The Ledger
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Gulati: A 90% investment win rate means you are taking improper risk
“When you're right, 90% of the time, you're probably not taking the right risk because you're very correlated or tied to the market, unless that's what you're looking to do. Our view is you need to be right a little more than 50%. I think it's in the 65 to 70% …”
Gulati: Holding small portfolio positions causes death by a million paper cuts
“Having a lot of small 25, 51% positions is usually a way to not generate returns, and also you end up losing, I feel like it's death by a million paper cuts.”
Gulati: Hospitality and entertainment post-COVID margin expansions are largely permanent
“Those companies generally were able to reduce their cost structures materially during COVID and because they had to in order to survive. Will some of those costs come back? Sure. But a lot of them are gone forever. So these companies have significantly higher …”
Gulati: Running risk as sole decision-maker differs fundamentally from team investing
“The one thing, Perry was a team-based approach, and I do think it's important to run risk on your own, be the sole trigger puller, the portfolio manager. It's very different than running capital within a large organization, from my perspective.”
Gulati: The ability to cut risk quickly is lacking across the industry
“Being able to cut risk and move on
Is one of those traits that's often talked about, but lacking in a lot of our industry.”
Gulati: Alpha is fundamentally driven by correct conviction-based position sizing
“I'm a true believer that it's all about position sizing and getting that correct. And that's how you generate alpha.”
Gulati: Antara avoids small positions in favor of larger structured trades
“We don't want to just put a trade on to have a one, two percent position. We'd rather size it to have a more meaningful impact, but you need to structure downside protection and have that hopefully asymmetric upside as well.”
Gulati: Antara purchases call options against short positions to cap downside risk
“Since our inception example, if we have a short stock position, we buy calls against it because we don't want to be short squeezed out. If we are doing something in the options market, everything's always capped so we can make sure we understand what our downs…”
Gulati: Reopening companies trade at enterprise values significantly above pre-COVID levels
“A lot of them are trading at a much higher enterprise value To EBITDA. Today, so a higher EV than they were pre-COVID. A lot of them are somewhere between 30 to 50% higher, which is the anticipation of stronger earnings going forward.”
Gulati: Antara focuses risk management on tail events over normal market volatility
“We think about the world and tails. We're not as worried about a three to five percent move in the markets. We're worried about that big move and that big tail risk”
Gulati: Antara typically holds around forty positions across longs and shorts
“So on the long side, we're going to have somewhere in the 30 to 35 names outside of maybe a distress cycle where it becomes a little more concentrated. And on the short side, it's about 10 names. So let's just call it 40 names total.”