1 00:00:02,040 --> 00:00:06,000 Speaker 1: This is Master's in Business with Barry rid Hoolds on 2 00:00:06,240 --> 00:00:07,320 Speaker 1: Bloomberg Radio. 3 00:00:08,560 --> 00:00:13,440 Speaker 2: We have an extra special Masters in Business live panel 4 00:00:13,640 --> 00:00:19,840 Speaker 2: that I recorded last month at Bloomberg's Hedge fund startup conference, 5 00:00:20,480 --> 00:00:25,200 Speaker 2: and Wow, what a tremendous lineup. This was Alana Weinstein 6 00:00:25,840 --> 00:00:30,800 Speaker 2: from IDW, probably the most prominent headhunter in the hedge 7 00:00:30,800 --> 00:00:36,400 Speaker 2: fund industry. Additionally, we had a series of rock star 8 00:00:36,720 --> 00:00:42,200 Speaker 2: advisors as part of the panel. Mike Rockefeller, he runs 9 00:00:42,240 --> 00:00:46,479 Speaker 2: Woodline Partners there about six billion dollars. Previously he was 10 00:00:46,640 --> 00:00:52,199 Speaker 2: at Citadel and Millennium. He really is one of the 11 00:00:52,280 --> 00:00:55,600 Speaker 2: up and comers in the world of hedge funds. Thomas 12 00:00:55,680 --> 00:00:59,320 Speaker 2: Wagner has been running a credit fund for about a decade. 13 00:00:59,320 --> 00:01:02,400 Speaker 2: They run about over at Nighthead Capital. He runs about 14 00:01:02,400 --> 00:01:07,480 Speaker 2: ten billion dollars. Really insightful stuff. Brennan Diaz probably runs 15 00:01:07,520 --> 00:01:10,080 Speaker 2: the newest of these hedge funds. He's a little over 16 00:01:10,080 --> 00:01:13,800 Speaker 2: a billion dollars. He launched right into the teeth of 17 00:01:14,720 --> 00:01:18,440 Speaker 2: the pandemic, a long only billion dollar hedge fund. And 18 00:01:19,480 --> 00:01:21,360 Speaker 2: this panel was absolutely fascinating. 19 00:01:21,400 --> 00:01:22,400 Speaker 3: If you're thinking. 20 00:01:22,080 --> 00:01:25,400 Speaker 2: About going out on your own, hanging your own shingle, 21 00:01:26,000 --> 00:01:29,360 Speaker 2: just trying to do it, yourself. These folks can tell 22 00:01:29,360 --> 00:01:32,600 Speaker 2: you exactly how challenging it is and the tools you're 23 00:01:32,640 --> 00:01:35,560 Speaker 2: gonna need to succeed. I thought this was a really 24 00:01:35,640 --> 00:01:40,600 Speaker 2: fascinating conversation with no Ado my panel discussion at Masters 25 00:01:40,640 --> 00:01:45,560 Speaker 2: in Business Live The Emerging Manager Playbook. It's been a 26 00:01:45,640 --> 00:01:49,440 Speaker 2: crazy couple of years, from the pandemic to the new 27 00:01:49,520 --> 00:01:54,200 Speaker 2: regime of rate increases. Frame what's going on in today's 28 00:01:54,960 --> 00:01:58,240 Speaker 2: environment and what's it like managing a fund in this 29 00:01:58,280 --> 00:01:59,960 Speaker 2: sort of circumstances. 30 00:02:00,120 --> 00:02:01,560 Speaker 1: Start with you sure so. 31 00:02:02,480 --> 00:02:06,800 Speaker 4: I think one theme is that allocators are becoming more 32 00:02:06,840 --> 00:02:11,080 Speaker 4: sophisticated about the return quality that they are receiving and 33 00:02:11,080 --> 00:02:14,120 Speaker 4: what they're willing to pay for and what they want 34 00:02:14,200 --> 00:02:15,640 Speaker 4: is uncorrelated alpha. 35 00:02:16,480 --> 00:02:18,320 Speaker 3: And you take that. 36 00:02:18,360 --> 00:02:22,200 Speaker 4: Concept, but then you look at the traditional long short 37 00:02:22,639 --> 00:02:26,359 Speaker 4: hedge fund and they are running portfolios of less than 38 00:02:26,400 --> 00:02:31,160 Speaker 4: thirty percent idio, which means that those returns are highly 39 00:02:31,200 --> 00:02:37,720 Speaker 4: dependent on macro factors, very unpredictable factors that you'll be 40 00:02:37,800 --> 00:02:41,919 Speaker 4: subject to. And what I think is an increasing appreciation 41 00:02:42,080 --> 00:02:46,320 Speaker 4: is that a high idio portfolio is what is predictive 42 00:02:46,400 --> 00:02:48,960 Speaker 4: for an uncorrelated alpha stream, and that is why you're 43 00:02:49,000 --> 00:02:54,840 Speaker 4: seeing the massive increase in multimanager assets, and those assets 44 00:02:54,880 --> 00:02:57,799 Speaker 4: have more than doubled since twenty seventeen. If you look 45 00:02:57,800 --> 00:02:59,440 Speaker 4: at some of the top launches that are coming out 46 00:02:59,440 --> 00:03:03,600 Speaker 4: in twenty twenty three, Ilex and Freestone, that trend looks 47 00:03:03,600 --> 00:03:06,360 Speaker 4: to be continuing. And the reason why is that a 48 00:03:06,440 --> 00:03:10,600 Speaker 4: multi manager provides a one stop shop for an allocator 49 00:03:10,919 --> 00:03:15,960 Speaker 4: where you can get a high IDEO, lowvall durable return 50 00:03:16,000 --> 00:03:19,080 Speaker 4: stream and you can do it in one single investment 51 00:03:19,800 --> 00:03:22,680 Speaker 4: where you could have scale and you eliminate. 52 00:03:22,240 --> 00:03:26,799 Speaker 2: Complexity, diversification built in right from the good go. 53 00:03:27,000 --> 00:03:28,560 Speaker 3: That's right, Alana, Let's. 54 00:03:28,360 --> 00:03:31,480 Speaker 2: Talk a little bit about this current environment. You see 55 00:03:31,480 --> 00:03:33,400 Speaker 2: it from the perspective of talent. 56 00:03:33,960 --> 00:03:34,760 Speaker 3: Tell us what you're seeing. 57 00:03:34,800 --> 00:03:37,120 Speaker 5: Well, I'm going to zoom out, because if you all 58 00:03:37,160 --> 00:03:39,480 Speaker 5: want to start a hedge fund, I think we need 59 00:03:39,520 --> 00:03:41,440 Speaker 5: to kind of start at the top and I'm going 60 00:03:41,480 --> 00:03:43,360 Speaker 5: to give you the macro and then we'll go quickly 61 00:03:43,400 --> 00:03:47,760 Speaker 5: strategy by strategy. Barry, you and I talked about this recently. 62 00:03:48,000 --> 00:03:51,000 Speaker 5: There was to me at least an amazing article that 63 00:03:51,080 --> 00:03:54,560 Speaker 5: the FT put out a couple months ago which said 64 00:03:54,880 --> 00:03:56,360 Speaker 5: this was news to me. I knew there were a 65 00:03:56,400 --> 00:03:59,880 Speaker 5: lot of hedge funds, but apparently there are more hedge 66 00:04:00,000 --> 00:04:06,840 Speaker 5: funds than burger kings. Okay, true, thirty thousand hedge funds. 67 00:04:07,520 --> 00:04:08,800 Speaker 6: The other thing you should keep. 68 00:04:08,720 --> 00:04:12,600 Speaker 5: In mind is that the average lifespan of a hedge 69 00:04:12,600 --> 00:04:15,720 Speaker 5: fund is three years. So if you guys want to 70 00:04:15,760 --> 00:04:18,080 Speaker 5: start a fund and you don't want it to be 71 00:04:18,320 --> 00:04:21,000 Speaker 5: just another Burger king that goes out of business, you 72 00:04:21,120 --> 00:04:23,760 Speaker 5: need to understand what the lay of the land is 73 00:04:23,800 --> 00:04:26,280 Speaker 5: within each of those strategies. Mike talked a little bit 74 00:04:26,279 --> 00:04:31,279 Speaker 5: about long short equities not to be like the grim reaper, 75 00:04:31,600 --> 00:04:35,279 Speaker 5: but the reality is, if you're not a multi manager 76 00:04:35,480 --> 00:04:39,120 Speaker 5: and you're not aggressively managing market risk, then you fall 77 00:04:39,160 --> 00:04:44,159 Speaker 5: into the category of a long short single manager that 78 00:04:44,320 --> 00:04:48,719 Speaker 5: probably takes concentrated more concentrated directional risk. And if you 79 00:04:48,760 --> 00:04:52,719 Speaker 5: look at how these funds have performed over the last 80 00:04:52,920 --> 00:04:56,280 Speaker 5: two full years twenty one and twenty two, the average 81 00:04:56,760 --> 00:05:01,240 Speaker 5: the cumulative return of these funds is down forty percent, okay, 82 00:05:01,279 --> 00:05:03,640 Speaker 5: with some funds down as high as sixty percent, like 83 00:05:03,760 --> 00:05:04,520 Speaker 5: Tiger Global. 84 00:05:05,000 --> 00:05:07,320 Speaker 6: So if you think about the dollars loss. 85 00:05:07,000 --> 00:05:10,000 Speaker 5: To LPs, and it's important you understand this because forty 86 00:05:10,040 --> 00:05:12,839 Speaker 5: percent of the hedge fund universe is long short equities, 87 00:05:13,120 --> 00:05:15,600 Speaker 5: so I'm betting there's a decent percentage of you here 88 00:05:16,120 --> 00:05:18,839 Speaker 5: that is thinking about starting a long short equity fund. 89 00:05:19,279 --> 00:05:22,040 Speaker 6: There was a tremendous amount of AUM. 90 00:05:21,640 --> 00:05:25,560 Speaker 5: Lost, so Tiger Global pre twenty twenty one was one 91 00:05:25,640 --> 00:05:30,440 Speaker 5: hundred billion, Maverick fourteen billion, d one thirty billion, and 92 00:05:30,480 --> 00:05:34,840 Speaker 5: then non Tiger cubs like Alkeon thirty billion, Perceptive ten billion. 93 00:05:35,200 --> 00:05:38,240 Speaker 5: When you're down forty percent on average, it's a huge 94 00:05:38,279 --> 00:05:42,320 Speaker 5: loss to the industry. More than fifty percent of total 95 00:05:42,400 --> 00:05:46,040 Speaker 5: losses into in twenty twenty two came from long short 96 00:05:46,040 --> 00:05:50,000 Speaker 5: equity funds, and half of hedge fund liquidations came from 97 00:05:50,080 --> 00:05:53,040 Speaker 5: long short equity funds. So you really need to think 98 00:05:53,040 --> 00:05:57,000 Speaker 5: about if you don't fall into a all alpha non 99 00:05:57,040 --> 00:06:00,880 Speaker 5: correlated category like Mike does, what is the value that 100 00:06:00,920 --> 00:06:06,680 Speaker 5: you're providing. Macro very volatile return stream. Twenty twenty one 101 00:06:07,000 --> 00:06:10,800 Speaker 5: crappy year for most macro funds. Twenty twenty two, great year, 102 00:06:11,200 --> 00:06:14,680 Speaker 5: twenty three again not such a good year, and you 103 00:06:14,720 --> 00:06:18,880 Speaker 5: see again brand name funds like Rocos, Castle, Hook, Element 104 00:06:19,040 --> 00:06:22,120 Speaker 5: Element charged forty percent fees was able to up it 105 00:06:22,160 --> 00:06:25,599 Speaker 5: to that in twenty twenty shrinking and trying to stem 106 00:06:25,640 --> 00:06:27,680 Speaker 5: the bleeding from negative returns. 107 00:06:29,120 --> 00:06:30,840 Speaker 6: Credit a bright spot. 108 00:06:31,040 --> 00:06:32,800 Speaker 5: But I think, and I'm sure Tom will talk more 109 00:06:32,839 --> 00:06:36,880 Speaker 5: about this, you really need scale to compete. And then 110 00:06:36,920 --> 00:06:39,280 Speaker 5: there's the multi managers, and that's going to be your 111 00:06:39,320 --> 00:06:43,480 Speaker 5: biggest problem as a new emerging manager, how you're going 112 00:06:43,520 --> 00:06:48,400 Speaker 5: to compete for talent within a paradigm that has everything 113 00:06:48,480 --> 00:06:49,960 Speaker 5: to offer from. 114 00:06:49,880 --> 00:06:51,640 Speaker 6: Analysts up through to pms. 115 00:06:52,000 --> 00:06:55,840 Speaker 5: They have scale, they have capital, they have resources, they 116 00:06:55,839 --> 00:06:58,280 Speaker 5: have a pathway to be a PM. They have an 117 00:06:58,279 --> 00:07:03,479 Speaker 5: aggressive payout. They have that and they are like, it's 118 00:07:03,520 --> 00:07:05,840 Speaker 5: like mitosis. You know, we used to have we have 119 00:07:05,960 --> 00:07:09,160 Speaker 5: the tiger cubs. Now we have the multi manager cubs. 120 00:07:09,840 --> 00:07:12,320 Speaker 6: Mike is one of them. He mentioned Islex. I hope 121 00:07:12,320 --> 00:07:16,360 Speaker 6: it's okay. I share that you. He is now. 122 00:07:16,080 --> 00:07:20,920 Speaker 5: Providing strategic investments to multi manager funds. 123 00:07:21,520 --> 00:07:22,000 Speaker 6: Islex. 124 00:07:22,080 --> 00:07:24,679 Speaker 5: Are two guys from Citadel that Mike and his team 125 00:07:24,760 --> 00:07:27,640 Speaker 5: gave capital too, and they're going to launch with two billion. 126 00:07:28,000 --> 00:07:30,800 Speaker 5: Freestone Grove, another Citadel guy, is going to launch with 127 00:07:30,880 --> 00:07:34,240 Speaker 5: many billions. Andrew Comery, who came out of D E. 128 00:07:34,400 --> 00:07:37,880 Speaker 5: Shaw is launching with three billion. So into the fray. 129 00:07:38,080 --> 00:07:42,080 Speaker 5: So this is the environment you're entering into and I 130 00:07:42,840 --> 00:07:47,200 Speaker 5: as someone who has been recruiting in this industry for 131 00:07:47,240 --> 00:07:49,559 Speaker 5: the past twenty years with my team, and we're working 132 00:07:49,600 --> 00:07:53,520 Speaker 5: with the biggest, most successful funds in the world. It's tough, 133 00:07:54,000 --> 00:07:59,400 Speaker 5: Talent is scarce, it's they have many options, and I 134 00:07:59,400 --> 00:08:02,280 Speaker 5: think the multi manager dynamic just makes it that much 135 00:08:02,280 --> 00:08:02,880 Speaker 5: more intense. 136 00:08:03,040 --> 00:08:06,280 Speaker 2: So let me see what Brennan has to say about this. 137 00:08:06,440 --> 00:08:10,840 Speaker 2: You're the only long only person on the panel. Is 138 00:08:10,880 --> 00:08:14,560 Speaker 2: it that challenging to be long only or how are 139 00:08:14,600 --> 00:08:18,920 Speaker 2: you finding this environment from your investment style? 140 00:08:19,440 --> 00:08:21,600 Speaker 7: Well, I mean, I think all the points Mike made 141 00:08:21,880 --> 00:08:24,440 Speaker 7: are right, and I think that the whole rationale behind 142 00:08:24,520 --> 00:08:28,080 Speaker 7: launching along only, coming from a long short background, was 143 00:08:28,240 --> 00:08:31,960 Speaker 7: the realization that market structure was changing. The ability to 144 00:08:32,000 --> 00:08:34,240 Speaker 7: access short alpha and short alpha curs were changing. 145 00:08:34,240 --> 00:08:34,520 Speaker 1: In us. 146 00:08:34,520 --> 00:08:36,600 Speaker 7: The ability to maintain short gross exposure with the same 147 00:08:36,600 --> 00:08:39,760 Speaker 7: investment style and generate that level of alpha wasn't there 148 00:08:39,800 --> 00:08:42,040 Speaker 7: as much, and so I kind of felt that pressure 149 00:08:42,040 --> 00:08:44,880 Speaker 7: on the short side of the portfolio, forcing shorts or 150 00:08:44,920 --> 00:08:47,240 Speaker 7: a running higher net kind of too bad options for 151 00:08:47,280 --> 00:08:51,080 Speaker 7: an absolute return product. But looked at alongside a ledger 152 00:08:51,280 --> 00:08:54,240 Speaker 7: and still felt very strongly that the pool of alpha. 153 00:08:54,240 --> 00:08:57,320 Speaker 7: We were accessing there looking out you know, basically eighteen 154 00:08:57,360 --> 00:08:59,480 Speaker 7: to eighteen to thirty six months, so not looking out 155 00:08:59,480 --> 00:09:01,680 Speaker 7: five to ten years, but eighteen to thirty six months forward, 156 00:09:01,720 --> 00:09:04,280 Speaker 7: looking forward to what underlying businesses are going to be earning, 157 00:09:04,320 --> 00:09:07,880 Speaker 7: and thinking about absolute value and intrinsic value and taking big, 158 00:09:07,920 --> 00:09:13,000 Speaker 7: concentrated bets on opportunities that were really attractive. That window 159 00:09:13,720 --> 00:09:16,240 Speaker 7: was not only kind of as attractive as it ever been, 160 00:09:16,280 --> 00:09:18,400 Speaker 7: but in some ways it is getting more attracted, kind 161 00:09:18,400 --> 00:09:20,679 Speaker 7: of driven by the underlying short term volatility in the market. 162 00:09:22,000 --> 00:09:25,520 Speaker 7: And so I don't think managing along only is more 163 00:09:25,520 --> 00:09:28,120 Speaker 7: difficult to managing along shore. I think it's actually materially 164 00:09:28,600 --> 00:09:30,880 Speaker 7: materially easier, which is kind of why we went down 165 00:09:30,920 --> 00:09:31,840 Speaker 7: that route. 166 00:09:31,920 --> 00:09:33,720 Speaker 1: And I also think that there's material demand. 167 00:09:33,760 --> 00:09:35,720 Speaker 7: I think my expoint is one hundred percent right that 168 00:09:35,720 --> 00:09:39,680 Speaker 7: allocators want to pay for value, right. You know, investors 169 00:09:39,720 --> 00:09:42,240 Speaker 7: historically have not been you know, invested in hedge funds 170 00:09:42,280 --> 00:09:44,840 Speaker 7: just to pay fees on beta. They've been willing to 171 00:09:44,840 --> 00:09:47,120 Speaker 7: pay the fees on beta because the underlying assumption would 172 00:09:47,120 --> 00:09:48,840 Speaker 7: be that you would deliver them enough OUTFA to cover. 173 00:09:48,720 --> 00:09:49,440 Speaker 1: The beta costs. 174 00:09:50,320 --> 00:09:52,920 Speaker 7: However, there are you know, large pools of capital in 175 00:09:52,960 --> 00:09:56,280 Speaker 7: the world that want data exposure, very very large pools 176 00:09:56,280 --> 00:09:58,040 Speaker 7: of capital that will always have beta exposure. 177 00:09:58,040 --> 00:09:58,640 Speaker 1: And so I think the. 178 00:09:59,679 --> 00:10:01,880 Speaker 7: Message of going to people and saying I will take 179 00:10:01,880 --> 00:10:04,319 Speaker 7: that beta exposure, I personally want that beta exposure for 180 00:10:04,440 --> 00:10:06,959 Speaker 7: my own capital, like over time, I want the beta 181 00:10:06,960 --> 00:10:09,360 Speaker 7: because the beta collecting that risk premium should be positive 182 00:10:10,040 --> 00:10:13,120 Speaker 7: and you only pay me when I generate value for you, 183 00:10:13,280 --> 00:10:15,599 Speaker 7: value being defined as excess returns relative to the S 184 00:10:15,640 --> 00:10:15,800 Speaker 7: and P. 185 00:10:16,160 --> 00:10:19,400 Speaker 1: I think that has a lot of resonance with. 186 00:10:18,679 --> 00:10:20,839 Speaker 7: With with a lot of capital providers out there, And 187 00:10:20,880 --> 00:10:24,080 Speaker 7: I think that it's it's it's an opportunity for people 188 00:10:24,080 --> 00:10:26,599 Speaker 7: who invest like me, who think like me, to to 189 00:10:26,800 --> 00:10:28,760 Speaker 7: to go out and uh to go out and execute 190 00:10:28,760 --> 00:10:32,160 Speaker 7: on if they so choose. But you know, you have 191 00:10:32,240 --> 00:10:35,040 Speaker 7: to have the right model, you have to have a 192 00:10:35,040 --> 00:10:38,120 Speaker 7: truly aligned fee structure and you and you have to 193 00:10:38,160 --> 00:10:39,640 Speaker 7: kind of be willing to go down that road. So 194 00:10:39,679 --> 00:10:43,240 Speaker 7: I I, you know, I think it's in many ways 195 00:10:43,240 --> 00:10:45,640 Speaker 7: the same. It's it's it's it's responding to the same 196 00:10:45,679 --> 00:10:48,920 Speaker 7: trend that Mike is talking about and taking it in 197 00:10:48,960 --> 00:10:49,800 Speaker 7: a different direction. 198 00:10:50,200 --> 00:10:52,880 Speaker 2: So so to clarify, some people have called them pivot fees. 199 00:10:53,600 --> 00:10:58,840 Speaker 2: The profit participation is only on returns over and above. 200 00:10:58,760 --> 00:11:01,320 Speaker 7: What the SPX is generally, so it's actually I would 201 00:11:01,320 --> 00:11:03,640 Speaker 7: say even more advantageous in that our management fees are 202 00:11:03,800 --> 00:11:06,640 Speaker 7: are a pre payment on future alpha, So we have 203 00:11:06,720 --> 00:11:11,920 Speaker 7: to generate alpha before we get to any type of incentive, right, 204 00:11:11,960 --> 00:11:13,800 Speaker 7: so that the idea is over time, over the life 205 00:11:13,840 --> 00:11:16,560 Speaker 7: of the fund, which hopefully is a very long life. 206 00:11:17,440 --> 00:11:19,080 Speaker 7: When you when we when we end at the end, 207 00:11:19,160 --> 00:11:22,400 Speaker 7: we will look back and seventy percent of the economics 208 00:11:22,440 --> 00:11:24,800 Speaker 7: of the alpha that has been generated will flow to 209 00:11:24,840 --> 00:11:28,760 Speaker 7: the investors, in thirty percent will crew demander, and we 210 00:11:28,840 --> 00:11:31,200 Speaker 7: try to make that as clean and transparent as possible. 211 00:11:31,800 --> 00:11:32,640 Speaker 1: That creates more. 212 00:11:32,760 --> 00:11:37,000 Speaker 7: Volatility in our in our and our overall incentive fee 213 00:11:37,040 --> 00:11:40,640 Speaker 7: income relative to to other models. But I think that's 214 00:11:41,040 --> 00:11:43,160 Speaker 7: very solvable from a talent perspective. HOWLD you kind of 215 00:11:43,160 --> 00:11:45,840 Speaker 7: talk about that, but that's the underlying model. 216 00:11:46,160 --> 00:11:48,680 Speaker 2: Really interesting, Tom, What do you make of this current 217 00:11:48,760 --> 00:11:52,199 Speaker 2: environment and how are you finding the world of credit 218 00:11:52,960 --> 00:11:55,120 Speaker 2: within within the headphones realm? 219 00:11:55,720 --> 00:11:58,520 Speaker 8: Well, I, first of all, thank you Barry for having 220 00:11:58,559 --> 00:12:01,640 Speaker 8: me here and for everyone tending appreciate it. 221 00:12:02,720 --> 00:12:03,800 Speaker 1: You know, credit is. 222 00:12:05,600 --> 00:12:08,600 Speaker 8: Relative to every other asset class we see today, and 223 00:12:08,640 --> 00:12:12,600 Speaker 8: we invest we have of our ten billion, six of 224 00:12:12,640 --> 00:12:15,400 Speaker 8: it is permanent capital, so we do a lot beyond 225 00:12:15,520 --> 00:12:18,640 Speaker 8: just credit. We can do basically anything anywhere in the 226 00:12:18,640 --> 00:12:24,120 Speaker 8: world we want. But credit today, and particularly private structured credit, 227 00:12:24,600 --> 00:12:31,559 Speaker 8: so rescue financings, bridge loans, financings, to provide growth capital, 228 00:12:32,240 --> 00:12:35,640 Speaker 8: all structured as credit offer the greatest amount of alpha 229 00:12:36,000 --> 00:12:38,079 Speaker 8: relative to the risk I've ever seen. 230 00:12:38,400 --> 00:12:39,880 Speaker 1: In the twenty five years have been doing this. 231 00:12:40,760 --> 00:12:45,800 Speaker 8: It's extraordinary excess return and that's because that's not liquid. 232 00:12:46,440 --> 00:12:49,560 Speaker 8: And one thing that I think all of you, or 233 00:12:49,559 --> 00:12:51,600 Speaker 8: of those of you in the room that are contemplating 234 00:12:51,960 --> 00:12:54,439 Speaker 8: launching a hedge fund, is there is an extreme push 235 00:12:54,480 --> 00:13:00,079 Speaker 8: pull presently for liquidity visa V returns. Investors are allocators, 236 00:13:00,120 --> 00:13:04,600 Speaker 8: are not liquid, and they need to generate returns, particularly 237 00:13:04,600 --> 00:13:06,920 Speaker 8: in a context of higher rates where their hurdles have 238 00:13:06,960 --> 00:13:09,560 Speaker 8: all gone up and they're stuck in older investments, particularly 239 00:13:09,559 --> 00:13:11,480 Speaker 8: private equity. They're probably going to take a period of 240 00:13:11,559 --> 00:13:15,160 Speaker 8: time to recover to the alpha generative returns that they 241 00:13:15,160 --> 00:13:18,199 Speaker 8: had historically produced. So they want you to be liquid 242 00:13:18,280 --> 00:13:22,840 Speaker 8: and generate returns. That's not really possible today. So you've 243 00:13:22,840 --> 00:13:24,840 Speaker 8: got to find a niche that fits you. And I 244 00:13:24,840 --> 00:13:27,920 Speaker 8: think the best advice that I could give for folks 245 00:13:28,000 --> 00:13:31,560 Speaker 8: thinking about launching is forget all the noise, Forget what 246 00:13:31,559 --> 00:13:33,520 Speaker 8: the markets want, forget what the LPs want. 247 00:13:33,920 --> 00:13:35,120 Speaker 1: Do what you're going to be good at. 248 00:13:35,760 --> 00:13:38,360 Speaker 8: It doesn't matter what your strategy is, doesn't matter what 249 00:13:38,360 --> 00:13:40,360 Speaker 8: your structure is, doesn't matter what your fees are. If 250 00:13:40,360 --> 00:13:44,640 Speaker 8: you're good relative to whatever benchmark you're posted against, you'll 251 00:13:44,640 --> 00:13:45,360 Speaker 8: do just fine. 252 00:13:45,880 --> 00:13:46,720 Speaker 1: Your business will. 253 00:13:46,600 --> 00:13:50,240 Speaker 8: Grow, you'll make plenty of money, you'll retire a happy person, 254 00:13:50,520 --> 00:13:52,120 Speaker 8: your kids will do never have to work if they 255 00:13:52,160 --> 00:13:52,680 Speaker 8: don't want to. 256 00:13:53,080 --> 00:13:54,040 Speaker 1: You'll do just fine. 257 00:13:54,400 --> 00:13:56,880 Speaker 8: But if you try to shoehorn yourself into something that 258 00:13:56,960 --> 00:13:59,120 Speaker 8: doesn't fit, it'll go terribly wrong. 259 00:13:59,360 --> 00:14:03,120 Speaker 1: And I think the second most valuable piece of advice 260 00:14:03,120 --> 00:14:03,720 Speaker 1: I can give you is. 261 00:14:03,720 --> 00:14:06,400 Speaker 8: Separate from all the examples you're hearing up here, of 262 00:14:06,400 --> 00:14:10,000 Speaker 8: all these multi billion dollar launches, that's not normal, right, 263 00:14:10,320 --> 00:14:12,280 Speaker 8: It's not normal. And you might think you're gonna launch 264 00:14:12,280 --> 00:14:14,720 Speaker 8: with billion dollars. A lot of helped us get started. 265 00:14:15,320 --> 00:14:16,920 Speaker 8: We thought we were going to launch with a billion 266 00:14:17,000 --> 00:14:20,760 Speaker 8: five as of March sixteenth, two thousand and eight. 267 00:14:20,880 --> 00:14:22,960 Speaker 1: We had just come out of the Emerging Manager's Conference. 268 00:14:23,160 --> 00:14:24,200 Speaker 6: Going was perfect. 269 00:14:24,320 --> 00:14:26,080 Speaker 1: I was like, this is so easy. 270 00:14:26,440 --> 00:14:28,600 Speaker 8: Then eight weeks we raised a billion and a half. 271 00:14:28,600 --> 00:14:30,920 Speaker 8: We're going to launch with three billion. Ken Griffin was 272 00:14:30,960 --> 00:14:33,440 Speaker 8: backing us. It was like the greatest thing ever. Next 273 00:14:33,560 --> 00:14:35,960 Speaker 8: day bear Stearns went bankrupt and by the time we 274 00:14:36,000 --> 00:14:38,000 Speaker 8: launched on June third, two thousand and eight, we had 275 00:14:38,040 --> 00:14:41,080 Speaker 8: four hundred and thirteen million of caple and the world 276 00:14:41,160 --> 00:14:43,640 Speaker 8: just changed. Nothing happened with us. All the investments we 277 00:14:43,680 --> 00:14:46,440 Speaker 8: were pursuing was good. Our first couple years were spectacular, 278 00:14:46,560 --> 00:14:49,440 Speaker 8: like everything went great and things turned out okay. But 279 00:14:49,520 --> 00:14:52,840 Speaker 8: that second piece of advice is you can't bank on 280 00:14:52,960 --> 00:14:55,880 Speaker 8: being a multi billion dollar launch, And so what does 281 00:14:55,880 --> 00:14:56,360 Speaker 8: that mean. 282 00:14:56,760 --> 00:14:58,880 Speaker 1: That means you have to do everything. 283 00:15:00,000 --> 00:15:01,720 Speaker 8: You stand how to set up a computer on a phone, 284 00:15:02,000 --> 00:15:04,040 Speaker 8: You better know how to debug your computer, you better 285 00:15:04,080 --> 00:15:06,120 Speaker 8: know how to answer the phones politely, you should know 286 00:15:06,120 --> 00:15:07,920 Speaker 8: how to make good coffee for your LPs when we 287 00:15:07,960 --> 00:15:08,480 Speaker 8: stop by. 288 00:15:08,920 --> 00:15:11,000 Speaker 1: You're going to be doing all of it, Like, don't 289 00:15:11,080 --> 00:15:11,720 Speaker 1: kid yourself. 290 00:15:11,760 --> 00:15:14,040 Speaker 8: And if you don't launch with billions of dollars of 291 00:15:14,120 --> 00:15:17,200 Speaker 8: capital locked up for a multi year period. You run 292 00:15:17,240 --> 00:15:19,240 Speaker 8: a lot of risk that you create a cost structure that' 293 00:15:19,280 --> 00:15:22,160 Speaker 8: seemed compatible with where your capital could be, not where 294 00:15:22,200 --> 00:15:25,440 Speaker 8: it is today. So I would advise that you do 295 00:15:25,480 --> 00:15:28,040 Speaker 8: what you're good at and learn how to do everything well, 296 00:15:28,160 --> 00:15:30,480 Speaker 8: and work really, really hard and stick to it for 297 00:15:30,520 --> 00:15:33,160 Speaker 8: a period of time and if you love it, it'll 298 00:15:33,160 --> 00:15:33,560 Speaker 8: work out. 299 00:15:33,880 --> 00:15:37,360 Speaker 2: So let's address the issue you just touched on that 300 00:15:37,760 --> 00:15:43,400 Speaker 2: subscale operations. How do you compete for talent in the 301 00:15:43,400 --> 00:15:46,880 Speaker 2: most competitive market in the world when you can't write 302 00:15:46,920 --> 00:15:48,920 Speaker 2: giant checks and you're running subscale. 303 00:15:49,160 --> 00:15:49,880 Speaker 3: Let's start with you. 304 00:15:50,800 --> 00:15:54,480 Speaker 6: He ran subscale. That's good, clear, but on. 305 00:15:54,400 --> 00:15:58,120 Speaker 2: A relative basis, Yeah, it was only two billions. 306 00:15:58,200 --> 00:16:01,600 Speaker 4: Well, you know, there's a great movie that came out 307 00:16:01,640 --> 00:16:04,440 Speaker 4: in nineteen eighty nine, so some of you might not 308 00:16:04,480 --> 00:16:08,400 Speaker 4: have known it, but Fielded Dreams and if you haven't 309 00:16:08,400 --> 00:16:12,640 Speaker 4: seen it, the main character Ray Kinsella who's played by 310 00:16:12,720 --> 00:16:16,280 Speaker 4: Kevin Costner. He's out in the middle of his cornfield 311 00:16:16,480 --> 00:16:18,480 Speaker 4: and he hears a voice. 312 00:16:18,560 --> 00:16:20,880 Speaker 1: If you build it, he will come. 313 00:16:21,400 --> 00:16:23,320 Speaker 4: And he doesn't know what build it is, but he 314 00:16:23,400 --> 00:16:27,760 Speaker 4: decides to build a baseball field in his cornfield and 315 00:16:29,120 --> 00:16:32,080 Speaker 4: lo and behold a bunch of dead baseball players show 316 00:16:32,160 --> 00:16:35,280 Speaker 4: up at his house and start playing baseball. And you 317 00:16:35,320 --> 00:16:40,520 Speaker 4: should have the mindset of what that movie tells you, 318 00:16:40,640 --> 00:16:43,000 Speaker 4: which is, if you build it, they will come. If 319 00:16:43,040 --> 00:16:48,440 Speaker 4: you have a differentiated value proposition, people will invest. And 320 00:16:48,480 --> 00:16:52,360 Speaker 4: you know, this panel is a great representation because it's 321 00:16:52,400 --> 00:16:56,880 Speaker 4: all different strategies. We're all but what we have and 322 00:16:56,920 --> 00:16:59,280 Speaker 4: what people forget is what we're offering is a product. 323 00:17:00,160 --> 00:17:02,320 Speaker 4: And so you have to ask yourself, Okay, why am 324 00:17:02,360 --> 00:17:04,960 Speaker 4: I here, what is the product that I'm offering, and 325 00:17:05,240 --> 00:17:09,040 Speaker 4: what customer base is going to want this product? And 326 00:17:09,560 --> 00:17:13,760 Speaker 4: if you invest early in your infrastructure, if you hire 327 00:17:14,200 --> 00:17:18,919 Speaker 4: before you have capital, not after, then I think that 328 00:17:19,000 --> 00:17:21,440 Speaker 4: you will get that capital. You know, my good friend 329 00:17:21,440 --> 00:17:26,200 Speaker 4: Brandon Haley, who launched holisne He in twenty seventeen, had 330 00:17:26,320 --> 00:17:31,320 Speaker 4: over two dozen employees without a zero with zero dollars 331 00:17:31,359 --> 00:17:35,159 Speaker 4: and he ended up being a gigantic launch because he 332 00:17:35,320 --> 00:17:37,639 Speaker 4: sold that story to investors. So that's the mindset I 333 00:17:37,640 --> 00:17:38,880 Speaker 4: would take lot. 334 00:17:39,080 --> 00:17:41,760 Speaker 5: I think the difference, though, Mike, is you were coming 335 00:17:41,800 --> 00:17:42,520 Speaker 5: from Citadel. 336 00:17:42,680 --> 00:17:44,280 Speaker 6: Brandon was coming from Citadel. 337 00:17:44,359 --> 00:17:47,119 Speaker 5: People were willing to come before you built it because 338 00:17:47,160 --> 00:17:53,359 Speaker 5: they knew what each of you represented. We as a 339 00:17:53,400 --> 00:17:56,560 Speaker 5: firm are very loath I'll be candied with you to 340 00:17:56,840 --> 00:18:00,680 Speaker 5: do work with emerging managers because the truth is, most 341 00:18:00,720 --> 00:18:01,360 Speaker 5: of you are. 342 00:18:01,160 --> 00:18:04,720 Speaker 6: Not launching with millions of dollars. You're probably not even 343 00:18:04,760 --> 00:18:08,600 Speaker 6: launching with hundreds of millions of dollars. And given how 344 00:18:08,640 --> 00:18:14,000 Speaker 6: competitive the talent market is, it's very hard for really 345 00:18:14,080 --> 00:18:17,159 Speaker 6: talented people to get behind you with no proof of 346 00:18:17,240 --> 00:18:20,920 Speaker 6: concept because they're making two bets on you that are 347 00:18:21,000 --> 00:18:21,640 Speaker 6: beyond the. 348 00:18:21,600 --> 00:18:24,600 Speaker 5: Scope of what they're the bets they're normally making. They're 349 00:18:24,600 --> 00:18:26,880 Speaker 5: making a bet on you as a new founder, you've 350 00:18:26,880 --> 00:18:29,480 Speaker 5: never done this before, and they're making a bet that 351 00:18:29,520 --> 00:18:32,199 Speaker 5: you can scale, that you are worth getting in the 352 00:18:32,240 --> 00:18:35,720 Speaker 5: trenches with, and that you can grow. 353 00:18:37,280 --> 00:18:38,360 Speaker 6: And I guess the. 354 00:18:38,600 --> 00:18:42,440 Speaker 5: Good news bad news about my Unfortunately, it's not a prediction, 355 00:18:42,480 --> 00:18:43,639 Speaker 5: it's just a fact of life. 356 00:18:43,840 --> 00:18:46,080 Speaker 6: Very few of you will launch with scale. 357 00:18:46,720 --> 00:18:50,000 Speaker 5: Is if you're under two hundred and fifty million, I 358 00:18:50,040 --> 00:18:52,040 Speaker 5: actually don't think you need to worry about this. 359 00:18:52,280 --> 00:18:54,720 Speaker 6: You guys may disagree with me, but if you're a. 360 00:18:54,600 --> 00:18:57,280 Speaker 5: Really small fund, and many of you may start with 361 00:18:57,320 --> 00:18:59,920 Speaker 5: twenty five million, or fifty million or one hundred million, 362 00:19:00,880 --> 00:19:03,520 Speaker 5: you can hire junior people. You can hire people out 363 00:19:03,520 --> 00:19:07,359 Speaker 5: of the cell side. You can hire people at a 364 00:19:07,359 --> 00:19:10,000 Speaker 5: banking and they're moldable and will be thrilled to have 365 00:19:10,040 --> 00:19:13,520 Speaker 5: a seat at the table. And I also think it's 366 00:19:13,760 --> 00:19:15,520 Speaker 5: difficult unless people. 367 00:19:15,320 --> 00:19:17,480 Speaker 6: Know you and have worked with you before. 368 00:19:17,720 --> 00:19:20,320 Speaker 5: You know, the whole other set of things is are 369 00:19:20,359 --> 00:19:22,800 Speaker 5: you a good mentor can you develop them? Are you 370 00:19:23,119 --> 00:19:27,120 Speaker 5: going to pay them fairly? Are they joining something special 371 00:19:27,200 --> 00:19:29,320 Speaker 5: with a great culture? Is there a runway? These are 372 00:19:29,359 --> 00:19:31,679 Speaker 5: all the sets of things we deal with in helping 373 00:19:31,760 --> 00:19:35,320 Speaker 5: people cross the divide to go from where they are 374 00:19:35,400 --> 00:19:37,840 Speaker 5: to a large, established manager and get them comfortable on 375 00:19:37,920 --> 00:19:38,639 Speaker 5: all those points. 376 00:19:38,960 --> 00:19:41,120 Speaker 6: And so that's also there. And if they haven't. 377 00:19:40,800 --> 00:19:43,879 Speaker 5: Worked with you, you know, they don't really know what 378 00:19:43,920 --> 00:19:45,960 Speaker 5: the odds are that it's going to be a good fit. 379 00:19:46,040 --> 00:19:47,960 Speaker 5: And you in turn also don't want to bring on 380 00:19:48,040 --> 00:19:51,000 Speaker 5: board senior people that you don't really know and have 381 00:19:51,080 --> 00:19:53,879 Speaker 5: to give them substantial points in the fund and then 382 00:19:53,920 --> 00:19:56,239 Speaker 5: it may not work out. And if you end up 383 00:19:56,440 --> 00:20:01,480 Speaker 5: with the high class problem of achieving scale, then we 384 00:20:01,600 --> 00:20:07,400 Speaker 5: get into the setting up an economic structure which is 385 00:20:07,920 --> 00:20:12,120 Speaker 5: going to be attractive to your investment staff. And I'd 386 00:20:12,160 --> 00:20:15,639 Speaker 5: say the one guiding principle on that is, and it's. 387 00:20:15,520 --> 00:20:16,040 Speaker 6: A good thing. 388 00:20:16,280 --> 00:20:21,600 Speaker 5: As a newer fund, the value creation for everyone working 389 00:20:21,640 --> 00:20:25,320 Speaker 5: there should come at a massively different pace than sitting 390 00:20:25,400 --> 00:20:28,040 Speaker 5: at a large, established player where much of that value 391 00:20:28,080 --> 00:20:29,440 Speaker 5: has already been created. 392 00:20:29,520 --> 00:20:30,640 Speaker 6: So what do I mean by that? 393 00:20:31,280 --> 00:20:34,879 Speaker 5: If let's call it twenty five to thirty percent gets 394 00:20:34,920 --> 00:20:38,000 Speaker 5: paid out to the investment and leadership team. 395 00:20:38,320 --> 00:20:39,400 Speaker 6: This is on average, and. 396 00:20:39,359 --> 00:20:42,439 Speaker 5: This is a back of the envelope thought, but I 397 00:20:42,480 --> 00:20:48,639 Speaker 5: think directionally it's true here you should be talking about 398 00:20:48,680 --> 00:20:53,360 Speaker 5: thirty percent at going to fifty percent to the extent 399 00:20:53,440 --> 00:20:55,520 Speaker 5: that the people you hire. And again this is further 400 00:20:55,560 --> 00:20:57,560 Speaker 5: on down the road. Once you have scale and can 401 00:20:57,600 --> 00:21:02,479 Speaker 5: attract more and your credible people to the extent that 402 00:21:02,520 --> 00:21:06,199 Speaker 5: they put up great performance, they can hire and develop people, 403 00:21:06,920 --> 00:21:09,360 Speaker 5: then you're able to take on more capital and. 404 00:21:09,320 --> 00:21:10,840 Speaker 6: You're creating more value. 405 00:21:11,000 --> 00:21:14,160 Speaker 5: But at the end of the day, everyone is going 406 00:21:14,200 --> 00:21:16,920 Speaker 5: to reference you within an inch of your life, and 407 00:21:17,080 --> 00:21:19,480 Speaker 5: the same way LPs are going to want to get 408 00:21:19,480 --> 00:21:22,320 Speaker 5: a point of view on you, talent will too. And 409 00:21:22,359 --> 00:21:26,000 Speaker 5: there's what you're telling them upfront, which hopefully is attractive, 410 00:21:26,040 --> 00:21:29,600 Speaker 5: But even more attractive is the path forward and you 411 00:21:29,720 --> 00:21:33,359 Speaker 5: don't want them discounting any of the promises or vision 412 00:21:33,560 --> 00:21:35,680 Speaker 5: that you're giving them because of what they're hearing in 413 00:21:35,720 --> 00:21:38,480 Speaker 5: the market. So that's something to bear in mind, and 414 00:21:38,520 --> 00:21:42,280 Speaker 5: I think really critical as you ad both in the 415 00:21:42,920 --> 00:21:45,160 Speaker 5: less so maybe in the immediate term, but certainly as 416 00:21:45,160 --> 00:21:47,920 Speaker 5: you progress and are trying to reach out to really 417 00:21:47,960 --> 00:21:49,920 Speaker 5: talented establish people, right. 418 00:21:49,880 --> 00:21:52,920 Speaker 2: And you're finding the same sort of circumstances when you're 419 00:21:52,960 --> 00:21:54,119 Speaker 2: competing for talent. 420 00:21:54,840 --> 00:21:56,000 Speaker 3: What's your journey been like? 421 00:21:56,440 --> 00:21:59,040 Speaker 7: Well, I think it's a little bit focused on the 422 00:21:59,080 --> 00:22:01,399 Speaker 7: type of talent recruiting, right. So I come from a 423 00:22:01,440 --> 00:22:03,320 Speaker 7: world and a lineage of funds where we don't hire 424 00:22:03,359 --> 00:22:06,359 Speaker 7: experience people. Where there's a kind of fundamental viewpoint in 425 00:22:06,359 --> 00:22:07,919 Speaker 7: the firms I've worked at that we hire people that 426 00:22:07,960 --> 00:22:11,080 Speaker 7: are less experienced and we train and develop them. And 427 00:22:11,119 --> 00:22:15,520 Speaker 7: that obviously aligns easier when you're subscale, but that that's 428 00:22:15,560 --> 00:22:17,280 Speaker 7: not I didn't make the decision because of scale. That's 429 00:22:17,320 --> 00:22:20,040 Speaker 7: just how the world I come from does things. I 430 00:22:20,040 --> 00:22:21,919 Speaker 7: think though, to a honest point, you have to be 431 00:22:22,000 --> 00:22:25,919 Speaker 7: realistic about what the envelope of what you can spend is, 432 00:22:26,160 --> 00:22:28,719 Speaker 7: what that looks like, and that what the talent you 433 00:22:28,760 --> 00:22:30,879 Speaker 7: can get with that in a line against that. So 434 00:22:31,160 --> 00:22:33,840 Speaker 7: you have to be really kind of thoughtful about, you know, 435 00:22:34,080 --> 00:22:36,360 Speaker 7: Tom twin earlier, what am I, what do I want 436 00:22:36,359 --> 00:22:36,600 Speaker 7: to do? 437 00:22:36,960 --> 00:22:38,879 Speaker 1: What does my strategy look like? What does that business 438 00:22:38,920 --> 00:22:39,520 Speaker 1: plan look like? 439 00:22:39,800 --> 00:22:42,520 Speaker 7: What am I capable of doing from a development and 440 00:22:42,560 --> 00:22:45,320 Speaker 7: a mentoring and a leadership perspective? And then how does 441 00:22:45,359 --> 00:22:48,040 Speaker 7: that work from an economic perspective, both in terms of 442 00:22:48,119 --> 00:22:50,280 Speaker 7: day one but also to a honest point, what does 443 00:22:50,320 --> 00:22:52,960 Speaker 7: it look like over time? What does that economic trajectory 444 00:22:53,000 --> 00:22:55,360 Speaker 7: look like with success as you go? And I think 445 00:22:55,359 --> 00:22:58,480 Speaker 7: you want to be transparent with people around what day 446 00:22:58,480 --> 00:23:01,240 Speaker 7: one looks like, what that evolved to over time, and 447 00:23:01,280 --> 00:23:06,200 Speaker 7: what are the parameters that trigger that evolution. And I 448 00:23:06,240 --> 00:23:08,520 Speaker 7: would say the other thing that's you know, fundamentally different 449 00:23:08,560 --> 00:23:10,280 Speaker 7: is that the analysts I would guess at all of 450 00:23:10,280 --> 00:23:13,439 Speaker 7: our firms are probably doing you know, they're all being analysts, 451 00:23:13,440 --> 00:23:15,359 Speaker 7: but they're probably doing slightly different things. That the job 452 00:23:15,400 --> 00:23:18,240 Speaker 7: is not the same at every firm. And I think 453 00:23:18,240 --> 00:23:20,000 Speaker 7: that you want to be clear in terms of the 454 00:23:20,040 --> 00:23:22,760 Speaker 7: way you're going to invest the types of things that 455 00:23:22,800 --> 00:23:26,080 Speaker 7: the analysts will be expected to do, and that will 456 00:23:26,480 --> 00:23:29,879 Speaker 7: there'll be some natural self selection of firms that individuals 457 00:23:29,880 --> 00:23:32,240 Speaker 7: that want to have that think they can be more 458 00:23:32,520 --> 00:23:35,040 Speaker 7: or less successful in different environments. 459 00:23:35,440 --> 00:23:37,720 Speaker 2: And let me follow up, when you talk about hiring 460 00:23:37,800 --> 00:23:40,840 Speaker 2: people and mentoring them and shaping them, is it just 461 00:23:41,000 --> 00:23:44,760 Speaker 2: analysts or is it traders and pms and others within 462 00:23:44,920 --> 00:23:45,639 Speaker 2: within the funds? 463 00:23:47,520 --> 00:23:51,040 Speaker 7: I would say my general point of view is that 464 00:23:51,160 --> 00:23:54,680 Speaker 7: it's it's pretty much true across the entirety of the firm. 465 00:23:54,720 --> 00:23:56,480 Speaker 7: That when I think about the firms that I've worked 466 00:23:56,480 --> 00:23:59,000 Speaker 7: with and I work with in the past that have 467 00:23:59,119 --> 00:24:01,600 Speaker 7: been successful, and you look at the people that have 468 00:24:01,640 --> 00:24:05,600 Speaker 7: been highly successful there, none of them were really senior 469 00:24:05,680 --> 00:24:08,560 Speaker 7: hires coming in. They were hired pretty junior, and they 470 00:24:08,560 --> 00:24:10,840 Speaker 7: were trained and developed within those firms. And in a 471 00:24:10,840 --> 00:24:13,320 Speaker 7: lot of those firms, some of the biggest hiring mistakes 472 00:24:13,320 --> 00:24:16,359 Speaker 7: they've ever made were more senior. Now, that's that's true 473 00:24:16,359 --> 00:24:19,240 Speaker 7: for our process, that's not true for everyone else's process. 474 00:24:20,560 --> 00:24:22,560 Speaker 7: And so I think that there's always been a natural 475 00:24:23,359 --> 00:24:28,119 Speaker 7: pull towards going younger and less experienced and training and 476 00:24:28,160 --> 00:24:31,800 Speaker 7: developing those people. And that just makes it easier for 477 00:24:31,920 --> 00:24:34,600 Speaker 7: me in the current environment because I'm not competing against 478 00:24:35,240 --> 00:24:37,080 Speaker 7: you know, the type of people that aligned. 479 00:24:37,160 --> 00:24:41,239 Speaker 5: Well, you're also not injecting a fully formed human so 480 00:24:41,320 --> 00:24:43,639 Speaker 5: to speak, and our business into the ecosystem, and you 481 00:24:43,640 --> 00:24:46,399 Speaker 5: don't know if the tissue is going to reject the organism. 482 00:24:46,520 --> 00:24:47,440 Speaker 1: It almost certainly will. 483 00:24:49,440 --> 00:24:52,840 Speaker 5: The one other thing, though, is as a new manager 484 00:24:52,960 --> 00:24:56,120 Speaker 5: without much capital, just bear in mind, LPs are making 485 00:24:56,160 --> 00:24:58,560 Speaker 5: a bet on you. They're making a bet on you 486 00:24:58,640 --> 00:25:01,200 Speaker 5: as a manager not on the bench yet if you're 487 00:25:01,440 --> 00:25:03,240 Speaker 5: launching with just a small amount of capital. 488 00:25:03,880 --> 00:25:06,080 Speaker 2: Interesting point, Tom, you've been doing this for a while. 489 00:25:06,440 --> 00:25:10,760 Speaker 2: What's your experience been competing for talent and either hiring 490 00:25:11,160 --> 00:25:13,680 Speaker 2: or building at all. 491 00:25:13,840 --> 00:25:19,040 Speaker 8: Yeah, it's it's really challenging. It's always the toughest part 492 00:25:19,040 --> 00:25:19,640 Speaker 8: of the business. 493 00:25:19,640 --> 00:25:19,960 Speaker 1: I think. 494 00:25:20,000 --> 00:25:23,359 Speaker 8: Well, second in raising the money, that's that's probably you know, 495 00:25:24,280 --> 00:25:27,800 Speaker 8: parting dollars from people. We have long lockups and a 496 00:25:27,800 --> 00:25:30,840 Speaker 8: lot of it's really long, so that's that's always the 497 00:25:30,880 --> 00:25:34,960 Speaker 8: longest process. But you know, I think it's an it's 498 00:25:34,960 --> 00:25:38,920 Speaker 8: a unique challenge today because there's been a shift over 499 00:25:38,960 --> 00:25:41,760 Speaker 8: the last you know, fifteen years that we've run Nighthead 500 00:25:42,840 --> 00:25:45,359 Speaker 8: where a new generation of professionals are coming into the 501 00:25:45,400 --> 00:25:47,840 Speaker 8: industry or have come into the industry. They expect a 502 00:25:47,840 --> 00:25:51,040 Speaker 8: lot more sooner. And I think this is you know, 503 00:25:53,000 --> 00:25:56,080 Speaker 8: this is pretty common across the you know generation of 504 00:25:56,119 --> 00:26:00,720 Speaker 8: folks that are say twenty five to late thirties years. 505 00:26:00,880 --> 00:26:05,520 Speaker 8: And that's difficult because if you think about the last 506 00:26:05,600 --> 00:26:09,280 Speaker 8: fifteen years, we've gone fifteen years without a recession, really, 507 00:26:10,119 --> 00:26:12,240 Speaker 8: and that means you really don't know what you're doing 508 00:26:12,560 --> 00:26:14,760 Speaker 8: because if you have, yes, you invested in one year 509 00:26:14,800 --> 00:26:16,840 Speaker 8: with rate rise, okay, but you still haven't invested in 510 00:26:16,920 --> 00:26:20,320 Speaker 8: a recession. So it's really hard to get people that 511 00:26:20,400 --> 00:26:23,280 Speaker 8: have experienced that are relatively junior, that have a perspective 512 00:26:23,320 --> 00:26:27,760 Speaker 8: of how bad things can be. Right, and we've learned 513 00:26:27,760 --> 00:26:29,520 Speaker 8: what happens with higher rates, or we're beginning to learn 514 00:26:29,560 --> 00:26:32,040 Speaker 8: what happens with higher rates, which not even I or 515 00:26:32,080 --> 00:26:35,600 Speaker 8: people substantially more experienced than I am, have contended with. 516 00:26:35,680 --> 00:26:39,760 Speaker 8: It hasn't happened since the late seventies, and so you know, 517 00:26:39,800 --> 00:26:41,679 Speaker 8: we're seeing new things. Well that means that if you 518 00:26:41,720 --> 00:26:44,000 Speaker 8: have folks that haven't experienced those things, even if they 519 00:26:44,040 --> 00:26:47,560 Speaker 8: can imagine them, it's different to actually experience them. And 520 00:26:47,640 --> 00:26:51,480 Speaker 8: so managing people that haven't yet had the experience the 521 00:26:51,600 --> 00:26:54,639 Speaker 8: challenge and for you, as emerging managers. You need to 522 00:26:54,680 --> 00:26:57,560 Speaker 8: do that in a way that controls risks and keeps 523 00:26:57,560 --> 00:27:01,280 Speaker 8: people motivated. That's challenging, right, They when they believe that 524 00:27:01,280 --> 00:27:04,159 Speaker 8: they deserve more, they have a genuine view that they 525 00:27:04,160 --> 00:27:08,400 Speaker 8: should have more responsibility, more seniority, more economics, but they 526 00:27:08,400 --> 00:27:12,240 Speaker 8: haven't yet been battle tested. That's a tough dynamic, and 527 00:27:12,480 --> 00:27:14,280 Speaker 8: it's one that you really need to be very thoughtful 528 00:27:14,280 --> 00:27:16,960 Speaker 8: about and how you manage. I would say, don't cave 529 00:27:17,520 --> 00:27:19,879 Speaker 8: to the pressure. You know, find the right people that 530 00:27:20,080 --> 00:27:22,320 Speaker 8: understand that it's a process. They've got to be committed 531 00:27:22,359 --> 00:27:24,879 Speaker 8: to building the business alongside you, or it's going to 532 00:27:24,920 --> 00:27:27,880 Speaker 8: come crumbling in upon itself. I think the other thing 533 00:27:28,040 --> 00:27:31,639 Speaker 8: that's notable that we've seen recently is there's some really 534 00:27:31,720 --> 00:27:34,399 Speaker 8: high cost structures in the hedge fund world, you know, 535 00:27:34,480 --> 00:27:39,119 Speaker 8: like eight percent eight percent fixed costs. Like that's insane, 536 00:27:39,920 --> 00:27:43,879 Speaker 8: like insane that that is not the way to start 537 00:27:43,920 --> 00:27:47,720 Speaker 8: and run a business. If you have your fixed costs 538 00:27:48,040 --> 00:27:52,119 Speaker 8: meaningfully above your guaranteed fees and then you adjust for 539 00:27:52,240 --> 00:27:55,600 Speaker 8: loss of capital, right, if you can't build that cushion in, 540 00:27:56,160 --> 00:27:58,920 Speaker 8: you're at risk. Like just look at yourself, like a business, 541 00:27:58,920 --> 00:28:01,119 Speaker 8: would you invest in that business because your LPs are 542 00:28:01,119 --> 00:28:02,920 Speaker 8: going to look at it the same way. They say, 543 00:28:02,920 --> 00:28:05,240 Speaker 8: what happens if I allocate this business like I don't 544 00:28:05,280 --> 00:28:07,760 Speaker 8: want to be like everybody, you know, running for the door. 545 00:28:07,800 --> 00:28:09,679 Speaker 8: And if I'm the you know, the ant and the 546 00:28:09,680 --> 00:28:12,159 Speaker 8: elephants behind me, it's not going to be a good day. So, 547 00:28:12,520 --> 00:28:15,680 Speaker 8: you know, you have to think about the cost structure, 548 00:28:15,680 --> 00:28:18,399 Speaker 8: which aligns with how you manage the people, which aligns 549 00:28:18,480 --> 00:28:20,840 Speaker 8: with what type of people to hire. So it's a 550 00:28:20,920 --> 00:28:24,280 Speaker 8: it's a multi variable analysis which I'm definitely not smart 551 00:28:24,359 --> 00:28:26,760 Speaker 8: enough to solve, but it's you know, for me, it's 552 00:28:26,800 --> 00:28:29,000 Speaker 8: a feel you know, the types of folks that you 553 00:28:29,000 --> 00:28:31,040 Speaker 8: can hire they think will be a good fit. And 554 00:28:31,080 --> 00:28:34,560 Speaker 8: I think it's incumbent on new managers to think about, Okay, 555 00:28:34,560 --> 00:28:37,080 Speaker 8: who do I want to have effectively in the trenches, 556 00:28:37,760 --> 00:28:40,000 Speaker 8: you know, with you because I think the reason that 557 00:28:40,000 --> 00:28:43,080 Speaker 8: a lot of firms fail in that first three to 558 00:28:43,120 --> 00:28:46,800 Speaker 8: five year period is because they build themselves or they 559 00:28:46,840 --> 00:28:51,920 Speaker 8: expect stratospheric growth, and the reality is it can be 560 00:28:51,960 --> 00:28:54,520 Speaker 8: really lumpy, right, you just don't know, you know, our 561 00:28:54,560 --> 00:28:56,520 Speaker 8: experience is a good one. We launched, we thought we 562 00:28:56,560 --> 00:28:58,200 Speaker 8: were gonna have tons of capital we had less. The 563 00:28:58,240 --> 00:29:00,520 Speaker 8: markets fall off a cliff, and I mean like fell, 564 00:29:00,800 --> 00:29:04,080 Speaker 8: like really really off a cliff, and no one we 565 00:29:04,080 --> 00:29:06,960 Speaker 8: didn't expect that, but we built the business to be 566 00:29:07,040 --> 00:29:09,560 Speaker 8: able to withstand that, and then we grew, you know, 567 00:29:09,600 --> 00:29:12,600 Speaker 8: really rapidly after that because we set up for you 568 00:29:12,640 --> 00:29:13,960 Speaker 8: know what if everything goes wrong. 569 00:29:14,160 --> 00:29:16,840 Speaker 1: So I threw a lot into the mix there. 570 00:29:16,840 --> 00:29:19,040 Speaker 8: But I think all of these things are important considerations 571 00:29:19,040 --> 00:29:20,960 Speaker 8: when you're hiring. It can go great, you can build 572 00:29:20,960 --> 00:29:23,760 Speaker 8: for huge success and have it, and that's fantastic, But 573 00:29:23,920 --> 00:29:26,440 Speaker 8: the odds are that that won't happen either. 574 00:29:26,440 --> 00:29:27,400 Speaker 1: The markets won't give it. 575 00:29:27,360 --> 00:29:30,040 Speaker 8: To you, the personnel won't be there, you know, the 576 00:29:30,080 --> 00:29:31,720 Speaker 8: capital won't come in the way that you expect. So 577 00:29:31,720 --> 00:29:33,920 Speaker 8: if you build for a sense of conservatism and you 578 00:29:33,960 --> 00:29:36,200 Speaker 8: build a buffer around your business, you know you'll get 579 00:29:36,240 --> 00:29:37,080 Speaker 8: to escape velocity. 580 00:29:37,880 --> 00:29:38,600 Speaker 3: Really interesting. 581 00:29:38,840 --> 00:29:42,640 Speaker 2: I'm intrigued by anyone who's working for you who was 582 00:29:42,680 --> 00:29:46,760 Speaker 2: born after before, if they were born after nineteen eighty seven, 583 00:29:46,800 --> 00:29:50,160 Speaker 2: they've never experienced the recession in their professional career. 584 00:29:50,160 --> 00:29:51,960 Speaker 3: It's pretty right, pretty amazing. 585 00:29:52,200 --> 00:29:55,960 Speaker 2: So let's talk a little bit about you mentioned your LPs. 586 00:29:56,360 --> 00:30:00,000 Speaker 2: How do each of you differentiate yourself what you're selling. 587 00:30:00,120 --> 00:30:03,960 Speaker 2: Point when you're either trying to bring in capital or 588 00:30:04,200 --> 00:30:09,360 Speaker 2: hire somebody, or in any other way, make yourself differentiated 589 00:30:09,400 --> 00:30:10,880 Speaker 2: from the masses that are out there. 590 00:30:10,960 --> 00:30:11,840 Speaker 3: Let's start with you, Mike. 591 00:30:12,560 --> 00:30:12,880 Speaker 1: Sure. 592 00:30:12,920 --> 00:30:17,840 Speaker 4: So our view is and was that the successful funds 593 00:30:17,880 --> 00:30:21,600 Speaker 4: in the next decade are those that will be durably 594 00:30:21,640 --> 00:30:24,520 Speaker 4: built businesses. As Tom mentioned, you know, you have to 595 00:30:24,560 --> 00:30:30,480 Speaker 4: think about this as a business and those that can attract, 596 00:30:30,720 --> 00:30:35,880 Speaker 4: retain and develop talent with a competitive advantage. And you 597 00:30:35,880 --> 00:30:38,240 Speaker 4: know this past weekend there was a Formula one race 598 00:30:38,360 --> 00:30:41,040 Speaker 4: in Monaco, so I'll use that as an example because 599 00:30:42,160 --> 00:30:46,080 Speaker 4: a durable successful hedge fund is a lot like an 600 00:30:46,160 --> 00:30:49,000 Speaker 4: F one racing team. Right, you have the racers, you 601 00:30:49,040 --> 00:30:52,720 Speaker 4: have your investment team, that's the DNA of your business. 602 00:30:52,760 --> 00:30:57,440 Speaker 4: But without a great car, you can't win races. And 603 00:30:57,520 --> 00:31:05,480 Speaker 4: behind those cars, okay, you have mechanics, engineers, strategists, teams 604 00:31:05,520 --> 00:31:09,520 Speaker 4: of people that are helping. And similarly, the hedge fund 605 00:31:09,560 --> 00:31:13,080 Speaker 4: of today and for the next decade will be a 606 00:31:13,160 --> 00:31:17,120 Speaker 4: hedge fund that has an infrastructure that can support their 607 00:31:17,120 --> 00:31:20,800 Speaker 4: investment team, allow them to operate at peak performance, and 608 00:31:20,840 --> 00:31:23,960 Speaker 4: then run the business of a fund and that's a 609 00:31:24,040 --> 00:31:26,960 Speaker 4: different job than what all of us here as investment 610 00:31:26,960 --> 00:31:30,320 Speaker 4: managers do. That's not our expertise. So you have to 611 00:31:30,360 --> 00:31:33,880 Speaker 4: have that infrastructure, those experts in house to help you 612 00:31:33,920 --> 00:31:36,600 Speaker 4: do that, and that I think that has been a 613 00:31:36,640 --> 00:31:40,160 Speaker 4: big selling point for our LPs in the beginning, but 614 00:31:40,240 --> 00:31:42,520 Speaker 4: also the talent that we bring in knowing that we've 615 00:31:42,520 --> 00:31:43,440 Speaker 4: built this to last. 616 00:31:44,160 --> 00:31:46,760 Speaker 2: What I'm hearing from you, Mike, is that generating alpha. 617 00:31:47,320 --> 00:31:48,440 Speaker 2: That's table stakes. 618 00:31:48,480 --> 00:31:50,560 Speaker 3: That's just what you need to sit down. 619 00:31:51,160 --> 00:31:55,760 Speaker 2: Everything beyond that seems to be where you separate yourself. 620 00:31:55,440 --> 00:31:57,400 Speaker 3: From the crowd. Absolutely. 621 00:31:57,560 --> 00:31:59,920 Speaker 4: LPs want to know that they can put capital and 622 00:32:00,280 --> 00:32:02,280 Speaker 4: they know it's going to be an I liquid investment 623 00:32:02,360 --> 00:32:05,360 Speaker 4: and know that they are putting capital into a stable, 624 00:32:05,600 --> 00:32:09,120 Speaker 4: durable business. And that's what you have to provide them when. 625 00:32:08,960 --> 00:32:10,440 Speaker 3: You launch Alana. 626 00:32:10,480 --> 00:32:15,080 Speaker 2: You have a unique perspective on differentiators and hedge funds. 627 00:32:15,360 --> 00:32:17,440 Speaker 3: Tell us what you see from your vantage. 628 00:32:17,040 --> 00:32:21,040 Speaker 5: Point, Well, people come in and they meet with us 629 00:32:21,120 --> 00:32:24,360 Speaker 5: and they talk about what they're going to do. And 630 00:32:24,400 --> 00:32:28,960 Speaker 5: I will tell you, having seen a gazillion presentations, investor 631 00:32:29,040 --> 00:32:37,960 Speaker 5: materials letters, it's great to have that stuff done in 632 00:32:38,000 --> 00:32:40,440 Speaker 5: a way which obviously you're going to put time into it, 633 00:32:40,600 --> 00:32:42,480 Speaker 5: you want to feel proud of it, but at the 634 00:32:42,560 --> 00:32:46,160 Speaker 5: end of the day, my feeling is this industry is 635 00:32:46,200 --> 00:32:51,920 Speaker 5: for the most part, very commoditized. And the reason I 636 00:32:51,960 --> 00:32:54,920 Speaker 5: went through the different strategies is to let you know 637 00:32:55,640 --> 00:32:59,040 Speaker 5: that to the extent you're launching a strategy that has 638 00:32:59,160 --> 00:33:02,920 Speaker 5: not performed well in the last couple of years, LPs 639 00:33:02,960 --> 00:33:05,480 Speaker 5: are not going to give you the benefit of the doubt. 640 00:33:05,880 --> 00:33:09,480 Speaker 5: It doesn't matter what your presentation materials look like. It 641 00:33:09,640 --> 00:33:12,520 Speaker 5: just doesn't. You're going to have to put up performance. 642 00:33:12,600 --> 00:33:15,400 Speaker 5: And the biggest piece of advice I can give you 643 00:33:16,080 --> 00:33:19,920 Speaker 5: is maybe you know you can say you're differentiated all 644 00:33:19,960 --> 00:33:23,440 Speaker 5: of this stuff. You've got to start investing as quickly 645 00:33:23,640 --> 00:33:27,080 Speaker 5: as possible. You bang the tin cup for capital for 646 00:33:27,120 --> 00:33:29,760 Speaker 5: the first three to six months, You do what you can, 647 00:33:30,040 --> 00:33:34,760 Speaker 5: and then stop literally stop. As counterintuitive as that sounds, 648 00:33:36,040 --> 00:33:38,880 Speaker 5: what you want to do is start to prove show 649 00:33:38,920 --> 00:33:42,640 Speaker 5: some proof of concept because unless you are coming from 650 00:33:42,840 --> 00:33:46,400 Speaker 5: a fund that is a top multi manager, or you're 651 00:33:46,400 --> 00:33:52,360 Speaker 5: coming from a great a fund that is pedigreed, and 652 00:33:52,560 --> 00:33:54,960 Speaker 5: LPs want more of that DNA like I'll give you 653 00:33:55,000 --> 00:33:55,800 Speaker 5: another example. 654 00:33:57,040 --> 00:33:58,640 Speaker 6: Last year, braid Well launched. 655 00:33:59,160 --> 00:34:02,760 Speaker 5: That was a fund started by Alex Carnal that came 656 00:34:02,800 --> 00:34:05,560 Speaker 5: out of Deerfield and had a huge reputation in healthcare, 657 00:34:05,840 --> 00:34:06,600 Speaker 5: and he launched with. 658 00:34:06,600 --> 00:34:07,920 Speaker 6: Over three billion dollars. 659 00:34:08,360 --> 00:34:11,839 Speaker 5: So unless there's something that LPs can see sink their 660 00:34:11,880 --> 00:34:14,440 Speaker 5: teeth into in terms of the DNA that you carry, 661 00:34:14,719 --> 00:34:16,120 Speaker 5: you're going to have to show. 662 00:34:15,960 --> 00:34:16,759 Speaker 6: Them what you can do. 663 00:34:16,880 --> 00:34:19,319 Speaker 5: And then yes, it becomes a question of how do 664 00:34:19,360 --> 00:34:22,520 Speaker 5: you beg borrow and steal to fund the enterprise while 665 00:34:22,560 --> 00:34:24,160 Speaker 5: you're putting off performance so that. 666 00:34:24,160 --> 00:34:27,120 Speaker 6: You can then go back to LPs raise capital and. 667 00:34:27,040 --> 00:34:30,960 Speaker 5: Also get better talent, because now this field of dreams 668 00:34:31,040 --> 00:34:32,280 Speaker 5: has some skin on the bones. 669 00:34:33,560 --> 00:34:37,239 Speaker 2: Brennon, what do you think what is the differentiator for 670 00:34:37,680 --> 00:34:39,280 Speaker 2: you as a long only fund manager? 671 00:34:39,719 --> 00:34:42,439 Speaker 7: I mean, I think the easy answer is that we're 672 00:34:42,640 --> 00:34:46,279 Speaker 7: a long only head manager that's doing concentrated hedge fund 673 00:34:46,360 --> 00:34:48,640 Speaker 7: like investing, and there's people that do that, so I like. 674 00:34:48,680 --> 00:34:53,400 Speaker 7: But the field there is a lot smaller, and the 675 00:34:53,440 --> 00:34:55,280 Speaker 7: pools of capital allocated. 676 00:34:54,840 --> 00:34:56,640 Speaker 1: Against long only or are pretty large. 677 00:34:56,640 --> 00:34:58,200 Speaker 7: There's a lot of money in passes, there's a lot 678 00:34:58,200 --> 00:35:01,040 Speaker 7: of money and other long only strategies, So it's different 679 00:35:01,080 --> 00:35:03,719 Speaker 7: than launching, you know, a higher fee product like a 680 00:35:03,719 --> 00:35:06,680 Speaker 7: long short product where you're competing against you know, the 681 00:35:07,040 --> 00:35:09,000 Speaker 7: mics of the world, where they're making those trade offs, 682 00:35:10,239 --> 00:35:12,400 Speaker 7: it's a little bit different. I would also echo the 683 00:35:12,400 --> 00:35:16,440 Speaker 7: idea that my experience and not every allocator is the same. 684 00:35:16,480 --> 00:35:19,920 Speaker 7: Allocators want it to invest in what they perceive as 685 00:35:20,040 --> 00:35:23,160 Speaker 7: institutional scale managers. It doesn't necessarily mean you need to 686 00:35:23,160 --> 00:35:25,239 Speaker 7: have thirty employees, but they want to. They want to 687 00:35:25,239 --> 00:35:26,560 Speaker 7: look at it as a real business. They want to 688 00:35:26,600 --> 00:35:28,480 Speaker 7: understand the plan, They want to understand how you think 689 00:35:28,800 --> 00:35:32,840 Speaker 7: about the growth of the business, the contingencies of the business. 690 00:35:32,840 --> 00:35:36,200 Speaker 7: But your strategy is how you're building the culture. Because 691 00:35:36,400 --> 00:35:38,319 Speaker 7: to be perfectly frank that I think that's the that's 692 00:35:38,320 --> 00:35:40,360 Speaker 7: the easiest thing to kind of underwrite from an outside. 693 00:35:40,080 --> 00:35:42,040 Speaker 1: Perspective's always there to underwrite stock pitches. 694 00:35:42,080 --> 00:35:44,520 Speaker 7: I find it hard to underwrite stock pitches if I 695 00:35:44,520 --> 00:35:47,600 Speaker 7: don't know the stock really really well. And so I 696 00:35:47,600 --> 00:35:50,000 Speaker 7: think you want to you want to invest in that 697 00:35:50,080 --> 00:35:52,440 Speaker 7: part of the business, and what that investment looks like 698 00:35:52,560 --> 00:35:55,520 Speaker 7: is going to be, you know, specific to your strategy. Right, 699 00:35:55,680 --> 00:35:58,359 Speaker 7: it looks very different for a multimanager than it does 700 00:35:58,400 --> 00:36:01,239 Speaker 7: for a smaller organization. But you can still I would 701 00:36:01,239 --> 00:36:03,920 Speaker 7: say get to that level of institutional scale as a 702 00:36:03,960 --> 00:36:06,600 Speaker 7: smaller manager if you if you make it a priority 703 00:36:06,640 --> 00:36:10,520 Speaker 7: and you're thoughtful around how that looks both day one 704 00:36:10,560 --> 00:36:13,320 Speaker 7: and what your communication looks like for what it should 705 00:36:13,320 --> 00:36:13,920 Speaker 7: be over time. 706 00:36:14,480 --> 00:36:16,360 Speaker 3: Tom, what's your big differentiator? 707 00:36:17,080 --> 00:36:19,600 Speaker 1: I don't think we really have one. No. 708 00:36:19,719 --> 00:36:23,719 Speaker 8: I think there's a great quote pickable that's not picking out. 709 00:36:23,760 --> 00:36:29,319 Speaker 1: We're yeah, random sports investments. Seth Klarman. I read a 710 00:36:29,320 --> 00:36:30,359 Speaker 1: great quote. 711 00:36:30,239 --> 00:36:33,560 Speaker 8: By him, I think two weeks ago, and he said, 712 00:36:34,080 --> 00:36:38,560 Speaker 8: we're fortunate to be unconstrained by a specific investment strategy. 713 00:36:38,760 --> 00:36:39,760 Speaker 1: Remember the quote. 714 00:36:39,520 --> 00:36:43,200 Speaker 8: Directly, that's so beautiful, right, because what are you paying 715 00:36:43,320 --> 00:36:45,319 Speaker 8: bao posts for. You're paying them to go out and 716 00:36:45,360 --> 00:36:50,080 Speaker 8: find great investments where there's downside protection. So the way 717 00:36:50,080 --> 00:36:52,879 Speaker 8: that we present what we do is that we can 718 00:36:52,880 --> 00:36:58,000 Speaker 8: invest anywhere in the world really in anything, but everything 719 00:36:58,040 --> 00:36:59,160 Speaker 8: we do we. 720 00:36:59,040 --> 00:37:01,200 Speaker 1: Take a credit approach to which is we have an 721 00:37:01,280 --> 00:37:02,200 Speaker 1: extreme focus on. 722 00:37:02,160 --> 00:37:05,279 Speaker 8: Capital preservation and we try to structure for the best 723 00:37:05,280 --> 00:37:08,200 Speaker 8: possible return. Sometimes it's an equity like return or linked 724 00:37:08,200 --> 00:37:10,479 Speaker 8: return or convertible or warrants, so. 725 00:37:10,400 --> 00:37:13,040 Speaker 1: We can gain an equity return, but that's really the approach. 726 00:37:13,080 --> 00:37:17,200 Speaker 1: So every investment that we pursue we take that approach. 727 00:37:17,200 --> 00:37:22,320 Speaker 8: With the investment that we made in the football team 728 00:37:22,800 --> 00:37:26,759 Speaker 8: in the UK was structured as a secured loan with 729 00:37:27,280 --> 00:37:31,840 Speaker 8: you know, the ability to eventually you know, gain full control. 730 00:37:32,239 --> 00:37:32,520 Speaker 1: You know. 731 00:37:33,280 --> 00:37:36,160 Speaker 8: A lot of the investing that we've pursued has been 732 00:37:36,200 --> 00:37:39,320 Speaker 8: structured in that way. And I think that's a differentiator 733 00:37:39,520 --> 00:37:43,200 Speaker 8: because it's a little different than investing in somebody that's 734 00:37:43,239 --> 00:37:45,600 Speaker 8: going to go trade hyal bonds or you know. 735 00:37:45,600 --> 00:37:46,560 Speaker 1: Do public distress. 736 00:37:47,080 --> 00:37:49,879 Speaker 8: And I think the second thing is, at least from 737 00:37:49,920 --> 00:37:53,160 Speaker 8: my core business, which we started as a distressed debt fund, 738 00:37:53,760 --> 00:37:57,640 Speaker 8: the distress debt funds just went off the rails the 739 00:37:57,680 --> 00:38:01,839 Speaker 8: last fifteen years. The way that they operate is they 740 00:38:02,000 --> 00:38:05,240 Speaker 8: look at a business as a carcass and then approach 741 00:38:05,280 --> 00:38:06,960 Speaker 8: it to fight over the carcass. 742 00:38:07,360 --> 00:38:07,560 Speaker 1: Right. 743 00:38:08,320 --> 00:38:10,440 Speaker 8: We look at a business that might be a carcass 744 00:38:10,480 --> 00:38:12,200 Speaker 8: and say, can we revive that thing? 745 00:38:12,920 --> 00:38:13,640 Speaker 1: Right? Because if you. 746 00:38:13,640 --> 00:38:18,359 Speaker 8: Can, the pie that you're fighting over grows, And that's 747 00:38:18,440 --> 00:38:22,799 Speaker 8: a lost art for a lot of investors in turnarounds, 748 00:38:22,800 --> 00:38:25,719 Speaker 8: like there aren't many real turnaround experts anymore, and that 749 00:38:26,160 --> 00:38:28,239 Speaker 8: is how you make tons of money, at least in 750 00:38:28,280 --> 00:38:31,239 Speaker 8: my sub sector. And so I think we've done that 751 00:38:31,280 --> 00:38:33,480 Speaker 8: pretty well. Like we've invested in a few businesses the 752 00:38:33,560 --> 00:38:36,640 Speaker 8: last few years where we had control that we've turned around. 753 00:38:36,680 --> 00:38:39,080 Speaker 8: You know, our biggest short going into the COVID was Hurts. 754 00:38:39,120 --> 00:38:41,000 Speaker 8: It's now our largest long we've ever had in the 755 00:38:41,000 --> 00:38:43,680 Speaker 8: history of the firm, and it was a turnaround plate 756 00:38:43,880 --> 00:38:47,000 Speaker 8: you know, centered around electrifications. So you know, I think 757 00:38:47,640 --> 00:38:49,080 Speaker 8: you've got again. It goes back to what I said 758 00:38:49,120 --> 00:38:50,879 Speaker 8: the very beginning. You got to find what you're good 759 00:38:50,880 --> 00:38:53,680 Speaker 8: at and what you love and then apply it to 760 00:38:53,719 --> 00:38:55,319 Speaker 8: your strategy and do that. 761 00:38:55,920 --> 00:38:58,480 Speaker 1: Like, just do that, forget all the noise. 762 00:38:58,680 --> 00:39:00,200 Speaker 8: Just do what you love and what you're good that 763 00:39:00,680 --> 00:39:02,560 Speaker 8: and the rest of it should should be okay. 764 00:39:02,760 --> 00:39:05,560 Speaker 5: But also having a structure that supports what you do 765 00:39:05,840 --> 00:39:08,200 Speaker 5: is very advantageous. I mean, I don't want this to 766 00:39:08,239 --> 00:39:11,600 Speaker 5: be lost on you. Of that ten billion, four billion 767 00:39:11,880 --> 00:39:15,200 Speaker 5: is in an insurance company, and you have what another. 768 00:39:15,239 --> 00:39:18,280 Speaker 1: Four two and a half that's in draw down. 769 00:39:18,239 --> 00:39:21,200 Speaker 6: Right, so there's no timeline for returning capital. 770 00:39:21,560 --> 00:39:25,040 Speaker 8: Some of our capital is literally the insurance company is permanent, permanent, 771 00:39:25,400 --> 00:39:27,879 Speaker 8: and then one of the drawdown funds the investor. It's 772 00:39:27,920 --> 00:39:32,440 Speaker 8: a really like uber wealthy family. When we draw the capital, 773 00:39:32,680 --> 00:39:35,160 Speaker 8: we never have to give it back. Now, we don't 774 00:39:35,160 --> 00:39:37,640 Speaker 8: get paid until we give it back, but we don't 775 00:39:37,640 --> 00:39:39,840 Speaker 8: actually have to give it back. And our fee is 776 00:39:39,880 --> 00:39:42,040 Speaker 8: a sliding don't steal this, by the way, it's like 777 00:39:42,080 --> 00:39:43,719 Speaker 8: a really good idea. It took a long time to 778 00:39:43,719 --> 00:39:46,280 Speaker 8: come up with this. The fee is a sliding scale 779 00:39:46,320 --> 00:39:48,680 Speaker 8: based on the IRR. So there's this weird push pull 780 00:39:48,680 --> 00:39:50,799 Speaker 8: because sometimes you do a great investment, you compound at 781 00:39:50,840 --> 00:39:53,960 Speaker 8: forty or thirty five or thirty for the first eighteen months, 782 00:39:54,239 --> 00:39:56,600 Speaker 8: and then you know you're not going to continue compounding. 783 00:39:56,160 --> 00:39:57,640 Speaker 1: At that rate. You're probably going to slide to a 784 00:39:57,640 --> 00:39:58,160 Speaker 1: lower level. 785 00:39:58,160 --> 00:39:59,880 Speaker 8: Well, we have to decide do we want to ca 786 00:40:00,040 --> 00:40:01,719 Speaker 8: after the higher and send a fee, or do we 787 00:40:01,760 --> 00:40:03,319 Speaker 8: want to hold it and make it a larger moike. 788 00:40:03,680 --> 00:40:06,000 Speaker 8: I always go for the larger moik, right, Like, the 789 00:40:06,040 --> 00:40:07,520 Speaker 8: worst thing you can do is try to live off 790 00:40:07,560 --> 00:40:10,680 Speaker 8: of IRRs. It's not possible. It can't eat those moik 791 00:40:10,800 --> 00:40:13,439 Speaker 8: is what you want. So that duration of capital is hard. 792 00:40:13,440 --> 00:40:16,560 Speaker 8: But the dumbest decision I ever made was pursuing long 793 00:40:16,640 --> 00:40:19,600 Speaker 8: duration capital. We would be three times larger, four times larger. 794 00:40:19,640 --> 00:40:21,640 Speaker 8: If I had just you know, built a colo business 795 00:40:21,920 --> 00:40:24,040 Speaker 8: and listened to Alanta and like hired people to do 796 00:40:24,120 --> 00:40:25,439 Speaker 8: direct lending and do these other things. 797 00:40:25,600 --> 00:40:26,799 Speaker 6: I wouldn't tell you to do that. 798 00:40:26,920 --> 00:40:28,840 Speaker 8: No, but you were like you always had these good ideas, 799 00:40:28,840 --> 00:40:30,560 Speaker 8: like this is what your peers are doing, and you 800 00:40:30,600 --> 00:40:32,759 Speaker 8: had very very good advice over time that I listened 801 00:40:32,800 --> 00:40:34,439 Speaker 8: to none of and I'm much poorer for it. 802 00:40:34,520 --> 00:40:37,279 Speaker 6: Well, but friend's it ten million dollar fun. So there 803 00:40:37,320 --> 00:40:37,520 Speaker 6: you go. 804 00:40:37,640 --> 00:40:40,600 Speaker 8: No, but I said, you're going way back. I want 805 00:40:40,640 --> 00:40:42,680 Speaker 8: permanent capital because if I just said, if we can 806 00:40:42,719 --> 00:40:44,560 Speaker 8: have permanent capital, we could do whatever we want, Like 807 00:40:44,560 --> 00:40:46,200 Speaker 8: we could buy English soccer teams. Now what I said 808 00:40:46,239 --> 00:40:49,600 Speaker 8: we could do we could make investments that really compound 809 00:40:49,600 --> 00:40:51,600 Speaker 8: for a long period of time. And so we focused 810 00:40:51,600 --> 00:40:54,560 Speaker 8: on doing that. Maybe it was a good decision and 811 00:40:54,600 --> 00:40:56,520 Speaker 8: maybe it wasn't. Time will tell, But again it went 812 00:40:56,560 --> 00:40:59,040 Speaker 8: back to like that's what we love, that's. 813 00:40:58,880 --> 00:40:59,440 Speaker 1: What we wanted to do. 814 00:41:00,160 --> 00:41:02,880 Speaker 6: Being it's not just the strategy, it's also the structure. 815 00:41:02,920 --> 00:41:03,560 Speaker 1: You wrap that up. 816 00:41:03,880 --> 00:41:06,040 Speaker 5: You created a structure which is like I mean, it's 817 00:41:06,040 --> 00:41:09,120 Speaker 5: almost a mini Apollo. You created a structure where you 818 00:41:09,320 --> 00:41:11,880 Speaker 5: just charge on alpha. LPs can get behind that. It 819 00:41:11,920 --> 00:41:14,320 Speaker 5: may be long only, but you're just charging on alpha 820 00:41:14,719 --> 00:41:18,120 Speaker 5: and you're all alpha. So and you have all of 821 00:41:18,160 --> 00:41:20,239 Speaker 5: the DNA from one of the greatest hedge funds in 822 00:41:20,280 --> 00:41:23,480 Speaker 5: the world. These are things that make each of these 823 00:41:23,480 --> 00:41:28,000 Speaker 5: guys differentiated to your question and unique. And the reality 824 00:41:28,120 --> 00:41:31,600 Speaker 5: is there are very few individuals that come to market 825 00:41:32,040 --> 00:41:33,880 Speaker 5: with that skill set and that foresight. 826 00:41:34,320 --> 00:41:37,040 Speaker 6: So since that brought up site back, then that's true. 827 00:41:37,200 --> 00:41:38,120 Speaker 3: Since we've brought. 828 00:41:37,960 --> 00:41:40,840 Speaker 2: Up LPs and allocators, I want to skip ahead to 829 00:41:40,880 --> 00:41:45,520 Speaker 2: this question. What's the hardest question that you get asked 830 00:41:46,160 --> 00:41:49,440 Speaker 2: by your limited partners or allocators? What's the most challenging 831 00:41:49,520 --> 00:41:50,600 Speaker 2: question they throw it? 832 00:41:50,640 --> 00:41:52,200 Speaker 3: You will start with you again mine. 833 00:41:52,600 --> 00:41:55,880 Speaker 4: Yeah, I think there are two hard questions. One is 834 00:41:56,480 --> 00:42:00,600 Speaker 4: on the topic of exiting people. And you know that 835 00:42:00,760 --> 00:42:04,840 Speaker 4: is you know, mostly an objective decision, but there's a 836 00:42:04,880 --> 00:42:07,200 Speaker 4: lot of subjectivity to it as well. And I think 837 00:42:07,760 --> 00:42:10,840 Speaker 4: you know, LPs want it to be you know, objective, 838 00:42:10,840 --> 00:42:14,319 Speaker 4: and it's sometimes you know, hard to explain explain some 839 00:42:14,440 --> 00:42:17,080 Speaker 4: of the background to why we might keep somebody versus 840 00:42:17,160 --> 00:42:21,719 Speaker 4: versus exits to them. I think the second question that 841 00:42:22,120 --> 00:42:24,000 Speaker 4: they ask and we have a tough time with is 842 00:42:24,080 --> 00:42:29,319 Speaker 4: just on adapting any strategy that we have. You know, 843 00:42:29,600 --> 00:42:33,160 Speaker 4: LPs don't want you to adapt and change the business 844 00:42:33,160 --> 00:42:34,759 Speaker 4: model that you promised and that and that's and I 845 00:42:34,840 --> 00:42:37,920 Speaker 4: think that's completely fair. But there are times that are 846 00:42:37,960 --> 00:42:40,880 Speaker 4: critical in a fund's life that you need to adapt 847 00:42:40,920 --> 00:42:41,479 Speaker 4: or you'll die. 848 00:42:42,000 --> 00:42:44,879 Speaker 3: And so for example, right, so. 849 00:42:45,800 --> 00:42:48,759 Speaker 4: You know, whatever it may be, that that is a 850 00:42:48,800 --> 00:42:51,520 Speaker 4: hard question to answer because you know, most of the 851 00:42:51,560 --> 00:42:54,279 Speaker 4: time what they want to hear is don't change your. 852 00:42:54,719 --> 00:42:55,279 Speaker 1: Path at all. 853 00:42:55,840 --> 00:42:58,319 Speaker 5: Alana, you want to, well, I do want to, but 854 00:42:58,360 --> 00:42:59,560 Speaker 5: I also want to comment on what. 855 00:42:59,520 --> 00:43:01,400 Speaker 6: Mike said, I do. That's true. 856 00:43:01,480 --> 00:43:04,680 Speaker 5: But when you have, however, many years of putting up 857 00:43:05,120 --> 00:43:08,919 Speaker 5: great performance and delivering exactly what you promised LPs, there's 858 00:43:08,960 --> 00:43:12,799 Speaker 5: a higher receptivity I think, to then whatever you see 859 00:43:12,840 --> 00:43:15,040 Speaker 5: the pivot points, as I've seen this with other clients 860 00:43:15,080 --> 00:43:17,239 Speaker 5: as well that maybe started as one thing and as 861 00:43:17,280 --> 00:43:20,000 Speaker 5: long as they didn't stray too far from their core DNA. 862 00:43:20,320 --> 00:43:23,040 Speaker 5: I have one client that is now fifty billion. He 863 00:43:23,280 --> 00:43:25,759 Speaker 5: was thirty billion two years ago, and he's done it 864 00:43:25,800 --> 00:43:29,719 Speaker 5: through us thinking through create other strategies and other products 865 00:43:29,960 --> 00:43:33,319 Speaker 5: that are tangential. But still related and he's got credibility 866 00:43:33,360 --> 00:43:36,080 Speaker 5: with his LPs because of what he's delivered turnover. 867 00:43:37,080 --> 00:43:39,000 Speaker 6: Okay, I just have to comment on this because. 868 00:43:38,760 --> 00:43:42,239 Speaker 5: You know, like it's such as the bane of my existence, 869 00:43:42,239 --> 00:43:44,279 Speaker 5: and I think it's one of the biggest problems in 870 00:43:44,320 --> 00:43:51,760 Speaker 5: our industry. People are terrified. LPs are terrified to fire people. 871 00:43:52,239 --> 00:43:54,200 Speaker 5: They think somehow it's. 872 00:43:54,080 --> 00:43:58,799 Speaker 6: Going to reflect poorly on their ability to retain a team, 873 00:43:59,120 --> 00:44:01,840 Speaker 6: their culture, something bad's going on at the fund. 874 00:44:03,440 --> 00:44:06,040 Speaker 3: You mean gps are terrified of fire people. 875 00:44:06,200 --> 00:44:09,360 Speaker 5: Yeah, but they're terrified of l people. 876 00:44:09,360 --> 00:44:10,640 Speaker 6: Well think, Sorry, that's what I meant. 877 00:44:12,440 --> 00:44:15,680 Speaker 5: You have to be You have to give people room 878 00:44:15,840 --> 00:44:19,200 Speaker 5: to fail or to succeed rather give give them runway, 879 00:44:19,200 --> 00:44:22,080 Speaker 5: give them tools, help them develop. But at a certain 880 00:44:22,160 --> 00:44:25,200 Speaker 5: point you need to graciously exit them if they're not 881 00:44:25,280 --> 00:44:27,799 Speaker 5: cutting it. Because the majority of you will not have 882 00:44:27,880 --> 00:44:30,280 Speaker 5: a pass through model. Okay, I mean. 883 00:44:30,200 --> 00:44:31,040 Speaker 6: That's just the truth. 884 00:44:31,400 --> 00:44:34,520 Speaker 5: And you're gonna have a little problem called netting, which 885 00:44:34,600 --> 00:44:38,960 Speaker 5: is Peter over here. I'm going to use just simple 886 00:44:39,000 --> 00:44:42,560 Speaker 5: illustration his ideas put up one hundred million of piano 887 00:44:42,800 --> 00:44:46,160 Speaker 5: p and L and Paul over here lost one hundred million, 888 00:44:46,360 --> 00:44:48,640 Speaker 5: and you're zero and which you don't want to do. 889 00:44:49,200 --> 00:44:50,200 Speaker 6: Who is Peter and Paul? 890 00:44:50,360 --> 00:44:51,600 Speaker 5: You don't want to pay from You don want to 891 00:44:51,640 --> 00:44:54,200 Speaker 5: take from this guy to pay that guy. Sorry, take 892 00:44:54,239 --> 00:44:57,160 Speaker 5: from this guy to pay that guy. Because you're gonna 893 00:44:57,239 --> 00:45:00,000 Speaker 5: end up losing your best people. And you also don't 894 00:45:00,120 --> 00:45:02,600 Speaker 5: want your a's to feel like they're surrounded by a 895 00:45:02,640 --> 00:45:05,439 Speaker 5: bunch of bees or worse yet, c's. So you need 896 00:45:05,520 --> 00:45:08,640 Speaker 5: to manage people who are not cutting it and give 897 00:45:08,680 --> 00:45:09,720 Speaker 5: them time to succeed. 898 00:45:09,960 --> 00:45:12,200 Speaker 6: You need to manage them out and don't worry about 899 00:45:12,480 --> 00:45:14,799 Speaker 6: about your LPs because at the end of the day 900 00:45:14,840 --> 00:45:16,920 Speaker 6: you're going to have a much bigger problem if your 901 00:45:16,960 --> 00:45:17,600 Speaker 6: stars leave. 902 00:45:18,000 --> 00:45:21,120 Speaker 2: The appreciate you cutting your losses. 903 00:45:21,760 --> 00:45:23,799 Speaker 6: I just you have to manage talent the way you 904 00:45:23,840 --> 00:45:26,759 Speaker 6: manage your portfolio. That's how you have to approach it. 905 00:45:26,800 --> 00:45:28,960 Speaker 5: You have to be you have to be rigorous, you 906 00:45:29,040 --> 00:45:31,040 Speaker 5: have to be you know, you have to make tough 907 00:45:31,040 --> 00:45:33,720 Speaker 5: decisions and you can't worry about anything else. 908 00:45:33,800 --> 00:45:34,960 Speaker 6: This is the biggest problem. 909 00:45:35,000 --> 00:45:37,840 Speaker 5: It's not just emerging managers, but in general that I 910 00:45:37,880 --> 00:45:42,000 Speaker 5: see in our industry and the best founders, okay. 911 00:45:41,920 --> 00:45:44,239 Speaker 6: Are the ones who do this really really well. 912 00:45:44,520 --> 00:45:46,719 Speaker 5: And sometimes you know, people sort of they get a 913 00:45:46,760 --> 00:45:49,759 Speaker 5: bad rep for it, but they're also the best at 914 00:45:49,800 --> 00:45:52,440 Speaker 5: developing people and giving people the most runway. 915 00:45:52,520 --> 00:45:56,480 Speaker 6: It's about creating an environment which attracts rock stars. On 916 00:45:56,520 --> 00:46:00,000 Speaker 6: your question toughest question, one of the things you mentioned 917 00:46:01,920 --> 00:46:08,040 Speaker 6: mentioned is how you're going to pay for resources. So, 918 00:46:08,480 --> 00:46:12,600 Speaker 6: if you have a two percent management fee and you're 919 00:46:12,600 --> 00:46:14,960 Speaker 6: an one hundred million dollar fund and you come from 920 00:46:15,000 --> 00:46:18,200 Speaker 6: a fund we're used to having tens of millions of 921 00:46:18,239 --> 00:46:23,640 Speaker 6: dollars spent on research and software, in data and corporate access, 922 00:46:23,840 --> 00:46:26,239 Speaker 6: you have to answer the question. 923 00:46:26,000 --> 00:46:28,239 Speaker 5: To LPs as to how you're going to fund that. 924 00:46:28,320 --> 00:46:31,000 Speaker 5: You can't have you touched on this. You can't have 925 00:46:31,080 --> 00:46:35,880 Speaker 5: as one hundred million dollar fund two percent management fee 926 00:46:36,200 --> 00:46:39,000 Speaker 5: and then one million dollars spent on fund expenses because 927 00:46:39,000 --> 00:46:41,480 Speaker 5: that's a three percent dragon returns out of the gate, 928 00:46:41,560 --> 00:46:43,560 Speaker 5: and it's even higher if you're less. 929 00:46:43,920 --> 00:46:46,279 Speaker 6: And the answer to that question really has to come 930 00:46:46,320 --> 00:46:49,359 Speaker 6: back to how are you special? Okay, you don't need 931 00:46:49,400 --> 00:46:51,960 Speaker 6: all these data sources. I'm going to do X. I'm 932 00:46:51,960 --> 00:46:54,480 Speaker 6: going to do it really well, and here's what I need. 933 00:46:54,520 --> 00:46:58,239 Speaker 5: And be very precise about what you're bringing to the 934 00:46:58,280 --> 00:47:00,840 Speaker 5: table and the resources you need. To support that. The 935 00:47:00,880 --> 00:47:03,920 Speaker 5: reality is you're not competing head on with these funds 936 00:47:03,920 --> 00:47:06,320 Speaker 5: that spend tens of millions of dollars or even hundreds 937 00:47:06,320 --> 00:47:07,840 Speaker 5: of millions of dollars on research. 938 00:47:08,520 --> 00:47:11,720 Speaker 2: Brandon, what's the toughest question you get asked by potential LPs? 939 00:47:12,280 --> 00:47:14,560 Speaker 7: I'd say during the fundraising process. For me, the toughest 940 00:47:14,600 --> 00:47:16,400 Speaker 7: is always what what's your target that you're going to 941 00:47:16,480 --> 00:47:18,480 Speaker 7: raise to which my answer is, I have no idea. 942 00:47:19,360 --> 00:47:21,360 Speaker 7: You tell me, we'll see. I'm going to launch it 943 00:47:21,400 --> 00:47:22,719 Speaker 7: and we're going to see what it is, and it'll 944 00:47:22,760 --> 00:47:24,680 Speaker 7: be what it is now. I would say that the 945 00:47:24,680 --> 00:47:26,520 Speaker 7: hardest question I always it's a little bit like the 946 00:47:26,560 --> 00:47:28,640 Speaker 7: last question is how do you how do you differentiate 947 00:47:28,680 --> 00:47:31,600 Speaker 7: yourself versus other funds? Because I always inherent in that 948 00:47:31,680 --> 00:47:34,160 Speaker 7: question is you have to know what that other fund 949 00:47:34,200 --> 00:47:36,920 Speaker 7: is doing. And like I'm a strong believer that unless 950 00:47:36,920 --> 00:47:38,799 Speaker 7: you're in the walls and unless you understand. 951 00:47:38,440 --> 00:47:40,400 Speaker 1: Exactly how the investment process works, it's really hard to 952 00:47:40,400 --> 00:47:42,279 Speaker 1: compare yourself to another fund. 953 00:47:42,320 --> 00:47:44,040 Speaker 7: And so I try to turn it back to this, 954 00:47:44,239 --> 00:47:45,799 Speaker 7: you know, this is how we invest, this is how 955 00:47:45,840 --> 00:47:49,000 Speaker 7: we do things. You compare that to the other people, 956 00:47:49,080 --> 00:47:52,000 Speaker 7: you kind of see in the market, but during the 957 00:47:52,040 --> 00:47:53,920 Speaker 7: fundraising process for kind of everyone in this room that's 958 00:47:53,920 --> 00:47:57,719 Speaker 7: about to go through it, you know, the how what 959 00:47:57,320 --> 00:48:00,319 Speaker 7: what's your target for raising? I always found somewhat music 960 00:48:00,360 --> 00:48:03,279 Speaker 7: because I don't think anybody really knows until last minute. 961 00:48:03,800 --> 00:48:06,120 Speaker 3: Tom, how about you, I'm looking for a doozy from you. 962 00:48:07,840 --> 00:48:10,439 Speaker 8: It's I love the question, like what do you see 963 00:48:10,440 --> 00:48:12,480 Speaker 8: as the great opportunities over the next six months? 964 00:48:13,120 --> 00:48:16,600 Speaker 1: You're literally like really you know the answer to that question. 965 00:48:16,640 --> 00:48:18,680 Speaker 8: I wouldn't need you as an LP, right, I'd already 966 00:48:18,719 --> 00:48:19,800 Speaker 8: be retired. 967 00:48:19,360 --> 00:48:21,360 Speaker 1: Like managing my own money and somebody else being managing 968 00:48:21,360 --> 00:48:23,120 Speaker 1: my money in the family office. I'd be a professional 969 00:48:23,120 --> 00:48:24,840 Speaker 1: flight fisherman, you know. 970 00:48:25,520 --> 00:48:29,239 Speaker 8: Like March, you know, sixteenth, twenty oh eight, no one 971 00:48:29,320 --> 00:48:30,800 Speaker 8: knew that we were about to embark in the greatest 972 00:48:30,880 --> 00:48:32,920 Speaker 8: run of distressed financials we've ever seen. 973 00:48:33,520 --> 00:48:35,320 Speaker 1: Right September tenth, two. 974 00:48:35,200 --> 00:48:37,040 Speaker 8: Thousand and one, no one knew there'd be a huge 975 00:48:37,040 --> 00:48:40,080 Speaker 8: opportunity in airlines. You know, we just kind of go 976 00:48:40,120 --> 00:48:43,600 Speaker 8: through history like you just don't know. So I think 977 00:48:44,080 --> 00:48:48,000 Speaker 8: my answer to this question generally, and playing off a 978 00:48:48,000 --> 00:48:50,560 Speaker 8: little bit of the other comments, is don't worry about 979 00:48:50,560 --> 00:48:54,680 Speaker 8: what the LPs think. Okay, just say what you do, 980 00:48:54,800 --> 00:48:57,960 Speaker 8: what you believe is right for generating returns. Because I'll 981 00:48:57,960 --> 00:49:02,239 Speaker 8: tell you, particularly as a distressed in, the LP's are 982 00:49:02,239 --> 00:49:06,600 Speaker 8: always wrong, always, like very very rarely do we make 983 00:49:06,640 --> 00:49:09,359 Speaker 8: a new investment and people go, Wow, that's great. Usually 984 00:49:09,400 --> 00:49:12,080 Speaker 8: they're like, oh my god, really, like you really think 985 00:49:12,080 --> 00:49:13,799 Speaker 8: that's a good investment? Yes, like this is what's going 986 00:49:13,840 --> 00:49:15,560 Speaker 8: to happen, Like, oh my god, who lost his mind? 987 00:49:15,719 --> 00:49:18,239 Speaker 8: So I think you have to balance the fact that 988 00:49:18,880 --> 00:49:23,879 Speaker 8: you're the asset manager, you're the business builder. Just be honest, 989 00:49:24,280 --> 00:49:27,920 Speaker 8: right and stick to your strategy, but don't get swayed 990 00:49:27,960 --> 00:49:30,200 Speaker 8: by what the crowd thinks. 991 00:49:30,000 --> 00:49:31,800 Speaker 1: That's a surefireway to fail. 992 00:49:32,239 --> 00:49:35,800 Speaker 2: Let's stay on that end of the panel for this question. 993 00:49:36,080 --> 00:49:39,360 Speaker 2: Tell us the biggest surprise or lesson learned over the years, 994 00:49:39,400 --> 00:49:42,640 Speaker 2: what really sticks with you. 995 00:49:41,719 --> 00:49:45,600 Speaker 1: And I'm still doing it now. I think the fact 996 00:49:45,600 --> 00:49:46,520 Speaker 1: that I like it so much. 997 00:49:47,600 --> 00:49:50,759 Speaker 8: Yeah, I came from you know, I was on a 998 00:49:50,960 --> 00:49:54,279 Speaker 8: sell side trading floor with a thousand people and it 999 00:49:54,360 --> 00:49:57,800 Speaker 8: was sort of like, you know, very collegial, lots of 1000 00:49:57,800 --> 00:50:00,880 Speaker 8: interpersonal reaction, interaction, very loud, boisterous. 1001 00:50:01,800 --> 00:50:03,279 Speaker 1: I love that and thrived in it. 1002 00:50:04,600 --> 00:50:08,279 Speaker 8: I know it's super surprising and the you know, when 1003 00:50:08,320 --> 00:50:10,120 Speaker 8: you go to run your own firm and you start, 1004 00:50:10,160 --> 00:50:12,360 Speaker 8: particularly you're small, it's just totally different. 1005 00:50:13,160 --> 00:50:15,560 Speaker 1: And I wasn't sure that it would give me the same. 1006 00:50:16,080 --> 00:50:20,640 Speaker 8: Level of satisfaction and that that get energized every day. 1007 00:50:20,719 --> 00:50:25,000 Speaker 8: It's been way better. You know, my afro's gone and 1008 00:50:25,040 --> 00:50:26,200 Speaker 8: I lost all my hair. 1009 00:50:26,400 --> 00:50:28,040 Speaker 1: Which probably means to stress levels up. 1010 00:50:28,040 --> 00:50:33,040 Speaker 8: But it definitely has been, you know, a pleasure and 1011 00:50:33,640 --> 00:50:35,360 Speaker 8: far exceeding what I ever anticipated. 1012 00:50:35,960 --> 00:50:38,880 Speaker 2: Brendan, what's the biggest lesson or biggest surprise that you 1013 00:50:38,960 --> 00:50:40,480 Speaker 2: learned over the past few years. 1014 00:50:40,760 --> 00:50:43,040 Speaker 7: I think the biggest surprise, and I think it's not 1015 00:50:43,080 --> 00:50:45,640 Speaker 7: intellectually a surprise, but it's a little bit like having kids. 1016 00:50:45,680 --> 00:50:48,160 Speaker 7: You don't really know what it's like until you've got them. 1017 00:50:48,440 --> 00:50:50,680 Speaker 7: If you've worked, if your background is working at other funds, 1018 00:50:50,719 --> 00:50:53,680 Speaker 7: working with other people, you have peers. You work with 1019 00:50:53,760 --> 00:50:55,480 Speaker 7: other people, you have peers if something's going wrong, and 1020 00:50:55,520 --> 00:50:59,279 Speaker 7: go complain to those peers. When it's yours. It's you 1021 00:50:59,800 --> 00:51:02,560 Speaker 7: and the way you behave and the way you act 1022 00:51:02,600 --> 00:51:04,360 Speaker 7: and who you talk. It all matters because you're setting 1023 00:51:04,360 --> 00:51:08,200 Speaker 7: the culture for the entire organization. And that's, you know, 1024 00:51:08,280 --> 00:51:11,320 Speaker 7: the thing Jim Parsons, who who I worked with before, 1025 00:51:11,480 --> 00:51:12,960 Speaker 7: showed me before I started. You know, the highs are 1026 00:51:13,000 --> 00:51:15,960 Speaker 7: higher and the lows or lower, and you kind of 1027 00:51:15,960 --> 00:51:18,759 Speaker 7: feel it more internally, and the ability to socialize it 1028 00:51:18,760 --> 00:51:20,440 Speaker 7: out is less. 1029 00:51:20,239 --> 00:51:22,000 Speaker 1: There and so it's one of those things. 1030 00:51:22,000 --> 00:51:23,719 Speaker 7: It's not obviously I would say that I think everyone 1031 00:51:23,719 --> 00:51:26,400 Speaker 7: in the room be like Again, of course it is, 1032 00:51:26,960 --> 00:51:29,239 Speaker 7: but until you go through it, you don't know what 1033 00:51:29,280 --> 00:51:29,640 Speaker 7: it's like. 1034 00:51:30,440 --> 00:51:32,920 Speaker 1: And again, highser higher, lowers or lower. I think it 1035 00:51:33,000 --> 00:51:35,040 Speaker 1: nets out to being awesome, but. 1036 00:51:34,920 --> 00:51:37,640 Speaker 7: Prepare yourself for that, and prepare yourself that it's different 1037 00:51:37,640 --> 00:51:39,160 Speaker 7: and how you behave matters. 1038 00:51:40,080 --> 00:51:43,000 Speaker 2: A lot you've seen, You've seen so much from your 1039 00:51:43,239 --> 00:51:46,520 Speaker 2: vantage point. Tell us what was the biggest surprise was 1040 00:51:46,960 --> 00:51:49,880 Speaker 2: for you. We'll save the biggest lesson for the last question, 1041 00:51:49,960 --> 00:51:51,560 Speaker 2: but was. 1042 00:51:52,080 --> 00:51:53,600 Speaker 6: I just want to answer it this way. 1043 00:51:53,760 --> 00:51:56,960 Speaker 5: I mean, it nets out that it's awesome when you're successful. 1044 00:51:57,080 --> 00:52:01,160 Speaker 6: But the common the most common one thing I hear. 1045 00:52:01,440 --> 00:52:04,040 Speaker 5: I mean I get this literally at least once a 1046 00:52:04,080 --> 00:52:06,600 Speaker 5: week from real managers. 1047 00:52:06,640 --> 00:52:08,160 Speaker 6: These aren't guys who couldn't cut it. 1048 00:52:08,239 --> 00:52:10,560 Speaker 5: These are guys who got to at least two three 1049 00:52:10,680 --> 00:52:15,560 Speaker 5: four hundred million. They had actually good returns even with 1050 00:52:15,680 --> 00:52:17,279 Speaker 5: the volatility of the last. 1051 00:52:17,000 --> 00:52:17,720 Speaker 6: Couple of years. 1052 00:52:18,000 --> 00:52:20,920 Speaker 5: And they are either closing shop and you just need 1053 00:52:20,960 --> 00:52:24,360 Speaker 5: to be aware of this, or they're just not having 1054 00:52:24,400 --> 00:52:27,520 Speaker 5: fun anymore. You talked about having fun and loving it. 1055 00:52:28,120 --> 00:52:30,880 Speaker 5: You go into this business, you go into the idea 1056 00:52:30,880 --> 00:52:34,040 Speaker 5: of starting a fund. You're all emerging managers for two reasons. 1057 00:52:34,160 --> 00:52:39,399 Speaker 5: You believe in your strategy and you want to put 1058 00:52:39,440 --> 00:52:42,080 Speaker 5: it out into the world with your own imprimature and 1059 00:52:42,160 --> 00:52:45,440 Speaker 5: which you don't really realize or maybe you realize it, 1060 00:52:45,480 --> 00:52:48,520 Speaker 5: but yes, like the having kids analogy, it's not until 1061 00:52:48,520 --> 00:52:52,759 Speaker 5: you're in the seat that it's really tangible. These two 1062 00:52:52,840 --> 00:52:57,359 Speaker 5: things investor and entrepreneur, these two hats you need to wear, 1063 00:52:58,000 --> 00:53:01,680 Speaker 5: are actually in conflict with each other. And every moment 1064 00:53:01,840 --> 00:53:05,759 Speaker 5: you spend, particularly as a new manager, not investing, and 1065 00:53:06,239 --> 00:53:08,479 Speaker 5: many of you will not be able to afford out 1066 00:53:08,480 --> 00:53:11,040 Speaker 5: of the gate the same infrastructure that these guys could. 1067 00:53:11,320 --> 00:53:13,560 Speaker 5: So you're going to get pulled into HR issues and 1068 00:53:13,640 --> 00:53:16,520 Speaker 5: legal issues and administration issues, and god, you're going to 1069 00:53:16,520 --> 00:53:19,120 Speaker 5: be dealing with LP sometimes one hundred percent of your time, 1070 00:53:19,400 --> 00:53:22,120 Speaker 5: and you're going to be trying to put up great performance, 1071 00:53:22,600 --> 00:53:26,960 Speaker 5: and that's exhausting and it's sad, But there are many 1072 00:53:27,080 --> 00:53:29,320 Speaker 5: I just have to tell the truth. There are many 1073 00:53:29,520 --> 00:53:34,200 Speaker 5: examples of individuals who got to a point where one 1074 00:53:34,280 --> 00:53:37,799 Speaker 5: might call them successful. They're running four hundred million, five 1075 00:53:37,880 --> 00:53:40,280 Speaker 5: hundred million. I have one guy who's running a billion 1076 00:53:40,280 --> 00:53:44,120 Speaker 5: and a half. His returns have suffered because of the distraction, 1077 00:53:45,160 --> 00:53:47,239 Speaker 5: or they're just not having fun anymore, because the thing 1078 00:53:47,280 --> 00:53:49,880 Speaker 5: that got them into this in the first place was 1079 00:53:49,880 --> 00:53:53,960 Speaker 5: a love of investing, and they find themselves actually focused 1080 00:53:53,960 --> 00:53:56,600 Speaker 5: on a whole host of other issues which really are 1081 00:53:56,600 --> 00:53:58,719 Speaker 5: not how they want to spend their time. So if 1082 00:53:58,719 --> 00:54:01,000 Speaker 5: this is what you really want to do, and it's 1083 00:54:01,040 --> 00:54:03,719 Speaker 5: an itch you want to scratch, you should go do it. 1084 00:54:04,239 --> 00:54:06,399 Speaker 5: But to the extent what you really want to do 1085 00:54:06,719 --> 00:54:10,640 Speaker 5: is have autonomy, invest have scale out of the gate, 1086 00:54:10,880 --> 00:54:14,719 Speaker 5: have great resources, and not that fus necessarily about all 1087 00:54:14,719 --> 00:54:17,799 Speaker 5: the rest of it. We should have that conversation, and 1088 00:54:17,840 --> 00:54:20,680 Speaker 5: if you do launch, and you launch successfully, we'll have 1089 00:54:20,760 --> 00:54:21,839 Speaker 5: that conversation too. 1090 00:54:22,840 --> 00:54:25,680 Speaker 3: Mike, what was the biggest lesson, biggest surprise to you? 1091 00:54:26,000 --> 00:54:28,480 Speaker 4: Yeah, you know, I bear You asked this question when 1092 00:54:28,480 --> 00:54:29,960 Speaker 4: I was on another panel with you A couple of 1093 00:54:30,000 --> 00:54:35,120 Speaker 4: years ago, and interesting, Michael, Interestingly, it's the same answer. 1094 00:54:35,160 --> 00:54:37,640 Speaker 4: And you know, this is a talent driven business, and 1095 00:54:37,719 --> 00:54:41,960 Speaker 4: what's been most surprising is the compounding effect of great talent. 1096 00:54:42,400 --> 00:54:46,080 Speaker 4: You always think about it in financial terms, but people 1097 00:54:47,040 --> 00:54:50,000 Speaker 4: who hire great people and keep the bar high, it's 1098 00:54:50,040 --> 00:54:52,000 Speaker 4: amazing what it does to your business. 1099 00:54:52,040 --> 00:54:54,520 Speaker 1: And so that's been the biggest surprise continues to be. 1100 00:54:54,920 --> 00:54:56,960 Speaker 3: So we're just about out of time. 1101 00:54:56,960 --> 00:54:59,520 Speaker 2: We don't have time for audience questions, but let me 1102 00:54:59,600 --> 00:55:05,000 Speaker 2: just throw one last question ten second response from each 1103 00:55:05,040 --> 00:55:06,320 Speaker 2: of you, and we'll. 1104 00:55:06,160 --> 00:55:07,400 Speaker 3: Start with Tom. 1105 00:55:07,920 --> 00:55:10,400 Speaker 2: One piece of advice for someone about to launch a 1106 00:55:10,480 --> 00:55:12,839 Speaker 2: new fund, Just. 1107 00:55:12,800 --> 00:55:15,280 Speaker 8: As I said earlier, just do what you love, surround 1108 00:55:15,320 --> 00:55:18,359 Speaker 8: yourself with people that you really want to work with, 1109 00:55:19,080 --> 00:55:22,640 Speaker 8: and stay true to your initial objectives, one of which 1110 00:55:22,680 --> 00:55:24,560 Speaker 8: has to be to work as hard as you possibly can. 1111 00:55:25,200 --> 00:55:25,399 Speaker 5: Right. 1112 00:55:26,120 --> 00:55:28,120 Speaker 1: Yeah, I would kind of a correlaria to that. 1113 00:55:29,200 --> 00:55:32,280 Speaker 7: Don't try to sell people on what you think that 1114 00:55:32,400 --> 00:55:34,920 Speaker 7: you want to hear. You have to come to market 1115 00:55:34,920 --> 00:55:36,960 Speaker 7: with a perspective. You have to have a strong point 1116 00:55:36,960 --> 00:55:39,239 Speaker 7: of view, and that either works or it doesn't. And 1117 00:55:39,440 --> 00:55:41,319 Speaker 7: that's the that you have to kind of underlying make. 1118 00:55:41,400 --> 00:55:43,680 Speaker 7: But it won't work if you try to go if 1119 00:55:43,719 --> 00:55:45,799 Speaker 7: you try to shoehorn it into something that it's not. 1120 00:55:46,360 --> 00:55:50,680 Speaker 5: Alana, take your time with respect to hiring people, build 1121 00:55:50,680 --> 00:55:53,440 Speaker 5: this in the right way. LPs would rather see a 1122 00:55:53,520 --> 00:55:58,600 Speaker 5: longer and slower ramp. With respect to optimizing your investment 1123 00:55:58,640 --> 00:56:02,799 Speaker 5: team and your non investment team and performance. 1124 00:56:02,880 --> 00:56:05,240 Speaker 6: First, focus on putting up the numbers. 1125 00:56:05,800 --> 00:56:07,719 Speaker 3: Final word, Mike, what do you got? 1126 00:56:08,239 --> 00:56:10,680 Speaker 4: I'd have to say in honor of the late Sam 1127 00:56:10,840 --> 00:56:16,640 Speaker 4: Zell who said this, go for greatness. 1128 00:56:15,719 --> 00:56:20,279 Speaker 2: Truthic Mike Rockefeller, Alana Einstein, Tom Wivener, Brennan Diaz, thank 1129 00:56:20,320 --> 00:56:23,040 Speaker 2: you so much for your time in your insights, and 1130 00:56:23,640 --> 00:56:28,880 Speaker 2: you're out of here again. So that was the entire panel. 1131 00:56:29,040 --> 00:56:31,040 Speaker 2: You heard the whole thing in its entirety. 1132 00:56:30,840 --> 00:56:33,080 Speaker 3: We ran late, didn't get to. 1133 00:56:33,040 --> 00:56:36,000 Speaker 2: Get questions from the audience, and it was really just 1134 00:56:36,239 --> 00:56:41,560 Speaker 2: all Diaz, Rockefeller, Wagner, and Weinstein discussing how challenging it 1135 00:56:41,640 --> 00:56:46,400 Speaker 2: is launching your own fund, especially in this environment. Special 1136 00:56:46,440 --> 00:56:49,640 Speaker 2: thanks to my audio engineer, Rob Bragg for putting this together. 1137 00:56:50,200 --> 00:56:53,839 Speaker 2: Michael Boyle was the producer of this event. And if 1138 00:56:53,880 --> 00:56:56,720 Speaker 2: you ever get a chance to attend any of these 1139 00:56:56,760 --> 00:57:01,200 Speaker 2: Bloomberg Live events, they're really quite special, really really worthwhile. 1140 00:57:01,520 --> 00:57:03,560 Speaker 2: Take the time and spend a couple hours and watch 1141 00:57:03,560 --> 00:57:06,760 Speaker 2: some of these folks tell you what they've done to succeed. 1142 00:57:07,120 --> 00:57:08,440 Speaker 3: You won't be disappointed. 1143 00:57:09,320 --> 00:57:13,760 Speaker 2: Thanks for listening to this podcast. Extra Master's in Business 1144 00:57:13,840 --> 00:57:14,120 Speaker 2: Life