Thread by @cppinvest

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

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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.

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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.