YouSaid · the spoken record

André Perold

lines on the record: 75
first: 2020-12-21
most recent: 2020-12-21
sittings or episodes: 1
sources: podcast

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“Everything is perfect except the price is wrong. And if everything's perfect, you can see it and understand it completely and handicap it. And all that's wrong is the price. It's so much easier to invest and take advantage of a price anomaly. So it's sort of like a treasury bond. Most treasury bonds are trading at par, but there's one with the identical coupons in principle. That's a treasury bond trading at 90 cents. You know it's a steal. And you just have to be able to know it's 90 cents versus power to take advantage of it, but everything else is perfect. That's the ideal and the question is how close can you get to that? You're looking for these opportunities”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Me first say that there are certain markets that are inefficient that don't avail themselves very easily to be exploited for alpha. An example would be, I think, in many frontier markets. It's not always clear that the accounting is right. It's not always clear that the people running the firm aren't conflicted, that there's transfer pricing, what's called tunneling where they shift things between firms and you don't really see it because you don't have the means to see it. There just isn't the transparency. In some cases, the governance of these firms isn't great. Even if the price is wrong, you don't quite know it's really wrong. And you also don't know what catalyst there are to give you the return that you are seeking. So I would say in markets like that, they're inefficient, but not in a way that is helpful. The best inefficient market is one where”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think these days it's almost all specialist related. The difference is how you execute. So today it would be, okay, we find a specialist partner. How can we work with them? It could be you put some money in their fund as a traditional LP might. It may be that we have better terms, better liquidity, better capacity, better transparency. We work very hard and fight for those. But it may also be that we execute through separate accounts or we'll co-invest with them or we'll upsize with them. So I would say there's a direct capability that goes with this that's very valuable. But in the end, the engine of the idea of the particular opportunity that's being discovered and you want to exploit is through an expert and the direct stuff for us is mostly about how to execute really well.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very hard to get right. We don't know anyone who's any good at it. We certainly are not, and we far prefer to go bottom up and find these themes, these specialties, these inefficient markets. And then we can have real conviction and then we can design a plan of execution to go with it.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“And asking them constantly, many times a day, if the team is on the phone talking to experts in subspecialties, like, what are you seeing? Tell me the opportunity said. What's your favorite idea? And it's all bottom up. But eventually, when you go through those ideas, you start to see pictures. You start to see patterns. And you say, wait a minute, that same idea is coming up in a range of places. Aha, there's actually a common theme here. Let's stand back and say, is that a theme that we can exploit? And then you say, okay, what's the best way to exploit it? And then you design a little bit more of a top-down look at it, as opposed to having a more macro perspective where you're thinking about, hey, I think rates are going to rise. I think the dollar is going to go down. I think we're going to have inflation. I think equities are too high. Those sorts of macro perspectives don't really feature into what we do.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the first thing I'd say is having now been doing this for a decade and a half, we have an amazing team. We have a team that understands that to find opportunities, it all begins with networking. It's in the middle, it's networking, it ends with networking. You just networking constantly. And as a firm, you build a strategic asset called your network that is profound. And we get lots of inbound calls, but we're always calling”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk about those differences. So let's start with the sourcing of opportunities. And in this, as you're looking for these niches, how do you spend your time differently than when you're looking for managers?”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think that's a very different process. You have to think through as an investor rather than allocator when you do that. It takes a different set of skills and a different mindset.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say today it's at least 50% in a much more idiosyncratic areas and growing. In the past, we relied more on individual managers to do the sourcing themselves around the world in marine areas. And over time, we just realized that we needed to take control of that process. And in fact, change the unit of analysis from the manager to the opportunity set. And so if we discover that a certain market is inefficient, let's say it's European microcaps or something, that's the inefficiency we should focus on, that is the unit of analysis and then figure out how to take advantage of it rather than look for managers and hope they work out. Here we're sort of taking the bull by the horns and saying, no, no, no, no, we can identify the opportunities and then we'll find specialist partners that we can execute with.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“So if I'm looking at your portfolio sheet five or ten years ago and another sheet today, I'm just trying to get my arms around how much of the portfolio has moved towards these more idiosyncratic opportunities and how much of it might look like, oh, we had these great managers before when we were filling asset classes and we're just keeping them because we think they're great.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“But you can't be, in the end, you still have to parse it. So in its bluntest form, you need to say, look, how much of a particular investment is equity like? How much is bond-like? And so on, and then ascribe to each investment a degree of equity likeness. And then you add those up. And if you get a really big number, you know that you probably have a lot of equity exposure. And if it's small, the opposite. And then you can manage it at that high level as well.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Particular investments, and you say, okay, when are they going to win or lose? And do they win or lose at the same time as everything else or not? You can get a pretty good sense of whether it's diversified or not. And I would say today, certain asset areas are more inflation sensitive than others. If you're worried about inflation, which we are to an extent, you may want to emphasize some of those more than others. And others are less sensitive. And so you just got to parse it out. And it's as much a bottom-up exercise as a top-down exercise.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so that's as much a bottom up as a top down process. I think bottom up, you first need to deeply understand the investments that you're making is what are the drivers of those investments. And we can maybe talk in more detail about some of these, but I'd say in something like biotech, that wins where the fundamentals are going to win or lose based on the success of science, you don't discover a vaccine because the economy is doing better or worse. You discover a vaccine because you have great scientists who were able to figure it out. And that doesn't correlate with equities or anything, so that's nice. In credit, there are a lot of idiosyncratic credit investments that are senior, you're getting good yields, but the reason that they succeed or fail isn't that tight to the economy. They can be in catastrophe risk areas or litigation areas or other areas. So once you start to see these”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“So you've described almost two different types of businesses. You have the, call it the diversified pool, which has some tweaks on it, and then offering pieces, or I like to say the whole pizza pie or slices of the pizza pie. I'm really curious about the slices. We'll talk about that. How do you put the two together in the diversified pool so that the overall risk profile is maybe similar to what it had been or similar to what your longstanding clients expect?”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“That are a little off the beaten track where the opportunities exist precisely because they're off the beaten track. And that requires that you be able to execute really well. It means that you're working with different kinds of specialists and different kinds of partners that are much smaller sized. And it means you need to be that much more on top of your game because you're now much more involved in working with them. It's not just delegating to people and sitting back and watching.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think that has changed quite a bit. And I would say early on it was more of an allocate to asset categories. And then within the asset categories, find the best that we could do, which I think today still characterizes most of the way allocators, endowments, foundations, pension funds think. But along the way, we fairly quickly realized that it's very limiting to allocate your buckets and then have to fill the buckets. And it's much better if you can opportunistically look around for the best ideas that may not conform to buckets and then put those together. And I would say the biggest change has been how we've taken that idea a long way from where it was. We're today to find those ideas, you need a very sharp pencil and look for very idiosyncratic opportunities and very inefficient markets.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“So is your original core model? There's a difference between finding the best opportunities you can and then having this kind of broad, diversified asset allocation approach. What was your particular way of putting that big diversified pool together?”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think for us, that's a pretty key piece. But also over time, as we found subsets that we think are more enduring, places to get alpha, clients who don't want a holistic portfolio, et cetera. What if I do a lot of that myself, but I really like some of the things you're doing in certain component areas? And we've started to make those available. And as we've done that, that's broadened our ability to work more closely with clients of different kinds, be they family offices. We do a lot of work with, but other institutions as well. And so that's actually very exciting.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Basic idea of the one style, the beauty of one style for us, style meant mand It's a very broad mandate. We absolutely still have that. The mandate is to go and find the best set of Returns Them together in a diversified portfolio where they Don't correl Highly with each other then by being diversified. That's your best defense. That first and then think about tail risks that might occur and try and find ways to protect. And that aspect hasn't changed. And the beauty of doing that is it makes you think about the world at large all the time because you're looking anywhere and everywhere. That's a great strength if you can pull it off. To be able to have such a broad mandate.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you initially said you have to look at the world as it is and not how you wanted it to be. And I know when you first started the business, even when we talked a couple of years ago, the High Vista model was a one-pool endowment model style approach. How has that changed?”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“The time, especially today. And yet, as I look back, We were able to put up pretty good numbers Consistent way. So that feels good.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think the single biggest Change has been How the opportunity set itself has changed. Investing is a game where you're dealt a hand every day. Hand is different, and you need to play the hand your delts. You can't play a hand that you wish you were dealt. And I think the challenge for us all has been how have we adapted? And I must say I'm pretty proud of how our firm has adapted to get some sense of How the When we began in 2005. Yields were three percent higher. Are So that alone. A huge difference. What you see out there, not just because bond yields are lower by a lot. Also, because the way it occurred and what has happened in the world to go with that. We had the GFC, we've had the European crisis, we've had a bunch of others, and obviously we're now in the middle of COVID. Still trying to come out of it. I would say Very different”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's such a good question A few things one is the original idea hasn't changed where we're very much looking opportunistically for returns. Freedom to look around the world in any asset class, in any type of security for opportunities is very powerful, provided you have the skill set to pursue those opportunities, that you have the governance to make sure that you don't go off the rails when you go to further away corners of the world. And that hasn't changed. I've always said, and I still believe that Alpha is scarce and it's transient. It doesn't stick around for very long because it gets competed away. And so you always have to skate to where the puck is going, knowing that it's not going to stay long in any one place. And so having the freedom to be able to do that is very powerful. So, that hasn't changed. At all. When I look back”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“Somehow it's been 16 years since you started Hi Vista. And we'll replay our first recording. So we'll have the Hi Vista story. What's happened over those 16 years that's going to change the way you think about your investing in the business?”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Andre Perrold, the managing partner and chief investment officer of High Vista Strategies, a $4 billion firm with roots in endowment style investing that searches for inefficiencies across asset classes. Andre was the second guest on the show where we discussed his background as a renowned investment professor at Harvard Business School and the founding of Hi Vista. Our second conversation covers the evolution of High Vista over the last few years. We discussed changes in the business and the firm's response by focusing on inefficient markets. We then dive into examples of opportunities in biotech, private credit, and litigation finance and close with a perspective on active management and private markets. Please enjoy my conversation with Andre Perold. Andre, thanks so much for joining me again.”
2020-12-21 · Capital Allocators · André Perold – Pockets of Inefficiency at HighVista Strategies (Capital Allocators, EP.169) · IDENTIFIED FROM THE TRANSCRIPT · source