0/ @patrick_oshag had former Notre Dame CIO Scott Malpass on the pod, Malpass took ND's endowment from a 3 person team (a priest, a receptionist & himself) & $425M in 1989 to ~$14.0B when he stepped aside last year w/ endowment spending going from $19.5M to $425.7M over that time
1/ He became CIO at 26 w/ 2 years of work experience & is one of the more underappreciated capital allocators of the last 3 decades.
Malpass was one of the first CIO's to embrace the Endowment Model having a greater equity allocation, diversification, & investing into alts.
2/ He thinks there are maybe ~40-50 institutions in the world that can implement this model successfully (which is why most endowments underperform) as it requires significant resources, access, continuity of the team, buy-in from the capital base, etc...
3/ On the manager side he thinks ~1% or less of managers can generate true alpha. In terms of manager identification Malpass focused on the traditional investment approach, philosophy, & process line of questioning; but also really emphasized the human element. Why are they
4/ passionate about this?
What separates the top performers from those who are a flash in the pan is those that have clarity of thought about who they were, what they could do, and what they couldn't do & are tremendous at executing that over market cycles.
He spends a lot
5/ of time trying to define the skill they have, what their edge is, & whether or not this is enduring. He emphasized managers like Steve Mandel, Paul Singer, Mike Moritz & Doug Leone, etc... where its immediately obvious what makes them tick & differentiated
6/ ND was one of the first investors in Sequoia having met Don Valentine & Mike Moritz early on in his tenure at ND. Throughout all of Sequoia's success they valued the people that bet on them early, treated ND as partners, & never let success or scale get to them.
7/ In terms of incentive alignment he noted some of the conflicts in the HF industry. Mgmt fees used to be budget based (managers would give LP's a copy), w/ a focus on carry above a hurdle as they don't want to pay for beta, just alpha.
Post GFC there was some rationalization.
8/ Regardless of change he's been focused on innovation. At one point they calculated ND's venture portfolio (through funds) helped fund ~35% of companies listed on the NASDAQ
He highlights the importance of VC, the fact that there are fewer top players than other asset classes
9/ Re: PE They never allocated to large buyout funds (due to incentive alignment & the difficulty to generate a 2-3x net). He's never been focused on IRR's, much more focused on MOIC. They did move beyond VC, to growth equity, & then small & mid-sized buyouts.
10/ Malpass thinks too much size in any asset class in general is a negative towards performance. As the asset classes grow that capacity changes.
For emerging managers he mentioned focusing on capacity constraints of $250-$300m
11/ On the macro front- Bonds aren't attractive here, but they do serve a purpose as a diversifier in a complete equity market collapse & for individuals w/ tax considerations. Still constructive on equities long-term particularly given focus on innovation / IR environment.
12/ Finally, on crypto he's supportive of it, interested in the payments use case to reduce costs, bullish on CBDCs (Dollar, Yen, Euro)
He mainly invests via VC & infrastructure companies (is on the board of @PaxosGlobal) & would have a small direct allocation to crypto vs gold
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0/ In a podcast with Druckenmiller @DavidNovakOGO coined a few "Drucks Nuggets" advice that he has given over the years & had him extrapolate on it:
1. Do not invest in the present. Always imagine where the world will be in 18-24 months and invest for that.
1/ 2. Put all of your eggs in one basket and watch that basket carefully 3. Invest & then investigate 4. Look at leading & lagging industries (e.g., market internals such as housing, retail, trucking) 5. Be imaginative of what can go wrong (and what can go right...pick up change)
2/ 6. Be dispassionate about decisions.
Druck echoed similar sentiments to his Palantir interview where he says this is the hardest macro environment he's ever encountered to try to have any confidence in a forecast 6-12 months ahead.
0/ Last month JPM published a piece on payments entitled "Payments are eating the world" introducing their "POWER+" framework.
These 5 themes (& 20 micro themes) are responsible for ~$54T of the ~$240T in global payment flows:
Platforms
Online
Wallets
Embedded
Real Time
1/ When looking at the opportunity for FinTech / Crypto to disrupt banks there's the view that payments are a "solved" problem despite a ~$2T+ rev opportunity
Jamie Dimon notes JPM moves $8T/day across 52M payments of which ~98% is same day & 78% is real-time.
2/ JPM pegs global payment volume for platforms / super apps at $36T ($32T in China & $4T ex-China).
-The avg adult has 80 apps on their phone but uses 9 daily
-Super Apps aggregate complexity into a single destination & embed payment capabilities enabling txs w.o leaving the app
0/ @nubank filed their F1.
-They have 48.1M users as of 3Q21 w/ a NPS of 90+, adding 2.1M new customers / month on in 3Q21 & 80--35.3M MAU (73%)
-They are the 1st credit card or bank account for 5.1M+ users & have 1M+ SMEs.
1/ They position themselves as a better solution for consumers & SME's across "Five Financial Seasons":
-Spending (CC, Mobile Payments, Rewards)
-Savings (Personal / Business Acct)
-Investing
-Borrowing (Personal Loans)
-Protecting (Insurance)
2/ Not only do they have 48.1M users but they are the primary bank account for 50%+ of their active consumers who have been with them for 12+ months. They have 28% of the Brazil population age 15+ (and have been rated the #1 Bank in Brazil by Forbes each of the past 3 years).
0/ Yesterday was $AFRM's 3rd earnings call as a public co but @mlevchin treated it like Day 1 articulating the vision for AFRM to "unbundle the credit card," discussing TAM, product roadmap, the 10-year+ vision, & recent trends / consolidation
Worth a listen given BNPL debates.
1/ For FY21 $AFRM facilitated 16M+ transactions & $8B+ in GMV for 7M users with merchants +5x YoY
Initial FY22 guidance of $12.75B of GMV vs. high-end Street at ~$12B (doesn't include $AMZN, or Debit+, modelling $PTON (-30-35%) YoY vs. Street +, $SHOP is implied at ~$600M-$1.0B.
2/ He spent a lot of time talking about the @Returnly acquisition & looking at other ways to add value for their merchants.
He highlighted their merchant marketplace (~1/3 of FY21 tx's occurred here)
0/ We had Druckenmiller give another warning this AM about more gov't spending.
"In Spring of '20 economy was in a black hole & it was the most uncertain period [Druck] has seen in his lifetime. Congress did the best they could do & spent $2.3T. Fast forward 5-6 months & we
1/ didn't have a great depression, it turns out we had the sharpest V recovery in history.
By early Fall the 30 year trend in retail sales was above trend, this took 5-6 months, in the Great Depression it took 10 years, post GFC it took 5 years, this was a very different animal
2/ than precedent economic periods. It wasn't until after retail sales were back to trend that $575B of the $850B of transfer payments were spent. Over 1/2 the $5.2T spent on COVID was after economic crisis was already over."
0/ Leading FinTech co's are seeing CAC decrease as they scale.
$SQ finished '20 w/ a CAC <$5 & 36M MAUS (up from 24M in '19) while $HOOD saw CAC hit $15 in 1Q21 down from $20 for '20, $32 in 1Q20 & $53 in '19 w/ 18M accounts in 1Q21 up from 12.5M, 7.2M & 5.1M respectively
1/ These customer bases are starting to surpass incumbents: E.g., $BAC has 39.3M "digital users" (12.9M Zelle) while $JPM has 63.4M households, 55.3M digital / 40.9M mobile customers
$SCHW has 32M active broker accounts with $7.4T in clients assets & $IBKR at 1.4M /$363B
2/ The CAC associated with legacy broker accounts has ranged from ~$750-$1,000 while bank accounts ranged considerably from ~$350-$1,500 per @ARKInvest