YouSaid · the spoken record

Peter Kraus

lines on the record: 100
first: 2020-02-03
most recent: 2020-02-03
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Never as good as it seems, and it's never as bad as it seems. I think if I'd known that when I was 18, might have been a little easier on myself.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not an immaterial thing. And it helps me reflect on my own mistakes. I try to analogize between things that I've done and things that I read about and where did I go wrong or how could I have done something better? I don't read the self-help or the business stuff. I really read actual history because I think it's through the history that I find the rich context that is easier to analogize to what I'm living in today as opposed to here are the 10 points of success that doesn't make that much sense to me. I try to read literature, but I'm not very good at that. I went back and read 1984 last year. I mean, I think I read 1984 in high school. So you can't say that I ever read it. Chilling, depressing, fascinating because at the time it was written. If you think about post-World War II in the UK,”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I read a lot, I read history a lot, I read about biographies, people, but also read about historical, political, and financial and economic history. I do believe that history rhymes, doesn't repeat, but it does rhyme. Geography matters”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“He makes observations day to day on his own views of the market and his own investments. He makes two to three videos ninety seconds each a week. They're posted on LinkedIn, Twitter, Facebook, and Instagram. And LinkedIn does this influencer thing, and they rated him number one in the world.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“This year, I don't know if you know this because it just happened recently. Simon Thorpe, who runs our credit business, is the number one influencer in the finance business at LinkedIn. I think that's a pretty big deal. Aperture's got a pretty big footprint. And why? Because Simon, who is, if you ask Simon, would have told you a year ago, are you kidding? Didn't even use social media because he's genuine, because we're delivering the person as a person. We're not delivering them as a quote unquote financial professional. Simon Sinner's shirt and sweater in front of the Bloomberg with his finger pointing and talking for ninety seconds about an issue that's interesting to him, and that resonates, that connects with people. That's the next step of interacting with investors in a way where they get to know the person actually is running their money.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Met or listened to financial professionals in sort of a stilted, professionalized selling methodology. You're either being sold something like the financial advisor was selling you something, or it was kind of a stilted academic paper kind of delivery. We think we're building real intellectual capital inside of Aperture, and we wanted to offer that intellectual capital to our clients, our prospective clients, in a way that they could understand it. And so I'd like to say we're sort of the Netflix of the asset management business. We offer you content where you want it, when you want it, and how you want it. And it could be in the palm of your hand. It could be, you know, on your computer, it could be wherever you want to read it.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Personally, I'm a Neanderthal. I've learned a little bit, but professionally aperture has been an eye-opening experience. We thought out of the box, the head of our client business came from the music industry. So it had nothing to do with this world. But we had a view that The financial industry was not making itself available in a personalized way to the end client that you”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Kind of a crazy thing, but if someone says something to you and you kind of take it the wrong way, do you say to them, I missed it, what were you getting at? Or do you just walk away going that guy's a jerk? Too often people are walking away going, That guy's a jerk and living in their own world. How do you?”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“My biggest pet peeve is that in general, I see people over time in my life Giving others the benefit of the doubt less often. Maybe it was because I was just younger and the people around me were younger that there wasn't this sort of prejudice of a view. But in today's world, the number of times in which people at disparate points of view give themselves the benefit of the doubt has really shrunk to almost immaterial. And I think that's sad Not just a US issue, that's a global issue. So, my pet peeve is that people should ask themselves, am I giving you the benefit of the doubt? Why am I just jumping to a conclusion that you mean X? I don't even ask you.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Some artists will capture that, most artists will not. So, if you can find a way through time of collecting artists that capture the iconic imagery of the moment, and if you've been collecting over forty years, that's actually pretty interesting. Now, that's a big statement. Can you achieve that? Maybe not. One of my best friends who's the director of one of the museums in New York said to me, you know, it could be pretty depressing. You could be living in a time period in which artists just aren't any good. I said, yeah, I can't do much about that. And that could be true. That could literally be true.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I've learned that active hate is actually as good a reaction as I love it. Because it's moving you, it's actually having an emotional impact on you. If you look at something and say, it's interesting, maybe. The part about collecting that I like the most is trying to push myself. Into an area of discomfort because you tend to buy things that become familiar to you. Because I know that I feel comfortable buying it. The image makes me feel good. Okay, so that's like a consistency. But it also narrows your vision. So going back to the idea of origination, how do you think out of the box? How do I find things that actually disrupt me? And how do I stay current in what's thinking? Another view of art is that art is essentially a set of iconic images that are reflective of the time that you're living in.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, my wife and I have been avid collectors of contemporary art for forty years, and I'd say that that has gone from a interest to a hobby to perhaps even an addiction. We go all over the world, we look at art pretty much every weekend. It's an interesting aspect to this, at least I think it's interesting. The investing process is a creative process, and art is a creative process. And trying to understand art as a creative process and as a nomenclature because artists have a nomenclature, the question is, can you read it and understand it is, I think where the intellectual interest for me lies. And I've had some really interesting experiences over the 40 years. For example, sometimes there's an artist that I look at or we look at because my wife and I rule this we both have to like it and we hate it, literally hate it acting.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that doesn't seem to be a challenge, but it's Peter at ApertureInvestors.com. So that's not a hard email either. I'm happy to talk to anybody, as I said before.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“My big aspirations for the business not being small minded about it is that we changed the industry. Did we actually get allocators of capital to recognize that they're choosing from a pool of managers who have a bias towards Growing assets which undermines the performance that the allocator is trying to achieve, and that as the allocator, as the owner of the asset, you need to demand that the managers change their business structures. And we're trying to show people that it is possible to run a high quality asset management organization with global talent that's at the top of the class, producing returns with a different fee structure.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's 40 hours over 10 years. That's not so long. So I've known you over a long time period, but I don't know you that well. Again, it's the intensity of time over the time period to actually get to understand the human being.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I've been calculating that I spend personally an average of about 30 hours and then other people in the company will spend cumulatively probably another 10 hours, maybe fifteen. So again, that's a lengthy period of time. It's not huge, but most allocators would never spend anywhere near that much time with a person. It's a little bit like concentrated investing. If you get to spend more and more time with people, you have a better chance of actually getting the judgments about the people right I had this epiphany as a banker said to myself one day, you know, I've been calling on you for 10 years. You're the CEO of some company. I've known you for a long time. Okay, you've known me for a long time, but you think about it. Over ten years, maybe I see you four times a year for an hour.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So much These layers of assessments of the people and how they're managing the team and how they're going through the process and how they're trading. Time do you spend with one of your managers before you decide whether you want to make them an offer to come?”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't want that person. So you have to discover how people run teams and how they think about that. By the way, managers are perennially bad people managers. I mean, that's not what they do. They're introverted. They're not very outgoing. They're highly analytical. And the people around them are exactly the same. So how do a bunch of introverts actually interact effectively? That's a challenging structure, a challenging situation. Again, trying to understand how does a manager do that. Then managers have to be able to evaluate their own people and fire their own people if they don't work. Because at the end of the day, you're not going to pick everybody that's going to work. Even aperture, I'm going to pick people that aren't going to work. And I need to be able to be able to figure that out.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's important in building teams because some managers build teams that are just functionally taking orders. Go look at that. Go look at this. Give me the details. I make the decision. Managers should make the decision, but the manager needs to have a value structure where they actually are interested in what the analyst is telling them from the point of view as they could change their mind. They could actually move their perspective. When you'll get better people underneath you, and two, you'll have a much better answer. Three years on the value side is are you willing to run a team where you compensate people for their real input and you make them a part of their team or at the end of the day do you think you're the only one making the decisions and if somebody pushes you on compensation you just let them leave”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Nobody's perfect. I'm not perfect. Nobody in the company here is perfect. We all have biases and mistakes. So what's your value system around how you take criticism and how you listen to others? I was with someone yesterday who said, well, the reason why you're in the room, Krauss, is because I know you'll tell me I'm wrong. Okay, so that's a mind that says, I want to be told I'm wrong. Whether I agree with you or not, it's a different question, but I want that input. There's lots of people in the world that don't want to hear that. That's just not what they want to hear. They rely on their own instincts, their own views of the world. I find that the best investors are people that have a value structure where they actually value other people's input. That doesn't mean they talk to everybody, but they find people who actually are different than them that have a different point of view, and their value system will actually support that.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“That happens. I got it right, and here's what I did, and here's why I did it. And it happened again here and it happened again here. Okay, that's interesting. I got it wrong. Here's how I got it wrong. I believed in this bond. I thought this was a good trade. I completely missed the fact that the central bank was going to do X. I should have seen it, didn't see it. Cost me money. I learned. That's also good. But the rates of, well, you know, I generally buy this factor, but it was a growth reversion or it was a momentum change or factor shift. I have no interest in that. That's just a manager who's exposed to factors. And you can buy that for 35 basis points, and I'm not interested in that manager. Then values are important to me. At the end of the day, everybody's a human being here. And humans are, as I said before, complex.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So humility, self awareness, being able to be the villain in your own narrative, recognizing that those are critical characteristics. So talking to people, it's not so much about looking at their performance track record, but how do they talk about it? And do they understand the details of it? Can they recognize what happened in underperformance at a certain year or outperformance in a certain year? And some people tell me, listen, I really outperform, but I just got it right and I got lucky.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Track record is important. But more important is how people describe their failures. Everybody can describe their successes. And as somebody once said, I love this phrase you're never a villain in your own narrative. So when are you the villain? And how do you describe that? How objective are you? Self-awareness and objectivity in an investor is another critical element. The ability for investor to be self-aware is, I think, quite challenging because they have significant egos. And when they're successful, they tend to undermine their self-awareness. They tend to believe in what they're doing. And they become sometimes blind to where they're at. In particular, if you're making a lot of money at that time,”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Available to many more people at much faster speed. And if all you're looking at is the same information everybody's looking at, you're just not going to produce a return. But if you're thinking about your universe strategically and you're thinking about, look, I think B is really an interesting company or in an interesting area that value chain. That value chain is growing. Now I can project with greater probability that B is actually going to grow faster than the value chain and it's going to do something else. Then I've got some reason to actually get interested in B and find out if it's the management team I like, if it's got the operating leverage, I think it's interesting. Where is the company structured? And now those elements of decisions that I make have greater leverage to the stock price than you do if you're just looking at a financial screen. So I look for people that think about originating ideas that way, not just in stocks, but also in the fixed income space.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“But sometimes I find managers that are really comprehensive readers and they read all kinds of literature outside of the box literature. They have thematic views, and that leads them into a growth industry or a growth segment. And they start to think about what are the elements of that growth segment. And they're good at thinking about value add propositions. So they think about a value chain. You start with A, you go to Z. Okay, well between A and Z, there's some things like Q and R that aren't very interesting, but there's some businesses like B and S that are fascinating and that actually are leverageable beyond that value chain. So I'm going to go look at those industries. Okay, that's a manager that's thinking out of the box. They're not just doing a screen and looking at financial results. Because at the end of the day, we talked about this earlier. Information has become”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things I'm also really interested in is idea origination Idea Origination is important. Well, if I'm fishing in the same pond that everybody's fishing in, it obviously lowers the probability that I'm going to find something that's different. If I'm fishing in a pond that's bigger or different, I have a much higher probability I'm going to find something it's not a crowded trade that may actually be interesting. So I'm very interested in how managers source ideas. What I find is 90%, maybe 85% of the manager source things pretty much the same way. They have some kind of a screen process that identifies a large university and brings it down to a smaller universe, and then they start to actually think about what they want to spend time on.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“He's so excited about the opportunity at aperture because now with far less money he could earn far more than he did at JP Morgan, and he can consistently say to his clients I'm on your side. I don't have to convince you that I'm not an asset gatherer. I don't have to convince you that I'm really fighting for you.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“That. You said, well, because good managers know that they don't perform. And so I said, so what are you telling me? I'm not going to get a good manager because the managers, I'm not going to get are people that know they're not going to perform and aren't willing to actually bet on their performance. Guess what? I don't want that manager. I'm actually trying to figure that out when I talk to people. Are you really a risk taker? Do you really get it? Because if you really are a risk taker and you believe in what you can do and you have done it, we launched a fund this week in Europe called European Equities. He was at JP Morgan for twelve, I think seventeen years. He ran a portfolio for twelve years. His cumulative average performance was $800 and some odd basis points.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that this is one of the interesting things in the industry. The revenue model itself is if you're a manager that can perform, your compensation and aperture is significantly better than any place that you're at because you earn on less capital, more money than you would in the long-only space, and even in the hedge fund space. So for those people who actually believe they can perform and have a history of performing, this is kind of like a emancipation because they're not on the road all the time trying to raise assets. They don't turn themselves into a salesperson. They focus on performing and they ask you to get paid for their results. They know they're not going to perform every year, so they're prepared in some years not to make any money. So they have to understand that. And that also understanding that person finding that person is also interesting. I had a CEO tell me one of the big companies, we never get a good manager. And I said, why is that?”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's what I thought I was wrong. I sold it. That's much more appealing. So you can have those conversations with managers who have experience, and you can ask them those questions, and they will give you those answers, but you're not seeing it real time. When you see it real time, there's a much higher level of conviction that that's a manager that you want to invest in.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we're very tied to looking at history, and it's the agency risk in us that is a huge bias in our willingness to invest capital. We have to see experience because if you invested without experience, people would say that's silly. And that's a human trait. That's actually fair. That's not an unfair thing. But experience has its own bias associated with it. And escaping that bias is also a challenge. So with regard to this one person that I did hire, I actually watched him perform. And when you watch somebody perform, meaning they tell you why they're buying something, what the thesis is, why they're waiting it that way, why they're selling something, then you can actually see does that play out. And more importantly, you can see when it doesn't, how they react. Do they rationalize the position? Do they say, well, yeah, I said that, but I think this now. That's not very appealing. Or do they say, yeah.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Or maybe his five year performance is really good. And that's about the only part you listen to. And then he goes on with all the other things that he has to say. But ultimately, it's just based on historical performance.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I've looked at both and I've actually hired both. Interestingly enough, the fellow that runs global equity technically had not been a portfolio manager, although he managed his position with portfolio manager skills. And actually, he ran a portfolio for us on Bloomberg and our Bloomberg system for, I think, 13 or 14 months. It was very interesting about that. This goes to allocating capital to managers. So in the industry, just take a basic simple situation, you've got a financial advisor, you meet with your financial advisor, and your financial advisor says, we're going to buy manager A. What's the reason for that? Well, his three-year performance is really good.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So when you're screening through potential PMs for aperture, You tend to look at portfolio managers that are more experienced so you can dive into examples of that? Or are you looking at someone who's been a very successful analyst who your intuition is telling you they have the chops to be able to trade and be a portfolio vendor?”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Market and then you have to make a judgment as to what direction the market is moving because momentum is going to drive those trades one direction or another. So it's not to say that quants don't do this because they do. And it's not to say that it can't be successful in quantitative works because it has been, but we tend to look at the world fundamentally through human eyes where quantitative analysis is a tool rather than a driver. And I'm looking for somebody that can actually integrate all those things. And that's why it's hard to go from an analyst to a PM.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's actually a portfolio construction technique that works. However, you still have sector biases, you still have country biases, you still have factor biases. So now you have to learn how to think about the sector, the factor, the country, in an equity portfolio, or if you're in a fixed income portfolio, you've got duration risk, you've got yield curve questions, and you have country and you have sector, and you have industry. So you're not used to as the analyst taking all those things into consideration and weighting them. And where's the experience of understanding what the correlation risks are amongst the between those? And how do you think about that? And then finally, how do you react? So finally, the portfolio is constructed. It's behaving, and then it starts to misbehave. What's your next move? How do you deal with that? Those things are not subject to quantitative analysis. They really need to be driven by an understanding of the portfolio itself, an understanding of the”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“The interdependencies of the different ideas and the interdependencies of the different ideas with the market and the impact that that has on the total portfolio as it relates to an index is a challenge. It's a different challenge than they're used to, not something that they've thought about. Now, they're smart people. They can learn it, but there's also an instinct to it. There's a field to this. You can construct portfolios with quantitative methodologies. So for example, let's just be very simple. We can say we're going to have 20 stocks and we're going to make them all equated. And if the equal weights get beyond five percent up or down, we're going to adjust”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very good point, and it's a very difficult problem because what I'm leading up to is that the third component of a successful PM is that there also have trading skills. So you need to be an analyst, an engineer, and a trader. The number of analysts that can become an engineer and a trader is small. The ability to identify an analyst who actually can be successful being the trader and the engineer is very difficult to the point where it's hard to take the risk. Have done it, but it's hard to take that risk. And you need some proof of concept. So I think the challenge that analysts have is they spent most of their career getting really deep on a particular company, set of companies, bonds, structures, whatever. They concern themselves to some extent of when I buy it and when I sell it because they have price targets.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“They take analyst input, they organize it, they weigh it, they think about how it looks in a construct, they figure out what their sector exposures are, their country exposures are, their weightings within those, they run the math, they look at their volatility, they look at their risk, they say, okay, that's a reasonable structure, and move on. That's not the analyst, that's the engineer. Portfolio manager has to be an engineer, but I also wanted to be an analyst. I want to be able to ask them, what is this stock? Why do you own it? Why did you make a mistake with it? For them to be able to answer that question right down to the details.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“What I'm essentially trying to do when I'm interviewing these portfolio managers is understand number one, are they really risk takers? Because oftentimes the managers in the industry are actually not risk takers. They're constructors of an index-like portfolio against an index. They're attempting to build a business. They're more businessmen than they are portfolio managers. And they aren't really comfortable taking risk. Secondly, I'm looking for people that are also strong analysts because I don't want a portfolio manager who's really just an engineer.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is probably, again, one of the things in my career that I've really both learned and enjoyed the most. First of all, I'll basically meet anybody. I don't stand on ceremony. You want to meet with me? No problem. I've learned a little bit about first meetings in being able to say, well, okay, that's probably not something I want to do. So I'm a little bit better with my time than I was when I started. But I'm very open-minded. I think that if you come to the party with too many constraints in your mind, you lose the advantage of thinking out of the box. So number one is, whether it comes from a headhunter, it comes from somebody I know, it comes from somebody who refers it, it comes from somebody who calls me directly, it comes from somebody at the firm who knows somebody else, however we accumulate or we just call people and say, we think you're running an interesting strategy we want to meet with you. It's all of those different things.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not controlling the capacity, which is really what you care about, and it's not incentivizing the manager with your incentives, which is what you care about. You're just getting a fee deal that the headline makes you feel good, but it's not actually achieving what you want. It's not changing the bias of that organization and the bias of that manager. Aperture does that.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“ninety percent of their assets and fixed fees and ten percent of their assets in performance, it doesn't actually achieve that. So one of the interesting things I see in the marketplace is large institutions will say to me, well, you know, we get that performance fee structure from other companies. And I say to them, gee, that's really good. I'm glad you do. How much of that portfolio manager's compensation comes from the performance? And the answer invariably is not much. And then I say, well, you're a free rider, effectively, because the company that's giving you that deal is giving you the fee deal you want, but it's because it's an incremental dollar to them.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I did, and we did. So my visit to the SEC and Treasury was as CEO of Aperture, and I believed that it was worth disrupting ourselves, meaning AB, by launching funds that were these performance-based funds. And we did, I think, while I was there, we launched five or six funds. One of the imperfections of doing it at AB, which I've resolved at Aperture, is One of the main drivers of this performance structure and compensation structure is the portfolio manager is really aligned with you, the client. If the portfolio manager is”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the residual beta. So if I have beta 0.4 and the market's up 10%, I earn 4%. I get paid 20% times 480 basis points, whether I perform or not. Again, that drives me towards growing assets. I think that's wrong. If clients want to pay 20% of the beta exposure or in the carry in the case of a credit fund, more power to them. But I don't think that's smart. So basically, we're saying to clients, why don't you expose your money to a manager who only gets paid if they beat the index? And stop worrying about what percentage of the index you have exposure to because your portfolio has lots of beta exposure and lots of carry exposure. So rent some of that beta and carry exposure to us at the ETF rate and pay us only if we beat the index. That is the basic portfolio theory of aperture.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, over the last 10 years, I've watched hedge funds carefully and I've been invested in hedge funds since, as I said, really the mid-80s. And they've changed dramatically in that time period. One of the problems in the industry today is the short positions. First of all, they're not 10 stocks. They're 40 stocks. They're 40 stocks because they have limit the amount of capital they put in each position because they don't want to get blown up in the short. You can't hate 40 companies. That's impossible. So essentially you have an inefficient index. You could be short, the index, but the client's not going to pay in 20 if you're short at the index. So you are short stocks and you tell the client that I'm creating alpha in those short positions. In general, across the industry for long periods of time last 10 years, there is no alpha in the short positions. So the short positions are really there for the purposes of dampening volatility and taking the beta down. The problem is the hedge fund charges you 20%.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, we are trying to disrupt the hedge fund market because the hedge fund market says in the long short world, I'm going to deliver to you a beta of less than one, lower volatility. But over time, I'm so good that I'm going to be able to produce equity market returns, or perhaps even better than equity market returns.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wouldn't say that people don't do it because they do. I wouldn't say that it's necessarily bad, but I don't actually think clients understand that one of the things they're doing in that case is accepting leverage and the risk that comes with leverage, which is very hard to quantify. So we try to create a constraint around our investing here that you can be short, but you're going to be short stocks or bonds that you think actually go down when markets go up, not just to reduce volatility. So that gets to the issue of hedge funds. And whether they're credit or equity.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“But making money in a short means that the stock goes down when the market goes up. Stock that goes up 5%. When the market goes up 10% is not making money. Performing less than the market, and if you borrow that money and buy a long position that outperforms the market, you are creating returns for clients, but is financial engineering. It's just taking the client's money and leveraging it and getting paid on the leverage, which personally I reject.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we attempt to provide general constraints, meaning it's emerging market debt or its global equity, but within that I don't want to say to somebody you have to have large cap, you have to have small cap, you have to have mid cap, you have to be in China, you can't be in China. It's basically you go where the money can be made. Because at the end of the day, I'm trusting that the manager who's spending all day long and all of their life trying to find a return is better at identifying where to put the money than me, because I'm not spending that much time doing that. So, number one is each of the portfolios is a low level of constraints around it. That also means that if we want to be short, we can be short. But it recognizes or has the following view that shorts can make money.”
2020-02-03 · Capital Allocators · Peter Kraus - Widening the Aperture on Alpha (First Meeting, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source