speaker 1: and beat on your craft. And Josh articulates that he's 997 01:05:07,600 --> 01:05:09,720 Speaker 1: so thoughtful and how you think about that and break 998 01:05:09,760 --> 01:05:14,160 Speaker 1: it down UM, And just many many lessons in there. 999 01:05:16,160 --> 01:05:18,720 Speaker 1: The other book I would mention UM that I really 1000 01:05:18,800 --> 01:05:22,200 Speaker 1: enjoyed I read this summer UM is Maria kina Kova 1001 01:05:23,080 --> 01:05:26,080 Speaker 1: The biggest bluff How I learned to pay attention and 1002 01:05:26,120 --> 01:05:30,680 Speaker 1: master myself. So Marie is very interesting UM. True story. 1003 01:05:30,760 --> 01:05:34,440 Speaker 1: She got her PhD in behavioral psychology at Colombia, studying 1004 01:05:34,520 --> 01:05:38,680 Speaker 1: under Walter Michelle Um. I think it's for the Marshmallow test. 1005 01:05:39,280 --> 01:05:42,200 Speaker 1: And she'd never played poker before, and the book is 1006 01:05:42,240 --> 01:05:47,400 Speaker 1: about her learning to play poker um and actually doing 1007 01:05:47,400 --> 01:05:50,040 Speaker 1: it quite well. And you know, there's the aspect of 1008 01:05:50,640 --> 01:05:53,760 Speaker 1: playing the cards the probabilities, which I think is a 1009 01:05:53,760 --> 01:05:56,360 Speaker 1: lot like investing. Is just playing the probabilities and minutes 1010 01:05:56,800 --> 01:06:00,120 Speaker 1: playing the players playing the cards, which is all so 1011 01:06:00,760 --> 01:06:04,400 Speaker 1: like investing the behavioral side um. And there's just a 1012 01:06:04,440 --> 01:06:07,880 Speaker 1: lot of takeaways in her book, which is focused on poker, 1013 01:06:07,960 --> 01:06:11,840 Speaker 1: but for me, around investing and managing yourself and the 1014 01:06:11,880 --> 01:06:16,400 Speaker 1: power of paying attention. What sort of advice would you 1015 01:06:16,480 --> 01:06:20,840 Speaker 1: give to a recent college grad who was interested in 1016 01:06:20,880 --> 01:06:25,560 Speaker 1: a career in finance as a portfolio manager or an analyst. 1017 01:06:26,360 --> 01:06:27,840 Speaker 1: There's a there's a book I read a couple of 1018 01:06:27,880 --> 01:06:32,320 Speaker 1: years ago called Excellent Sheep The miss Education of American 1019 01:06:32,320 --> 01:06:37,600 Speaker 1: Elite by William Dershowitz, professor at Yale UM. And what 1020 01:06:37,680 --> 01:06:41,640 Speaker 1: he really draws on is, as just belied a little 1021 01:06:41,640 --> 01:06:43,680 Speaker 1: bit in the title, is like, you know, as a 1022 01:06:43,680 --> 01:06:50,200 Speaker 1: professor at Yale, seeing these incredible young people, the brightest minds, UM, 1023 01:06:50,280 --> 01:06:53,120 Speaker 1: but they've just been on this treadmill. UM. You know 1024 01:06:53,160 --> 01:06:57,640 Speaker 1: that perfect test scores and great grades and were just 1025 01:06:57,680 --> 01:07:02,200 Speaker 1: on this treadmill of continuing it in air quotes demonstrate excellence, 1026 01:07:02,280 --> 01:07:06,440 Speaker 1: but maybe lost a little bit in terms of how 1027 01:07:06,480 --> 01:07:11,800 Speaker 1: to think creatively and critically and the real purpose behind 1028 01:07:11,800 --> 01:07:15,000 Speaker 1: what they're doing. And in some ways that resonates with 1029 01:07:15,240 --> 01:07:18,520 Speaker 1: me in terms of what you're seeing UM in young 1030 01:07:18,600 --> 01:07:21,480 Speaker 1: people like these phenomenal people, but they haven't had a 1031 01:07:21,480 --> 01:07:27,800 Speaker 1: ton of adversity and UM really thinking deeply about what 1032 01:07:27,840 --> 01:07:30,840 Speaker 1: it is they want to do and why they want 1033 01:07:30,840 --> 01:07:35,440 Speaker 1: to do it UM, and less about the treadmill and 1034 01:07:35,480 --> 01:07:40,800 Speaker 1: the brand UM and the external affirmation, but for what 1035 01:07:41,080 --> 01:07:44,200 Speaker 1: they want to do UM. And so my advice to 1036 01:07:44,760 --> 01:07:49,960 Speaker 1: a young person would be around that UM and specifically 1037 01:07:50,000 --> 01:07:51,880 Speaker 1: if they're looking to go and invest in management and 1038 01:07:52,040 --> 01:07:54,600 Speaker 1: be pretty similar to the same thing that I would 1039 01:07:54,600 --> 01:07:57,360 Speaker 1: take somebody you know in college or high school. It's like, 1040 01:07:57,760 --> 01:08:01,280 Speaker 1: don't go for UM. You know what you want to 1041 01:08:01,280 --> 01:08:03,960 Speaker 1: go for is the best professor. It doesn't matter what 1042 01:08:04,000 --> 01:08:07,960 Speaker 1: the name of the course is, but you know, find 1043 01:08:08,000 --> 01:08:12,000 Speaker 1: an exceptional professor. UM. There's magic in that and the 1044 01:08:12,040 --> 01:08:15,080 Speaker 1: same thing when thinking about you know, taking your first 1045 01:08:15,120 --> 01:08:18,639 Speaker 1: step is find a phenomenal individual that you connect with 1046 01:08:19,080 --> 01:08:21,120 Speaker 1: and work for them. It doesn't matter what the brand is. 1047 01:08:21,160 --> 01:08:24,519 Speaker 1: Everybody's drawn to the best brand UM or what they 1048 01:08:24,520 --> 01:08:28,240 Speaker 1: think is most coveted. But find a phenomenal individual. Forget 1049 01:08:28,240 --> 01:08:32,080 Speaker 1: about the brand and all of the treatments around it. UM. 1050 01:08:32,280 --> 01:08:34,800 Speaker 1: Work for that individual, and I think what you'll take 1051 01:08:34,840 --> 01:08:38,600 Speaker 1: away from that will be so much deeper than UM 1052 01:08:38,640 --> 01:08:43,280 Speaker 1: just going for that that external validation good advice UM. 1053 01:08:43,280 --> 01:08:46,120 Speaker 1: And our final question, what do you know about the 1054 01:08:46,160 --> 01:08:51,160 Speaker 1: world of investing today? You wish you knew years ago 1055 01:08:51,640 --> 01:08:55,320 Speaker 1: when you were first ramping up. So you know, I 1056 01:08:55,360 --> 01:08:58,320 Speaker 1: started my investment career in the private I saw doing 1057 01:08:58,360 --> 01:09:03,799 Speaker 1: distress turnaround investing UM, and when I started my public 1058 01:09:03,800 --> 01:09:06,880 Speaker 1: market investing career, I was all about that, you know, 1059 01:09:07,040 --> 01:09:13,480 Speaker 1: hard assets, downside cash flow. And I think what I 1060 01:09:13,479 --> 01:09:16,160 Speaker 1: have learned over time and you've seen this revolution and 1061 01:09:16,200 --> 01:09:20,320 Speaker 1: other investors, is really the importance of human capital and 1062 01:09:20,360 --> 01:09:25,360 Speaker 1: culture than people UM. And you know, I think the 1063 01:09:25,439 --> 01:09:30,080 Speaker 1: phenomenal companies that really compound over time have something about 1064 01:09:30,120 --> 01:09:34,479 Speaker 1: their human capital and their culture UM that is unique, 1065 01:09:34,520 --> 01:09:39,519 Speaker 1: distinctive enduring, not always, but enduring and allows them to 1066 01:09:39,560 --> 01:09:43,439 Speaker 1: compound in a way that is much more meaningful than 1067 01:09:43,439 --> 01:09:46,200 Speaker 1: buying that cigar butt. And so I think what I 1068 01:09:46,240 --> 01:09:49,920 Speaker 1: wish I would have focused on earlier was was that 1069 01:09:49,960 --> 01:09:54,599 Speaker 1: element um rather than just looking for the cigar butts? 1070 01:09:54,880 --> 01:09:58,600 Speaker 1: Quite quite interesting. Thanks Adam for being so generous with 1071 01:09:58,720 --> 01:10:02,000 Speaker 1: your time. We have been speaking with Adam Carr. He 1072 01:10:02,320 --> 01:10:06,000 Speaker 1: is the head of Orbis US and portfolio manager at 1073 01:10:06,000 --> 01:10:11,120 Speaker 1: the thirty seven billion dollar Orbits Investment International firm. If 1074 01:10:11,160 --> 01:10:14,519 Speaker 1: you enjoy this conversation, well, be sure and check out 1075 01:10:14,760 --> 01:10:18,840 Speaker 1: any of our previous three and ninety or so such 1076 01:10:19,200 --> 01:10:22,759 Speaker 1: interviews that we've had over the past. Is it six years? 1077 01:10:22,760 --> 01:10:25,599 Speaker 1: Oh my goodness, that's a long time. You can find 1078 01:10:25,640 --> 01:10:29,599 Speaker 1: that at iTunes, Spotify, wherever you feed your podcast fixed. 1079 01:10:30,080 --> 01:10:33,840 Speaker 1: We love your comments, feedback and suggestions right to us 1080 01:10:33,920 --> 01:10:38,240 Speaker 1: at M I B Podcast at Bloomberg dot net. Give 1081 01:10:38,320 --> 01:10:41,840 Speaker 1: us a review at Apple iTunes. You can sign up 1082 01:10:41,840 --> 01:10:44,760 Speaker 1: for my Daily Reads at rid Holtz dot com. They're free. 1083 01:10:44,760 --> 01:10:47,920 Speaker 1: They'll show up in your mailbox every day at seven am. 1084 01:10:48,000 --> 01:10:52,120 Speaker 1: Check out my weekly column at Bloomberg dot com Slash Opinion. 1085 01:10:52,560 --> 01:10:55,960 Speaker 1: Follow me on Twitter at rit Holts. I would be 1086 01:10:56,000 --> 01:10:58,559 Speaker 1: remiss if I did not thank the craft staff that 1087 01:10:58,680 --> 01:11:02,840 Speaker 1: helps put these converse stations together each week. Maroufal is 1088 01:11:02,880 --> 01:11:07,479 Speaker 1: my audio engineer. Michael Boyle is my producer. A tick 1089 01:11:07,560 --> 01:11:11,080 Speaker 1: of Valbron is our project manager. Michael Batnick is my 1090 01:11:11,160 --> 01:11:14,920 Speaker 1: head of research. I'm Barry Results. You've been listening to 1091 01:11:15,040 --> 01:11:17,639 Speaker 1: Master's in Business on Bloomberg Radio