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Frederik Gieschen Profile picture
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Feb 2 • 9 tweets • 3 min read
Intersting Bloomberg piece on multi-strat hedge funds and institutional allocators.

"Clients increasingly willing to pay high fees to gain access to... scores of traders who can be easily replaced. A stark contrast to old business model: Launch a fund, call the shots, profit."
What do a lot of institutional allocators want? Steady returns. No blow-up risk. A risk profile that matches that of the allocator seat where upside is limited.
Similar dynamic in private equity and credit. Deploy large checks in brand names that have a portfolio of strategies = efficient due diligence. Trade fees for protection from the brand. Power law kicks in and the rich get richer.
Plight of the emerging manager.
“My strategy is not wild. I left because it was not a place for me." Onorino says raising capital is “almost mission impossible.”
“You’re seeing a lot of those people who try and I give them credit for trying and hanging their shingle. In some cases, they’re going to get paid more being in a place like this than even starting their own businesses.”
bloomberg.com/news/features/…
"Multi-strats have a low tolerance for underperformance. Those who start losing in high single digits or over extend their risk can have their assets cut at best, and at worst can be fired on the spot"
"This emphasis on rigor appeals to pension funds, foundations and endowments that have gravitated toward HFs, often without the resources to closely track what each manager’s doing. Why get on the rollercoaster with a rockstar?"
"There are only two ways to make money in business. One is to bundle, the other is to unbundle."
Ugh, linked the wrong tweet re PE🙄

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More from @NeckarValue

Frederik Gieschen Profile picture
Feb 1
Whitney Baker on learning at Soros & Bridgewater

"If you have a view on something, try to be exposed to the thing closest to that view. If you like gold, buy gold, not miners. Concentrate your conviction views... hedge out stuff you don’t have a view on"
mebfaber.com/2022/01/31/e38… Image
"Kick the tires until there’s no tires left to kick. Have the most rigorous process for increasing your own conviction. If you can kick the tires really hard and make sure that you are concentrated in stuff you have the most conviction in, I found that to be additive."
"let’s say you’re a discretionary stock investor and you’ve got a portfolio of 30 stocks and you’ve got a whole story to remember on all of those stocks...

A lot of your mindshare is taken up by all the 80 things going on across the micro of your book. Image
Read 7 tweets
Frederik Gieschen Profile picture
Feb 1
Lessons from the Titans is filled with observations on legendary industrial companies. These are some of my favorites.

“Their secrets are hardly secrets at all—continuous improvement, rigorous benchmarking, disciplined investment, principled leadership, solid business systems.”
“The reasons for failure and the formulas for success haven’t really changed at all. Whether it be 1950, 1980, or 2020, they are pretty much exactly the same.”
There's no silver bullet: sustainable success is simple but not easy.

The book emphasizes the compounding advantage of getting a lot of small things right.

“... three common drivers: a relentless discipline on costs, cash flow, and capital deployment.”
Read 17 tweets
Frederik Gieschen Profile picture
Jan 30
Richard Bernstein: "Whatever the market spin, Bernstein can and does see through it"

"March 2000: “Attention VCs: Leave Silicon Valley for West Texas,” declaring that technology stocks were overpriced, predicting the real money over the decade would be in energy and commodities"
"August 2005: report highlighting rising number of insider sales by executives at homebuilding companies. Seven months later home prices peaked"

institutionalinvestor.com/article/b150zq…
"The problem with working on the sell side is the amount of travel necessary — the demands on your time and energy are unbelievable. People wonder if I left ­Merrill because of some deep dark secret, but I was just worn out. I needed to do other things."
Read 4 tweets
Frederik Gieschen Profile picture
Jan 25
Loved this with @scuttleblurb and @LibertyRPF

"Most people, including me, will flip through one essay after the next like nothing, oblivious to the hard work We are spoiled with great content. I personally subscribe to over a dozen newsletters. Most sit in my inbox unread."
"Some will cancel their subscription if they have to waste even 5 seconds logging in to read a 5,000 word post. "Too much friction".

“Fluff” is also friction ... the more insidious content-specific kind where you don’t make a meaningful point"
"finding aligned partners has been a long process. Getting to scale took 5+ years, it came all at once, and there are a million scenarios where I make the same moves and things don’t work out. Just because someone isn’t managing money doesn’t mean they aren’t capable of doing so"
Read 8 tweets
Frederik Gieschen Profile picture
Jan 25
It's easy to overtrade when volatility is high and the market can make even legends look like fools.

Soros entered the the crash of '87 badly positioned: short Japan, long the US.

Japan held firm and the bounce in US markets looked like it was fading. Soros dumped his position.
He told the trader: "I'm going to walk out of here, they're not going to carry me out."

Survival was key. He had confidence in making it back - unless he lost his capital.

For a while he looked like a fool. Barron's: "A Bad Two Weeks: A Wall Street Star Loses $840 million"
But Soros was still in the game and could go on winning.

Druckenmiller: "He knows all he has to do is stay in the game and his talents will come back. For the threat of looking silly, he's not going to jeopardize the fund."
Read 6 tweets
Frederik Gieschen Profile picture
Jan 22
"A lesson I wish I’d learned much earlier in life is that people are not always believable in the same domains that they think they are.

... some influential, very high-IQ people often have limited awareness of exactly where their circle of competence ends." by @tom_morganKCP
"Whenever someone offers you their opinion, a superb initial question paraphrases Morgan Housel: “what have you experienced that makes you believe what you do?”"
"there are probably no universal “tells” for lying, but the ideal approach is to observe closely enough to get a baseline of behavior, then you can notice deviations. Across thousands of interactions this translates to an intuitive recognition of an articulate incompetent."
Read 6 tweets

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