Disclosure
Blitz: Evanston prefers smaller, sector-focused long/short equity managers
“So long, short equity, which you know, is a good part of what we do. We've always preferred smaller managers and managers with a sector of expertise, you know, all else equal.”
Disclosure
Blitz: Evanston prefers larger distressed debt managers with established infrastructure
“Distressed debt is very different. You know, we generally prefer larger managers. They're managers who can afford the infrastructure, the legal expertise. They've been through multiple credit cycles.”
Insight
Blitz: Quantitative risk models work in 98% of cases but miss tail events
“We have a framework we call our qualitative risk framework where effectively, you know, we think quantitative measures of risk work in 98% of the cases, but it's the two percent of the other cases that you really need to worry about.”
Disclosure
Blitz: Evanston allocates nearly half its portfolio to long-short equity
“If you look across the firm, probably about, you know, close to half is in long-short equity, maybe 15 or so percent in macro, 20% event-driven and the remainder in relative value. Very little quantitative strategies and very little in the way of strategy that…”
Insight
Blitz: Investors are poorly compensated for crowded, high-leverage strategies in illiquid markets
“And when you start combining highly leveraged strategies with strategies that are crowded, where people are looking at similar factors in a market that we still think is fairly illiquid, you know, in our view, those are risks that you're not particularly well,…”
Insight
Blitz: Manager selection depends heavily on qualitative soft factors
“We think so much of manager selection and trying to figure out who's going to do well prospectively is based on much softer
Factors such as, you know, why is the person doing this?
What drives them?
Do they really love this?
How competitive are they versus are…”
Insight
Blitz: The importance of trading and execution is dramatically understated
“I think the, it's so dramatically understated the, you know, how important trading is in any investment strategy, market impact, implementation.”
Insight
Blitz: A clear portfolio construction approach strongly predicts manager success
“What we found over the years is that, you know, the more folks are confident and have a handle on their own approach to portfolio construction, as opposed to kind of blowing in the wind on it, the much more likely they're going to be successful in it.”
Insight
Blitz: Track records built on low capital bases struggle to scale
“And a lot of times in the past, you might have what appears to be an optically good track record, but it was done on a very low capital base, or there was some sort of issue that enabled them to do well out of the gates, but at any sort of larger size, you kno…”
Disclosure
Blitz: Evanston immediately rejects hedge fund managers showing a sleaze factor
“You know, we have a term we just call sleaze factor, which is whether it's on the investment side or the operational side, if you're meeting with the manager and you're just not getting a great vibe from them, you're getting incomplete answers. Just, it doesn'…”
Disclosure
Blitz: Evanston requires unanimous nine-person committee approval for new managers
“So we have a nine person investment committee that is the formal kind of investment body, if you will, of the firm. And we need unanimous approval of all nine of those investment committee members before someone makes it in the portfolio. Only really need one,…”
Insight
Blitz: Evanston's best hedge fund investments rarely check every box perfectly
“Very, very few of our, you know, best investments have had every single box check absolutely perfectly, and in fact, some of our more mediocre initial investments have been the things that kind of check every box, but again, that spark wasn't necessarily there…”
Disclosure
Blitz: Evanston avoids tiny toehold allocations, investing in size from day one
“And I'd say when we do our day one investments, we do it with conviction and in size. And so you know, we're not believers in, hey, you know, let's take a 10 basis point position in a manager so we can all pat ourselves on the back that we knew that that manag…”
Disclosure
Blitz: Style drift from asset growth is Evanston's top redemption reason
“It's probably the number one reason why we redeem from managers is the style drift that comes from asset growth.”
Insight
Blitz: Trade structuring is a more sustainable edge than directional macro calls
“Something like the ability to structure trades very well, or, you know, say, hey, here's my macro view, but I'm going to position myself in such a way that if I'm right, you know, I'm going to do really well, and if I'm wrong, I'm going to, you know, lose a li…”
Assertion Supported
Blitz: Many bonds inside liquid high-yield ETFs rarely trade daily
“You know, even in the high yield ETF, a large percentage of the high yield bonds comprising that ETF don't even trade Hardly on a day-by-day basis, even though the ETF itself is very, very liquid.”
Insight
Blitz: Liquidity mismatches in commingled credit funds harm long-term investors
“If you're in a commingled fund and credit, and the manager is very liquid terms, but the underlying assets aren't very liquid, that can get you in trouble very quickly. If they put in a large redemption and start selling at bad prices, that negatively affects …”
Disclosure
Blitz: Evanston's long/short equity managers run 40% to 50% net exposure
“So, you know, if you look across our long short equity manager universe, I would say the net exposure is probably between 40 and 50%.”
Disclosure
Evanston Capital meets with over 200 new managers per year
“So we end up meeting in a given year, call it north of 200 new, new managers that we weren't previously familiar with.”
Assertion Not checkable as stated
Blitz: Evanston averages 15% to 20% annual manager turnover
“Turnover on average in a given year is about 15 to 20”
