It’s been three years since I started the fund, and I wanted to share a few thoughts on what I’ve learned along the way . . . thanks to @ArtkoCpaital for inspiring this! (Tweetstorm below)
Had always wanted to start a fund, so committed to studying at the feet of masters every day. Read for hours before and after work (weekdays/weekends), treating it as a second job (first one being a lawyer).
After a decade at a wonderful company that was sold (thank you Bill Ackman), collected my last FT paycheck (hopefully) and launched fund with <5 investors, forever grateful to them.
3 years later, having just posted amazing results, wanted to reflect a bit, hoping this helps other new fund managers. 2 parts to this, strategy and application. Let’s take strategy:
There is a magic formula in investing, but Renaissance isn’t sharing . . . so you’ll have to find your own strategy, one that fits your style and temperament, and that’s the journey.
You can’t outperform if you have no edge, and you’ll definitely have less edge when everyone’s using the same strategy, turning over the same rocks.
If everyone's a contrarian value investor, then no one's a contrarian value investor.
Even with the “right” strategy, applying it can be difficult, translating a thesis to a successful investment takes time, hard work and resolve. The art is in the application . . .
Respect the masters; knowing how to paint by numbers doesn’t make you Michelangelo, and knowing the tenets of value investing doesn’t make you Buffett.
There are 3 types of advantages, informational, behavioral and psychological. Very little informational advantage these days; most investors can find it if they search for it long enough.
Besides more information isn’t always better. Complexity obscures and simplicity clarifies.
Your Excel model alone isn’t Alpha; asset prices are the intersection of numbers and narratives, while both matter, the latter is often more important.
Behavioral. That’s process. Your strategy informs your process and your process guides your behavior, so make sure your process makes sense . . . and protects you against yourself.
That's because unless you’re AI, psychology will dominate your day. You are your baggage, so don’t cram yours into overhead bins. Travel lighter and check-it. Be honest with yourself, but act gracefully when doing so.
FUD (fear, uncertainty, doubt) and FOMO (fear or missing out) is like eating fast food, you can’t avoid it, but you must control it. It’s no coincidence both acronyms begin with F.
It’s not all bad because what makes us afraid can inspire if channeled properly, and with inspiration comes creativity.
Get used to knowing more, but knowing you may understand less. Also never underestimate the role of chance. Humility must be your handmaiden when probabilities are involved.
Odds and Ends: be humble and thankful for your supporters, their investment in time/capital is an immeasurable token of faith in you as a person.
Listen warily to your detractors, but do listen . . . maybe there’s some truth.
Pursue this work only if your passion for it is unrelenting; because the pressure can be. Also guard your physical and mental well-being. Stress can kill and dying really hurts your CAGR.
Alpha and AUM are symbiotic, but building AUM is a different skill-set, never hurts to start working on it early.
I’ve been lucky to surround myself with other funny, smart and generous investors. People who think differently than me, and are nice and patient enough to explain why. So be generous with your time because what you give is what you get.
Lastly, this is by far one of the most challenging, fun, stressful, and rewarding endeavor that I’ve had the privilege to pursue, and with a little luck, will continue doing so. Wishing you all good fortune and happy investing.
Apologies to @ArtkoCapital since I misspelled the very person responsible for inspiring this thread (makes me think I should add "spell-check" to things I've learned!). Regardless, many thanks to them.
