1/ For you youngsters that are unfamiliar with the inner workings of our business, let me translate this. All public registered vehicles are required to have a distributor by statute. Your distributor handles your broker dealer relationships (managing the various platform
2/ requirements and regulatory compliance), and they oversee your factsheets and public communications (as does internal compliance). For that, most statutory distributor relations cost between 5-10 basis points per year. Kelso/Resolute was Ark's distributor.
3/ In addition, many firms also hire distributors or third-party marketing firms to push their products through the broker dealer channel. It used to require a pretty heavy monthly retainer plus a portion of the management fee as compensation. Howevah. . .
4/ distributors recognize the weak points in their business model. They raise you a bunch of assets which are pretty sticky if you perform, and you as the asset manager get arrogant and think, "what do I need to pay these guys for going forward? I have the assets now."
5/ Smart distributors therefore want a piece of your success permanently, so they negotiate an equity stake. Go ahead and fire them, but if they have a piece of you, they are getting a revenue share anyway. I'm guessing that's what happened here.

6/ Usually, when you are just starting out and flat broke because the cost of supporting a regulated business is crippling, you cut a deal with your distributor for capital, or reduced retainers or lower basis point shares. You're just happy to have the capital and support.
7/ The age old battle in asset management is this: the manager thinks his/her performance is what attracts assets - salespeople are only necessary evils, often forgetting when the manager is starting out and unknown (and batshit crazy), an effective salesperson is your lifeline.
8/ The salespeople know that most asset managers can't explain their own process coherently (if they even have one), and if they do have one they frequently tell it badly. So, the salesperson is king because it's his relationships that get you going and keep you going,
9/ especially when you have a bad year. Both sides are partly correct. Good performance is easy to sell; a new manager is almost impossible to raise assets for.
10/ There is only one person at fault in this particular situation. That contract was most likely stroked when she needed cash and she either didn't have a buyout clause or forgot about it, and now she's paying the price. Kelso ain't stupid. Again, I'm making an informed guess
11/ If you look back historically, Tesla was a big part of her success. Dopey retail RIA's don't care, and larger smart institutional allocators have noticed none of their brethren really own Tesla in size, so they see that Cathie owes everything to luck, even if she doesn't.
12/ Imagine being a sales guy walking into the State of Arizona pension office. "We buy known frauds and hope we get out before the music stops. We know a rational steward of client capital could never own this without violating every law of prudence, but try and
look past that and trust your job to luck. We do." Now you have one more name to add to your class-action suits when the music stops.

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More from @cppinvest

14 Nov
1/ Here’s an interesting Covid dilemma brought to you by the fucking idiots in local government that can’t think their way out of a paper bag:

85 year old man falls and breaks hip and requires surgery. Leaving aside for the moment the limited to non-existent visiting hours and
2/ the issue that creates (ask any doctor what the typical elderly reaction is to post surgery anesthesia recovery and how being around familiar faces helps), family of said 85 year old is now faced with a dilemma.

What’s the rehab plan?
3/ Normal course would be some time in a rehab facility immediately after to insure physical therapy is maximized and supervised by pros. However, because of nonsensical and draconian reactions to all things Covid, in NY if a congregate care facility is struck by a single case
Read 6 tweets
11 Nov
1/ I just listened to a fascinating call arranged by our friends @TweetMacro with John Fund, the Wall Street Journal columnist and author of books on voter fraud. Here’s the punch line: there was undoubtedly fraud in this presidential election but not enough to move the needle.
2/ Fund’s basic point was this election was rife with improprieties – probably more than most – but it’s too much for Trump to prove it in a short timeframe, and then get the establishment that has attempted to thwart him at every turn for four years to do anything about it.
3/ So Trump needs to run the process through to the December meeting of the electoral college, and then concede. But, that doesn’t change Fund’s other important point: we spend too much time on who is in office and not enough on how they got there.
Read 22 tweets
8 Nov
1/ Last week The Second Biggest Idiot to Occupy a State House (BIOSH2) mandated that all MA residents MUST wear a mask at all times when outside the home, else one risks getting fined $300. You’re probably sitting there wondering, “how stupid can he be?” Allow me to show you.
2/ In the past two weeks, we’ve had 16,000 positive cases and 164,000 total since The Worst Plague of All Time graced our shores. BIOSH2 probably looks at this chart and says: “How many dumb conclusions can I draw from it?”
3/ Of those 16k cases, 83% were in the 0-59 age group. Those 16k cases have resulted in a grand total of. . . 185 hospitalizations. 73% of the hospitalizations over the past two weeks were in the 60+ cohort and 10% in the 50-59, proving that younger peeps don’t really suffer.
Read 21 tweets
10 Sep
1/ Why I Hate Lawyers

with apologies to all you lawyers.

Back in the day there were really just two big off-the-shelf Order Management Systems (OMS) that most mid-sized shops used. Big firms often have their own customized solution. We used one of the two big ones.
2/ These things ain't cheap: $200k/yr for us for the Full Monty (compliance, accting etc.). These systems are 28(e) eligible (soft-dollar safe harbor in '34 Act), so we paid using commission credits. And in our heyday, we'd generate $300-400k annually in soft dollar credits.
3/ You have to keep track of soft-dollar credits carefully lest you run afoul of Johnny Law. It was almost a full-time job. And there are portals from other software vendors the allow you to track and pay invoices in one central location, which we used. Thank God.
Read 24 tweets
14 Aug
13 F's out. That's F for Fraud.

Here's page 1. Lots of sellers. Some updates not filed yet (they have until tomorrow). Baron bought 1,800. Big of him. Jennison unloading 450k. Citadel has not yet filed. That's options related shares. Image
Page 2. T Rowe a big seller again. Whale Rock is a Boston hedge fund, ex-Fidelity. Advisor Group is a new holder. Here are their top holdings. ImageImageImage
Page 3. DE Shaw playing the same momentum game as Renaissance. Image
Read 4 tweets
29 Jul
1/ In the podcast referenced below, @profplum99 makes the excellent point that passive investing is having an outsized impact on price discovery; distorts it, and results in these seemingly blind v-shaped market recoveries (if I may paraphrase).

2/ We agree with Michael on this subject and have had conversations w him about it. Still we all need context around the amounts in question. Passives have a role for sure, but don’t underestimate how much money is sloshing around in the hands of idiots (RobinHODLr’s).
3/ Pick your source, but the Fed estimates total US household financial assets to be in the neighborhood of $90 trillion.
Read 17 tweets

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