Capital Allocators – Inside the Institutional Investment Industry

Latest Episodes:

Dawn Fitzpatrick – Multi-Faceted Investing at Soros Fund Management (Capital Allocators, EP.112) Nov 04, 2019

Show notes

Dawn Fitzpatrick is the Chief Investment Officer at Soros Fund Management, where she manages $25 billion in Soros family and philanthropic assets. Dawn started her career as a trader at O'Connor and went on to serve as the global head and CIO of O'Connor. In 2016, UBS Asset Management promoted her to Global Head of Equities, Multi-Asset and O'Connor, where she oversaw more than $500 billion in assets. Dawn regularly appears on lists of the most powerful women in finance, most recently getting named to the 2018 Worth Power 100.

Our conversation starts with Dawn's development in the industry from trading in option pits to navigating the Global Financial Crisis at O'Connor and leadership roles at UBS. We then turn to her taking the helm at Soros Fund Management, including creating a long-term strategy tied to the needs of the Foundation, building in short and medium-term targets to allow flexibility, blending internal and external management, connecting the dots across asset classes, sharing perspectives on public markets, private credit and private equity and measuring and managing risk.

Dawn contends that Soros has a uniquely attractive platform for the right type of leading investors to apply their trade, and I would agree. If you're a manager interested in having a look, reach out to Brenda Formes at Brenda.Formes@soros.com

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Ash Fontana – Investing in Artificial Intelligence at Zetta Ventures (First Meeting, EP.11) Oct 28, 2019

Show notes

My guest on today's First Meeting is Ash Fontana, a Managing Director at Zetta Ventures, a venture capital firm that backs Artificial Intelligence companies with B2B business models. The firm invests in early-stage companies with unique data sets and models, and rolls up their sleeves to help founders by using a playbook Zetta created specifically for AI companies. Ash started his career as an entrepreneur and investor, and before joining Zetta started and built the money side of AngelList alongside Naval Ravikant. Our conversation covers Ash's background, Zetta's thesis, team, and strategy, and turns to Zetta's sourcing, due diligence, decision making, portfolio construction, working for portfolio companies, and investment examples. Along the way, we cover the evolution of AI, assessing data sets, misperceptions about AI, competing with the tech giants, and the future of investing in the space.

Ana Marshall – Applied Direct Investing at the William and Flora Hewlett Foundation (Capital Allocators, EP.111) Oct 21, 2019

Show notes

Ana Marshall is the Vice President and Chief Investment Officer for The William and Flora Hewlett Foundation, where she oversees a $10.5 billion pool of capital. Ana joined Hewlett in 2004 after spending eighteen years as a direct investor in high yield credit, emerging market debt, and international equities.

Our conversation covers Ana's lifelong passion for investing, joining the "super buy side," conducting company meetings to inform the manager selection and allocation process, portfolio structure, manager selection, monitoring and measuring risk, perspectives on peers, internal dynamics, and working through a big mistake.

Jay Girotto – Farmland Opportunity (First Meeting, EP.10) Oct 14, 2019

Show notes

Jay Girotto is the President of Farmland Opportunity, a $400 million investment manager that provides direct ownership of high quality, consistently productive row crop farmland in the U.S. Like many managers in traditional asset classes, Farmland Opportunity searches for inefficient transactions, value-added improvements, and an aligned structure to maximize the benefits of farmland for the long-term. Our conversation covers Jay's path from software engineer to farmland investor and discusses the attractive features of the asset class, including macro characteristics of uncorrelated returns and inflation hedging, and micro features of supply-demand imbalances, labor-intensive sourcing, unprofessional operations, and land value appreciation. We then turn to Farmland Opportunity's strategy in the area incorporating a specific regional focus, operational partners, aligned incentives, risk assessment and exit strategies.

Jonathan Tepper - Variant Perception of Capitalism (Capital Allocators, EP.110) Oct 07, 2019

Show notes

Jonathan Tepper is the founder of Variant Perception, an economic research group that works with institutional managers, hedge funds, and allocators to provide objective and comprehensive data to form actionable ideas from leading indicators and emerging trends. He is also the author of three books, the most recent of which, The Myth of Capitalism: Monopolies and the Death of Competition, received widespread acclaim earlier this year. Our conversation covers Jonathan's unusual upbringing, learning about currencies from Big Macs, building economic and liquidity forecasting models, and catering Variant Perception's research to investors. We then turn to The Myth of Capitalism, discussing the history, causes, and ramifications of the absence of competition in U.S. industries, natural and unnatural monopolies, examples in the tech giants, funeral home operators, airports, and hospitals, and what can be done to counter this negative trend.

Joe Lonsdale – Entrepreneurship and 8VC (First Meeting, EP.09) Sep 30, 2019

Show notes

Joe Lonsdale is a founding partner at 8VC, a leading venture capital firm that partners with top founders and entrepreneurs to build lasting technology platforms. He began working at Peter Thiel's PayPal while Joe was an undergraduate at Stanford, and upon graduation became an early executive at Thiel's Clarium Capital, which became a multi-billion dollar global macro hedge fund.

From within Clarium, Joe went on to become a co-founder of Palantir, and later founded Addepar and OpenGov. After operating this series of successful start-ups, he turned to early stage venture investing for himself and then as a founding partner of Formation 8, the precursor to 8VC. In 2016 and 2017, Joe was the youngest member of the Forbes 100 Midas List.

Our conversation begins with Joe's dive into entrepreneurship out of school, the founding of Palantir and Addepar and his shift from operator to venture capitalist. We discuss the venture landscape, 8VC's competitive advantage, building new companies within 8VC, price competition for deals, the due diligence process, adding value to portfolio companies, and new ideas on the horizon in venture investing.

Although we were pressed for time, Joe packs the conversation with great nuggets of wisdom from his incredible success.

Gary Klein with Paul Sonkin and Paul Johnson – Conducting Pre-Mortem Analysis (Capital Allocators, EP.109) Sep 23, 2019

Show notes

Gary Klein is a noted cognitive psychologist with an innate ability to see what others don't. Over his 40-year career in the field, he's pioneered the field of naturalistic decision making, the Pre-Mortem method of risk assessment, and the ShadowBox training approach. Gary is the author of five books and editor of three more, and most recently, founded Shadow Box, LLC in 2005 to train decision makers on his technique. You can learn all about Gary at gary-klein.com.

Paul and Paul, you may recall, were guests on the show discussing their book that I greatly enjoyed, Pitch the Perfect Investment. Both are former investors and professors of finance.

Together Gary, Paul and Paul co-authored a paper entitled Rendering a Powerful Tool Flaccid: The Misuse of Premortems on Wall Street. The paper is a detailed look at how properly conduct Pre-Mortem analysis.

Our conversation covers Gary's background studying expertise with fighter pilots, tools to improve decision-making, including the Shadow Box technique, Cognitive After-Action Reviews, and Pre-Mortems. We then do a deep dive on Pre-Aortem analysis, including its history in the Air Force, what it is, how it works, when it falls short, and the benefits of reducing overconfidence, time efficiency, increasing candor, making groups smarter. We discuss views on other risk mitigation techniques as well, including devil's advocates, red teams, risk assessment, and critiques.

I found the conversation an incredible door opener to one of the most effective and time-efficient sources of value in improving investment decision-making processes. I'm privileged and excited to share this conversation with you.

[REPLAY] Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) Sep 23, 2019

Show notes

Paul Sonkin and Paul Johnson are investors, professors, and co-authors of Pitch the Perfect Investment. Paul Sonkin is an analyst and portfolio manager at GAMCO Investors and has researched small, micro, and nanocap companies for a quarter century. He taught for 16 years at Columbia Business School. Paul Johnson runs advisory firm Nicusa Investment Advisors, and previously was a top-ranked sell side analyst, hedge fund manager, and an investment banker across 35 years. He also taught 2,000 students across 40 classes at Columbia Business School and Fordham University, and has received a host of awards for his prowess in the classroom.

Their recently released book is the first I've come across that reverse engineers a portfolio manager's thought process. It starts with crystal clear first principles of business analysis and covers everything an analyst needs to know to identify a great stock. Then, Paul and Paul describe how portfolio managers assess ideas. Their framework is targeted for analysts starting their careers in the field, but seasoned portfolio managers and allocators both will also learn a lot about communication with their teams from the clear descriptions and colorful examples in the book.

Our conversation covers the concept of the book, the wisdom of crowds, getting an 'edge', the four questions every portfolio manager needs to answer, and the role of creativity in investing. These gifted professors offer clear terminology for investment first principals and along the way offer a renewed appreciation for how difficult it is to beat the markets.

For more episodes, go to capitalallocatorspodcast.com/podcast

Follow Ted on twitter at @tseides

Michael Schwimer - Sports Betting at JAMBOS (First Meeting, EP.08) Sep 16, 2019

Show notes

Michael Schwimer is the CEO of Big League Advance (BLA) and JAMBOS. Last year, I sat down with Michael and discussed his playing career and the formation of BLA. That conversation, which you can listen to on the feed right after this one, has been the most downloaded episode of Capital Allocators. Our second conversation starts with an update on BLA, the private equity fund that takes stakes in the future earnings of minor league baseball players. We touch on the implementation of the strategy and the development of the BLA sports analytics team since last year. We then discuss other ideas Michael brainstormed with his team to deploy their unparalleled horsepower in sports analytics. That exercise led to the formation of a new sports betting service called JAMBOS. We walk through the business of predicting the outcome of sporting events, the disruption of tout subscription services for sports betting through transparency and accountability, and the potential impact of predicting game outcomes on the future of sports and sports entertainment. You can find out more about the service at www.jambospicks.com.

[REPLAY] Michael Schwimer – Moneyball as an Investment Strategy (Capital Allocators, EP.72) Sep 16, 2019

Show notes

Michael Schwimer is the CEO of Big League Advance, a company that makes investments in Minor League baseball players in exchange for an agreed-upon percentage of their future earnings. Before founding BLA, Michael was a professional baseball player, working his way through the minors and reaching the majors as a pitcher for the Philadelphia Phillies. A shoulder injury left him pondering what to do next, which led to the creation of BLA.

Our conversation discusses Michael's career as a player, the difficult life of Minor Leaguers, and his mission to improve their fortunes. We discuss his passion for statistics, application of Sabremetrics, and development of a team of All-Stars in the game of sports analytics. We close with a look into the future of BLA and Michael's prediction for this year's World Series Champion. Whether his bet proves right or wrong, Michael's rationale exemplifies second order thinking through the lens of data analytics that is never far from his mind.

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