This week’s guest has forgotten more about hedge funds than most people will ever know. This episode will appeal to managers, allocators and any investor interested in the world of hedge funds. Ted Seides worked under David Swensen at Yale’s endowment and was a co-founder, President and Co-chief investment officer at Protégé Partners, a multibillion-dollar alternative investment firm. I met Ted after reading his book, “So You Want to Start a Hedge Fund: Lessons for Managers and Allocators.” He has taught me a lot ever since. Hedge funds have taken a beating, so this very nuanced investigation into the industry comes at the right time.
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Books Mentioned
So You Want to Start a Hedge Fund: Lessons for Managers and Allocators – Ted Seides
Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment– Swensen
The Hero’s Journey: Joseph Campbell on His Life and Work – Joseph Campbell
How to win Friends & Influence People – Dale Carnegie
Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak- Travis Sawchik
Moneyball: The Art of Winning an Unfair Game – Michael Lewis
Links Referenced
Show Notes
1:32 (first question) – Since both are huge Joseph Campbell fans, Patrick starts by asking Ted how he discovered Campbell and the Hero’s Journey retreats.
4:51 – A dive into Ted’s backstory including his time at Yale and the formation of Protégé Partners
5:49 – Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment – David Swensen
6:29 – Lessons learned from David Swensen and his work in endowment management
8:22 – What were some of the checklist items that worked out well in David Swensen’s model for investments in Yale’s University Endowment assets.
11:06 – A look at the structure that Yale had in their investments given their massive influence
14:04 – Shift from Yale to Protégé and how many seed investments they made there.
16:00 – The success rate at Protégé and how it was measured
17:20 – What styles were most prolific at Protégé Partners
17:50 - The economics that a seeder takes in a hedge fund
18:34 – What did they look for in the managers that they made investments in
22:27 – How Ted was able to get his first investors to support Protégé at the beginning
23:46 – Exploring the current state of fundraising
25:45 – What role does charisma play in raising money in a hedge fund launch
26:51 – The state of fees and where they need to be
35:26 – The paradox of skill and why we seem to have higher fees for lower skilled managers
39:29 – Ted talks about fee structures for hedge funds that mimic frequent flyer programs and why that could work for hedge funds.
43:34 – Patrick suggests something radical, taking fee discounts, investing them over time, but investors lose them if they divest within a certain amount of time.
45:17 – A look at some unique styles of funds
48:54 – Which of the edges would be most important to Ted in an investment decision: a strong pedigree, an impressive track record, or a unique idea?
51:05 – Patrick questions whether or not all of the folks who are “successful” are in fact talented or did they just become lucky to be a part of the right team/company.
55:25 – Advice to allocators in terms of over concentration vs over-diversification
57:40 – A look at the most memorable investment during the Protégé Partner days
1:00:22 – How would Ted counsel someone that wants to start a hedge fund
1:04:27 – Is it getting too hard for allocators to compete with hedge funds
1:07:43 – What other authors/resources have been helpful to Ted over the years
1:08:28 – How to win Friends & Influence People – Dale Carnegie
1:09:14 – Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak- Travis Sawchik
1:09:20 – Moneyball: The Art of Winning an Unfair Game – Michael Lewis
1:10:45 – The habits that have been most helpful to Ted’s wellbeing
1:13:03 – What have been the benefits of meditation for Ted
1:13:31 - 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works – Dan Harris
1:14:28 – What are Ted’s next interests
Learn More
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I just spent 4.5 hours driving tonight and I listened to your podcasts the entire time. My brian isn’t tired from the driving but from thought provoking interviews you conducted. These interviews are not only extremely interesting but they cause me to ask a lot of questions about how I can improve my thought process and question issues I might not have thought about otherwise. While Barry Ritholtz is probably the gold standard of investing podcasts, as someone in the asset management business I really appreciate the topics you bring up in the interviews and the work you put into creating fantastic interviews. Thank you and I look forward to all future podcasts.
I so appreciate this note. I will try to keep getting better.