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Christopher Zook

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72
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2021-12-13
most recent
2021-12-13
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1
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podcast

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  1. “Of people have borrowed this over the years. What's the greatest challenge in your business today? Not your problem, but what's the greatest challenge? And I ask both of these gentlemen on my right and my left that question. And they came back and said, without question, the number one challenge that we have in our business today is we have too much money to deploy. And I have to concentrate my holdings because one of them, after about three glasses of wine, he started really moping about how He had a billion dollars he needed to spend a quarter. He said if I go to my board and say these are the 20 managers we're going to hire this quarter and next quarter we're going to hire 20 different ones at $50 million apiece I'm going to get fired because of the fact that they're not going to want to look at that but if I go to them and say by the way we're going to do these four managers that you already know they're already really high quality and we're going to do 250 a piece then they're going to give me a raise because I've put the”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Performance. So when we talk to these managers, how much are they focused on the two? How much are they focused on the 20 is a real discussion point? If a firm takes their eye off of the performance ball, they're not going to raise new capital. If they don't raise new capital, then obviously the golden goose gets cooked. So it's really important for them to focus on that. But what is very fascinating to me, and it's a big part of the theme and a good example of the theme and how things happen, The theme for GP steak actually started of all places literally in the Alamo. The Alamo of Texas is a famous landmark about the history of the state of Texas becoming independent from Mexico and becoming its own country. At an investor meeting for one of the firms that we'd invested with, I'm sitting with two large pension players on my right and on my left. And literally I love to ask the question and it's used a lot.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Objective is to make sure that they're growing their business doing the right thing for their clients, and then ultimately to make sure that everybody wins as a result of that. Now that said, there are a couple of cases that we're aware of where it has become much more about, there's an old joke when I was chair of the Texas Head Fund Association, which I founded, we had a big debate. This was in the early 2000s about whether or not hedge funds really cared about the 20 anymore. Did they just care about the two? There's a legitimate debate there, and I think that's what happened to the hedge fund industry quite a bit, is that if it was easier to go get a billion to $2 billion to $4 billion and you get 2% on that, well, the 20% you don't want to take a lot of risk with because you don't want to impede the management fee income. Well, in the private world, I think there is some of that that is absolutely happening, where firms are growing just for the sake of growing, not because of the fact that they're doing it for”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I think it does depend. It was one of the things that we really, really focused on and still do on what is the motivation for the sale of a stake. Again, this is something that's public knowledge. We sold a minority interest in our business to Tony Robbins earlier this year. Why? Because of the fact that we believe that together we could grow the business much faster with the balance sheet capital than we would individually. So do we think today, and I'll just use us as an example, do we think differently today because of the fact that we have Tony and AJ and Josh and the rest of the team, as shareholders? And the answer is absolutely not. Do we have more responsibility to them? Yes, but we've had shareholders in our business going back since I founded the firm in 2001. So we don't think any differently. And most of these private equity firms are exactly the same way. They own 75, 85, 90% of their business after we've bought our stake.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Have the ability to be the mega firms of tomorrow and be 50 to $100 billion firms, that gives us very asymmetric opportunities, very highly convex positive asymmetry in the way that we can invest in these businesses, which is why we've invested over a billion and a half dollars in that space in the last five years.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “That's going to pay a contractually obligated management fee regardless of what transpires with that business which provides enormous downside protection for the owner of that business, but it also then has this big upside optionality, so when you have firms that go from, like in some of the cases, we acquired stakes and businesses when they had $15 billion in assets under management. There were already big, really, really good firm, but now they're $50 billion. And so if in three to four years you triple the size of any business, you're obviously expecting to see an enormous value increase as well. And that's what we've been able to see on top of that downside protection, the current cash component, and on top of, as we see now even more in our partnership with Bonaccord in the middle market space, it gives us the ability to see firms today at $3 billion, $5 billion, $10 billion.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “So, when we look at the opportunity in the GP stakes world, it's time. And GP steaks were very popular and very much around in hedge funds, and we just consistently passed on that. Not that we disliked the strategy, it just had a much more binary outcome. If you own a piece of a hedge fund in two years, you're either just doing incredibly well or you're out of business. There's really not a lot in between. Certainly there's some in between, but not much. It's much more binary for a passive third party. When we heard about the opportunity that was developing with our partners at Dial, when Dial talked to us about what they were doing in GP stakes of private equity firms with firms that we already knew, it literally was a similar meeting. It was 45 minutes and was like, okay, we're in. Now we need to understand all the dynamics on this. But we love the fact that the private equity business model and private credit and private real estate fit in the same bucket. But you have locked up capital.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Best opportunity to be successful with the highest level of confidence. And that's really, really difficult to do today, but there are still pockets of that. But in so much of what we do, and if you look at everything we've done, whether it be GP stakes or midstream energy or things of that nature, we have always looked at it from the standpoint. It's really kind of hard for us not to make money. And if it's hard to not make money, we feel pretty good about the opportunity to make a very good return.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “So thinking about investing is well used, but where's the puck going? Skating where the puck is going to be, to quote Mr. Gradsky. We really, really like to have the wind at our back. Now, to be very clear, we will invest with the wind in our face, but we have to be paid exponentially better to be willing to go counter trend. So in 2009, 2010, we were clearly contrary, and when we were buying up everything that had gotten destroyed during the global financial crisis. But because we shorted subprime, we literally had the benefit of all of this cash coming into us. And we were like a child in a candy store. I mean, it's like, oh my gosh, I'll buy that. I'll buy this. I'll buy this. We were very much contrarian then, but we knew the opportunity set justified in besting with the wind in our face. But most of the time, we're going to look for the wind at our back. And then from there, it's going to be where is the highest probability adjusted outcome that's going to give us the”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “It was clear that they had come up with a very, very good way to take advantage of the housing bubble bursting, and so we knew that it was a way to make a profit from something we believe was going to happen, but that it also would be a significant hedge for the rest of our portfolio in the event that that were to take down the economic system. Everything that we approach, we approach it the same way. What's the theme? What's the best risk reward to take advantage of that theme? And then from there, what is the best team to partner with? Most of the time we don't have the expertise in-house. Sometimes we do. But most of the time, we're going to partner with the very best in the world at what it is that they do to take advantage of that theme. And shorting subprime is just such a great example of that.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Was to New York, and I was with John and his team, and they were talking about what they were doing in housing, and it took me 45 minutes to say, I'm in, we definitely want to do this. It took me 45 days to understand what the heck they were talking about, CDSs and CDOs and CDO squares and all these things.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “So I've always been a very thematic investor. And for us being thematic just allows us to refine our thought and refine our efforts and our energy. And so in 2006, it became very, very clear to us that the housing bubble was going to burst. And I literally was so frustrated because of the fact that I had no idea how to short a house. So I didn't know how to take advantage of that bursting of that bubble. I was literally in Los Angeles Airport and I was doing some manager meetings out there and DITEC funding came on the TV there in the airport with this commercial saying they would give me 120% of the home's value, no credit check, no income verification and I yell out loud that is nuts and everybody in the waiting area thinks I'm nuts. But I like this is insane. My literally very next trip.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Our business is curating unique and exclusive investments for our global network of investors. We are very different than some that provide access. And access is important, but what we are is curated access. It's truly our money first. And so it's much more alpha focused as opposed to just beta focused. And our business is literally taking to our entire ecosystem, which is 2,000 investors in 47 states and 13, 14 countries, to be able to give them something that has been curated for them, handpicked, invested by us personally first, and then open to them in a way that they would never be able to get to it on their own.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Our interests with theirs to where we were the largest investor in what we were doing. We didn't take a management fee. We just took a percentage of the profits. And that was just perfect alignment in their eyes and perfect alignment in our eyes. And ultimately we have a saying that there's maximum alignment, there's maximum profits. And ultimately, that's really what caused us to work more and more and more towards the standalone vehicles or conduits as we call them, some people call them SPVs, to be able to really cover the entire gamut of the investment landscape and go wherever we want to put our personal capital. And that was really the turning point. And then we gradually, over time, we refined all of our focus to just alternative investments. We actually spun off our large capital loan only business into a standalone investment advisor. We gave an entrepreneurial opportunity to those folks. And then everything we do is pooled vehicles and everything we do is alternative.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Certainly, the business model in the original design was always where investors of our own money first and then we're going to figure out what else we're going to do in the marketplace and then open up to our investors. And the large cap long only, that gave us a good core, if you will. And then the satellite was all of the alternative investments we did on the hedge fund side and on the private equity side. And where the transition really began to occur was in the mid-2000s, particularly when we shorted subprime with John Paulson. I had a great relationship with John, went back to literally 1994. The opportunity to invest in shorting subprime, which John Paulson, was something that we really wanted to be able to do for all of our investors. And so, yes, we had a fund that they could do that through, but we really wanted a dedicated specific vehicle for that. And ultimately, that is what we were able to create. We saw that that was very appealing to our investors. We were able to totally”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “It does seem like the way you approach investing today is a little bit different from large cap stocks and hedge funds and private equity. So what was the evolution of CAS from where you started to where you crystallized what you've evolved into?”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “And I had a very good track record long only large cap, garp as a strategy, if you will, or style, and so when I started the firm, we had a lot of alternatives investments that we effectively rolled up into a fund of hedge funds. And then we had the separately managed accounts business that we were able to move over intact. The thing that obviously none of us expected was a month after we started the firm, 9-11 happened. And so that created some interesting dynamics around the start of the business. But the actual launch of the business was pretty seamless because that had already been on the pure asset management side.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “And Doing actually in 1992 was managing separate accounts on a discretionary basis. So while I was on I was in the asset management side of the business as well. So I was able to then when I moved. And then moved to Oppenheimer. I was able to port my track. And I had a very”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “That aspect Was consistent with what that dream was literally in 1991. So when you went to start, you'd spent that decade or so in brokerage and now you're going into a business where most of the lines weren't the things you were doing. So what was that initial launch like for you?”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Side Brokerage side of the world was incredibly valuable and lucrative. Actually, managing dollars and managing money. Finding investments.”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “That nature. And so I really enjoyed the investment side of it. I've always been intrigued by the markets and all along the way of my career. Been a matter of going back to that passion, that love So talk me through what your early work experiences were leading into fand and cast. And started with. Soon after Opportunity and”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “My guest on today's show is Christopher Zook, the chairman and CIO of CAS Investments, a 20-year-old non-traditional multifamily office that has $3 billion invested in a series of thematic strategies, including $500 million from the CAS team and its shareholders. Our conversation covers Christopher's self-determined path to creating CAS, a thematic model that creates raving fans, and some of CAS's investment themes, including GP stakes, Midstream Energy, Disruptive Technology, and Changing Consumer Behavior. Along the way, we touch on CAS's investment philosophy, sourcing, research, and implementation of themes. We close with Christopher's relationship with Tony Robbins and the future of CAS with Tony as a partner. Please enjoy my conversation with Christopher Zook. Christopher, great to see you”

    2021-12-13 · Capital Allocators · Christopher Zook – Thematic Investing and Raving Fans at CAZ Investments (Capital Allocators, EP.226) · IDENTIFIED FROM THE TRANSCRIPT · source