Active Management Still Matters in Emerging Markets | Jamie Carter
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Hey, everyone. Jack Farley here. What you're about to hear is a brand new show here on the Monetary Matters Network called Other People's Money. Hosted by my friend and business partner, Max Weethy, Other People's Money is the premier podcast about the business side of the fund management industry. Do us a favor and search for Other People's Money with Max Weethy and subscribe to that podcast.

Hello, everyone. Before we get started, I just want to do a quick disclaimer that nothing we say here is investment advice or marketing or advertising for Veris or any of their funds or products. Everything we do here today is meant to be informative and educational. Welcome to another edition of Other People's Money. I am joined today by Jamie Carter, Partner and Managing Director at Veris Partners, an emerging markets investment boutique based out of the United Kingdom. I'm very excited to have you here today, Jamie. Thank you so much for being here. That's great, Max. Lovely to be here. Nice to see you again.

Well, Jamie, you are a first for us. You are a first non-PM founder. So you are purely on the executive side, on the operation side, on the capital raising side, which really is the focus of the show here. But obviously, money is always tight when you start a business. And so many people kind of have to do a one man band. So I'm very excited to talk to somebody who is really specialized.

over the course of their career in the business side. So let's get to that. Talk a little bit about your career. Let's establish you as the expert that you are, and then we could get into Varus and some of the exciting things that are going on in the UK and European investment landscape. My career actually started out a very large firm, which was Mercury Asset Management, well known in the UK, one of the kind of dominant franchises. But in 2005,

I left there to join Oldfield Partners, which was a new boutique. There were four of us, Richard Oldfield, Nigel Waller and Klaus Anton, who were all ex-Murtry, all investment people. And I was there to basically cover all the non-investment activities, as you kind of outlined. So from the basic operational setup, finance, I managed to swerve the compliance hat, which Nigel took on. But there were lots of other things. And obviously, business development was going to be a big part of that.

Now, as you can imagine, at a boutique, everyone's mucking in and doing everything, but there's a lot there to do. And over time, we went from basically a business plan to actually getting the firm up and running, getting a pooled vehicle up and running, winning some separate accounts. Over the next few years, my role then focusing more on the business development side, as we can hire people to come in to cover ops and finance and other bits and pieces. So I focused on business development.

And then about halfway through my time at the firm, so from 2005 up until 2013, this was, I was latterly doing more business development. In 2013, I became chief executive, and then it was a combination of CEO kind of leadership and business development roles up until the point I left in 2020. And to give you a sense of what that journey was like, we went from, as I say, a business plan,

up to probably around $6 billion at the peak across a couple of strategies, a few strategies. And by the time I left in 2020, we were probably still around $5 billion. We were long-only equities. We had a very clear traditional value style. The biggest strategy was global equities. We also had an emerging market strategy, a couple of other smaller things.

But very successful. And the business had been, I guess, primarily built around North America, which is probably unusual, right? Given that we were UK focused, but we had a decent kind of UK client base, but also made the move over to

North America, probably around 2008, nine and ended up actually with bulk of our assets coming from us. It begs the question you, you help build this company up to 6 billion and around 5 billion when you left. Um, what is it that happens, you know, when a shop becomes mature, uh, that makes it so that somebody like yourself who's focused on ops, who's focused on capital raising, you know, might want to move on and find something now. Cool.

It's not that there's always things to do. The market's changing, even with the best clients in the world who really understand your strategy, there's always things to do. There's always new pools of capital you need to tap. So it's not that there isn't a sort of challenge anymore. I just felt myself after 15 years, I felt a little bit stale and I felt that I probably needed to change. And I wasn't quite sure what, but having done 15 years, it sort of

We'd gone through a kind of foolish cycle. We had matured. We'd also been through the kind of first succession. So Richard Oldfield was obviously a key decision maker on the global equity strategy. We'd managed to effectively move to the next gen of decision makers. We had moved or agreed to move some of the economics from Richard to some of the rest of us who'd already kind of built a reasonable stake anyway. So there was a number of things we'd done

which set the path really for the next 10 or 12 years. And it just made me think, do I want to do 25 or 30 years at one firm? And it's just a slight pause to say, maybe I should do something else. Maybe I should get those kind of entrepreneurial and sort of growth juices flowing again. I'd always enjoyed the business development side. I'd always enjoyed the

the chase, the sort of thrill of the chase, you know, the wins when you get a client over the line. Um, and I just felt like I could probably try and do that somewhere else. Um, so that was the sort of genesis of like, I left on very amicable terms. I had dinner with five or six of them last night. So, you know, we're all very good friends. That's great to hear. So you, you, you stopped over for a cup of coffee. I know at a, at a firm called long view,

But then you met Rufus and started Varus. I think hearing these sorts of origin stories are always funny. And I had a similar one myself where you're having a phone call and it's not exactly what you think it's going to be. Yeah. So it's interesting. So I was at Longview Partners, this is sort of towards the back end of 2021. And I was headhunted into a process

for a firm called Genesis, which was a really successful boutique here in London. So they're an emerging markets boutique. They'd been around for decades. They ran a huge chunk of money, really, really highly regarded. And they had a kind of non-investment head who was, I think, looking to retire. So they were looking for his replacement. So I got into this process, started to go through the interviews. And one of the interviews, which were the partners, one of them was Rufus. He'd been

a partner there, one of the key investors for sort of nine or 10 years. Anyway, I went into this meeting, this interview, and Rufus dominated with the questions and he peppered me with questions around like, if you were starting a firm from scratch today, like what would you do? What would you outsource? What would you keep your house? What should the cost base be? And I was sort of puzzled at the time because Genesis had 10, 12, $15 billion, 50 people

But he kept remembering these questions and would you do this or this? And if you were going to start really from scratch, I mean, really from scratch, what would you do? And I thought it was odd, but sort of interesting, sort of left. That process ended up being paused. And then he reached out to me about six or seven months later and said he was actually going to be leaving Genesis and he had been

talking with another person about launching a boutique. They needed a bit of advice. They knew I'd done it before, but I talked to them. And so the summer of 2022, I was talking to, as it turns out, Rufus at the start, then Rufus and Leila, and then laterally Rufus, Leila and Echo, who are now my big colleagues at Varus. So it was very serendipitous for it to start that way. But from those early conversations with Rufus and Leila, where

They recognize that part of the reason for this podcast, obviously, is that there's not a huge amount of information or an ecosystem if you're going to start a long-owning boutique. There's a very clearly defined ecosystem for hedge funds with like the prime broker relationship, tap intro, solvency services. The long-owning world is not quite as clear and it's a bit more challenging to navigate and work out what's what. And so quite early on, I kind of posed a few questions to Rufus and said, look, these are the key things you need to think about.

If you want to chat again, we can talk some of this through. And then one conversation led to another conversation led to one every kind of four or five weeks led to basically a year of being in touch as they work towards

forming Varus and then eventually getting me on board, which was last summer, July, August time. The entity was formed in 22. You came on in 23 and the strategy began trading. So I know there's three people on the investment team, but only one strategy. So can you talk to me a little bit about why you only have the one strategy, why you have three people on the investment team and why you made that decision? Sure.

So one strategy is really around alignment. We want to take the best experiences, best elements of our past history, avoid some of the things we've seen in the market which are difficult. And we think alignment is a key part of that, building the right foundation from which to go about your investment strategy. So we wanted to own 100% of our business, no outside seed, no kind of help.

We are heavily co-invested. We've got the majority of our liquid net worth in this. We want to focus all of our time on what's going to make us money with our own liquid net worth. I need to keep Mrs. C and my children happy. We want to focus absolutely on that, no distraction. And we think the way to do that is with one strategy, which is capacity constraint. Now, for us, with what we're doing, which is long-only emerging markets, high conviction,

25, 26 stocks perhaps, we think we can do that with around about $5 billion. Basically, the current portfolio today could be $5 billion. But we also recognize that things may change over time. So we'll probably pause maybe halfway, $2.5 billion, and just check where the real opportunities are. Because if they're more in mid caps than in large or mega caps, we may have to adjust that down.

The key thing is that we want to be really tight on capacity so we can generate the best performance possible for ourselves and for anyone that's on board with us. So that's how we've come to that. In terms of the strategy, as I've said, long-only emerging markets, it's global, so we're covering the whole world. And each of my colleagues have worked in organizations where there are multiple decision makers. So in Genesis's case...

It was perhaps at the extreme end because there was usually seven, eight, nine PMs all kind of running a sleeve or a book or involved in the process. At generation where my colleague Echo comes from, there's like co-PMs.

And Layla, who's had a sort of long and storied career in emerging markets, nearly 30 years. At various points, she has worked with people, she's worked on her own, she's been CIO, she's all sorts of experience. But we very firmly believe that for emerging markets of what we're trying to do, that 3PMs working together for collective decision making is the right way for us. I mean, we're often asked this because it is somewhat unusual.

We can absolutely understand why if you're looking at the US market, every company that you look at is English speaking. If you're English speaking, having the one decision may make absolute sense. But for us, given that we're looking at so many different countries, so many diverse opportunities, with so many languages and local cultures and customs and perspectives to understand,

I think generally in emerging markets, having more people involved in the decision-making process is probably normal. And for us, the three works really well. So is it geographic distribution? Is how you split up the coverage? Is it sectors? Is there any bleed over?

It's a good question. It's a bit of both because it's somewhat dictated by historical baggage. So Layla spent a lot of time. So Layla originates from the Middle East. She spent a lot of time investing in that kind of region in LATAM. She's done all sorts of stuff all over the world. She's done financials. But she brings, I guess, more of a background in LATAM and EMEA and financials. Echo being from China.

I spent the overwhelming majority of her career doing China and Asia, but actually since joining Barris has picked up a couple of companies in LATAM and he's kind of exploring new areas that she hasn't looked at before. Rufus is very unusual in that he's a farm boy from rural Missouri who was moved to China when he was three, learned Mandarin, went to school back in the US and then ended up back in China just after university with his first job and has a

as you can imagine if you speak fluent mandarin and a lot of time in china he's got a real affiliation and kind of knowledge of that world and asia but we don't want to restrict anybody to you know a silo we think there should be as there is lots of discussion about um different opportunities in different markets and different sectors and it helps if you know more than one person has looked at a particular company in a particular sector or country because you can actually get some debate the

It has to be, there is a diversity of perspective amongst my three colleagues given their experiences. And we think that's very helpful. If you have clones around, you know, talking about a particular investment idea that you generally don't unearth the sort of difficult points or key parts of the investment thesis you have to get right. So, you know, we want to have discussion. We want to make sure there's enough overlap, but that's all over the case. Well, and I guess with the triumvirate, there's never going to be a tie.

So there's never going to be a tie. So it's interesting. So we're looking for broad agreement, but we don't require absolute 100% unanimity. And so given that we, my colleagues will work together, there's always a lead PM for an individual stock. But it's quite often the case that perhaps all or at least two people have been involved in discussing that stock as it's being worked on. So by the time it gets to the point where it might go into the portfolio,

Everyone's aware of what's going on. Everyone's aware of the research that's done. Most of the questions have been asked and probably dealt with. If there's really at that point still a major disagreement, then we recognize that we need a mechanism to move on. And so we've empowered Layla, the CIO, to have that power to move us on. Whether that be a veto to say, no, we can't put this in because there's too much disagreement or

we're wasting too much time and there are better things to do. Let's just kind of move on. If we get to that point, she can use that power. She hasn't today and we're not really expecting to, but it is there to move us on if we need to.

Okay. So you talked about the importance of having more eyes in emerging markets. I think almost everybody believes that their investment process is the right way to do things. But the big question is, do allocators agree with you? Do the people writing the checks view that? And so much of the world is moving towards passive or moving towards quantitative strategies that are less focused on fundamentals.

But emerging markets is still one of the holdouts where active management is still extremely popular. And so I want to talk about that. I'm sure many people who are listening, they want to be portfolio managers and count that the road to having a fundamentally managed portfolio might not be large cap U.S. in this sort of modern investment landscape.

I think it's a good point. I mean, it's something that over my nearly 30 years in the industry, obviously, I've seen a rise of passives and the, I guess the more questions that are asked about where active management budget or focus should be spent. And I've never, ever had a debate with anyone about emerging markets requiring active management. Like everyone I've ever spoken to recognizes that EM remains inefficient.

There is definitely an alpha opportunity there. So that is a good place to deploy active management. Quite how you do that, you know, that is kind of open to interpretation and different approaches. But I have not found anyone that argues with that fact. You know, we still see some market players as kind of irrational at times. There is, it's not that there is, you know,

sort of different levels of information, but given the languages, like say, for example, if you're looking at Chinese company statements and they're all in Mandarin, you know, you need to speak Mandarin to get the most out of that. If we're listening to a conference call that's being held in Mandarin, you need to be able to speak Mandarin and the English version, which may come later may not be, may not give you quite the same kind of insights or sort of judgment or similar.

Well, and the different degrees of state control in markets and the way companies insert, you know, they become crown jewels of the country and, you know, their success is important to those people in power. And so understanding as well, the political landscape, as well as just what's happening at the company levels in work too. You're dead right again, Max. So we reckon probably 30% of the MSCI

emerging markets is sort of state owned or has some sort of state ownership or interference and at time and time again we've seen where that's the case that the state does interfere this is like a dual mandate there's a dual objective and as a shareholder there'll be times where you know that second mandate or second objective just takes priority and you can kind of lose out so

if you just go passive and hold the MSIEM, you are exposed to a load of those companies, some very poorly run companies, some very illiquid companies, some terrible management teams. And we just think that there is...

definitely an opportunity. And also we very strongly believe that amongst global emerging markets, because they're so different and they can be so volatile and there's so many different things going on. If you have a global opportunity set, it gives you the best chance to kind of navigate your way through those markets because they're all very different. They've got lots of different things going on within them. You have to be aware of the macro. You have to be aware of the political kind of situation in each country.

If you're not, you might have a problem looming towards you. But we do think that's the best way to go about this on a long term view. So for us, three to five years plus, obviously for us as individuals, we're thinking about funding our retirement in 20 years time.

Yeah. So I want to ask about where the alpha comes from, you know, for you guys and your PMs historically. It's something I've always wondered about with emerging markets. Is it stock picking or is it geographic weighting? You know, there was a period of time when China was carrying the EM index and being overweight China and long the big Chinese tech stocks was what separated outperformers from underperformers. Obviously, if you've been

long Chinese tech for the last few years up until David Tepper and the big stimulus announcement, you've probably been dragging. So how do you guys think about geography versus stock picking in emerging markets? And is that in line with your peers?

That's a good question. So we're very much bottom up. As I've said, like with emerging markets, you do have to recognize the kind of the macro, the country, political influences. So we're very much bottom up. We do not care what's in the benchmark. We do not care about country weights in the benchmark. We do not care about individual stock weights.

What we do care about is our portfolio of 25, 26 stocks is well spread, well spread across countries, well spread across sectors. Does it matter to us if we have much less in China than the benchmark? Not particularly. What matters to us is that the four or five companies that we find are good investments where we think we're going to make decent money over a period.

You do have to think about, for certain countries which have a history of difficulties, you have to think very carefully about whether you even want to step into those or not. Lots of EM investors over the years have ended up in lobster pots, as my old colleague used to call them, where there's liquidity when you go in, but when you try to go out, you can't draw stuff. They have a very long time. You have to think very carefully about that. We're very much bottom-up.

Effectively, we've shrunk the EM universe down to a list of about 100, 110 stocks, which is our focus list. They're the stocks that we would like to own at the right price. I have a good quality businesses with the sort of characteristics we like, but we've

We're really looking for those businesses at the right price. So when the cheapest 25% are attractive, which they usually are, then that should make up the portfolio. We just need to make sure it's well spread. So if we found that 10 stocks from that list were all from the same sector or from the same country, we might have been careful about which ones we want to put in. Obviously, put in the ones with the biggest upside, for example, just to make sure that the portfolio is the best one.

That's the diversification, as they say, is one of the only free lunches in investment. So you need to take a blast. Yeah. So I do want to switch it a little bit to talking about the long-only world. Obviously, that's why Rufus came to you and brought you in to help build Vera. So what makes the long-only world different and how has it changed over your career? Yeah.

I mean, the hedge fund world definitely has a kind of ecosystem which is more developed to get people off the ground. Having said that, my contacts and anecdotal evidence suggests to me that there are, certainly in the UK, there are less hedge fund launches than there were perhaps 10, 15 years ago. It is getting more difficult.

The launches that do occur are more likely to be spin-outs or more likely to be people that are launching with a chunk of money from somewhere and a bigger chunk of money than might have been the case five or ten years ago. So that's definitely a change. And the same thing is repeated in Lyon in terms of less boutique starting. One of the things I didn't mention, which is probably relevant about my history and my experience, is that

There's a group here, there's a kind of members association here in the UK called the Independent Investment Management Initiative, which actually changed its name a few years ago. But I chaired that for a few years. And it's basically a kind of members association of boutiques, predominantly in London, probably 50 members. And they range from...

I mean, real startups like ourselves, like Varus and other firms that perhaps just been going for a year up to, uh, there were boutiques in there that had been going for 20, maybe even 30 years running 20, 30, $40 billion. So, and everything in between. And as chair, I basically met with all of these firms, all of the key people who were all very open about their experiences. I've seen what, what, what goes well, what goes wrong, what's, you know, what the difficulties are, what the issues are. So I see some sort of common.

themes and common issues which we've come onto. But the IIMI did a study actually a few years ago where they looked at the number of new firms registering in the UK and they'd seen quite a sharp drop off, which matched what we thought we would find. And it's definitely the case anecdotally that there are less firms starting and it's basically getting harder.

positive, I suppose, is that the environment compared to say 2005, when Oldful Partner started, the technology and the outsourcing arrangements, whether you're long-owned or hedged, are way better than they used to be. There's far better service providers. It's far more acceptable with allocators that you might outsource some stuff from the start. And then actually that might be the best way to go for quite some time.

So that is all helpful. But the big thing that's got tougher is raising capital, which is harder, I think, all over the world, but with specific difficulties in different countries like the UK for example. Okay. And who are the buyers historically and today of long-only products versus hedged products? And what are they looking for in terms of fees? How do the fees differ?

Um, are they looking to, to get an exposure of a specific exposure? Like they've gone to an allocation consultant and the consultant says you need to have X percentage, you know, allocated to emerging markets. And then obviously there's a, you know, MSCI EM index or whatever that, that you would then benchmark against. Um, is that the majority of the buyers of, of these products?

It varies enormously. And so if you're like we are, Varis, we're thinking very hard about where we're best suited, where we're going to fit best. One of the things I learned at Ultral Partners over this 15 years that I was there, given that we were a traditional value shop in a period where value was pretty tough, the most important thing for Ultral Partners was that

They had a particular mandate within a lineup of several managers. They were the value manager. There were other people who were much growthier, high quality, whatever it was. Oldful Partners filled a specific role within a portfolio setup. And so...

That's something that obviously we're very mindful of. And I, I would expect Varus to always be held alongside, you know, some other EM exposure. We're very unlikely to be the only EM exposure. We might be in with two, three, four other managers or, you know, one big chunk of passive and perhaps two high conviction managers like us. And, and,

Which client type or where does that obviously sort of informs where we're traveling to, who we're speaking to. I've found over the years that the North American market overwhelmingly is long-term, very sophisticated, tends to be multi-manager, tends to be...

tends to be keen on boutiques. I think it's fair to say. So I found, for example, in the endowment and foundation family office market, they are not led by big brand names and sort of distribution. That's not really what they look for. They look for focus alignment, capacity constraints, that sort of thing. So that's one area of the US where I think again, there's a commitment to emerging markets. There's a commitment to active, there's a commitment to boutiques.

So as you know, Max, the business development process is a funnel and you just want to give yourself the biggest funnel at the start from which to sort of narrow things down. As to other kind of areas, so pension funds may look at this completely differently.

We invest with an absolute return mindset, but we recognize that someone could go down the street and buy MSCI emerging markets for a few bits. So we've got to beat that over time. So we make it clear that's going to be kind of over three to five years. We think that's a reasonable timeline. We want to align with people who think that way. Anyone who thinks in kind of 12 month or quarterly

or performance periods, probably not going to be for us. So we need to kind of align with the right people to start with. But I think amongst all client types, there are always some people who think that way and are looking for that sort of strategy. And then for us, it's just being clear, absolutely transparent about what we do, what the performance expectations should be. I think a lot of people, a lot of managers

don't set the right client expectations at the start. I mean, we can't sit here and say we will outperform every year for 15 years, right? There's going to be periods where certain things happen that are going to be more difficult for us. But the more we can say that upfront, make that clear so there's an understanding and people think about how we might be balanced elsewhere, the better that is for the long term relationship, the better that is for our business.

So I don't want to spend too much time on old field, but I think it's helpful, obviously, because it was around for longer. But you mentioned that you were a value manager alongside other managers. A lot of people think, okay, we're in a

15 year, 10 plus year period where value is not working. Obviously, you got up to six. And I think you said when you left, it was around five. There are plenty of value managers who lost a lot more as a percentage of AUM. Do you think that was just because you were emerging markets or it was this alignment with your investors? And how do you deal with

these sorts of periods where the factor or the style is really out of favor for what you're doing. It comes back to that point about the expectations at the start. So, I mean, one of the things I...

always remember about ultra partners is that we spent so much time in the first or one or two meetings with a prospect telling them about what could go wrong. Like we, you know, we're value value has periods where it's in fashion, because where it's out periods where it's like not in favor kind of last multiple years, you know, and we could sort of talk to the history of that, but we, we made clear what people should expect from us in good times and bad times. And over that period,

There were, even in the really tough periods for value, you had short periods where value worked really well. So calendar year 2016, Q4 2018, value had a big pop and the old full partner strategies both had big pops. So it was a reminder to everyone. I mean, in 2016, I think amongst the global equity universe, we were probably top of the pops because no one was positioned in the same way that we were at the time.

And so it was just a reminder to those allocators that had us alongside a number of other people, inevitably those periods where value did really well, a lot of their other managers had had difficulty. And so it was a regular reminder that we were there to do a particular job. And as long as we were doing that job, it was okay. And don't get me wrong, I wrote 10 or 12 year period

the clients that you have, I mean, they're hugely important. I mean, we have some fantastic clients, but sometimes you can get a change of person at the top, you can get and all of a sudden it looks a bit different. Someone, the conversation starts changing. Yeah. Yeah. It starts changing. And it could be that someone's got a very different objective. So pension fund can go from underfunded to fully funded and just decide to get rid of all their equity managers. And that can happen in a rapid and short pace of time.

And so you can just get these things change. But Oldsville Partners was very fortunate to get like the right clients from day one to avoid the wrong ones, which would have been difficult to manage and wouldn't really have aligned. And that just hugely helped longevity. And I think, interestingly for boutiques, I think

The right client base is basically the most underrated competitive advantage. Like no one talks about it really in that way. But if you get the right, the first five to 10 clients you have as a business are absolutely the right ones. It makes the next 10, 15, 20 years a huge amount easier.

Yeah. One of the things we didn't touch on was the fees. How does the fee structure differ? You said you take an absolute return approach, but are you benchmarked? And then are fees tied to beating a benchmark?

So for us, we're starting out with a sort of flat annual management charge, no performance fee. I would expect that by the time we get to capacity, we would probably have a bit of both. I think a performance fee can be helpful in terms of managing capacity and giving people comfort that you're really going to manage capacity because people would feel you're still incentivized. But for us, we're not doing that at this stage. I think in the long-only world, my experience is that

There are plenty of people who are willing to pay a moderate fee, understand what they're paying, understand it's not going to be any more than that, therefore collect most of the alpha when it's generated. Obviously, there are some people that think differently, and we'll get to that when we get to that. But for now, we're starting out that way. One of the other observations I've had over the years and Layla's had from a long, short background is that if you do charge a performance fee,

They tend to be worded in a way that's kind of very helpful to the manager, obviously. And if you have a few good years and you do generate big performance fees, I don't think the clients ever forget that. And so even if you do have a few great years, if later on you have a more difficult period, I think if you've charged performance fee and you've really done well, I think it sort of sits in clients' heads and it makes the difficult times then easier.

even more difficult. That's just my experience and what I've seen anecdotally. And as I say, what I've heard from Leila and a few others. So we want to charge a moderate fee. It's all understood. But at some point we'll come back to performance fee. And I've had conversations with people about looking at a tear sheet and they've got gross and net performance on them. Like, well, one gross is irrelevant because you can't eat gross.

Two, what you're doing is you're showing people how much they've been giving up in performance and management fee over time. And, you know, there's the sort of like

Joel Greenblatt, like very academic, like, well, the only true way to measure skill is to compare gross returns to the index. I'm like, yeah, but, you know, in theory, if you're that good, it'll show up in in the net returns, too. And you're not reminding your investors how how fabulously wealthy they've made you in performance fees, but to each their own.

Exactly. And that's the point is we will, over the next two, three years, we'll navigate and we'll end up in the right place with the right people who want the current fee arrangement. But I know, as I say, I've no doubt over time we'll end up with some parts of the arrangement. And we kind of understand that. And actually, that'd be fine for us. I say, if you're going to manage capacity and it is limited, it's actually not a bad way to make sure you kind of stick to that at the end and you're still doing the same thing.

I don't actually, I use the word incentivize, but I don't like we've all got between us $18 million invested in the fund. We're incentivized to make this work regardless of whether it's a performance fee or not. We're all in this.

Understood. Understood. Well, let's talk a little bit about you alluded to the fact that the US market is really where you are focused for raising capital might be surprising to people that UK based shop is so focused on the US and not the UK, and then you know, the rest of Europe.

Obviously, with your experience heading that organization in the UK, I'm sure you've had plenty of conversations about how raising money in your home country and abroad has evolved. I think so many people are just focused on the US. So I'd love to hear what it's like raising money in the UK, forming and launching a fund in the UK as well, and then the rest of Europe. Yeah.

If I take your last bit first, forming a fund in the UK, it's tough. So through membership to the EU, the level and complexity of regulation just massively increased over a number of years. And I would argue that it wasn't always as proportionate as it should have been. Small firms had an enormous amount to do and it did make things very complicated.

And the process of actually getting authorised and getting a firm off the ground for Varus, for example, our FCA authorisation took about ten months. We probably had four or five calls with our case officer, about 20 emails back and forth, each with about a dozen questions on. And it really sort of dragged out quite a long time. It's not to say that they shouldn't have been doing it. That's just the process. What was interesting to me right towards the end was that

It used to be the case that if you were a small firm of four or five people, generally, as you said, it would be investors, right? It's PMs, it's the investors. There might be someone like me on board, but you would often...

He's an outside client consultant to act as your compliance officer. They've got more knowledge, they've got more resource, more people. And that used to be acceptable in the UK, but it seems as though over the last year or two, that's kind of changed. And now you can't have an outside person as your nominated compliance officer for an authorised firm. And the person that is nominated has to kind of prove they've got the experience to hold that role.

And so I know that while we went through our process and I'm the compliance officer and I had to be interviewed by the case officer for an hour on compliance and I managed to pass that because luckily I've been around a long time and a lot of all that stuff sort of seeped in. I know two other firms who were basically told that their applications would be rejected unless they could put someone in with relevant experience to kind of tick that box.

So that's sort of got tough and that adds extra cost to a launch, which people hadn't expected. But then from that point, the capital raise I think is really interesting. So if I take the EU first, for Europe, I've never felt that it was really a single market. There's lots of individual countries who...

gold-plated particular parts of regulation or required extra licensing fees or local language stuff or a tax advice here or the markets or particular distribution channels within markets were really dominated by, for example, the banks or something. So you have to kind of partner with more people

it wasn't like going to the US and having effectively, no matter where you went in the US, you were basically dealing with the same regulations largely. It was very, very different in EU and it was very, it's very hard to navigate and very resource heavy if you wanted to do so. So for Varus, we've kind of written off. And that's partly as well because you need a UCET pooled vehicle, which we don't have. We've got a Caymans master feeder,

for various reasons, but it just means that market is easy for us to one side. I suspect once people find out what we're doing, we'll probably have people reach out to us, which is fine, but we're not proactively going to go there. If the check warrants launching a use, you would do that? We'll drink with Arbor. Yeah. But even then, we don't want to make this business overly complicated. Right.

To what you're saying about you have to work with people there, I think it's like Switzerland, you have to work with an agent who is Swiss and is on the ground. Do you view this as almost like

taking a toll that, you know, these financial institutions, you know, and the people who work at these financial institutions are generally from a class of people who have been in that class for a very long time. And they've been able to work with governments and whatever to sort of establish that there will be this toll. If you want to do finance in our country, we're going to get our percent.

There's people who know far more than me, but it certainly felt that way to me, either when I was involved or when I spoke to people. Maybe it's not as bad as I remember, but there's a really good firm here in London who I spoke to recently, and they're attacking Europe as third-party marketers per country rather than doing it themselves because of some of these issues.

They're employing a third party, you're obviously going to have to pay a toll to do that. Third party goes and raise the money and has the relationship to have the local language and stuff. But it makes it quite a bit, you know, if you're 20 billion under management and you want a globally diversified client base, that's one thing. But if you are going to do one thing, very limited capacity, very aligned clients, it doesn't necessarily make sense. And I just don't think that makes sense for Barrister.

Yep. In terms of the UK, the UK, which I think used to be a great place to kind of start an investment management business, it has just got so much harder. And there's a few things at the heart of that. One, obviously, is the rise of passive, definitely.

Two is that some pools of capital have effectively disappeared or changed nature. So I'm thinking about defined benefit pension schemes where these corporate pension schemes that 25, 30 years ago had a huge amount of equities. They've de-risked enormously, most of them closed. And it just means they've got little, if anything, in equities. And that entire pool has effectively just evaporated.

and been replaced with defined contribution pension provision, which is either done by individuals or is aggregated in various different ways. It could be through corporates or could be through wealth managers, for example. But there, I would think it's fair to say there's more of a desire for the vanilla products.

So big brand, you know, no one gets fired for hiring IBM, right? So if you get a big brand name and you offer a number of strategies for your VC pension, that's going to be easier and less risky. Your job is to limit costs, to not have to end up somewhere and say, you made this guy fabulously wealthy and our employees got the short end of the stick at the end of the day because they blew up.

versus, okay, yeah, maybe it wasn't the best investment decision, but you kept costs in mind and you paid the lowest fees. There's a big chunk of that, yeah. I'm not willing to, there's just career risk to whatever you kind of put in place. And so you've got to be able to justify, which I understand. But that makes it a bit harder for boutiques who might be doing something a bit different, niche, and with very limited capacity. So that's the other thing.

is that as some of these pools have grown or consolidated over time, so I'm thinking of, for example, the UK wealth management space where, you know,

There's been a huge amount of consolidation. The AUM that they're running is getting huge. The amount of capital they have to deploy to an individual manager is just growing fast. And it means you as a manager have got to be able to take a bigger and bigger ticket, which means you need to be bigger and bigger. So all of those things just make it harder and harder for a bull team. Not impossible because there are obviously some great success stories, but it does make it tougher. And it's part of the reason why for Varus,

We focused on, well, all of our history really for our previous firms were from North American client bases. And so we think that's where the best fit is for a number of reasons. So what are the clients like in the US that makes them different than what you just outlined for the UK? Definitely more willing to, I mean, as I said already, far more willing to look at boutiques. In fact, keener on boutiques than big brands, but

much more focused on uh capacity management and singular focus and all those things which which which which helps us so down its foundations family offices and even a you know a large number of pension funds um that's definitely the case it's an overarching theme and then you've got a sort of section within that that are willing to look at firms very early you know there are people who will act as you know if not see anchor investors or very early i do think it's

if you're a boutique ways of money, it's much like a technology adoption curve, right? You've got kind of innovators or influencers at the start, early adopters, early majority. I mean, for us, we're cutting off there. The late majority in the laggards will be too late. We're not all the way up that curve.

In the US, there's lots of people in each of those sections that you can go to. In the UK, that kind of first early adopter section, it's very hard to find. Of course, there are some family offices, there are some endowments that think very similar to the US. It's just they're much smaller in number. And so in the US, you've got well over 1,000, 2,000. I mean, it's an enormous number to go and go for.

And, you know, I think it's a question that anybody who's trying to raise money for a fund wants to ask. Still, it's still incredibly difficult to get in front of those people. You're talking about how easy it is. 90% of the conversations I'm having are with people talking about how hard it is to get in front of those people and that the true early adopters here in the U.S. are high net worth and sort of the small family offices. So it's interesting that

What you think of as early adopters is maybe stage two, stage three for a lot of people in this all hedged world. Yeah. To be honest, I would agree with what they're saying, but from the UK, we really, we're realistically, we've got to try and skip a level and we're fortunate enough that, I mean, the, the,

the pedigree of my colleagues like the firms they came from their track records from those institutions like are absolutely top notch so that i think gives us the best chance possible of skipping one group um and obviously fortunately for me i've met a lot of people over the years i know roughly who to go to i've someone put it to me i've never been an arsehole so like that makes it a bit easier to knock on someone's door um you may have to edit that out but uh

So you've sort of got an idea of where to go, but of course it's still tough. I mean, we still know that from launch in October 2023, we had $18 million of our own money. We've now got about the same from about 11 or 12 individuals who are former colleagues basically and kind of friends. So we've got some of that from the UK, definitely.

but it'd be hard for us from the UK to find those high net worths in the US. Although sometimes I do find just going through the kind of family office endowment foundation world, you can get a referral and things can happen reactively almost, which would obviously be fun for us.

Okay, so let's call it 30 to 40 is where you're sitting at now. What is the check size look for this sort of first round? How does that evolve? And then, you know, at this point where you would pause or potentially even close, how many investors are you looking to get?

And can we talk a little bit about how sometimes those early checks are, they lead to bigger checks from the same group of people later on, how they're kind of starter positions. Yeah. Yeah. So it's difficult to pin down. Normally, I would say that a sort of $5 to $10 million check might be what you're sort of dreaming of. And if you can, it's almost like a book build. Trying to get enough people that are of that sort of size that were willing to come in around the same time.

You might be able to get like four or five people with five and 10, but actually I think there is a group out there that we've spoken to. I mean, a number of people, there's a sort of cohort of early adopters who are willing to do much more than that to secure decent terms. They're willing to be in early. And that brings me on to another interesting part of this. So

But for me, I'm mapping out, we've spoken to about 150 institutions, which will range of where they will vary where they are on that adoption curve. I'm already talking to people that would be early majority, not early adopter, because I want them to be watching us for two years for the point that we might get there and be a right size for it. So you've got to spend time at every point on the curve for me. And also you need to think about clustering. I just think

Like anyone tackling the US who's from outside the US has to think about cluster. I've not seen too many people think about it carefully.

but you can't be visiting 30 US states every time you're on a prospecting trip. It's just not possible. You don't want to be over to the US every third week because you've got some investing to do. So you've got to think about maybe 10 or 12 cities where there's a high concentration of those kind of early adopters and people that you can speak to, maybe some consultants that are at the latter stage, and you build from there. I think about it as a beachhead, a beach to attack,

you know, six, seven, eight, nine, 10 sittings. And if you've got a large enough funnel of those early investors, you are clear about what you're doing. You've done your homework. You know, they've got EM, you know, that they like those sorts of managers, you know, the fact people early in the past,

I'm hoping that we can skip that kind of high net worth layer and perhaps get there very quickly. Yeah. Well, I've noticed that, um, people from the UK tend to always, um, underestimate the distance between things here. The saying I've heard is we think a hundred years is old and you think a hundred miles as far. It's so true. It's so true. I mean, so two weeks ago, Layla echo and myself, we were out to the U S we had a couple of days in Boston.

We're in New York, we're in Philadelphia, we're in Chicago. That's a pretty normal trip, but that's a manageable trip. If you've got to hit eight, nine cities in five days, it's tough. We're super enthused. I keep saying to my colleagues, by the way, it's not just me that's done this before. Both Layla and Echo have built businesses within existing businesses. This is not totally alien to the three of them at all.

And like rule, as you can imagine, we own 100%. We're all super excited. We think the EM opportunities there, we're having lots of good conversations. The only thing

that has been, it's clear, it's a sort of cloud on the horizon, so to speak. It's just that the change of administration in January brings about a bit of an unknown for EM. And so one of the things that's clear, one thing that's clear when we talk to allocators that we've known and speak to for a while is that although they recognize that in 2016, 17, actually emerging markets did fine. Trump came in for the next year, we're fine.

despite all the worries. They're not quite sure this time. He's unpredictable. It's unpredictable. So I get the sense that the people that want to allocate more to EM are probably just going to sit for a couple of months and see what happens. But for us, the positive from that is that those people who currently got passive EM could be worried more about whether that's the right thing to do. We think we can be selective and avoid

some of the countries or companies that are likely to get targeted or are likely to suffer, for example, from tariffs and avoid some of those more difficult areas. And so if you've already got past the EM and you want to think about a change, actually, I think that'll probably be a pretty good time. So, I mean, I guess then the question begs the question, why not hedged? Why not something where you can take a bit more of a directional view? I mean, it

Obviously, it's easy to paint emerging markets with a broad brush, but there might be countries where, for whatever reason, the head of state finds it more advantageous to butt heads with Trump and to build a name for him or herself as somebody who stands up to the U.S. and probably to the detriment of the companies that are there, to the benefit of the politician. But, you know,

Easy shot on goal if you have the ability to take the opposing view of the company. Well, I mean, so Layla started her career long only at Schroeder's and then spent nearly 20 years on the long short side in emerging markets. And the reason we are long only is because she sort of concluded after all that time, although she'd added value, it was a huge distraction, but not a huge amount of value. And

you know, emerging markets, it's kind of expensive to hedge or difficult to get the borrow. They're hugely volatile. You have to think about risk and, you know,

The experience is that you tend to get shut down at the point you don't want to be shut down. It's a difficult discipline. And we actually think the opportunity in EM over the next five to 10 years as individuals is far better for us if we're just long early and accept the sort of volatility. Every now and again, something will happen and later we'll get excited and say, "Oh, if only we could do this, if only we could do this." For example,

You can just get events, right? So in Korea this week, you get something that just comes out of the blue and just sort of threw us all. We just thought, what on earth is going on there? Quite Emmy from a developed market country. But I will say any country with a short selling ban is not a true developed market. Yeah.

But, you know, that's interesting. There is one, not to take us too far back to something you said earlier, but, you know, obviously in the U.S. you can start

a fund, a private fund and not be registered. You still have to file paperwork, but they're not coming in to do a review until you become an RIA, until you hit that AUM threshold. There's the exempt reporting advisor, and depending upon what state you're taking clients from, you might have certain filings from state to state. But for the most part, if you're small, you are not marketing very publicly and

You're not, you know, blowing up and getting sued. You're not you're not going to end up on the radar of any of the regulatory agencies. The FCA, it sounds like it's very different. You are registered. You are being interviewed by them before you take a dollar.

Yeah, completely. And so there's a very long process which will require a consultant to help you through because the paperwork's enormous. There are minimum capital requirements, there are minimum liquidity requirements. We've got quarterly submissions we need to make around our own liquidity and our capital buffer. And they're quite complicated returns. And it all adds to the cost because in reality, you probably need an outsourced management accountant to deal with your finances.

If you're lucky, they can also draft your returns for you for the SCA. But there's lots of other information you have to provide. It's very closely policed. And that's the US. People are scared of the SCC.

I sort of understand why, but actually, as you've said, if you're a relatively small fund and you are selling a fund under private placement rules to institutional investors, which no one would argue whether they're institutional investors or not, it's actually a relatively straightforward set of rules to deal with. And even if you do get to the point where you need to have SEC registration, which may be us, my memory of that is that it's not any worse than the SCA and what you're already doing here in the UK. So I

I'm certainly not scared by or worried about it. I actually think it makes things more straightforward. It's just the geographical distance and those sorts of things. But with video, perhaps it gets a bit easier. Yeah, look at us here. All right. So we've talked all this time about what works. What about what doesn't work? What are the things that can kill an investment boutique, both towards the end of their cycle, but also early on? Because there are different pitfalls at different stages.

I mean, early on, I think it's not enough planning and thought about whether what you are offering is really going to work and where is it going to work? Who is going to be attracted to this? Who is going to buy this? What need am I solving? And how do I get to those people? Do I have connections to get? I think a lot of people...

find it hard to map that out. Perhaps they don't have the experience. Generally, I guess they're investors. They might have worked in bigger institutions where someone else is thinking about that. All I would say to anyone that was thinking about this, and I know loads by the way, so I know lots of people who are at larger firms and are somewhat orphaned or not being... They don't have the distribution backing of the firm. They've been left in the corner. They've got a decent record. They've just not got as much money as they should have. And a lot of people are thinking about this.

I would urge them to speak to someone like me who's built a business before and just pitch the idea to someone. And someone like me who would go out and raise money would tell them in five minutes what the issues were or whether they need to rethink things. And what salesperson doesn't like to give off all their brilliant advice? So people would do that for free. I think that's very helpful. I think also at the early stage,

People tend to focus too much on the running costs of the business rather than getting the first 30 to $50 million of AUM. So everyone I speak to, all of their thought goes into what does it cost to run the business, which I think is relatively easy for someone to work out. What they don't think about is what is the minimum level of AUM to make refund expenses reasonable enough I can attract decent sized investors. Because if you

If you've only got five or $10 million, those funding expenses are big as a percentage of the value. And so it makes it quite hard to get the next person in. And I think you have to be

like really confident or have an idea or a plan that you can realistically get to 30. If you're long only, you can get to 30 to $50 million. If you're hedged, I think it's different because you can charge a performance fee, which makes it a bit easier. You can make your money on a smaller amount. And also I think there's far more acceptance of hedge funds passing through costs on fund expenses, which I'm sort of surprised by, but it just does seem to be the case. Yeah. So it's definitely, you can start with a lower AUM for a hedge fund.

But long only, that's the thing I would sort of stress. Where can you get the first 30 to 50 and having a good plan for that? Will Barron: So is this giving fee waivers or lower fees to early investors with the idea that it allows you to take

a larger check that actually meaningfully moves the business forward. Potentially. It may be that you're just lucky enough that there is one client that you've been looking after for 10 years who knows that you're running too much money or you're not allowed, whatever it is, where you think you've got a good chance. I mean, you need more than one. You'd need a list of five. You thought you'd get one of them, but you've got a chance to get that first check. It's still difficult. Yeah.

But I just think even for, even for Barris, and we've one of the mistakes we've already made is that we ha we, we didn't, we didn't control our fund cost as much as perhaps we could have. So now we are having to effectively pick up part of that bill to make sure that the underlying clients and the clients that are coming over the next couple of years aren't fitting an unreasonable amount of that expense. So to give you an idea.

to make sure that Varus is breakeven from day one on that internal capital that we have of $18 million. We're charging 2% management fee. So Varus is a firm, it's breakeven, it can rent the offices and cover whatever we need to, Bloomberg, Terminal, that sort of stuff. And also,

From our perspective, we think we're going to make low teens returns. And so giving up 2% on a management fee at this point is hopefully not that material. And actually all it does is underline our runway. It's absolutely in walks, which is obviously one of the key parts, right? So you've got to show you're viable and you've got a long runway. I think a lot of the

A lot of the difficulties with boutiques in the early stages is just convincing people that you have to wear with all to survive for five years plus. You know, there's a, there's an opportunity cost to doing this. Um, there is a cost to doing it. And so you've got to be able to get that across. Well, especially if you're set a lumpier long-term thesis, you know, if, if, because it can happen, it can happen that the, that the thesis plays out in the,

fifth or sixth year. And if at three years you decide to throw in the towel, then your LPs are not going to get that boomerang. Yeah. So every boutique still needs a bit of good fortune. Whatever it is you're doing, I mean, for us, we need people to want emerging markets. And although there are lots of people out there that do, they might move very slowly over the next three to six months. There's all sorts of things that you still need in your favor. But going back to the funnel, if you're speaking to enough people

who are the right targets. You understand them. They know what you're trying to do and how you might fit in the court of law. And you give yourself the best chance of getting them on board. But you still need a bit of luck along the way. You do need, you know, for there not to be military coups in too many countries and that sort of thing.

Yeah. Yeah. So, I mean, you talked a little bit about obviously the administration change here in the United States and how that has some investors in a wait and see mode. But there are other longer term trends with, you know, U.S. versus the rest of the world that have really reached pretty, you know, at least historical extremes in terms of the dominance of the U.S. markets, both in terms of market cap, but also, you

just investor interest, you know, beyond just the indexes. So I have to ask, you know, in this environment, is it throw in the towel? Is it this has to mean revert sometime? You know, do you have some people who are like, we're doubling down on EM because, you know, we're mean reverters and you have other people who are like, US is going to 100% of the benchmarks. Like why own anything else? We come across, so this,

There's people in various camps. There's definitely some contrarians out there who just think they've been in a fortunate position over the last 10 years. The US has done really well. EM hasn't.

They haven't been particularly scarred by that and they're itching. You can sort of tell they're itching to do something. There are then another group who've been scarred and are just very wary of doing anything, but still recognize they have to have a commitment to EM. It's still 70, 75% of the population. There are still some fantastic trends in terms of consumerism which are going on and have been missed by quite a lot of people. So you've sort of got different groups.

What is interesting to me is lots of people, because the US is outperforming. So if you think about an endowment that's got a kind of target allocation, it might be that they want, say, 5% in EM and they have, I don't know, 20% in the US, for example. Because the US has been so strong, they've ended up at 22%, 23%, 24%. EM's at 3%, 4%. They know they need to make that switch, but there's very few people that are really pushing to do it. And

I'm not quite sure what the trigger will be, but they're all looking for that trigger. They're all looking for that comfort that they can make that change. It's very difficult to know what it will be. All we're trying to do is outline to people the opportunities that we see. And to give you an example, I won't give a specific stock example, but

We found eight or nine, what we would call new economy businesses, where there's a playbook from the West, whether that be the US market. So Uber in the US, there is an equivalent somewhere else in emerging markets where you can see the trend, you can see the trend in profitability. It's quite a clear playbook. And to us, it's a bit of a puzzle that these seven, eight, nine businesses

And people don't seem to be valuing them as though you can see that trend and what's going to happen. And this is a multi-year trend, right? That looks fairly well set.

And to us, it just looks as though it's being missed. So one of the things we're going to do in our next newsletter is kind of point some of this stuff out to try and show people, look, here's your US stock and what's happened to that business over 10, 15 years, which is wonderful by the way. But look at what we've got in EN, which is five, six, seven years behind. And it's got all the scope to get to even just halfway in terms of profitability or whatever it is. And we're hoping that that might trigger a few conversations.

Yeah. So you have the newsletters. How does the FCA feel about publishing research, publishing opinions? So many people here in the U.S., I think, you know, wrongly hide behind, you know, can't say anything because of compliance. Is it the same attitude in the U.K.?

Yeah, very wary because in the UK, our authorization from the FCA is that we will only deal with professional investors, no retail. And so for us, we can't put just anything out into social media space because anyone could look at it. So if you want to see what we really think on our letters,

The full letters are only available to a distribution list where we decide whether to put you on or not. We always ask. I never put anyone on a distribution list. I haven't asked. I haven't said yes. So that keeps people in touch. Now and again, through a LinkedIn or on the website, we might take a subset of our letter, which explains how we go about a particular part of our process or a particular process.

uh thing that interests us about emerging markets not to be too specific not to be talking about stocks in the portfolio or performance but just here's how we think isn't this in you know isn't this interesting this is kind of the way we go about things and we can we feel that we can do a bit of that which we do um but i i do i do regularly speak to managers who feel they can't

They'd say anything really, I don't know how to answer the ether. It shouldn't be that restrictive, but you do have to be careful because you're not really trying to talk the return of less. I mean, for us, it's... But you still, my question is, you know, at the end of the day, you still control who purchases the fund. And if the end of the day, you can go to the FC and say, this is our client list. Like these are...

U.S. endowments, these are pensions like we're not even if this person might have read the article and shared it, like we're not going to let them in front.

that's 100 correct so because of our vehicle cayman's master feeder you can't invest without getting the application form from us you know if we don't think that you pass the test then it's quite straightforward but lots of other managers in the uk because they've been forced to have usage vehicles because that's kind of anyone can get in there and so for i mean we're quite lucky i feel like we've got more freedom than most the most people i speak to other uk firms

They feel like because there's a usage vehicle and because you have to be on these platforms for anyone to access you, therefore anyone can access you. And so it's more of a problem for them. Ah, that makes a lot of sense. All right. Well, I want to close on one difficult question, which is, I was just going to come back. I was just going to come back. I was just going to come back to, oh, no, go ahead. Yeah, please. The successes and mistakes of boutiques when they're more mature, right? So there's a, there's, I've given you all the sort of terrible reasons not to do this from the start, but if you do do it and you're successful,

The thing that most boutiques will struggle with over time, A, succession is a big thing. And B, kind of just overreaching and overstretching. And overreaching and overstretching could be in terms of the number of strategies you have or the number of job recruits you're trying to service or the number of clients you're trying to service. All of those things create friction and work and a need for resource and a need for people. There's lots of technology which help, but you do need people.

And that can be difficult. If you branch out into diversifying strategies, that again can cause difficulties. It means everyone is not quite as aligned as they might have been on day one. I think all those things are sort of tricky. Succession is a big one. And lots of firms deal with it okay. Lots of firms don't. But it is the hardest thing.

But I'd split succession into two categories. One is unexpected succession. So key person falls ill, goes under a bus. I mean, you have to be able to tell your prospects or investors what will happen in the kind of emergency succession plan. So that has to be done. That does mean you have to think about that.

And then the second type of succession is obviously more planned, multi-gen type thing where lots of firms decide they want to, the legacy is they want the firm to go on forever and they want to make it multi-generational. And that's admirable. It's very, very hard to accomplish. But I have just as much respect for

We're a firm that runs for 10, 15, 20 years and where the founders just decide, we're not going to buy succession. We don't necessarily want the legacy. We've done a great job for clients. They've made a lot of money. Now's the time where we're going to return the capital and it's somebody else's time. I think either approach is great. The first approach where you're trying to be multi-gen is really, really, really, really tough. Possible, but really, really tough.

Well, what about this? It's perfect for my for my harder question that I did want to end on was the one thing that doesn't seem to be a killer sometimes of investment boutiques is underperformance, that their funds, that they they reach scale, they get these great.

great clients. I mean, how, how, uh, how much better can a client be if, if they're willing to accept, um, you know, five, 10 plus years of underperformance. And it sounds like a pretty great client to me, but you know, I, we've all seen the statistics, you know, 90% of active managers underperform their benchmarks. Like how does this happen? How do these, do these firms manage to stick around? Um, despite not doing what they're supposed to do. I think

My understanding is, so there's been research that shows that boutiques tend to fare better than their larger brethren and boutiques that specialize on a small number of things have tended to be better than boutiques that focus on a lot of things. So there is evidence out there that shows that's the case. There is evidence. Lumping in active managers together is possible.

is wrong, firstly, is what you said. Yeah. Because I would guess my argument to that, and I haven't done the research, so I have to be slightly wary, but my argument would always be those studies that are done on the active management, are they really including managers which are out there that don't really run a usage or a 40-act fund or something that would be in a liberal Morningstar universe? My guess, probably not.

And I would guess that the best performance probably comes from those managers that wouldn't be part of those studies or that universe because they're secretive and they're kind of tucked away and they're dealing with a relatively small number of institutions in the US or Australia or whatever else. That would be my first guesstimate. But also,

I think as I sort of alluded to, one of the things I learned from multiple partners is that you have to be really honest and clear and set client expectations at the start. If you're saying we think we can do well over a cycle in any one month, quarter or year, it's going to be a bit unpredictable. At least you can set that from the start. You have to emphasize it and reiterate and remind people when it's going well that that is the case. And

Again, as I said, if you're fulfilling a particular role within a portfolio, your underperformance, if understood, and it's in line with what people would expect given your role, it might be okay. I'm not saying it's always okay, but it might be okay. That sounds crazy, but if you're a specialist and niche enough and you're doing a particular job, that might be all right.

Yeah, I guess it's nice if you don't have your investors calling and saying, my 30-year-old son just retired because he's made 20,000% on Bitcoin. So what are you guys doing for me right now? Yeah.

And I just, funny enough, I just, we just had a conversation with, uh, with Rufus about, um, sort of investors generally and their approach. And as I sort of said before, like getting the right clients with the right time horizon, which it absolutely makes things, you know, so much easier, not an easy, it's not an easy job, but like so much easier than it could be.

Um, the last thing you want is for every month when you send out your fact sheet, but someone's on the phone saying, you know, why this and what this and what you're doing next month. That's just again, Layla's experience from a long short world. It's just that it's just not helpful ultimately to compound your value over a long period of time. Yeah. Well, Jamie, is there anything we didn't touch on? I think we need to, we need to discuss. Uh, it's probably, it's probably, as you can imagine, I could sort of talk about this forever. There's, um,

It's been hugely interesting and rewarding to work in this industry for so long. And for me, I do really strongly believe boutiques, just smaller organizations can have something really special and have a real advantage, which some people get, some people don't. But having worked within a big and a small firm and my colleagues are the same, we're doing this in a small firm because we think that you can avoid distraction.

focus on better alignment, you know, lots of things work much better. So, uh, you know, I, I hope that this, I hope that other people find this sort of interesting and useful, and I've certainly found this or hugely rewarding thing to do, but it is tough and it is not the underestimated bottom line. All right. Well, we'll end it there. Thank you so much, Jamie. Thanks very much, Max. It's a pleasure. Thank you.