The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Blitz: Long/short equity offers the greatest manager diversification among hedge fund strategies
“We actually think long, short equity is the strategy where you get the most diversification among underlying managers.”
Blitz: The average hedge fund adds no value net of fees
“I think the industry as a whole, and we, we've always felt the industry as a whole does not really add much value, if any value, net of fees. So the average manager isn't very interesting.”
Blitz: Bottom-up manager selection beats top-down asset allocation in hedge funds
“Much more bottom up. You know, we think the scarce resource are really great, great managers. And, you know, we've learned this the hard way, right? When you try to say, here's my view of the world, let's shove a mediocre manager in to fit that view of the wor…”
Blitz: Allocators should add to underperforming managers and trim top performers
“You want to be reducing when someone's doing well. You want to be adding when someone's doing poorly if everything else, all else is equal. You want to be investing in a new manager, at least new for our portfolio after a period in which they've been strugglin…”
Blitz: Allocators should redeem immediately when a manager's passion deteriorates
“If you start to sense, boy, the mentality of the manager is changing or something about their strategy or something about their love for the business is kind of Changing for the worst. Even if they're going through a drawdown, you're still better off probably …”
Blitz: Evanston prefers early-stage managers because principals are hungrier
“That often leads us to early stage managers who aren't managing a lot of money. The principals of the firm are hungry at that time, and there's not many good ones like that out there, but those are the ones we tend to prefer.”
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.”
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…”
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…”
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…”
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.”
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'…”
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.”
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…”
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,…”
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…”
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,…”
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…”
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.”
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.”