Chhabra: Allocators overlook red flags when chasing outperforming fund managers
Ashvin Chhabra · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · Jul 4, 2022 · at 58:02
Ashvin Chhabra, President and CIO of Euclidean Capital, breaks down the psychological biases allocators face when evaluating managers raising capital after strong performance periods.
0:00 / 0:19exact quote · 19.3s
720p mp4 · rendered on demand · StarZero watermark
“What is hard is that you're always looking at managers who have done well recently. That's why they're raising capital. So you have that behavioral bias, you want to get in, And you're willing to overlook things that in retrospect were always there.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Ashvin Chhabra
Chhabra: The institutionalized David Swensen endowment model no longer works
“I'm not clear that the entire ecosystem of the Swenson model that had become so super institutionalized really works any longer. The fees are high, the fees are asymmetric, the LPGP risks are different, and I think we should explore different models, and I thi…”
Chhabra: Substantial wealth comes from concentrated business ownership, not diversification
“That is the engine of wealth creation. That is where all of wealth gets created, and so I analyzed the Forbes 400. I tried to figure out how wealth gets created, and it was really what I had learned in my interaction with these internet millionaires in 99, 200…”
Chhabra: Fischer Black's options math was trivial to a physicist
“Fisher Black had done some interesting work. He had solved the heat diffusion equation. It was sort of a trivial piece of math almost from a physics point of view. And so I think every physicist thought they could make a fundamental contribution in finance the…”
Chhabra: Prop trading desks give traders an asymmetric free option
“Because the traders have a free option, and On the firm capital, and so you're just going to induce me to take a lot of risk, and if it works out well, I'll make a lot of money if it blows up. There was something wrong with that whole structure”
Chhabra: Modern portfolio theory fails by ignoring markets' extreme social instability
“It completely misses the point that markets are this crazy beast that are totally uncertain because they're really a product of social activity, and over long periods of time, any social activity has huge variations.”