Cocke: LB Partners uses multi-year incentive measurement and clawbacks
Chas Cocke · Chas Cocke - From Allocator to Manager (Capital Allocators, EP.224) · Nov 29, 2021 · at 46:45
Chas Cocke discusses how he designed fee structures at LB Partners to maintain manager-LP alignment during down years.
0:00 / 0:18exact quote · 18.9s
720p mp4 · rendered on demand · StarZero watermark
“And so when I built LBP, we intentionally built it with a multi-year measurement period. We built it with a hurdle so that if I'm having a down year or a down moment, In year two, and I was up in year one, well, our clients can actually begin to claw back some of what it looked like I might have been paid.”
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 Chas Cocke
Cocke: A $10 billion endowment likely paid $500M in fees in 2021
“I would bet that if you looked at a ten billion dollar endowment in fiscal year, 20, 21, it would shock me if they didn't pay at least Five hundred million dollars in fees in fiscal year, 20, 21. It wouldn't surprise me if it's even higher than that.”
Cocke: Wall Street cap intro pitches prioritize marketability over fund performance
“I started to realize, you know, what's happening is the Goldman Sachs and Morgan Stanley's of the world are getting these guys in their cap intro department and they're creating their presentations for them, which it occurred to me what that really meant is th…”
Cocke: Small, tightly aligned investment units generate the best returns
“And it turns out that actually what I was very drawn to was a guy, a Bloomberg and a dog. And I actually think that is where the most special returns lie. And it doesn't have to be someone who has no team. But in small units where they are very, very synced up…”
Cocke: Quant strategies struggle to systematize businesses undergoing fundamental transitions
“That if you can find a business that is going through transition, where it's becoming a greater and greater business, but its perception lags, that type of opportunity set, I think, is really hard to systematize from kind of a quant perspective, where the busi…”
Cocke: UVIMCO allocated over 55% of its portfolio to hedge funds in 2002
“I got down there, and they had 55% in hedge funds, and it was going higher. Almost nothing in loan only, and the rest in privates.”
Cocke: Top investors gravitate to structures offering highest pay and freedom
“The best investors in the world are generally running structures where they can get paid the most, where they can have the most creative freedom, and where they can attract and surround themselves with the best talent and the best investors, and that, that mom…”