Ray Dalio on Mistakes

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April 6, 2016
Dalio

A long time ago, I stumbled upon this gem/manifesto by Ray Dalio, the billionaire founder of hedge fund giant Bridgewater ($154Bn AUM). It doesn’t contain his investment principles or Bridgewater’s secret sauce (which is likely constantly evolving anyway, powered by talented and creative minds). Instead, it offers a wealth of general advice on life, collected [...]

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Soros’ Alchemy – Chapter 4

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March 30, 2016
Soros 1

Seth Klarman of Baupost wrote in a 1996 Letter that one should always be cognizant of whether seemingly different investments are actually the same bet in order to avoid risk of concentrated exposures. In other words, the task of risk management involves identifying (and if necessary, neutralizing) common risks underlying different portfolio holdings. One such [...]

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BlueCrest’s Michael Platt

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December 19, 2015
Platt Michael

Michael Platt and BlueCrest Capital have been in the headlines recently as the latest hedge fund billionaire to return external capital and morph into a private partnership / family office. Below are portfolio management tidbits from Platt’s interview with Jack Schwager in Hedge Fund Market Wizards. Capital Preservation, Risk, Team Management “I have no appetite [...]

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Soros’ Alchemy – Chapter 1, Part 3

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November 20, 2015
Soros

Continuation in our series of portfolio management highlights from George Soros’ Alchemy of Finance – Chapter 1, Part 3: Soros introduces the theoretical foundations of reflexivity. Psychology, Intrinsic Value “What makes the participants’ understanding imperfect is that their thinking affects the situation to which it relates…Although there is no reality independent of the participants’ perception, there [...]

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Soros’ Alchemy – Chapter 1, Part 2

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November 10, 2015
Soros

Continuation in our series of portfolio management highlights from George Soros’ Alchemy of Finance – Chapter 1, Part 2: Soros discusses the flaws of human psychology, how it complicates the task of investing in a marketplace of other thinking participants, why historical performance is not indicative of future results. He also explains why the term [...]

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Soros’ Alchemy – Chapter 1, Part 1

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November 7, 2015
Soros

Portfolio management highlights from George Soros’ Alchemy of Finance – Chapter 1: The Theory of Reflexivity. In part 1, Soros discusses the concept of price equilibrium, supply and demand, and why market prices fluctuate. Intrinsic Value “The concept of an equilibrium is very useful. It allows us to focus on the final outcome rather than on [...]

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Soros’ Alchemy – Preface & Intro

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September 30, 2015
Soros

Dear Readers, apologies for the length of time since our last article. It’s been a busy year – got married, growing the business, grappling with a large position ruining otherwise healthy year-to-date performance – you know, all the usual life items. We have all experienced situations when the fundamentals of a business are moving in [...]

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My New Crush: Stanley Druckenmiller

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July 1, 2015
Druckenmiller 2

I have a new (intellectual) crush: Stanley Druckenmiller. If you don’t share my feelings, you will after you read his Jan 2015 speech at the Lost Tree Club. Portfolio management related excerpts below: Diversification, Sizing “I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept…And if [...]

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Klarman 1991 Interview with Barron’s

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June 15, 2015
Klarman 3

This 1991 Barron’s interview with Seth Klarman offers some intriguing insights into how Baupost got its start, and the nature of Klarman’s initial client base and business structure. Baupost currently manages ~$32 Billion AUM (per latest firm ADV), whereas ~24 years ago that figure stood at $400mm, and ~33 years ago only $27mm. Time + compounding [...]

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The Sugar Cookie

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April 23, 2015
Sugar Cookie

Many moons ago, we shared with you this matrix highlighting the importance of focusing on process over outcome.   In every investor’s lifetime, there will inevitably be one or more instances of “bad breaks” – when the investment process was solid, but the outcome was nonetheless bad. If that has ever happened to you, then [...]

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Whitebox on Risk & Risk Management

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March 21, 2015
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There must be something in the Whitebox water supply: it’s producing an army of investment math nerds with acute self-awareness and sensibilities, led by their fearless leader Andy Redleaf. Those of you who have not yet seen Whitebox’s “10 Enduring Principles To Interpret Constant Market Change” are missing out — it is absolutely worth three [...]

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Cross-Pollination: Volatility & Options

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February 1, 2015
Pollination

In our continual search for differentiation in this fiercely competitive investment biosphere, we remain intrigued by the idea of cross-pollination between investment strategies. After all, regardless of strategy, all investors share a common goal: capital compounding through the creation of return asymmetry over time. Fundamental investors often shy away from options and volatility, labeling them [...]

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Mistakes of Boredom

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December 31, 2014
Boredom

Flying back to Los Angeles after Christmas, somewhere over New Mexico, I rediscovered an article written by Ted Lucas of Lattice Strategies in 2011, quoting mathematician and logician Blaise Pascal’s Pensées on the psychological propensity of humans to seek out diversion and action, and the boredom caused by inaction: “Sometimes, when I set to thinking [...]

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Glancing Back At 2014

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December 28, 2014
2014 Cork

It’s that time of year – calendar year 2014 draws to an end. For one’s trackrecord, there’s particular emphasis on annual calendar year returns. Convention dictates that the annual return period fall between January 1st and December 31st, although there is no particular rhyme or reason behind this convention (e.g., why not April 1st to [...]

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Howard Marks’ Book: Chapter 19

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November 11, 2014
Marks Book

This concludes our series on portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 19 “The Most Important Thing Is…Adding Value” Trackrecord, Compounding, Capital Preservation “It means relatively little that a risk taker achieves a high return in a rising market, or that a conservative investors [...]

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Howard Marks’ Book: Chapter 18

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October 7, 2014
Marks Book

Continuation of portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 18 “The Most Important Thing Is…Avoiding Pitfalls” Risk, Volatility “…trying to avoid losses is more important than striving or great investment successes. The latter can be achieved some of the time, but the occasional failures [...]

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Long Weekend Beer & Reflection

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August 30, 2014
Beer On Beach

A few months ago, a friend sent me this gem of an article titled Some Thoughts On Becoming An Independent Fund Manager. Perfect light reading (and reflection) for Labor Day Weekend – grab an alcoholic beverage and enjoy!

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Howard Marks’ Book: Chapter 17

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August 9, 2014
Marks Book

Continuation of portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 17 “The Most Important Thing Is…Investing Defensively” — a rather apt topic given today’s market environment. Psychology, Capital Preservation, Expected Return, Risk, Opportunity Cost “What’s more important to you: scoring points or keeping your opponent [...]

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Montier on Exposures & Bubbles

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July 12, 2014
James Montier 2

Below are some wonderful bits on bubbles and portfolio construction from James Montier. Excerpts were extracted from a Feb 2014 interview with Montier by Robert Huebscher of Advisor Perspectives – a worthwhile read. Cash, Expected Returns, Exposure “The issue is…everything is expensive right now. How do you build a portfolio that recognizes the fact that cash [...]

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Baupost Letters: 2000-2001

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July 1, 2014
Klarman 2

This concludes our series on portfolio management and Seth Klarman, with ideas extracted from old Baupost Group letters. Our Readers know that we generally provide excerpts along with commentary for each topic. However, at the request of Baupost, we will not be providing any excerpts, only our interpretive summaries. For those of you wishing to [...]

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