3 Burst results for "Eureka Fund"
"eureka fund" Discussed on Capital Allocators
"So it's constantly changing, but it is gradually getting more professionalized. That's for sure you have this premise that I think a lot of people would question that skill itself is measurable and repeatable. Tell me where that comes from. That really comes from tops in the sense that does of the evidence. So easy in the Pharma the Founder Vision Maga theory never really produced proof the markets were fishing was in the sumptuous. And whereas proof of skill is very, very large data set we have. One thousand. Historically. Opposite three thousand people who contributed to tops and be measured for long periods. Three, five ten. Twenty years in some cases. And so you're able to measure people individuals in Hobart of different market regimes. And the surface numbers wouldn't necessarily give. You made the fact that some people consistently do well and some don't say what he could bell curving police might find that some. kind of momentum distribution but if you dig down into it and you look at. What we call success rates I, think it will country batting average. But if you begin to see the individual, not only consistently was Alpha but their success ratio is consistently between fifty and sixty percents consistently getting it more right than wrong skew. And then you can look at. How that worked in different sectors in countries and so selling them and their long as their shorts you get so much texture in the information that you really have high statistical conviction that there is something here is. A variable which you can call. Alpha, which is this factor which is missing there in the results and it's the skill in that context. It sounds like it's just stock selection. That's what women's. Reno. But I'm sure the same would apply in the macro world. The great macaroni investors in there less good maker investors and you could measure their trades you could measure the skill you could measure. In different regimes Blah Blah Blah, and it's the same thing what if you found or the optimal ways to then transfer? Let's say the presence of Stock Selection Alpha into portfolio that delivers in the toss part of our business. You'll talk measure Alpha specifically as the thing that you. Tried to capture and if that the other word photography's Alpha Kappa so the thing that you're putting into the portfolio is not. A return seeing you optimize love return objective. It's an objective since the performance of those ideas against whatever the bench markers is and create. Information Ratios and. Manage around the Alpha and for our manages he's actually the same thing where we optimize between manages we optimize to their Alpha, we're not rising to return roped into. And so they get capital if they do well with the Alpha. Again and Silverado for finding amenities. We end up with the same level of complexity in how we evaluate their offers, we tops and a half's that come together in terms of constructing portfolios right on the one hand you could say, Oh, these are all equally weighted by positions just for liquidity, whatever it is, and on the other hand, you could then optimize on the particular skills across stock selection sector. Market regime one of the ten and a half lessons in your book is the the notion that the best portfolio construction combines concentration and diversification. What do you mean by that? It's a paradox because the two things should be antithetical and so diversification markovits mismanages love diversification at brings clear benefits in terms of repeated a risk and. All good for for construction should be aiming to achieve a minimum level of diversification but for stock pickers, my view is that most. Managers few managers have more than ten or twenty high convictions anyone time. And for that reason, one of the constraints in the top systems that we ought the contributed will failures. Contributors are only expect to run about ten names and we say we only want you'll ask convictions don't give us. You don't you worry about diversification just give us your highest convictions and we'll y about diversification. And because we want that concentration with their individual manages, we also encourage them to put a high amount of their risk in their chop convictions. and. So those two things combined will they don't combine level of one prophet they combined the level of the proud that you deliver to the climb. So that's why you recall revolt from being one strategy when he in Iran. To being now, combining fifteen strategies, which we think is a minimal level of diversification and that then delivers to the climbed a set of. Very interesting out the streams, each one is relatively concentrated. You put them all together. Highly diverse for failure full of high conviction ideas. That's the thing and tops is even more than now. Talk a little bit about the short side specifically, very different game than the longs. What are the key lessons you've learned from shorting all these years I say in the book kind of totally g them let stapley obvious at shorts in lungs very different and if you look at the long-term. Record of Eureka. Fund as a proxy, our long-term annualized Al Long. About nine. Sent an onshore side about three percent. And I. think that showed side is actually quite credits boo result in the context of industry. And providing your shoot signs positive. Short. I was positive. That allows you really employers lung book very. aggressively. The first reason for differences that the information bias of the market is set up completing for the long sides, the brokers. Said cheap to police companies seventy to eighty percents of or recommendations. Bio holds that's fifty. percent of them Ab- is so your shortsellers competing against in a world where information bias against him or her. Those are two meeting in a world which is inherited me. It's more expensive because you have a borrowing costs that has a bigger hurdle before you make money it's much more competitive because when you short a story of a CO compete against long shortsellers but your. Effectively. You'll borrowing some you're competing against Schulz stemmons and they are because essentially hit from our justice that typically amongst smarter people in the market. And the variability of the is reflected in the cost. So actually real cost to competing against people who have the same ideas you they drive up the cost that's where the competition comes through. So it is a more difficult game and it requires more trading you're up against short-squeezes you're up against crowding away. You're not on long side. So glad you too much more active in the way.
"eureka fund" Discussed on Capital Allocators
"All terrific to see you. and. Lovely to see you too. After all these years. Yeah. It's been a little while why don't we start even way before that and how you first got interested in investing I I got interested in I, was working as a trainee. In Lloyds Bank International in Zurich. and was very early days I. Was United to rotation in every financial function. Of the bank and I, I did credit analysis fx trading. Cashier. Every letters of credit. At the end of the two years I worked in the investment with Mr Myra and that was the first time I found something that I actually really loved. And it was just being asked to look at a few companies and. Think about the stock market and that was the first time. What was it about it that you love so much looking at a company it's both art and science and it distills. So, many different things from the. Understanding the management's. The industry structure of the industry, the position of the company industry through to the macro. Background interest you have to understand every dimension is. Everything to do with the economy the Makah right down to the very small detail and it's both romantic and. Historical and empirical and Just everything. So, when you first started that interest really in the equity market, how did you start to learn? What you came to believe about how markets work. It's been a very, very long apprenticeship and I'm still learning. So. I didn't learn massive now actually Zurich there went to business school in Seattle and then I went to Warburg's. And went into the European Investment Department at some very good mentors and really learned on the spot and It was learning by doing and learning by. Mistakes from the beginning, which is how I started to let and the the right or wrong thing about friendship mercury. Warburg's luckily management business. Was that they gave you money to manage almost immediately actually Mike early but I was giving money to manage within six months, which is ridiculous. I pay the consequences will be selling things that go wrong but I love doing. And what did you come to believe about how? To add value in the equity markets. I went through quantum processes looking at different types of ways of analyzing companies. Eda and cf Roi kind of. Different ways of putting the numbers together, but the bottom line was. I suppose it's. Alternately looking for companies where the long term value is not appreciated by the market and the long term value is defined as the sum of all cash flames in good understand. Why. The customers of the companies will generate in the future will be significantly more than the market has appreciated. It's very much wearing Ben, Graham? Wang Machine. Salaciously, but also combining that with catalysts. So it's never enough. For me to just be looking at. Understanding A long-term undervaluation you've got to have A. Catalyst which will draw people's attention to the valuation. So that was. That was kind of. Approach that I. Grew to like an used pretty early on. So than somewhere along the way, you decided to form your own firm. With the in what was that initial inception story? I'd known from the remarkably the very first I worked in the city because he was head of sales or at least very senior in sales. WHO's only twenty five actually but he had a meteoric career and he called me on my first day. At the warburgs and so we to work together very closely. For a few years, then we slightly different ways because he then moved and became head of Equity Trading and touch upon. And I got a call from him. In nineteen ninety seven, say let's have lunch never does lunch. So this had to be quite important of this a second to launch his life. And we went at lunch and he said, let's set up a hitch from and as it happened that points. I was talking to other people about setting up landry business and I hadn't thought of doing a hitch from it was Ian. Proposed and it was. Took me three or four months to. Discuss with negotiated and song, and then we took a leap into what was the original Marshall. Strategy to the Mitchell Masha was Saturday was was the Eureka Fund. which is still there the flagship. And it was European long show we were about the third hedge found in Europe. So, as we're behind the curve is the US, but we were relatively early in Europe, we divided the fond into two. Components really what we call core and trading and the cool investments were long. Ben Graham. Oh Philip Fisher long-term quality. Companies. Philip Fisher, you let companies which have great quality business and quality management. So they've gotta be lucky and smart, and then the trading side, which was much more higher turnover very catalyst based looking for every opportunity in the market and one was. One was lumpy concentrated and the other was less concentrated, much more active and that play both of our backgrounds in background was in trading my bet buckwheat. Investing. and was that was the original proposition. We raised fifty million dollars of which half Shem Soros, the rest of us from family and friends which ended those days is a lot of money. And it was enough to get started, and now over the years, the trading side evolved into what's become well known in the industry is tops. And when you touch a little bit on that evolution, what tops has become that was really ends genius vision and it's actually started. With. A discussion about how we measured are brokers and like most people as days, it was pretty random and was kind of a courtly fingering the air who's not a good job legal share the wanted. And said, well, it must be a better way of measuring this and doing it systematically. And we all stand click at that stage was a twenty one year old some trainee. So Oxford to think about how to do that, and he came up with the idea of giving the forty brokers who covers at that time virtual portfolio and said you run this virtual portfolio will measure whether you actually create any Alpha and value. And much to my surprise because I was pretty skeptical about it. I had the typical arrogance. By, Side Guy, they actually generated a lot of Elsa and so. We having measured it for about a year. We then Serene said, let's put some capital behind. and. We put by that stage. Eureka was a kind of to to out billion dollar fund. We put two, hundred, million, ten percent of the found into a program which basically replicated the ideas of all of the brokers are sending them in your into us in real time. At it after a huge Flagstar, two, thousand, two and two how has that evolved over the years is being an amazing evolution because. When we started, we didn't even optimize between the contributes. We just took every. Failure equal weighted. We didn't try and allocate optimizing. So it moved in a series of steps. First of all we started. Looking just optimizing between those failures. And then we started saying, well, you can actually optimize individuals beacon, analyze their skill. You can analyze what some are good at. They're not good at whether it's long insurance which sectors could at which market environments could have, and then you could start to blend them with each other different ways and school create signals for the strength of the Alpha in each person in each portfolio, we looked at the patterns and relationships between the failures we then globalized it. So he took it to us into Asia ended the same thing, and then there was a whole other. Level of complexity where we started introducing other systematic signals that other competitors used. Pure systematic funds blending those signals with the top south attributed signals, and it's continued to devolve in.
"eureka fund" Discussed on KFI AM 640
"California Public employees retirees. In the National Enquirer. We'll talk about that in a few minutes. This is one of these situations where you know, if this is your household. Maybe you need to come down hard on your sons and make some changes apparently a mother up in the Santa Rosa area had to call nine one one because her son's got into a bloody fight over a broken marijuana Bong. The day comes and you have to call nine one one because you sons are cutting each other with the jagged glass, it's too late. After one of them broke, the Bong, and they got into a fight over it. You got you got you already blew it though. You got a couple of near dwells who were just slacking off. This is how old they are nineteen and twenty oh you missed the boat. Yeah. Yep. Yeah. You screwed up Samuel j for row. F A U R O T. You nineteen was on the porch when cops arrived, and he was he was washing away blood. I guess trying to clean up the evidence. He was cutting his brother with the broken glass, the jagged edges the brother had lacerations and wounds. Police detained him and his mother and found the brother who had been stabbed bleeding profusely from his wounds. He was lying across the street where he'd gone to hide from the brother. The brothers been hospitalized for some stab wounds and lacerations, and he is twenty years old. Good work. I'm sure they're going to be useful. Where is this near Santa Rosa, Santa Rosa? I don't know if it was in Santa Rosa was reported by Santa Rosa Lee, probably children of hippies. That's what happens. No disciplined overrules. School. Yeah. No, stab at each other with Bong shards. What are the funnier stories we've seen lately, which brings CalPERS into question as the California Public employees retirement system, it's humongous, of course. Because even though the private sector long ago decided you cannot pay fixed pensions to employees for the rest of their lives. So you'll go bankrupt. We haven't learned that yet in the public sector. We ever will. Because the unions have a stranglehold on the politician it goes bankrupt. That's what they'll learn. Now. I think that I think would eventually she'll just raise tax money. That's okay. Each soaking tax payers to make up the difference. That's where exit you have always the union you have to get out dominance over the politicians. Every state pretty much has this states, give their employees. I think father got to fix pension from New York, California is most generous and has the biggest big one of the biggest deaths. I think Illinois has a slightly larger debt as a percentage of Konami. We're one of the worst states. Well through an investment managed by New Jersey. Hedge fund California's public pension fund CalPERS appears to have owned as much as one third of American media Inc. Which is the national enquirers parent company. Third a third. I mean, that's that's that's really size when I saw the strength of. Well, it's probably just a few thousand shares or something about a third of it. I guess it was working for them. And it's sort of like, well, maybe they didn't know they just hired the hedge fund the hedge fund makes the investments and they picked American media because they thought that the stock. Yeah. Actually, they invested this through a hedge fund run by Chatham asset management and Chatham has only returned two point three percent a year. Since they made the investment in two thousand nine. No, it is low. It's it's bad. If CalPERS just put money into an index fund. They would've made five times as much money. Is there some connection they had to this fund CalPERS? Oh, many years of Calpers's notorious for making bad investments, they have like stupid people running it. And and every few years, there's another story about a bad CalPERS investment. And they never they never seemed to come close to what the market is giving. And by the way was one fund something called the Eureka fund. And apparently ninety nine percent of it is held by CalPERS. Well, that doesn't sound like you're spreading the risk much all the money in one fund. They make they make decisions over the years. A number of articles Chatham asset management snapped up a majority stake in American media in twenty fourteen the publisher was struggling to emerge from twenty ten bankruptcy. And he's a financial lifeline. So it almost looks to me like this company, which is Chatham asset management hedge fund, they they basically we're using the CalPERS money to exact their own gains. That's how it looks to me because they took the money in the they took Alpers money invested in American media of which they own a majority stake. So the so the teachers the. The government workers in California. One of their big investments was in a newspaper that was going out of its way to trash Hillary Clinton and protect Trump. They were the ones paying Trump's girlfriends the berry stories about his indiscretions. Any? That's just that's nice irony. Isn't it is? One of the most anti Trump, public employees. Apparently, there's was one point nine member invest in his propaganda outlet. Because he's such close friends with the with the publisher of the National Enquirer. And they were they were the ones going after Jeff Bezos and his mistress. Now CalPERS wants to make it clear to things that they are winding down their investments in hedge funds over the last five years and the Chatham Chapman. Hedge fund did represent a small percentage of their three hundred and fifty billion dollar pension fund. It shows you just how big this thing is how mantra services and you're responsible for it listeners. Oh, yes. The employee's kick into know a lot of the money comes from the state in from the towns and cities have to kick into the pension fund, which is your tax money, right? Supposedly the pension fund has closed down a majority of its investment in this them Eureka fund, the remaining stake now is supposedly a little more than two hundred million dollars. But you're right. Calpers has seen an unimpressive. Two point three percent rate of annual return out of its regional investment in the Eureka fund in two thousand nine doesn't somebody look at that like a couple of years ago? It's not working for us. Should we look around for? I mean, what does it sit there for nine years serve their lazy? There's there's always a bottom ten percent of investment firms. Bottom ten percent of hedge funds a bottom ten percent of anything in life. Right. You're right. There's a you wonder who they are this is it this is it CalPERS is in the bottom. Ten percent. It's like being the stupidest guy, you know, at at an Ivy league school somebody's graduating last. So, you know, there's only so many smart people in the world. And I think there's a lot better jobs in the investment in the investment profession, then running a government workers fund. I mean, if you're showing up for that job, how many other jobs have you been kicked out of? The other people won't hire you if you're available to run the California government, pension, and the other irony here is that the Cowboys is one of these funds that always claims their pension fund that they tried to be socially responsible and this supposed to just get money for people. So the tax payers don't get hosed a little less enough with their social responsibility, and they're politically correct investments and here they ended up here. They ended up investing in Trump. All right. When we come back. A couple of things to say concerning last week's big stories and the people that went in the dumpster Friday. The Justice small at story is taken a couple of new turns coming up, John and Ken KFI. Debra Mark has.