tag:blogger.com,1999:blog-4815867514277794362.post6130130846487890239..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: The conflict between managing funds and selling fundsJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-4815867514277794362.post-22236127062761578042013-07-30T05:45:43.748+10:002013-07-30T05:45:43.748+10:00Great discussion. In my overstated opinion and li...Great discussion. In my overstated opinion and limited experience, rules and regulations in a company, country, or elsewhere rarely drive the culture. And, the culture is both a result and a cause of thoughts, actions, and character. If your company culture is what it looks like it is from the outside then you'll be fine until your culture changes. The simple answer...keep your culture. The harder question...how? Want to grow...bring someone in that fits your culture and structure it to address the how in a way that makes sense to you. <br /><br />Your thoughts?<br />Best,<br />BrentAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-71927659903747192032013-07-12T02:32:07.730+10:002013-07-12T02:32:07.730+10:00Hiring the right people doesn't hurt. But the ...Hiring the right people doesn't hurt. But the only thing I've seen work is to create an alignment of interest based around the long term value of the funds management business:<br /><br />1. Ensure most compensation is variable, and mostly paid in firm equity. <br /><br />2. Lock up the equity awards for a reasonable time.<br /><br />3. Firm equity has value. (No profit participation without capital participation). <br /><br />4. Provide liquidity for the equity, so it can be sold for fair value. <br /><br />5. Restrict managers to selling only a small amount of their equity at any time, to minimise the opportunity for timing. <br /><br />6. Until they retire, the majority of senior manager's net wealth remains firmly tied to the long term success of the firm. <br /><br />The above applies to both your PMs and your senior sales team. Similar issues:- short term opportunities also distract PM's, to the detriment of their real job of acting in clients long term interests. But you're right, the problem is more acute for sales; they can blame the PM for a blow up and move onto their next job with their reputation intact. <br /><br />And finally, avoid over-diversification of the business. Ideally, 1 team, 1 investment process, sometimes multiple products (build on that single investment process) and 1 bonus pool. No-where to hide, and nowhere to shift blame.<br />Anonymoushttps://www.blogger.com/profile/16468128268317563914noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-57537376427919943532013-06-24T17:04:52.844+10:002013-06-24T17:04:52.844+10:00As a former alumnus, I think you're too hard o...As a former alumnus, I think you're too hard on the sales staff: the money managers drank the Nasdaq cool-aid (and one or two other noxious brews) without any outside prompting...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-85140308914028931512013-06-24T08:05:39.785+10:002013-06-24T08:05:39.785+10:00a retrospectoscope is a very old medical term, pro...a retrospectoscope is a very old medical term, probably used for 100 years.<br /><br />Someone who uses a retrospectoscope talks down other doctors who have seen a patient in the past before the diagnosis had declared itself.<br /><br />http://www.erbook.net/retrospectoscope.htmDavidhttps://www.blogger.com/profile/10722955032273795530noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-21189390641617975022013-06-24T07:31:41.465+10:002013-06-24T07:31:41.465+10:00John
Have you thought about opening a fund for re...John<br /><br />Have you thought about opening a fund for retail investors? I'm sure some people who read your site would like to invest but do not have the high amount to invest in a wholesale fund? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-61384723766882520832013-06-23T16:57:25.669+10:002013-06-23T16:57:25.669+10:00John what you mention is also something I have giv...John what you mention is also something I have given a lot of thought and is really the chicken and egg problem in asset management.<br /><br />You can have the best fund in the world (performance and low and fair fees) but if someone doesn't sell it it's all no use. <br /><br />In most cases they need commissions to do that which means higher fees.<br /><br />This leads to most companies either becoming an asset gatherer or fund manager.<br /><br />The asset gatherer usually flames out as your said.<br /><br />The fund manager builds a reputation and AUM over a long time.<br /><br />The next question is a open ended or closed end structure so your AUM doesn't leave when the best buying opportunities are there.<br /><br />All difficult questions with no easy answers only compromises...Timhttp://www.eurosharelab.comnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-78067248244001917812013-06-23T04:26:34.387+10:002013-06-23T04:26:34.387+10:00"Anyone got a better idea?"
Don't u..."Anyone got a better idea?"<br /><br />Don't use salesmen?<br /><br />Find a few old fashioned stock brokers or financial planners with small numbers of longstanding clients. The type of clients that are now friends due to the excellent advice they have received over decades.<br /><br />These people are around, and I know several in Melbourne.<br /><br />You only need a few people like this, as you do not want to be manageing billions I imagine, and the rate you are compounding, unless you limit your distribution network, you do not have many years left.<br /><br />I think Buffett only lasted 15 years or so before he wound up, and I think you are compounding faster.Davidhttps://www.blogger.com/profile/10722955032273795530noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-48272281153739927602013-06-23T03:37:42.326+10:002013-06-23T03:37:42.326+10:00John, You're like Larry David when he was an u...John, You're like Larry David when he was an up-and-coming comedian. I once was told his shows weren't well attended, but the few people in the audience were other comedians, many famous. He was the comedians' comedian. <br /><br />What's more important, the respect of your peers or getting clients? What's harder to attain? Colin Pnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-69718719019199737672013-06-22T18:01:46.796+10:002013-06-22T18:01:46.796+10:00Oh, I think TRowe Price is wrong. I like to think ...Oh, I think TRowe Price is wrong. I like to think we offer good financial services - and I am plenty willing to offer them.<br /><br />---<br /><br />Not in my league - but Warren Buffett in the days of Buffett partnerships - had trouble getting clients.<br /><br />The clients he did get did rather well though.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-81136469055048335372013-06-22T13:28:38.371+10:002013-06-22T13:28:38.371+10:00A very good analysis of the inherent difficulties ...A very good analysis of the inherent difficulties of combining investment maangement and business development. <br /><br />I would go a step further and suggest that institutional funds management businesses generally are problematic - general management meetings, IT shutdowns, HR policy updates, etc., none of which I've ever seen create much in the way of investment returns.<br /><br />Ultimately investment managers are selling trust in their judgement in an unknowable future. If clients are sold on some other reason then sooner or later it unravels. <br /><br />Like minded clients who buy into what you do is the obvious answer, but admittedly as helpful an answer as telling the runner to win the race by going faster!homeandhosednoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-68349580594882437842013-06-22T13:08:32.409+10:002013-06-22T13:08:32.409+10:00Interesting post John. I think it was T.Rowe Pric...Interesting post John. I think it was T.Rowe Price who once said "The quality of a financial service is inversely proportional to the willingness to offer it..." Best, Drew.Unknownhttps://www.blogger.com/profile/04659740345265098447noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-56865263276782264802013-06-21T18:38:14.540+10:002013-06-21T18:38:14.540+10:00The BT story is even more poignant than you make o...The BT story is even more poignant than you make out. <br /><br />In the late 1990s, BT Australia was a merchant banking power-house in Sydney. Aside from that, it had the leading corporate superannuation business and one of the more prominent funds management operation. (Your former master, Kerr Neilson, learned the ropes there.) <br /><br />Unfortunately, the Australian operations were controlled by BT out of NY, which was, at the time, struggling in the bulge-bracket. <br /><br />Then some clown in NY got the bright idea to sell 'butterfly swaps' and some other nifty derivates. That business was profitable for a while, that is until clients got burned. Litigation followed, the BT stock price tanked in response, and Deutsche Bank bought BT for a song. <br /><br />The inevitable rationalisations followed, in the desperate search for 'synergies'. <br /><br />Among other things, the Australian operations, which were very strong performers, were dismembered. <br /><br />A large part of merchant banking business in Sydney was sold to MBL, which was a good acquisition for them as it laid the foundations for what later became known as the 'millionaires factory'. <br /><br />The superannuation and funds management business were, as you say, sold to the Iowa boys, who quite frankly, struggled to come up with any direction for those businesses, and they soon sold it to Westpac. By then, Kerr had taken the client list and set out on his own, forming the basis for Platinum Funds Management, which is was worth billions when it listed a few years ago. (Incidently, wasn't that float the source of your fortune too?) <br /><br />The remaining stub of the BT merchant banking operations in Sydney (and the much smaller Melberg office) were retained by Deustche Bank, but they were starved of capital and slowly run down over the years, due to issues which have plagued DBAG in Germany. <br /><br />This is this sorry history of how a very successful financial player can fall, all because some fool on swaps desk on the other side of the world does something stupid. <br /><br />How to I know all this? Well, I was a lawyer with a front-row seat to this circus. (NB. what I've sketched out here is publicly available information). Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-59404673135875465932013-06-21T17:59:48.086+10:002013-06-21T17:59:48.086+10:00How funny that this morning I read a more or less ...How funny that this morning I read a more or less similar comment about Kyle Bass on a forum. <br /><br />http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/kyle-bass-mauldin-conference/msg120792/#msg120792<br /><br />(I don't know Kyle Bass enough to have an opinion myself.)Johnhttps://www.blogger.com/profile/14682393043392310140noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-65607807652334242872013-06-21T17:05:54.017+10:002013-06-21T17:05:54.017+10:00Two comments fixed. Thanks.Two comments fixed. Thanks.John Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-37700669163254494452013-06-21T17:04:48.268+10:002013-06-21T17:04:48.268+10:00I think that you mean that the transaction closed ...I think that you mean that the transaction closed in 1999 not 2009filthylucrenoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-56612780570451071832013-06-21T17:02:53.863+10:002013-06-21T17:02:53.863+10:00Q3 1999 not 2009Q3 1999 not 2009Anonymousnoreply@blogger.com