Private Equity Returns in Public Markets, w/ Dan Rasmussen – [Invest Like the Best, EP.78]

It has been a while since we discussed private equity on the show, so I was excited for this week’s conversation. My guest is Dan Rasmussen, the founder of Verdad advisers. Dan worked in private equity and has spent years studying the entire field.

Dan identified several key drivers of private equity’s outsized returns: size, value, and leverage. His firm uses these factors as a starting point to build a portfolio of public equities that behave like their private brethren.

We cover a ton of ground, discussing the prospective returns for equities, forecasting, and tons of investing strategies.

Please enjoy this conversation with Dan Rasmussen.

Links Referenced

Subscribe to Dan

The Gospel According to Michael Porter

Tobias Carlisle

Steven Pinker

E.O. Wilson

 

Books Referenced

What Works on Wall Street, Fourth Edition: The Classic Guide to the Best-Performing Investment Strategies of All Time

Quantitative Value, + Web Site: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors

Expert Political Judgment: How Good Is It? How Can We Know?

Superforecasting: The Art and Science of Prediction

 

Show Notes

2:03 – (First Question) – The current state of private equity investing

 

4:09 – The three myths of private equity

 

6:51 – Taking a deeper dive into the myth of growth through operational improvements

9:29 – What Works on Wall Street, Fourth Edition: The Classic Guide to the Best-Performing Investment Strategies of All Time

 

11:25 – Valuations for private market investment and where they’re going

 

14:03 – Private equity companies that have a higher chance of delivering results that exceed expectation

 

16:39 – Other observations on the private equity space that would be interesting to investors considering the asset class

 

19:33 – Importance of being very purposeful in picking your reference classes

19:42 – Subscribe to Dan

 

22:03 – How do the lessons Dan has learned in private equity translate to his investment strategies

 

25:21 – How do you apply purely technical, systematic thinking into public market investing

 

29:23 – Analyzing leveraged stocks and the value they could create

 

30:06 – How Dan thinks about the direction of debt vs just the level

 

33:11 – Predicting a firms ability to deleverage

 

35:20 – How Dan’s company whittle down a company and are able to see value beyond their quantitative screens

 

41:29 – How does Dan think about the global vs US opportunity set

 

44:22 – What originally drew Dan to the Japan market

 

47:03 – How do rising rates impact Dan’s strategy in investing in highly leveraged companies

 

51:19 – Importance of having investor money locked up for a longer period of time both for the fund and investor

 

55:03 – Porter’s five forces

55:25 – The Gospel According to Michael Porter

 

1:00:51 – How Dan thinks about competitive advantage

 

1:04:41 – Exploring Dan’s personal process in pursuit of his ideal strategy

1:05:19 – Quantitative Value, + Web Site: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors

1:05:20 – Tobias Carlisle

1:06:27 – Steven Pinker

1:06:28 – E.O. Wilson

 

1:07:11 – What other markets pique Dan’s interest

 

1:09:39 – Why there is such a focus on small for Dan

 

1:11:11 – Source or person that Dan has learned the most from that might surprise people

1:11:24 – Expert Political Judgment: How Good Is It? How Can We Know?

1:11:28– Superforecasting: The Art and Science of Prediction

 

1:12:54– What was it like writing the book

 

1:17:19 – If Dan was going to write another book today, what would it be about

 

1:19:08– Kindest thing anyone has done for Dan