Claudia, thanks so much for doing this.

>> Oh, Ethan, thank you for having me.

Thank you for having me.

>> You raise money for startup hedge funds,

for startup hedge fund managers. Let's

say I'm starting a hedge fund. I'm

trying to sell my own product. What's

the first question you ask me,

>> Ethan? That is how how long have you

got? Um, so I would start by saying the

following. You know, if you think that

hedge fund assets are at what, 5

trillion now, and that the last I've

looked at around three and a half

trillion of those assets were held by

550 firms

that have over a billion dollars. So,

the billion dollar club. Yeah. And also

you know about 20% of funds fail on the

first year and around 50% fail by year

five. I want you to explain to me why. I

want you to tell me why. Why are you

doing this? Because it's tough. It's

really hard to be an early stage manager

and um the numbers are heavily skewed

towards the the larger managers

and we're getting into a situation where

the winner takes most kind of scenario.

So why do you want to go into this? Do

you know how hard it is? What are the

reasons? because he who has a why can

withstand almost any anyhow right uh so

I think that is very important and

there's no right or wrong answers to

this but I need to understand why

>> let's say my answer for that question

because I'm trying to play out an you

know an example I guess a story in my

head let's say my answer to that

question is I've got a strategy that I

think can scale that performs very Well,

and I want to turn it into a wealth

creation vehicle for myself and for

others, right?

What questions from that point are you

asking me?

>> There's many things I would ask. Um,

no particular order of importance, but

you have a strategy that you think

works.

Explain to me why you think it works,

how you've proven it works, how you've

developed

what you need to make it work. Yeah. So,

what are the conditions that you need

for this to work? Okay. Um, and what's

your background and your expertise in

managing that strategy?

Then I would ask you, is your passion

really

uh laying with managing that strategy?

So, are you a markets person or

are you a business builder?

Because again there's no right or wrong

answer but I want to understand where

your passion is. A lot of people are not

business builders. Entrepreneurship is

hard. Going from being an employee to an

entrepreneur is it's really not for the

faint of heart. Um and so I would like

to understand exactly what you have. Um

I would like to understand

what infrastructure is required to

implement all of this that you've built.

Um and um

I want to understand what's your runway,

how long have you got until you give up.

I want to understand

how long can you stay in it without

making

without paying yourself.

And so if you're going to run a

business, I want to understand how long

are you going to be able to be in here

if you don't perform, if you have to if

you have a a company, if you have to pay

other people before you pay yourself,

because it's going to take a while. So I

need to understand all of that. Um,

obviously the strategy needs to make

money, but for instance, if you're

walking in and saying, "Oh, I have a

strategy and I have a proformer or back

test or whatever." Have you ever seen a

bad back test?

So, so tell me is it is this do you come

with a track record that comes a

previous track record? If so, how can

you prove those numbers? Who can who can

who can prove those numbers? Are they

audited? Are they you know are they

portable? How are they you know how were

they achieved? What did you need to

achieve those numbers? What information

what resources did you need to achieve

those numbers?

>> There's a lot in what I've said that I'm

curious about. Before I dive deeper into

the different aspects that you laid out,

I want to just push this kind of

roleplay further. Um, so that our

audience can see, you know, in real time

how someone like you would be thinking

about this. Um let's say I've been

running the strategy for cult two years

um on my own personal capital and let's

say that that cap and

let's say the capital actually I think

it'd be more interesting let's say it's

a it's a big piece of capital let's say

uh I've been running my own money or

family money um and over 10 $10 million

let's say right and I have a two-year

track record um a a strong sharp ratio

I'll call it over 1.5, right? What other

like what else are you thinking

>> when you say you have a track record?

Where's that held? Who can witness that

track record? So, who can back that up?

So, if an investor is going to do due

diligence on you, how can you showcase

those numbers

and and who can back those numbers up?

That would be one of the things. The

other thing that I would be asking you

would be um

what is your strategy? What markets are

you trading

and what capacity when you say strong

track record that strong is a a

qualitative qualitative word right? I

would like to see the numbers. I would

like to see um so you say it's two years

that you've been managing it. Um I would

like to see the P&L you've generated on

it. Um I would like to see the draw

downs. Um 10 million sounds like a lot

but for most institutional investors or

it's not. So then the question is where

where is that capital? Is that all your

capital or is that just friends and

family? And if you want to start as well

um what access to markets do you need?

What access to data do you need? And

what do you need to make this scalable?

When you say that the performance is

great, what what is the capacity for

this? So are you managing a strategy

that is not really scalable where you

can take this to 150 million and with a

great sharp a great sortino maybe let's

say 250 million okay so that will remain

like a very niche boutique strategy

and that means that the type of

investors that you will approach is very

different than if you have a strategy

that can run eventually 500 to a

billion. So that would be the first

differentiation I would make because

that's where you know the road splits in

two approaches. Um and then goes back to

you wanted to make this a vehicle of

wealth creation. If you want to make

this a vehicle of wealth creation,

one of the ways that you could do this

is keep trading it and just manage more

friends and family money,

right? And just keep trading your own

money. It all depends on what you want

to achieve. If you are going to take

third party institutional money, your

life is going to change and the way the

things that you're going to have to do

are going to change. You're going to

have to report um numbers on a monthly

basis. It's the the monthly dictatorship

I usually call it, right? So, so all of

a sudden all of these things become very

very different. you are going to have to

have legal and compliance and all of

these that these infrastructures that

you have gonna have to be regulated

though all that has costs that 10

million is not going to cover that. So,

uh 10 million is great. Um

but really, you know, to be marketable

to a lot of other people, you need to

have more. Don't, you know, don't get me

wrong. I I've worked with people who had

zero to get them the first dollar, but

just I just want to be really realistic

about what are you doing and what do you

want to achieve? And again, what do you

want to do with that 10 million? Are you

a markets person? So, do you want to

keep trading it and get a bigger and

bigger pool of capital so that you can

just focus on that because that's what

you enjoy or do you dream of having your

name on the door and having a bunch of

people working for you and and having a

firm that is well known and being an

well-known asset manager and so on. So,

what are your dreams and aspirations?

Uh what's your lifestyle as well? So the

other thing as well a lot of people

don't ask but it's it depends the stage

of life that you're in. So for a lot of

people that imagine they have family

commitments and so on. So how long can

they

run without again without paying

themselves and without u all of those

things have an impact into how I would

talk to early stage managers and these

are not early conversations uh Ethan

like I've had I remember couple of years

back I had um a manager um walk through

my door they're lovely people and uh

I've been talking to them for a while

And it they were looking for seed. They

had zero. They were looking for seed and

um and there were two partners and I

remember them talking and talking. This

was like I don't know how many meetings

we've had. And then at a certain point I

said okay guys um have you guys had this

conversation of how long you can you can

sustain this without assets how long you

can go without pay. And one of them goes

oh no I'm good. I'm good for 3 years and

the other one says I'm good to till

September and then I'm out. We were in

June

and that was a very uncomfortable

situation, a very uncomfortable

conversation of these people that had

been working together for a while and

had not had that discussion of look, how

long can I go without getting paid,

right? So, um, I was in the middle of

that conversation very stressed because

I thought, "Oh my gosh, um, this is a

situation where you want to escape the

meeting and let them just jam between

themselves and you know, this

conversation between two partners, I

shouldn't be involved." Thankfully, this

has a happy a happy ending. So, I raised

that manager 150 million in the

following three or four months. So, that

was fine. Um, but it was a very

uncomfortable conversation. And so

people need to have these conversations

of look if you're managing a business

and businesses will go through periods

of of bad performance and if you talk to

managers who have been around for 30

years. I remember talking to some

managers who've been around for 30 years

and they say well remember here's where

we took the art off the walls. You know

they had to you know the years were

tough and um you need to endure and you

need to pay your staff. You need to make

sure that if you want to survive, you're

able to keep the people that will make

the firm turn around and not everyone

can do that.

>> Very philosophical questions. I'm really

sorry.

>> No, no, no, not at all. It's all those

questions though they are making me

think and um

one of the things that I have learned

from starting this podcast from speaking

to managers especially ones who've

walked me through leaving even a pod

shop right one of the big funds um who

clearly know how to manage money of the

best pedigree in the world right they

still go and they still say to me how

hard it was in those early days. Um,

and distinguishing

the money management side of the

business to actually the business

building and please elaborate.

>> Oh my gosh. Um, you're asking me really

difficult questions because we can talk

about any of these questions for days

without end. Okay. Um, and I was just Do

you know Justin Welsh?

Do you know if Justin is

>> okay? Justin Welsh is a massive creator

and he just yesterday posted something

or yesterday or today posted something

on LinkedIn that um most people it's

about most people don't want to be

entrepreneurs because they they don't

have what it takes in terms of if you

have your own business, no one cares.

No one cares about you. So you're not

going to get a gold star. you're not

going to get, oh, you know, student of

the year award, you're not going to get

a promotion, you're not going to get any

of that stuff. Um, and owning a business

is really, really hard. So, it's a

little bit if you think about, you know,

you're going to if you want to do a

marathon, why do you want to do a

marathon? Because you want to say that

you've done a marathon or because you

actually enjoy running? Because if you

don't enjoy running, do not go and train

for marathon. You're going to get

injured. like you are going to get hurt.

So you need to enjoy the ride because

it's about the ride

there. It will get really really tough

and there will be moments where you will

be really lost and you have to survive

those moments. This is true for hedge

funds. This is true for any business.

When it comes to hedge funds in

particular, okay, because that's what

you are asking me. Um and again I'm

saying this hedge funds a hedge fund

could be a vehicle but it could be SMAs

it could be you know people managing

alpha type strategies and liquid type

vehicles so not private equity and so on

so that kind of stuff um there's several

elements to this one of them is

performance which is what they think is

required but I was telling you before if

you think a table has four legs

Performance is one of the legs.

Yeah. So before we get to performance,

I want to know that

you actually have that you are business

savvy, that you have business acumen,

that you you know what you're going to

have to face. And you're going to have

to face problems with prime brokers.

you're going to have to face problems

with or deal with regulators, deal with

compliance, deal with Johnny's upset

with with, you know, Jamie and they're

not talking to each other and the

investment committee didn't go so well

because they they had a massive row

before or whatever, right? So, staff

issues. Um, you're going to have to deal

with the monthly dictatorship of the of

the performance and performance

reporting. You're gonna have to be

talking to investors when your

performance is down. And you're going to

have to explain and give them access and

and be open and transparent in moments

when you're going to feel you really

don't want to be having these

conversations because maybe you you

yourself feel down. You don't want, you

know, you don't want your performance to

be down. So, you're probably upset. Last

thing you want is but you need to do

that because those are your investors.

So, you need to do that. So all these

there's all these aspects of running a

business. Um and I'm not just talking

about the cost and the when I've asked

you about the runway. The runway is one

of them, right? One of the questions

that a lot of investors will ask you is

about the business um the break evens

and um and and the business plan. So

what's your break even point and what's

what's your plan to grow the company as

revenues increase and all of that. So

that business being business savvy is

one of the elements of it. Performance

is another element. Um

transparency

is another element of it. So being able

to

um really disclose what you're doing

and what the numbers are, what the risk

management is, what the markets are that

you're trading, what are the, you know,

the markets where the strategies

probably are likely to perform or

expected to perform and when the

strategy is not expected to perform.

when you did not do well and what you've

learned in the process. Um, all of those

things. So, you have to think this is a

people business and being a people

business there's an element of trust

and an investor will have to look you in

the eye and and feel like they really

trust you and that does not come from

one meeting. This is a process. I really

trust you and that you're being

transparent about what you do. It's very

simple. Do what you said you would do

when when you when you said you would do

it. And that's very simple. It's very

hard to do, right?

>> Yeah. Sorry to interrupt. Um but what

you just said there is something I hear

from um from you know very senior people

at hedge funds that I don't think is

talked enough about the full

transparency and really being honest

with the allocators about or with the

investors about when strategies will

perform as expected and when not. Can

you like boil that down some more? Um,

AQR, in spite of their, you know, subpar

performance in recent years, um, Cliff

Aes and the team were able to

communicate why their factors weren't

performing as expected and they're still

in business and still doing great. So, I

guess can you can you explain that some

more, please?

>> Oh my gosh. Um, yes. Let me just mention

something and then we go back because

there's this one back on what you've

said. So we talked about three legs of

the table. I just wanted to bring the

fourth one and then I'll come back to

this. So the fourth one that I think is

very important is the communication and

your ability to communicate with other

humans and articulate what you do. This

is not about transparency.

This is about storytelling.

This is about being able to sell. If you

have a business, regardless of what that

business is, even if you're a plumber,

if you can't sell your services, you

don't have a business. You don't need a

legal entity to have a business. You

need one client,

right? You don't need a website. You

don't need a legal entity. You need

clients. To to have clients, you need to

sell what you have. So, and to sell, you

need to communicate and articulate and

tell the story. So, um, great hedge fund

managers, and you just, you know, gave

an example of AQR, excel at

communication,

at telling a story, at staying top of

mind with their investors. Okay? And

that is not about transparency. that is

about articulation

of what you're doing and ability to

get the message across in a way that

people remember.

Yeah. So now going back to your question

about performance, I think there's a

couple of elements. One of them is that

for very large funds,

this is harder to unpack because some of

these funds and names of in the same

uh level at AQR um have very limited

capacity. So it will take really quite a

lot for investors to redeem from that

because if you have capacity with some

of these shops and you redeem

you are not going to get back. So just

bear that in mind that's it's a

different game. Yeah. So, and also a

firm that has been around for a very

long time that has a very long history

and has a very long history of surviving

downturns

will have a lot more goodwill of in with

investors

for them to weather the storm. Yeah. So,

that's one element of it. So it's

different for a smaller manager than it

is for the very large managers who are

really top tier that have very limited

capacity

in the markets. Now for a smaller

manager which is what you were talking

about that is I think it's crucial that

they explain and that they are able to

articulate what they're good at and what

they're crap at because let's just face

it, no one is excellent at everything.

Everyone has weaknesses

and I much rather know from the start

what they are because if you think that

an investor also has investment

committees they have to explain this

internally and so on. The better

informed that investor is the better he

can defend he or she can defend that

position internally as well. So it is

really really important that when you're

not performing you explain. I remember a

friend of mine, she was um a co at a

quant hedge fund many many years ago and

she's she called me that they were at a

massive draw down. She's like geez

Claudia I had such a diff difficult day

today. I just saved another investment.

So you know they were performance was

bleeding and her role was communicating

communicating communicating not to

gather assets but to save those assets

to prevent them walking out of the door.

Right. And and and there you're very

tempted as a manager when performance is

down to not report it to

the you know the different databases.

There's managers who don't report a bad

month or that wait a few months to

report a bad month. I would say that

communication needs to be, you know,

when you're doing when you didn't do so

well. Communication needs to be even

better. And people need to understand if

they're going to give you money,

when do you perform, when do you not

perform so that they know exactly how to

fit. Of course, they're going to do

analysis with your data. They're going

to slice your data 10,000 ways. They're

going to interview you

several several times. You and your team

and several members of your team.

They're going to dissect what you said,

how you said it. Your body language,

your eyes, your energy, your vibe with

the other people in your room, in the

room. Uh, but tell me when do you think

you're not going to do well and why do

you think you're not going to do well

during those periods? And then if you

had periods when you didn't do well,

were those expected or were they

unexpected? And if they weren't

unexpected,

why? Tell me why. Tell me what happened

leading into it. Tell me how much you

lost. Tell me what you've learned and

how you've changed. So I have an

investor assess. Oh, great. You've had a

massive draw down. You've lost someone

else's money, not my money. Tell me

about what you've done about it.

So, you know, I he was used to say, I

love people who've had draw downs before

because then they they've learned and

there's um it's not just an operational

side, there's a mental side of surviving

that, right? People who have traded

through very hard markets and they've

made it through, there is a mental

element, there's psychology element of

it. Even if you're systematic, right,

it's bloody hard. What are the traits?

So, not just skills, but traits that

startup managers who succeed have

that are often underappreciated

or people don't realize are necessary

for their success. We touched on this.

One of them

is that they are excellent communi

communicators.

outstanding communicator. I am assuming

that we're coming from a place where a

manager who

is doing well performance is like is the

first filter. You you need to perform

that's let's just assume that the

performance is there right so you're

telling me what makes manager A

different from manager B when they have

the same performance.

Yeah. And so all else equal and and and

I would say um

the and putting the strategy aside as

well because the strategy is what it is.

Obviously if you if you're trading trend

following medium-term trend following

it's a very different strategy than if

you're tra trading short-term intraday

with a sharper four, right? I mean come

on they're different things. So let's

just look at the traits beyond the

strategy. psycholog psychological

traits, personality traits, uh business

traits and

communication,

ability to communicate with the very

different stakeholders.

So, if you were in a pot shop, um

the odds are that you

didn't have to communicate with with

investors and or with depending on on

your level obviously, but um there's

going to be several stakeholders and

you're going to have to sell the firm.

You're going to have to sell the firm to

prime brokers and prime brokers have a

get out of bed price, right? So, you

need to everyone has a get out of bed

price. Um and so you you need to um

convince people to take your business if

your business is not proven yet. So you

need to articulate the story uh and you

need to negotiate these terms. So being

able to communicate, being able to

negotiate and negotiate

um

terms across different providers,

compliance providers, prime brokers, um

brokers, um investors. So uh there is a

lot of even when an investment is

let's say approved from the perspective

of uh the investor loves the investment

strategy the business side everything

there's still you still need to decide

how you going to structure the economics

of it and there's a lot of negotiation

involved and you need to be able to have

negotiation skills and you need to be

able to think outside of the box because

there's many many different ways you can

slice as a buy. Yeah. And and it's it's

hard. Um

some some sometimes you need to be

creative to to make things work. Yeah.

So that would be one of them. Um you

need to if you're managing a team, you

need to be able to hold the team

together.

So, and we were cracking this joke

before we we started, Ethan, that I I

used to have a CIO that used to say,

"What do you want? Do you want to manage

assets or do you want to manage assets?"

Um, and it's

Oh, you say that all the time. And I'm

like, but he said that with a really

straight face, like poker face, and it

is such

an important thing. So you need to

really know that you need to manage a

business. A business needs to be

managed. It's not just the book or the

portfolio. The business needs to be

managed. And people who come from the

money management side, they think about

oh they think about the risk, they think

about portfolio, they think about that,

but they don't think about the business.

And the business needs to run on its

own. and and one of the major mistakes

that I see is people thinking that they

can be

CIO and CXO so they can do everything

else and they become jack of all trades

and master of none and and you need

someone else to run the business. If

you're managing the portfolio, just

focus on the portfolio. Um the other

trait that I would say is real honesty.

real honesty to yourself about

what you know and what you know that you

do not know.

Right? So, I'm great at this. I'm crap

at that. So, I'm going to have to hire

for that because that's a blind spot and

it's hard. Um, so I think that that and

that that is a level of self-awareness

because sometimes people come with big

egos,

but you know, everyone has weaknesses

and it's very important to know what

your weak spots are. Um, so that you

can, you know, take tick the box with

with other people that are strong on on

that. Um, and um,

again, I I think of this what is it? A

players are hire A players and B players

are higher C players. So you know

>> if you want if you are an A player and

you know what your weakness is on

Samaria, hire someone else to do that.

Um so that would be one one of the um

one of the elements. Another element is

it is hard but it's humility.

Like if you're trying to sell this to

investors, why should they care about

what you do? Uh so just bear in mind of

the the the stats of you are just one of

the five to 600 meetings that an

investor does every year. So what do you

have that is different? What do you

bring to the table?

you and I think it's very important to

bear in mind that investors have a lot

of a lot of choice um and that they get

called on by very many many many

managers and and you are not aware of

how many managers are up there probably

the investors have a lot more knowledge

than you on that so those would be some

of the things that um that I would say

it's probably you caught me on that I

hadn't thought about that before but I

hope that answers that question.

>> No, it it it does. And

and I think it's

it's interesting. I think it's very easy

for someone,

say, in the audience who's an analyst or

a PM at a at a hedge fund to hear these

things and go, "Yeah, that makes sense."

But obviously, it's a completely

different thing to actually do it,

right? To to actually communicate

clearly,

>> oh my gosh,

>> the strategy should work or not.

>> Yes. Yes. Yes, absolutely. And look, I

think that we are in a time that is many

we are in a very special moment in time

when if we're talking about

communication skills, okay, we are in a

critical crossroads right now because

you have a ridiculous amount like AI has

moved so much, right? And if you think

about this communication skills in

particular, many years ago when I was in

banking, um HR used to organize some of

these public speaking um trainings and

these external companies would come in,

they would put them put you in a room

with a massive video camera at the back

and you'd be record and then that was so

awkward and then you know a lot of it

was it was really really like intrusive

and some of the learnings were about you

know then you would watch that and then

you criticize that and then you train

you know obviously there would be a

coach and then they would train you on

how to improve that. Um nowadays we

don't need like we have the luxury of

having so many tools where we can do

that ourselves but a lot of these

managers are not using these tools.

They're not analyzing how they present.

They're not analyzing how they

communicate. They're not thinking how

they communicate.

Um they're not thinking about marketing

materials. They're not thinking about

their meetings. Um and there's no reason

nowadays with the tools that we have

available for them not to think about

that because a lot of learning could be

done from just recording your meetings

and analyzing all your meetings,

right? There's there's no reason for you

not to do that nowadays.

Um, record your meetings, learn, see,

again, it it it requires vulnerability

because you're not going to like what

you've seen, but

look at it and learn. And be strategic

about keeping notes of what you do with

investors. Don't you be sequential when

you're starting out. Don't do, you know,

do one investor meeting. Think about it.

What did we do well? What did we not do

well? what we need to improve for the

next meeting. If you after each meeting

you implement one of these things, I'm

not even saying five. One thing,

yeah, you will get to the end of six

months way way better than what you were

before. And but no one is doing this. A

lot of these early stage managers, they

don't have a CRM. They don't have

meeting notes. they have no tracking of

how many meetings they had, of how what

was asked. Um, and so look, it is hard.

It's a numbers game and I think the

numbers are if you look at um asset what

it takes to so I think a lot of them

underestimate what it takes to raise

assets, right? Um so if you think that

some of the numbers they say 20 to 100

meetings to get an investment for early

stage managers you're looking at 50 to

100 meetings to get an investment.

Yeah. And then if so have you done those

meetings? Uh have you followed up in

those meetings? What did you do when you

were at the meeting? A lot of managers

go to the meetings

and a meeting is um an introduction to a

relationship.

The process is a trust process. It takes

a while. So

can you kindly be a human and be

interested in the person that is on the

other side and and and ask them

questions? So I often see managers going

into a meeting and speaking for an hour

and walking out and feeling like, "Oh,

this was such a great meeting." And it

was not. It was a really bad meeting if

you spoke to an hour for an hour because

you you should have just let the

investor speak. Learn about this person

that you want to go into business with.

Learn about them. Learn what they want.

Learn about what is worrying them. What

are their objectives? Ask them about,

you know, what do they want to get of

their time with you? What's important

for them to take out of this first

meeting? How do they want to follow up?

What is their process like? It's it's,

you know, the objective of the first

meeting is to get to the second meeting.

It's not to get a check. So, um, it's a

little bit like football, right? Um and

um

and you have now tools to do a lot of

these things if you bear in mind that a

lot of these meetings are on Zoom.

So there's no reason why you should be

speaking for more than 50% of the time.

I'd argue even, you know, 30 if you're a

manager.

You should be listening more and

learning more and implementing more.

>> That is something. Sorry, that is

something

I've never heard before. That this

specifically in a meeting, you're the

one pitching and you're saying you

should be speaking not more than 30% of

the time. Can you break that down for me

some more?

>> Well, you're going to meet you go to

meet someone.

Don't you want to know what that person,

who that person is, what they do,

why they wanted to meet you, what is

important for them to take away from the

meeting.

Wouldn't that improve your odds? Your

odds on open, right? Wouldn't that

improve your odds at meeting?

>> Right? So, if you if you go and meet

someone like first of all, most people

are not even prepared for that first

meeting. I know people who are who do

the homework. Again, this is goes back

to nowadays preparing for a meeting

should not take you more than 15 minutes

if you have the right tools. Like you

can build automations for all of this,

right? And and you know, you get your

LLMs plugged into your calendars,

plugged into your CRM, and every Sunday

night you get um an alert saying, "Okay,

these are your meetings for the week.

this is your briefing man based on you

know the last meeting you've had with a

person the person's public profile the

company the last discussions and blahy

blah so honestly this is not rocket

science you nowadays you have no excuse

for that not to be prepared for the

meetings then um because it is a lot

quicker to do these things with the

tools that we have available today that

we didn't have two years ago. Yeah. Then

when you do the meetings, if you can

record the meetings, again, not

expensive. I use tools like Fathom. It's

it's incredible. I if you have all your

meetings record and then you can run a

bunch of analysis on this and it's very

simple sometimes just looking at

the words that investors are using to

describe things. And you may be talking

about the same things, but you may not

be using the same words to describe the

same pain.

>> So maybe you should change the wording.

Or if an investor asks you if the new

the same question is coming up five or

six times in meetings,

maybe you should preempt the question

because if you pre if you know that

people are going to ask you that, maybe

can you avoid that? Can you pre-explain

so that then you don't waste 10 minutes

answering that and you can spend your 10

minutes in a better way, right? if it's

a frequently asked question. Um,

and um, and then

yes, if it's it's it's another person in

the other side, you want to know you

want to know what their process is. You

want to know that you're talking to the

right type of investor. A lot of people

are not talking to the right type of

investors for the the the life cycle

that they're in, especially we're

talking about early stage managers,

right? So, so you want to know that

they're able to invest, that they like

the type of strategy that you have or

they have experience in it. You you want

to yeah, listen to them.

Listen before you speak

>> and then analyze

and ask questions at the end and um read

the body language, read the room.

If someone is

saying yes and their eyes and their face

are saying no. The answer is no. So it

wasn't clear. So I explain it in a way

that is clear. Yeah. This is often with

systematic managers. Sometimes there's

the processes have more intricacies. And

some people may be perhaps a bit shy of

saying, "Oh, that wasn't very clear." Uh

but you can see in their face that it

wasn't. So maybe explain it in another

way so that you can see their facial

expression changing

and um yeah and and and ask them at the

end as well what do they need to receive

from you? What is the next step like?

What is it like to work with them as an

investor?

That all those things are very important

for you to have if you're a manager. If

you want to really develop longterm

relationships, if someone invests in

you, it's a long-term relationship. The

sooner you get to

understand this person and what moves

them as a human being and as a

professional, the better you can address

their their question. Would you say that

many startup hedge fund managers

don't take the business processes nearly

as seriously as they take their

investing processes?

>> I would say that they start first

thinking about the investment process.

Um they do have more and more now. I

mean if you like I've been in this for a

very long time. Definitely things

changed

um a lot after maid off um in terms of

processes and and and risk processes and

so on. So the ops DDS have really

changed the way that

>> they're done. Um, so they do pay

attention to their business processes,

but they what I would argue is that

sometimes they don't pay as much

attention to their marketing process, to

their communication processes with with

clients.

>> How many touch points do you have to

have with an investor before they

invest,

right? And they often do not think about

that and they think that the investor is

just going to call them one day and say,

"Oh, look, there's a check." It's not

like that. But it does not work like

that. An investor doesn't have to give

you the money. So you have to ask for

the business. You have to keep in front

of the investor. Stay in front of the

investor. Stay top of mind

and and keep articulating. Keep

communicating. Not be a pain. Don't be a

pain. Everyone's busy. That be think

long term. You have to think long term.

This is an ultramarathon.

An investment process can last for an

early stage manager 9 to 18 months and

it's a due diligence process right so

from meeting to getting an investment it

can be say it goes well 9 to 18 months

it's a long time

so be prepared for it and and

have the data use the data use the tools

that you have available nowadays to do

these things um the other thing as well

is a lot of them are not communicating

properly regarding their strategy. So

they may have marketing, they may have a

presentation, they may have a newsletter

and the newsletter is probably just a

fun fact sheet or a strategy fact sheet

which has you know performance for the

month um some overview of the markets.

If you're a discretionary manager, if

you're a systematic manager, we'll

probably have a bunch of stats on

allocations, risk contributions, um, and

and return contributions for for the

month and for the year and sector

allocations, things like that, right?

Um,

if you're an investor,

I I I've never asked this to an

investor, but how many of these fact

sheets do you receive every month? It's

it's probably in the thousands, right?

So why is yours going to get opened?

Maybe your strategy to communicate with

investors should be something different.

>> Yeah.

>> Maybe there should be something else

that you send to investors, not with the

objective of

um telling them what your numbers are,

but just within the

objective of keeping them engaged,

keeping them in touch without wasting

their time. I hate wasting people's

time, but um just I was having a

conversation with um an investor a

couple of days ago um at lunch and I was

asking him

in terms of fact sheets and and

newsletters and so on what he really

liked and he says, "You know what?

There's one that I started receiving

recently. I never received this. And

then I started receiving this from a

very very very large manager. And they

sent something which is just um a daily

kind of thought of the day.

Annie was saying I never

never read that before and it always

makes me think I it's always something

so interesting. So it has nothing about

performance but you know every day that

particular person or almost every day

that particular person is opening that

email and reading that email.

>> I think what you've said there

about

I mean what you've articulated with this

specific manager sending out a thought

of the day to his LPs.

I mean, the signal that's sent is I

value you. I care about you and I'm

sending you genuine insight. I'm sending

I'm giving you insight into my mind

because I really appreciate you being

here. And

I think that it's with money management.

I guess it's very easy to just think,

well, I'm giving you a great investment

product. You should be happy.

>> No. Um,

>> there's thousands of great investment

processes, investment processes out

there. So, show me how you think and

that is not performance-wise. So, a lot

of the process is show me how you think.

Show me what your approach is. Um, and

the show me is usually difficult to

show, right? It's a conversation

exposure through the manager. The

investor sees how the manager approaches

business, markets, and life, right?

because it's those three things, right?

Um how do you treat people? If you're if

you're a manager that you have a team,

what's your ability to retain that team?

Um how do you

um is that does that team seem stable?

Uh is the compensation structure proper

and so on, but do they seem happy when

them when the investors are talking to

them? Think about investors. A lot of

investors will have several rounds of

interviews with with these people. So,

they're going to be analyzing a lot of

elements that are human elements.

They're not just numbers, and people

forget about that. There's a human on

the other side. It's a people business.

So, this is important. Um, I think this

is really important.

>> Claudia, how long you been in capital

raising? How many years?

>> I'm very old.

25 years.

>> 25 years. a very long time

>> in those in those 25 years of raising

money um called for hedge funds for um

for all sorts of products.

Has there ever been a moment where you

thought a particular manager was going

to succeed? Um, this guy, this girl

ticked all the right boxes um and then

somehow someway um made a fatal error

like is have there been any anecdotes

where you've really been surprised where

something blew up and and

what can we learn from those situations?

I don't have enough fingers and toes to

count the occasions.

There's been so many times uh for so

many reasons. Um

look, I I've worked with managers that

were doing

absolutely brilliantly and got caught in

CO.

Um and then it's sometimes it's just a

spiral, right? you have one event and

that triggers you have managers that are

doing brilliantly. So for instance, if

you think that some of these strategies,

think of commodity managers and you

know, I've been around for a while. So

I've seen them ride the commodity the

commodity super cycle and then I've seen

them also

do the the ride down, right? What

happens when all the um sovereign wealth

funds and so on redeemed completely

eliminate their commodity exposure and

all these funds disappear? They are no

longer, right? they're multi-billion

dollar houses and they are no longer. So

you see those things which you probably

didn't expect. Um

volatility funds that were very large

and exploding obviously. Look I I was

around when made happened right and one

of the things that I I was and I

remember being in Geneva and having

investors crying on my shoulder. I I kid

you not. Crying on my shoulder. Um and

you realize

the extent of what people how people did

due diligence at the time and how how

they did not do due diligence at the

time. Um, so I've seen so many stories.

Um, a lot of stories

of people who survived and weathered the

storm though, and I like to think of

those, um, are people that had been

around. So, they had, again, this goes

back to the runway. If they've been

around for a very long time, they had

made enough money that a couple of years

down is not going to kill them. They

just continue. A big chunk of it is

their own capital. So they just

subsidize the firm for a couple of years

until things turn around. So those are

the good stories. Those are the people

who survive. The people who don't

survive usually they don't have that,

right? Because if the founder does have

the funds and can continue subsidizing

to to weather the storm, then these

funds don't go out of business.

Obviously, there's loads of scandals as

well or no, I don't want to say loads,

that's that's the wrong there's

situations where there are exposure

issues, there are, you know, fraud

issues, whatever, right? Um, and I don't

I don't want to highlight those too

much. Thankfully, the area where I work

doesn't have a lot of those and macro

CTA effects guys don't there's but there

were big players that completely

disappeared and I was very surprised

that they disappeared. I never thought

they would. And there are small players

that had everything to really go well

and then there's some sometimes just a

staff issue is enough for it all to

crumble down. for those smaller managers

who

actually I'm going to frame this

question differently because you've seen

like 2008, right? You've seen the

volatility of 2020. Um you saw 2022 and

you've worked with managers through

those periods of time. for someone like

me who's young and doesn't hasn't

actually seen those situations

from the vantage point

where

I act would actually know what it's like

you know knowing what the what the pain

is like um when when everything is kind

of let's be let's be frank it's burning

right um what advice would you give for

someone young regardless of what sector

they enter but within the financial cial

sector. How do you deal with those

volatile periods where to be honest

there's no real clear answer to the way

things are going to turn out? You know,

everyone in '08, in 22, in 2020, um,

everyone's thinking this is the end of

capitalism as we know it, right? What

advice do you give to someone who's

never experienced that and will for sure

in the future?

>> Oh my goodness. Uh, how long's a piece

of string? Um,

>> it

it really depends on the perspective

you're asking me.

Look, I was working for UBS in 2008.

It was tough. It was really hard. It was

It was hard for a very long time. Um, so

and and

I remember when Lemon disappeared

and all those people started walking

through our door and so on and having

conversations, some of them starting

funds and and things like that. Oh my

gosh, there's there's so many things I I

could say to you. Um, as a individual,

as an individual,

um, I'm going to say something to you

that I

think very strongly about,

which is financial literacy.

Okay? And this will make it to make you

or break you. Um even though we work in

finance, there's a lot of people who are

completely illiterate in terms of their

burn rate is much higher than their earn

rate. Right? So if you have a long

career, the odds are that at some point

you're going to be out of a job or out

of work rellated income.

Right? So,

and I remember in 2008, I'm not going to

say his name, but I need to thank him

because he really made a difference to

me. I remember in 2008 a a friend of

mine saying in a trading floor because,

you know, equities were having a um a

town hall and I was in FX says, "Oh,

Claudia, let's go over. It's 5:00. Let's

go over." Uh so, we went to Equities and

you know, we we listened to that and it

was not a good speech. It was the um

there's not going to be money to pay

bonuses to anyone's speech and there's

going to be, you know, a lot of people

are going to lose their jobs speech,

right? And my friend said to me,

Claudia, take a very good look around.

This is the world's largest trading

floor. In a couple of months, most of

these people will be bankrupt. They'll

be selling their houses and taking their

kids out of school.

And I never forgot that.

I never forgot that. And that shaped me

because I made decisions

there and then that have shaped the rest

of my life. I've always invested

aggressively.

Um I've always saved aggressively and

invested aggressively and that has given

me tons of options. One of the options

is that I could start my own business

and I don't have to to work. So that

that is something as a young

professional that I would say learn

about finances, learn about managing

your finances because

you know look it's time in the markets

and and that allows you that gives you

choices. We go back to the runway.

What's your runway? If you want to run a

business, if you want to do that gives

you the ability to make choices. It

gives you freedom.

Freedom to do things that you enjoy. So

I would say this is absolutely essential

to anyone that is in their 20s.

Okay. And that would allow you to

weather these storms that happen in the

markets because out of these storms

there's job losses, there's, you know,

P&L reduced, there's risk, there's a lot

of stress. So if you eliminate the money

stress, a lot of the other stress goes

away. Yeah. now and I don't think you

were asking me specifically that but you

know like I I I I had to address that

because being at the age you are right

that the big difference and I I still

see it you know there there's people who

there's there's people who make

seven figures and are living paycheck to

paycheck right so so that get your

finances in order learn about financial

literacy and that is also important if

you're managing a business. Now, the

second thing is

these moments are going to come. You

don't know when, but they're going to

happen.

So, um to weather the storm,

there's a bunch of things that you can

do as a professional. Uh so, keep

learning, you keep being relevant, keep

your network um and in your reputation.

Make sure again goes back to do what you

said you were going to do when you said

you were going to do it so that people

recognize you for it so that you always

have opportunities coming to you

regardless of what the markets are like.

Yeah. So now the other thing that I

would say is that there are a bunch of

skills that are

really

very relevant now. Um and so abilities

to read a room, communication skills, we

spoke about this when we were talking

about managers early. So your ability to

read a room, that's a portable skill,

right? You can take this anywhere

regardless of what happens in the

markets. Um, your ability to communicate

with other people, your ability to sell

to sell to to tell your story. So,

storytelling, agency,

being high agency, solving your own

problems, uh, not relying on other

people. Again, is very important if

you're managing a business and if you

you you go through these periods. That's

super important. And none of these

skills have anything to do with the

markets.

So, you've asked me what advice do I

have regarding these things? I don't

know when the next one is going to

happen, but I know it's going to happen

and it's going to be painful. So,

prepare to weather it regardless of the

field that you're in. You know,

that's and I'm very I guess I'm I'm very

passionate about this because I think

that I I see so many of my old

colleagues stuck doing things that they

probably wouldn't do anymore if they

were given the choice because they

didn't make these hard choices in the

beginning. Some of these things are not

easy to do. They're easy to talk about,

but they're not easy to do. Right? We

were talking about reviewing

uh say for instance reviewing your

meetings with investors. It's not

complicated to do

but it's not exactly

easy to do

>> either, right? It takes a bit of

vulnerability and so on and

self-awareness. So be very self-aware.

Again, these are all psychological

traits and personality traits.

>> Yeah. So I mean Yeah. constantly grow

and not easy.

>> Simple but not It's exactly it. It's

exactly it, Ethan. Um, simple but not

easy. And always be learning. always be

networking outside

of your own bubble because

um

I think in finance

people are and this happens to you know

in health in finance in fi in in legal

you you find a people network only

within their little kind of bubble right

it's it's a very homogeneous

>> it's a very homogeneous circle that you

have and I will challenge you

to break that and go outside of that and

go and meet people that do other things

that will challenge the way you see the

world and um and that will challenge the

way that you do business and you conduct

your life and and that is really really

important and most people in finance

don't do that. They also, you know,

look, it's they work really long hours.

It's hard. It's if you're going to

network, you normally networking with

you go to conferences and so on. But I

would challenge you to do that um very

early on. So if I was in my I didn't do

this in my 20s and um

most of see for instance last year

I'veworked a lot outside of my own

bubble and I was things that are rocket

science to me are so basic for someone

else and just spending sometimes an hour

with someone who know that it's you get

this aha moment and you see the world in

a completely different way in the same

way that things that are so kind of

bread and butter to you, like you could

do it with your eyes closed. And for

someone for someone else that has never

thought of it that way, it's like a

pearl of wisdom. Oh my gosh, that is

rocket science.

>> So if you think about, you know, the

world of hedge fund managers for a

marketer perhaps looking at those human

elements,

it's just basic day-to-day thing, right?

for um a quant researcher.

It's rocket science.

>> Indeed it is. Indeed it is.

>> You all have you all have different

skills. So So

and

always be learning, always be meeting

new people, always be learning because I

have clients and I have investors that

I've known for nearly 30 years.

And I have people that I it took 20

years to do business with them. So it's

a long marathon

and um

so those relationships you know relation

don't see relationships as

transactional.

So that would be another advice that I

would that I would say and this is very

important. You see this in early stage

managers a lot that they go into a

meeting and they see things as very

transactional. No, if it's very

important that you get to know the other

person even if that the odds are they're

not going to allocate to you

but they may give you feedback that is

absolutely precious for you to have.

>> They may say something in a meeting that

is a complete aha moment to you. they um

can maybe their investment maybe that

investment is not for them but for many

many reasons. We talked about um what

kind of chocolate do you like right

chocolate, dark chocolate, chocolate

with nuts, whatever, right? So, so not

everything is for everyone, but maybe

they say they have a meeting with you,

the investment strategy is not for you,

and they say, "Well, you know what, but

I'm very impressed with you. So, maybe

you should talk to so and so."

>> They open doors for you. So, look at it

as a very

networking and and knowing people is a

very open road,

right? and very long road.

>> Very, very long road. Life has lots of

twists and turns.

Don't burn any bridges.

>> I love that. And I think that's a

perfect way to end the the podcast.

Thank you very much for coming on Odds

on Open. I learned a lot, Claudia.

>> Yeah. Oh gosh. Thank you. No, thank you

for having me, Ethan. I really enjoy the

conversation. Thank you for the

opportunity. Um, I don't think we talked

a lot about markets. I feel like we

talked more about psychology, right?

>> Yeah. But I think uh

um but I think that's that's something

that's underappreciated by people um I

guess by early stage managers. I think

it's not something that's often spoken

about, but as you've said, it's these

simple but not easy, high value

behaviors that are hugely advantageous,

and I learned a lot.

>> Okay, thank you again. Thank you for the

opportunity.