The Ledger
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Investment decisions should be highly collaborative but not consensus-driven
“I am not a believer in consensus decision-making, so we aim to have a process that's highly collaborative where we can gather as many viewpoints as possible.”
Heller speaks last and changes scores most during investment evaluations
“We go through this process, a pretty formal process of assessing investments before we put them in the portfolio. And I listen to all of the team's views because I'm always the last person to speak. And I am always the person that changes my scores the most by…”
Early reference calls are key to building an investment diligence mosaic
“So we do reference calls really at the early end of our process, because we find that that's just an incredible way to start building a mosaic.”
Evaluate fund managers on process quality rather than market outcomes
“And there's a number of KDIs that might fall out of that in terms of the accuracy of their decision making, not necessarily on an outcome basis, but on a process basis, because of course you can't control what the market's going to do, but just looking at the …”
High-quality compounders are one of the best long-term inflation hedges
“And these businesses typically trade at a premium on the public side. But I do think that given there's a lot of uncertainty around inflation, it's one of the better tools that we have, again, thinking long-term to protect against that.”
Manager advantages vary significantly across venture, buyout, and hedge funds
“So in venture, the advantages might be around personal brand, firm brand. On the buyout side, it might be really around their ability to add value post-close. And on the long only or hedge fund side, it might look, it might be much more around their approach t…”
Brandywine made a crypto investment, viewing it like the 1990s internet
“And we ended up pursuing a small investment in the space at the end of that process, understanding that there's just huge unknowable risks around regulation, around the investment in tokens and their volatility, around how you're owning something and what you …”
Brandywine avoids high-fee, high-turnover, cash-heavy equity managers
“So for our long only portfolio, for example, we have a break-even analysis that we run to look at the returns of a manager, and it's something we do right up front of every process to say, what does a manager need to earn after fees and taxes to beat a benchma…”
Brandywine targets multi-decade crypto private equity over liquid trading strategies
“And I think relatively quickly, we came to appreciate that the trading strategies were not a good fit for us. And I do think, by the way, people can make fantastic money doing this, but we didn't really want to have our main bet be on the volatility of the ass…”
Specialty insurance offers rare uncorrelated returns and semi-liquidity
“And it's really hard for us to find Assets that are relatively uncorrelated and provide liquid-ish, not super liquid, but not ten-year lockup illiquidity that provide the post-tax returns that we look for. We have a pretty high bar for our hedge fund portfolio…”
Misalignment is unavoidable and managers frequently break multi-year promises
“One would be misalignment, which is unavoidable, but something that drives me crazy every time I see it. And two would be when managers promise something and then five years later forget that they made those promises and do something else.”
Brandywine uses web-scraping utility as a key diligence indicator for re-ups
“We have a manager that's built this really cool web scraping tool as part of their sourcing engine. So a big KDI around re-upping with them is, is that, has that tool provided actual utility to them from a sourcing perspective?”
Brandywine requires an illiquidity premium to invest in private markets
“And of course, with anything private we do, we're always looking at the public comps to make sure that we're getting paid in a liquidity premium for being invested on the private side. Otherwise, there's no point.”
Repetitive meetings expose fund co-founder friction and stress responses
“It's an intensely human business investing. And the pattern recognition that comes from doing it for a long time is to be able to sort of dive underneath what you see initially. And you can learn this through references, but you can also learn it just through …”
Thematic deep dives require discovery, connection, and identification phases
“He refers to the research process around a deep dive as discovery, connect, and identify. So the discovery part of the process is To understand an industry's history, its development, and how it works today across all stakeholders. The connect part of the proc…”
Brandywine yields mid-teens pre-tax returns on affordable housing bonds
“So we had made an investment in securitized affordable housing bonds, and they produce a really fabulous post-tax return, even a pre-tax return in the mid teens, and they have very low default risk, and they're just a wonderful asset for our multi-strategy por…”
Lloyd's specialty insurance pricing shifted from a soft to hard market
“What's happened in that space is we got a call from a manager saying the pricing environment has moved from sort of a soft market to a hard market, frankly, for good reason, because there's been a lot of risks that have popped up in the space. It might be an i…”