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.
why aren't all 96 resolved? a statement only gets an assessment when the public record can support or contradict it. opinions and what-ifs never can, and 1 checkable ones are still open, waiting for their date. predictions held up or didn't; assertions are supported or contradicted. on every card: ▮▮▮▮▮ certainty · ▮▮▮▮▮ debate potential. speakers are clickable
Jack Bogle carefully staged his personal origin story for journalists
“The only thing that's a real common denominator is Jack had this wonderful vision of who he was and how he wanted to be seen, and he nurtured that vision, and he had it down pat, so every journalist who came to spend some time with Jack would get the same stor…”
Investment committees drag performance by hiring and firing managers at wrong times
“Because the record is very clear that investment committees tend to fire managers at the wrong time and to hire managers at the wrong time, creating a drag on investment results they could otherwise have had.”
Most active mutual funds underperform decades-long benchmarks, guaranteeing indexers top-quartile performance
“85 to 90% of actively managed mutual funds underperformed the benchmark they have sought to be. Not every year, but every decade, every 20 years, and if you want to be in the top half of the top quartile, all you have to do is index, and you'd be there.”
Vanguard prepared a $5B iShares bid using Warren Buffett debt
“Well, first they went to Omaha, Nebraska and talked to Warren Buffett. Would he be interested in lending some money? And then they explained to him through their banker that they had the ability to raise money by passing it back to the funds anytime they wante…”
Ellis: Yale removed Lehman Brothers as counterparty years before its collapse
“So sure enough, Lehman was on the list years before the Lehman problem, and years before the Lehman problem, they were taken off the list. And why? Because if you examined it rigorously and carefully, you would realize they're not quite as good at this kind of…”
Ellis: Increasing manager talent makes markets hyper-efficient, diminishing active outperformance
“The biggest information for people who are interested in the profession and for people who are looking for a good manager is the data documenting the inability of active managers to outperform other brilliantly talented, fully informed, Fabulous equipment, act…”
Ellis: Influx of talent will eventually arbitrage away private equity return premiums
“And so we're going to have lots of talented people going into private equity. And over time, they will arbitrage the difference risk adjusted and liquidity adjusted pretty well between publicly listed securities and private equity.”
Successful active investing requires exploiting uninformed 'habitual losers'
“And the secret to successful active investing is to have what's called, it's a little bit nasty term, but called willing losers or serial losers or repetitive losers or habitual losers.”
Active managers must outperform by 25% just to match index returns
“Add that up, that's somewhere around two percent has to be recovered just to keep up with the market. So two percent of eight percent is 25%. You have to beat the competition by 25%, and they know everything you know as soon as you know it, and you can only bu…”
Choosing index funds guarantees top-quartile performance over the long run
“If you would like to be sure that you're a top quartile manager chooser, all you have to do is choose index funds, and the chances are you'll be the top half of the top quartile. We're sure to be in the top quartile. Long run.”
Underfunded public pensions will miss 7% returns due to heavy bond allocations
“You can see it easily in the state and city funds that are seriously underfunded, even if they're assuming a seven, seven and a half percent rate of return, which they're not going to get, because they've got 25% in two and a half, three percent bonds. They're…”
Non-index investing only works with an exceptional and largely uncopied edge
“I'm talking about if you are really an exception in the way you invest, you don't have to index. You can do something that's really different, but you have to be really good at your exceptional way of doing things, and you have to be not very widely followed o…”
The real competition in private markets is among allocators, not fund managers
“The real competition today is not by the investment managers to get your investment money. It's by the people who've got money to get access to the best investment managers. And that's been true for the last decade in venture capital. It's now clearly true in …”
Rising entry prices are compressing future private equity returns
“Entry price for private equity has been going up and up and up. The exit price can't keep going up a lot if some stock markets on the relatively high side ought to recognize that that's probably as good as we can anticipate. Jeepers. It's getting harder and ha…”
Index funds in China risk blindly tracking irrational retail speculation
“The Chinese market, as anybody who spends any time with it knows, is still dominated by retail investors, prices particularly. So unless you're good at understanding retail investors and how they track past price performance and project future price performanc…”
Over 80% of active managers must quit before market price discovery breaks
“And I don't know what it would be, but it's certainly more than half the people would have to quit. Probably more than three quarters would have to quit. And my own guess would be somewhere around 80, 85% would have to quit just because it doesn't make sense a…”
Ellis: Top ten investment management firms rapidly lose top rankings over ten years
“If you record over time, systematically, who are the best firms as judged by their clients, institutions like pension funds, if you're doing that, and you get to know the firms that are the 10 best, and you come back five years later, and half of the 10 best a…”
Ellis: Overcoming fees and transaction costs requires 33% outperformance
“With certain carefully identified exceptions, you, not only is it very difficult, you won't, and you almost can't, outperform the market after two big things. And it doesn't look big when you say it, only one percent. But if you say, wait a minute, seven perce…”
Ellis: David Swensen created the first derivative swap at Salomon Brothers
“The first derivative ever done was done by David Swenson when he was working at Salomon Brothers. It was an interest rate swap between IBM and the World Bank”
Ellis: The Yale model under David Swensen is virtually impossible to replicate
“You take all the different comparative advantages that Yale has in David Swenson as their chief investment officer, and it's virtually impossible to replicate.”
Institutional ecosystem participants contribute to pension and endowment fund underperformance
“The theory that I was putting forward and I stand with it right now is that all the different participants have made contributions to the problem of investment results, particularly of pension funds and endowment funds, typically underperforming the markets. T…”
Wellington merger failed because Jack Bogle demanded unilateral decision-making
“Then when he got to combine with Wellington and Thorndike, Doran, Payne, and Lewis to create the merger made in heaven, as he would have described it at the time. And within a couple of years, it just didn't work out because it was a culture clash of the worst…”
Jack Bogle rejected ETF inventor Nathan Most, calling ETFs speculative
“At this time, he had the guy who invented ETFs, Nathan Most, came to Jack and said, this is just right for you. And Jack looked at him and said, no, it's not. It's speculative. I'm not going to have anything to do with it. And so for years, Vanguard wouldn't t…”
Jack Bogle opposed automation at Vanguard due to high upfront costs
“Whereas Jack Bogle opposed automation because it costs too damn much. Well, you know, the capital cost of a computer is a lot, but over time it saves enough money to pay for itself. Jack Bogle just honestly didn't catch that, but Brennan understood it, and he …”
Traditional 1% RIA fees will prove unsustainable over the long run
“You can always get registered investment advisor, but at one percent of assets, it turns out to be a pretty significant cost. And although that's a business that has boomed, I think in the long run, it's going to turn out to be too costly relative to the value…”
Ellis: Yale checked up to 25 references compared to industry standard four
“I've served on 14 different investment committees, and the usual due diligence is four or five references for any major manager decision. Ah, not at Yale. 15, maybe. 20, maybe. Might even get to 25.”
Ellis: David Swensen was the first person to execute a derivative swap
“David's the first person in the world to do a derivative swap. First person in the world”
Ellis: Swensen sourced elite talent via a strict Yale student recruiting funnel
“So it's like a funnel, that wide angle at the beginning, thousand students a year at Yale, down to 25 students in the class, down to one or two chosen for summer interns. Down to one or two chosen for the long term. It's just, by the time you do all the sortin…”
Ellis: Yale seeded emerging managers and structurally co-designed their firms
“And the characteristics of that unusualness would be first that they were Yale chosen when they were first getting started. And then Yale would be a major account for them. Usually their sole major account or their leading major account. And usually right from…”
Ellis: Corporate bonds fail to compensate for risk compared to US Treasuries
“And why aren't there any corporate bonds? Because the pricing of corporate bonds compared to treasuries doesn't reward for the risk that's being taken.”
Ellis: Asset class and manager selection alpha has decayed to 50 bps
“Where he could have added maybe 200 basis points in each of those two dimensions, then it was a 150, then a hundred. And I would guess it's down under a hundred now, maybe in around 50, and there's not going to be another source that I know of.”
Ellis: Swensen's core lesson is tailoring portfolios to unique client characteristics
“I think he would do what he did the first time, and this is the most important lesson he taught, but most people don't even pay attention to it. Who is the client? What are the characteristics that make that client unusual or even unique, and how can you devis…”
Computers drive 99% of combined cash and derivatives market trading volume
“That is, 99% of trading is done by computers in the cash market and derivatives markets added together.”
SPIVA data shows 84% of active funds underperform over ten years
“Take SPIVA is now putting out the data. Take the funds that were in existence 10 years ago and bring all of them forward, including the ones that were merged out or terminated. What fraction of them could not keep up with the index that they chose as their ben…”
Factor investment sales peak at market tops, leading to inevitable disappointment
“So if value has been working very, very well, the demand for interest in buying into, and the supply, i.e. The interest in selling people on, value factor investment will rise to a crescendo at the top, and then people get disappointed.”
Crowding will significantly reduce future profits for factor investing specialists
“I believe that the guys who have for years specialized in factor investing are going to find they can't make as good a profit from doing it as they used to because of the crowd, but they'll still probably do a pretty good job for themselves and for their inves…”
Investors using smart beta to beat the market will end up disappointed
“Those who are in it because it's a good commercial opportunity, Intermediaries or in it because they think, Hey, this is a new way to beat the market are going to create a self disappointing experience.”
Investors benefit by doing less because most portfolio adjustments are mistakes
“And the less you do, the more you benefit is the reality about investing. Because usually what you do is you make mistakes.”
Half of personal bankruptcies stem from end-of-life healthcare costs
“Well, people, that's where half the bankrupt, personal bankruptcies come from.”
Career choices should follow daily enjoyment of work rather than passion
“When young people say, I want to go with my passion, it bothers me because passion to me is an irrational, powerful emotion, and I'm not sure if passion is the right thing
To guide somebody.
But if you said, no, I really enjoy the nature of the work, and I'm r…”
Investment management compensation will decline as the industry's golden era ends
“Are you going to it because you think it pays so very well?
Be prepared.
It's not going to pay so much.
If you think you're going to it because it's fun, everybody's having a great good time, candidly be careful because the party may be
Closing down, and maybe…”
Ellis: 1960s Insurance Equities Teams Lacked Top Talent and Fierce Competition
“In the insurance business, the smartest guys went into sales. The second smartest guys went into lending, because most of the insurance portfolios were debt, and the dumb guys went into the equity side, because they needed something to do, and so that was not …”
Ellis: Family portfolio is fully indexed except for Berkshire Hathaway
“For myself, for my wife, for my sons and for my grandchildren, it's all indexed with one exception and the one exception, which you and I both know is Warren Buffett. I lucked into understanding Berkshire Hathaway way back in the seventies, and I'm not about t…”
Ellis: Over 10 years, 84% of US and 87% of UK active funds underperformed
“If you do that, in the United States, the last 10 years, 84% of actively managed mutual funds underperformed the market they chose to beat, and then just for interest, You see the same information for the UK? There, it's 87% underperformed.”
Ellis: Selecting Active Managers for Vanguard Is the Hardest Job in Asset Management
“And I personally think the hardest job that I know of in investment management Is to be the new guy who's taken on the responsibility on behalf of Vanguard to select active managers that you will now deploy funds with. That is going to be a terribly difficult …”
Ellis: Most endowment committees should implement portfolios using index funds
“And then, of course, I would say, and probably most of us should implement using index funds.”
Ellis: Investment management will not remain the world's highest-paid line of work
“If you really love investing and you really, really want to do it, and it's not because it's the highest paid line of work in the world, which it is now, but it's not going to stay way up there forever.”
Arthur Andersen collapsed by prioritizing partner compensation over client service
“For years, Arthur Anderson was the outstanding professional firm. And then a group of people individually, and then collectively, and then more and more people got involved with, I care so much about how much I get paid, how much I take home, that I'm really n…”