The Ledger
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Cook: High-performing active investors are still wrong 40% of the time
“You're wrong about 40% of the time in our business if you're doing a good job.”
Cook: Sunriver faces short-side liquidity constraints above $1.5 billion in AUM
“What we have said is that we probably start to have some liquidity issues on, particularly on a couple of our shorts at around one and a half billion in AUM to stay in our sandbox and generate the kind of returns that we think We can and should generate for LP…”
Cook: Sunriver's internal data showed they exited structural short positions prematurely
“We were exiting some of our shorts, particular structural shorts too early. So we were taking a gain and then the short kept adding alpha even after we had exited. And so the data said, gosh, if we had just, I think we hold our shorts longer than the average h…”
Cook: Short alpha generation is episodic compared to steady long alpha
“What I have found over the years is that long alpha generation tends to be a little more smooth and steady, not always, but a little more smooth and steady and short alpha generation tends to be a little more episodic. So there are periods when it just rains s…”
Cook: Sunriver's proprietary sentiment tracker hit record highs across both books
“The short book right now actually has the highest sentiment tracker it's ever had. So it's an unusual setup for us. Usually you have one side of the book with
Really good sentiment tracker on the other side, not so good. You know, today we actually have high s…”
Cook: In investing, good ideas become bad when taken to valuation extremes
“A good idea taken to an extreme becomes a bad idea. And I think that's true in life and it's definitely true in investing. As an example I mentioned earlier, people have gone from talking about 20 to 30 times earnings for a good growth company to 20 to 30 time…”
Cook: Sunriver holds about 20 concentrated longs and 35 shorts
“One is just purely from a concentration perspective that we are much more comfortable being concentrated on the long side than the short side. We have about 20 longs. Typically, top 10 longs are 60 to 70% of capital. Short side is less than half as concentrate…”
Cook: Sunriver offers sliding-scale management fees and loyalty incentive cuts
“So we have a sliding scale management fee, which disincentivizes us to be asset gatherers and keeps us focused on performance. We also have a incentive fee that gets better with time. So the longer you're an investor with us, the better your incentive fee gets…”
Cook: Sunriver Management averages net market exposure in the low 40s
“We're roughly on average, low forties, 40% net.”
Cook: Sunriver generates alpha from selection and sizing, not tactical trading
“It really showed that we're adding a lot of value in security selection and a large amount of value in Sizing and really not much value in trading at all. Good news was we weren't destroying value in trading, but we weren't adding a lot of value in trading.”
Cook: Sunriver employs an external forensic accounting firm for short analysis
“We also have an external forensic accounting firm that we work very closely with that helps us in really complicated accounting issues”
Cook: Sunriver typically holds at most one Goldman Sachs VIP stock
“At any given point in time, when I look at, say, for example, the Goldman Sachs VIP list, we'll have maybe one stock in there.”
Cook: Sunriver reviews portfolio losers annually to distinguish process from outcome errors
“At the end of every year, I go through all the big losers in the portfolio, and I try to separate process and outcome as best as I can, and really try and talk to each of the analysts about what I think are process mistakes as distinct from outcome mistakes.”