The Ledger
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Investment managers hit their career sweet spot in their first five years
“We have a very strong belief, backed up by quite a lot of data, that there is a sweet spot in the careers of great investment managers that really occurs in those first five or so years when somebody who's proven themselves at a larger firm leaves, start somet…”
The family advisory sector fails to promote endowment-style investing
“The way our whole sector is structured to service families doesn't necessarily promote that as much as it should.”
East Rock avoids credit, core real estate, and infrastructure as low-reward
“Some of the differences, first, there are a set of Areas that endowments seem to like to invest in that to us seemed like poor returns on risk. And so those included for most of the 16 years we've been doing this, most of credit has fallen in that category. Wh…”
Investing in shrinking businesses insulates portfolios from macro and valuation risks
“One of the things I believe in terms of downside protection is you can protect your downside several different ways. One way is to have some specific hedge. Another way is to be high up in the capital structure, have some structural protection. And a third way…”
Personal character and long-term relationships matter more for alignment than co-investment
“There's a personal element to alignment that has to do with your relationship with the person, the character of that person, them caring about alignment. And that in many cases is much more important than just the financial flows of what do they put in and wha…”
Leaving a firm without pre-arranged funding is the best emerging manager signal
“The best positive signal there is, is that somebody leaves the larger place without something already set up.”
East Rock advises clients to hold long-only equity exposure outside its umbrella
“We did relatively little in traditional long-only equities, and the thinking there, here's where we had to make a choice about what we thought was best for our family clients, and we felt that to the extent our families ought to have long-only equity exposure,…”
Investing on pre-negotiated terms after fundamental de-risking yields top returns
“Once in a while, you get this look at the end, and I think in a lot of cases, those will be some of the best investments you ever make.”
The outsourced family office sector remains nascent and dominated by mega-institutions
“When I look at our sector, define my sector as this world of managing family capital. On some basis that is essentially outsourced rather than an in-house family office. I think our sector is nascent. Like, I think in some ways what I just described to you, th…”
Multiple investment risks compound rather than adding together linearly
“One risk plus another risk is not just the equivalent of two risks, but it compounds.”
Emerging manager reference checks must be 60-plus minutes and off-list
“In any case, there's no substitute for a massive number of references done a certain way Ideally done, for example, in person, ideally done, not in 10 or 15 minute conversations, but in 60 plus minute conversations, and ideally off list, and even more ideally,…”
Family offices require higher liquidity thresholds than endowments due to uncertain payouts
“We actually make payouts and they're more uncertain than what endowments have to make. So we tend to actually have to have a higher liquidity threshold in certain ways than an endowment would.”
Replicating public managers' edge is harder than replicating private market diligence
“I guess this is ironic because in the public markets, we ought to have the same amount of information, but it's much harder to replicate a public manager's knowledge base. When they see edge in a public name, they're talking about the primary research they did…”
East Rock fields a dedicated team to track talent before spinouts
“We have A whole team that is dedicated towards figuring out who those best people are at those larger firms and dedicated to spending time with them sort of in any way that makes sense, which could be inviting them to events, providing career advice, making in…”