Capital Allocators Monthly (June 2018)

 

Summer reading time, and this month was a good one.

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Reading
1. The Hedge Fund Fee Conundrum is my latest piece in II.  It describes the gap between perception (hedge fund fees are declining) and reality (fees have barely budged) driven by the contradiction that allocators want both lower fees and “best in breed” managers who command higher fees.

2. Brian Portnoy, The Geometry of Wealth.  Brian’s second book takes a complex topic, our relationship with money, and distills it into an easily understandable framework supported by sophisticated research. His first book, The Investors’ Paradox, is a thoughtful exploration about manager selection and choice theory.

3. Cliff Asness, The Hedgie in Winter  From the bet with Warren, I spent some time over the last decade trying to explain why hedge funds shouldn’t be compared to the S&P 500 and found the audience either already got it or refused to care.  Cliff lays out the case extremely well in this piece.  He then runs the numbers to show that hedge fund performance hasn’t been as bad as the pundits proclaim, but has been getting worse.

4. Stephen McKeon, The Security Token Thesis.  Stephen’s piece on security tokens picks up on a thread that John Pfeffer mentioned on a podcast last month. Stephen will be on the podcast this fall. The day before I read Stephen’s piece, I saw this article about the sale of the Plaza Hotel in NYC, which may include a security token representing a partial share in the economics of the building. It’s a great example of the potential use case for security tokens.

5.  Jeffrey Archer, Tell Tale: Stories. I first picked-up a Jeffrey Archer novel, Kane and Abel, when I was in sixth grade (somehow 35 years ago). I have read every one of Archer’s 23 novels and 8 works of short stories since. Tell Tale is his latest work of short stories and is a fun window into his style.

Watch
1.  Crypto Calls, This 1 minute video is a real gem. Pump & dump meets crypto. It’s not entirely clear if this video is a real pitch or a joke.

Listen
Capital Allocators
1. James Aitken is a brilliant, influential macro strategist who quietly works with one hundred of the largest pools of capital in the world.

2. Brian Portnoy discusses The Geometry of Wealth with great insights into money and life.

3. Tom Lydon closely following the ETF industry and talks about this increasingly important area of the investing landscape.

4. Tali Sharot, behavioral neuroscientist and author, shares how the brain works, optimism, decision making, and mistakes.

Best of the Rest
1. Shane Parrish’s The Knowledge Project. Shane is well known for his insightful Farnam Street blog and community.  He is a thoughtful and kind guy who gets amazingly interesting guests on his podcast to explore “the ideas, methods, and mental models, that help expand your mind, live deliberately, and master the best of what other people have already figured out.”

2. Michael Reece on Patrick O’Shaughnessy’s ILTB,  Michael is the Chief Data Scientist at Neuberger Berman and describes the use of big data in the investment process. He offers in depth take on how fundamental managers use data to improve their results and debunks some theories about how data will replace people in investing.

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Have a good one,
Ted