A Deep Dive into Hedge Funds with Ted Seides [Invest Like the Best EP.07]

This week’s guest has forgotten more about hedge funds than most people will ever know. This episode will appeal to managers, allocators and any investor interested in the world of hedge funds.  Ted Seides worked under David Swensen at Yale’s endowment and was a co-founder, President and Co-chief investment officer at Protégé Partners, a multibillion-dollar alternative investment firm. I met Ted after reading his book, “So You Want to Start a Hedge Fund: Lessons for Managers and Allocators.” He has taught me a lot ever since. Hedge funds have taken a beating, so this very nuanced investigation into the industry comes at the right time.

If you are not already, subscribe to Invest Like the Best here:

Please enjoy!

 

Books Mentioned

So You Want to Start a Hedge Fund: Lessons for Managers and Allocators – Ted Seides

Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment– Swensen

The Hero’s Journey: Joseph Campbell on His Life and Work – Joseph Campbell

How to win Friends & Influence People – Dale Carnegie

Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak– Travis Sawchik

Moneyball: The Art of Winning an Unfair Game – Michael Lewis

10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works – Dan Harris

Links Referenced

Protégé Partners

Headspace App

Hero’s Journey retreats

Show Notes

1:32 (first question) – Since both are huge Joseph Campbell fans, Patrick starts by asking Ted how he discovered Campbell and the Hero’s Journey retreats.

4:51 – A dive into Ted’s backstory including his time at Yale and the formation of Protégé Partners

5:49 – Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment – David Swensen

6:29 – Lessons learned from David Swensen and his work in endowment management

8:22 – What were some of the checklist items that worked out well in David Swensen’s model for investments in Yale’s University Endowment assets.

11:06 – A look at the structure that Yale had in their investments given their massive influence

14:04 – Shift from Yale to Protégé and how many seed investments they made there.

16:00 – The success rate at Protégé and how it was measured

17:20 – What styles were most prolific at Protégé Partners

17:50 – The economics that a seeder takes in a hedge fund

18:34 – What did they look for in the managers that they made investments in

22:27 – How Ted was able to get his first investors to support Protégé at the beginning

23:46 – Exploring the current state of fundraising

25:45 – What role does charisma play in raising money in a hedge fund launch

26:51 – The state of fees and where they need to be

35:26 – The paradox of skill and why we seem to have higher fees for lower skilled managers

39:29 – Ted talks about fee structures for hedge funds that mimic frequent flyer programs and why that could work for hedge funds.

43:34 – Patrick suggests something radical, taking fee discounts, investing them over time, but investors lose them if they divest within a certain amount of time.

45:17 – A look at some unique styles of funds

48:54 – Which of the edges would be most important to Ted in an investment decision: a strong pedigree, an impressive track record, or a unique idea?

51:05 – Patrick questions whether or not all of the folks who are “successful” are in fact talented or did they just become lucky to be a part of the right team/company.

55:25 – Advice to allocators in terms of over concentration vs over-diversification

57:40 – A look at the most memorable investment during the Protégé Partner days

1:00:22 – How would Ted counsel someone that wants to start a hedge fund

1:04:27 – Is it getting too hard for allocators to compete with hedge funds

1:07:43 – What other authors/resources have been helpful to Ted over the years

1:08:28 – How to win Friends & Influence People – Dale Carnegie

1:09:14 – Big Data Baseball: Math, Miracles, and the End of a 20-Year Losing Streak– Travis Sawchik

1:09:20 – Moneyball: The Art of Winning an Unfair Game – Michael Lewis

1:10:45 – The habits that have been most helpful to Ted’s wellbeing

1:13:03 – What have been the benefits of meditation for Ted

1:13:31 – 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works – Dan Harris

1:14:28 – What are Ted’s next interests

 

Learn More

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag