The Exchanges

Q miraculous, game-changing, and an awakening. If that's not how you would describe your investment management tech, request a demo at ridgeline.ai. And now, back to the show. I'd love to dive into the example of Japan. So you said you looked at it every year, but then about a decade ago, you decided to start investing. What was the reason that you first said now's the time to get involved?

A As a value investor, I've had numerous friends and folks who've gotten excited about different Japanese opportunities once, twice, three times a year. Before FinePoint, I really never had invested in Japan. So we do work on these companies. We generally always found the same problem. Great company, cheap price, poor governance. They were accumulating a lot of money and the money was set in the balance sheet. They weren't reinvesting it. And so they weren't creating value. And also disclosure was difficult. The accounting was difficult. And so it fell into the category of unknowable. So we ended up not investing. So the big change that happened was 2012. When Shinzo Abe came into a second term as prime minister, he started to recognize that when you have these great companies that are generating fat profits and all this money just sits on the balance sheet of these companies, they don't do anything with it. It's actually destructive for the economy. And so he was really ahead of his time. So in 2014, he came up with a corporate stewardship code in 2015, the corporate governance code. So the corporate stewardship code was a roadmap for asset managers to hold companies accountable for better governance. The corporate governance code was telling the companies what they should be doing. It wasn't mandated. It was more, here's some frameworks for what you think you should be doing. S…

AI assessment note: “The big change that happened was 2012. When Shinzo Abe came into a second term”

Q Why don't you take me all the way back to your upbringing?

A I grew up in a small town in Southwest Ohio, Beaver Creek, Ohio. My mother was a teacher. My father drove an oil truck. When I look back at that time, the most formative thing to me was the fact that my parents really believed that we should have jobs. We should be working when we were in school. So if you ever wanted to buy something, you had to make money for yourself. So we were really encouraged to have jobs at a very young age. During that time, I started out as a paper boy when I was 11 years old. I remember The kid that had the paper route was the only kid in the neighborhood who had money, and so when he ended up quitting, I really wanted that job, and so I was 11, you had to be 13, I begged my parents, I begged the paper company to let me do it, because it was a route in the morning, I had to wake up at four 30, I had to deliver newspapers every day, 40 newspapers for an hour, but I was able to convince them to do that, and so as an eleven-year-old, you're running your own business, you're taught responsibility, Whether it rains, or snows, or sleets, or has a blizzard, you have to get up and deliver the newspapers. And then on the weekends, you have to collect for the newspapers. So you buy the newspapers for 65 cents, you sell them for 90 cents. If people don't pay you, that's out of your pocket. I learned early on that I had a brother who was five years younger than …

AI assessment note: “I grew up in a small town in Southwest Ohio, Beaver Creek, Ohio.”

Q What was your first job in the industry?

A 1990. I graduated. So I went to Miami of Ohio. As you remember, there was a pretty big recession back then. So I had a finance degree. I had an accounting degree. Always wanted to do investing. Didn't know a lot about it, but I was always intrigued by it. But at the time, Wall Street's firing people, blaming people off. And so I didn't have the opportunity to go to Wall Street. My very first job was working at Pete Marwick as an auditor. From the first time I started working, the one thing that I vividly remember at that first job is that I felt like, I've always felt like in life, like I was running a race and because of my background, because of where I grew up, I was starting this race way behind the starting point. And so for me, the only way to get ahead was to work my butt off. I've always had this mantra that nobody was going to outwork me. At my very first job, my peers are working 40, 50 hours a week. I'm working 80 or 90 hours a week. Got promoted very, very early as part of that. What I also remember is I befriended somebody. They're five years ahead of me. I saw what they were doing, and I said, I don't want to do that. So I took a risk. I left Pete Marwick and actually went to go work for First Chicago, which was really my very first investing job.

AI assessment note: “went to go work for First Chicago, which was really my very first investing job”

Q When you do have such disparate opportunity sets, how do you think about portfolio construction and position sizing?

A When you think about the return characteristics of a Japanese stock versus a credit instrument versus a reinsurance contract, they are really different. We have developed this tool that we built internally that really is a variety of quantitative and qualitative factors that helps us think about the return characteristics across these different verticals and how we should think about sizing. Now, the quantitative factors that go into it will be things such as What's your base case? What's your nineties percentile? What's the risk? If you get everything wrong, how much money do you lose? What's the timing? Is there a catalyst around it? And then we have a large number of qualitative things that we think about as well. So do we have a history of success doing this type of investment? Does it have a catalyst? We have a category for the herb conviction score. So how strongly do I feel about this? How knowable are the inputs? How knowable is the risk? Does the analyst have a history of success doing this? I think it's important to say that the model really is a starting point. It helps stoke conversations. It helps based on all your history, what the model is telling you, and then forms a great basis for a conversation, and then we go from there.

AI assessment note: “We have developed this tool that we built internally that really is a variety”

Q Who's your favorite leader in the world of the charities you've given money to?

A Hands down, my favorite leader would be someone named Paul Farmer. He ran an organization called Partners in Health. He passed away probably three years ago, but there's a great book written about him called Mountains Beyond Mountains by Tracy Kidder. Paul was somebody who just was just totally committed to helping people and providing the most vulnerable people with the best healthcare that he could. He was such an inspiring individual and he was so committed and he's impacted millions of people. In all types of different communities. He's just been an inspiration to me to know people like that. You just feel fortunate to have interacted with somebody with that mission and those kinds of values and somebody who dedicates their entire life to helping people. So luckily we meet a lot of those people. It's one of the coolest parts of the work that we do. My wife has a phenomenal team that she works with who help her on this mission. And so we've been very fortunate to have them along with us really helping to make an impact.

AI assessment note: “Hands down, my favorite leader would be someone named Paul Farmer.”

Q How did you go from one to the other?

A I got a call from somebody who knew Seth, who said Seth was looking to add to the team. My wife and I went and had dinner with Seth when I was in New York, and we just really hit it off. Seth is a incredibly kind, thoughtful, and crazy smart, phenomenal investor. He was willing to mentor me. He was willing to invest in me. I felt like he loved investing and he wanted to do it for many, many more years. There was phenomenal people that I got to meet as well. So, sometimes you just meet people, things just click, and when I met Seth and spent time with him, I was like, wow, I can really learn a lot from this guy, and I can hopefully learn how to become a good investor from him, and then we were off to the races.

AI assessment note: “I got a call from somebody who knew Seth, who said Seth was looking”

Q I'd love to ask you about two aspects of the evolution over your career and defined point. Value investing and credit markets. Value investing has had a tough slog over this last 10 plus years. How do you think about what it means to be a value investor and how you try to go about it?

A When I think about value investing, to me, what I think about is really trying to find misunderstood, mispriced assets in a whole variety of markets. And it used to be, back when I was just getting started, it was buying cigar bots, like Warren Buffett and Benjamin Grant used to talk about. For me, really what it's more about identifying areas where there was structural mispricings, And actually doing fundamental work in valuing what securities or assets are worth in these areas. When you can value them and you can buy them at a big discount to that, and there's a catalyst to help you realize value, you do it. And when there isn't, then you don't have to invest. So when I think about the different areas of what I've done over the years, it's pretty broad. Take, for example, we did a lot of stuff with credit, high yield, distress, and then we moved into structure products, did a lot of stuff in South Korea for a number of years, Japan, Then we ended up moving into reinsurance and different credit derivatives. So it's a pretty broad mix of products, but I think the common denominator is it's out of favor. It's hated. You can have a view that's different than the market. You can understand why it's cheap, and you can have a view for what it's worth when you can buy things at a discount to that, and there's a catalyst, and you go ahead and do it. When I think about traditional valu…

AI assessment note: “what I think about is really trying to find misunderstood, mispriced assets”

Q And the other credit markets, you started buying loans at two times cash flow and selling them at four. The world's changed a lot since then. How do you think about the credit markets today and how that's changed?

A I have been a credit investor most of my career. I've invested in a lot of different pockets of the credit markets. It's clearly a lot harder today to invest in credit than what it was when I was working at First Chicago. So we do keep a very close eye on the credit markets. Even though we're sitting here in the summer of 2025, our credit exposure is at historic low levels. Spreads are tight. There's a lot of capital. You know, when I look at where new issues getting done, how there's covenants. Now in credit, you have these LME fights that are going on, these knife fights between creditors that can erode value or could be an opportunity. So there's a lot of changing dynamics that are happening in credit right now. However, I do believe credits have been historically pretty volatile because you tend to have money coming in and out of those markets. Especially during times of stress. I am very excited about the credit opportunity set for the next three to five years. We don't see it right now, but if I think about the dynamics of the credit markets, there's a couple of things that say to me, this could be a really great place to invest. So number one, the number of assets in the credit markets that are held by vehicles that offer daily liquidity is growing dramatically. So mutual funds, ETF, passive vehicles, the percentage of the market's assets that are held with those vehicle…

AI assessment note: “It's clearly a lot harder today to invest in credit than what it was”

Q Is there a systematic way or screens or just things you read that lead you to be looking at what it is that you're talking to the team about?

A I wouldn't say it's systematic. Having an open mandate, that is one of the biggest assets of our firm, but it's also one of the biggest challenges. So we've built a lot of process around making sure that we're aware of where the global asset markets are priced. So we have a committee that's set up, has a number of senior individuals at our firm that really tracks a number of metrics to look at where opportunities are being priced in different markets. So there are certain markets that we have had A lot of experience and a lot of success that fit well within our mandate. Those are the markets that we have metrics that we follow. We say to ourselves, we really want to go a mile wide. And then once we find something that we think has some of the characteristics that we look for, then we really go a mile deep. Then we start doing a lot of diligence to understand how assets are being priced. And then when we start to think our things are interesting, we'll bring in more resources, really marshal the troops and then underwrite individual assets.

AI assessment note: “I wouldn't say it's systematic. Having an open mandate”

Q How do the conversations lead to an ultimate decision, either at a specific name or a bigger allocation portfolio?

A We are a highly collaborative firm. We're all aligned with our partners. Nobody has their own P&Ls here. Everyone is really aligned to find the best investments. What I have found is the best way to run an investment process is we'll have analysts who will go out, work on investment. I tend to work on investments pretty closely with people. When they bring it to the group, we'll typically do that two or three times. We'll have large conversations around what we're looking at. I will be having conversations almost daily, if not weekly, with the individual analyst. And then ultimately we only have one portfolio manager at the firm. That's me. And so I have to give the go ahead on an investment. Uh, where the model comes in that we just talked about is so we will look at the model, look at how this investment stacks up versus other investments, what the model is recommending in terms of sizing, how I feel about that recommendation. Does it seem right based upon my experience? And then based on that, we'll execute on the investment. We have a large majority of our investments that go through this Process that could take six months to a year from the time it gets into the portfolio. Sometimes you have a day to make a decision. And so those are the ones actually that are really fun, but this require a lot of focus. The one that comes to mind, the recent one is Silicon Valley bank. Wh…

AI assessment note: “ultimately we only have one portfolio manager at the firm. That's me.”

Q When you started, value investing wasn't so out of favor, and you really did start with quite a significant launch. How do you look at it today?

A I'm very fortunate that I have a phenomenal set of LPs. I have a great team. I have people who are highly energized, who like coming to work every day, and we're really doing different things. The firm today, size-wise, is a little bit bigger than what it was when we first started. But the types of things that we're doing are dramatically different. Because of that, we hire generalists. We hire really good athletes, really smart people who are intellectually curious and can learn almost anything. And we plop them into our model as we go off and embark and looking at a whole variety of asset classes. I would say we have a small number of LPs. We have a small team. We run a concentrated portfolio. We're a research oriented organization. We're value investors. And so a lot of the fundamentals of who we are really haven't changed. What has changed is just the construct of the portfolio. We started out doing a lot of credit, maybe some equities. And if I look at what we're doing today, I mean, we're concentrated in Japan and reinsurance and a couple other things. I'd say our hedging program really has never changed. That's probably the one part of our firm, the investment part that has remained constant. I talked to you about how the investing style has changed, the focus on catalyst. We used to hold a lot of cash early on as the team matured, as I matured. As we started doing thing…

AI assessment note: “The firm today, size-wise, is a little bit bigger than what it was”

Q What was different from what you might have anticipated in that style of investing when you got to Baupost?

A The first thing that jumped out to me was you'd walk in during the day and it was quiet, and everybody had their heads down. Everyone was reading, doing research, and I remember thinking to myself, wow, this is a research organization. Like, they're investors, but they're really researching incredibly deeply what they're doing. As you start to understand the Bopolis philosophy, like, they're really trying to understand situations that they're in better than anyone. They bring in outside resources. They're incredibly smart people. They're very long-term oriented. I always say to people, everyone thinks they're a long-term investor. I think less than five percent of people are truly long-term investors based on my experience, but they were truly long-term. The model there was really hire great people. Seth would mentor you, give you resources, help you invest, invest alongside of you. And then as you did better, you'd get more responsibility and you'd hopefully grow and have a bigger impact. That was very refreshing to me. It was a culture of intellectual honesty, of trying to get to the right answer. Fundamentally, I thought about it as a research oriented firm.

AI assessment note: “The first thing that jumped out to me was you'd walk in during the day”

Q Within that broad group of companies making significant governance changes, have you found any sub strategies or sectors where that has been more prevalent than others?

A The answer is yes. What's interesting about Japan is typically when you see a company in an industry start to make significant changes and their stock prices go up and they start to reap the benefits because now they have excess assets to buy other businesses. What happens is you start to see other people follow in that same industry. IT services, for example, Hitachi was really one of the leading companies in this area. So they started making a lot of these changes and really started to Sell off listed subsidiaries, sell off excess assets, reinvest in growth businesses. The stock price has done tremendous. And then other companies like to follow as well. Some industries that are very slow to change and they really haven't adopted the benefits of better governance. I don't exactly know what percent of companies are actually taking positive action, but it's a well less than a majority. I think eventually most companies will do it. We're still in the infancy. I'd say the last few years, You've seen a lot more of an impact than the five years before that, so I think that's really positive, but there definitely are industries who, because there's a leader, because there's someone who champions the cause, that a lot of other people see the benefits, and then they follow.

AI assessment note: “The answer is yes. ... IT services, for example, Hitachi was really one of the leading”

Q So you mentioned that you don't participate as an activist investor, but the time may be ripe for activism. How have you looked at the behavior of activists and companies in your investment remit?

A We would rather find great companies and great management teams. I'd say today, what we have found is, 20 years ago, I don't think people understood what the activists were doing and why, and what the benefits were. Now, I think market really understands, okay, there's an activist who bought stock in a company that has massive cross shareholding, huge cash balances, owns all their real estate, very bad margins. And so investors say, wow, that's an opportunity. And so if there's an activist that gets involved, What you see today is there's a lot more support. They say, oh, everyone is doing this. This is really good for the market. It's good for society. There's buy-in amongst the asset management community. There's buy-in amongst the government. And so when you start to see activism take positions and advocate for change, everyone piles in behind them. And there are instances where you still have companies that fight them really hard, but just the culture around activism has just really changed. And I think it's because people see the benefits of it. I think that's the biggest reason.

AI assessment note: “when you start to see activism take positions and advocate for change, everyone piles in”

Q What risks in Japan are you worried about?

A One thing we should at least talk about is there's a lot of risk in our portfolio that we have no control over. The significant geopolitical risk in Japan, what every market, they think about China, Taiwan, there's a lot of geopolitical risk. We got another global pandemic. We could have a recession. We could have high inflation and interest rates. And so we actually have a pretty robust hedging strategy. Since we're fundamental investors, we hedge currency, commodity, and interest rates at the investment level. So for example, we hedge the yen. We don't have a view on the yen dollar. We think about ourselves as being dollar investors. So we hedge anything that's not dollar back to the dollar. So that's something we do. Same with rates. We don't have a view on rates. So we hedge that out whenever we buy fixed income instruments. And then on top of it, we say we own a basket of financial assets. We have no view on the risk of those events happening, such as a recession, but often the way the markets are pricing, you can buy protection against those risks in a variety of different forms. At very cheap levels. And so we build a basket of financial hedges on top of our portfolio when vol is low. And then when vol is really high, we typically sell them. And so we have a dynamic hedging program that we employ. I worry a lot about China, Taiwan. I worry about an earthquake. Like you c…

AI assessment note: “I worry a lot about China, Taiwan. I worry about an earthquake.”

Q So as we dive into that and what you're doing, when you bring to bear both the experiences you've had and then these perspectives about how value investing credit markets have evolved, how did you lay out what it is you're trying to do at FindPoint?

A We're really trying to compound capital over a long period of time. The way we do that is we have an open mandate. Our clients have given us a lot of trust that we can look across a lot of different global markets, and we can look for areas of structural mispricings. We go in, we underwrite assets, and we can buy things cheap where the cattle will do it, and we can't, we'll move on. I feel like our job is to find really attractive risk-adjusted returns. We have a global mandate to do that. And I'm also a big believer. We don't have to know everything. Often people will say, oh, what do you think about European stock market? I don't really know a lot about it. I don't follow it that closely. And so I don't really have a view. We have this saying here that when investing, you don't get paid for difficulty points. It's not like diving where the tougher the dive, the higher your score. That doesn't exist in markets. And so one of the things we try to do and I try to do is really have a sense for, okay, what can we know? Where are assets priced? Where is there a lot of stress? Where are their problems? As a big event happened, that's maybe caused people to run away from a market. And then is that a risk that you can really understand? It's important to know what you know, but it's more important to know what you don't know. And I'm a huge believer in that. That's really stuck with u…

AI assessment note: “We're really trying to compound capital over a long period of time.”