YouSaid · the spoken record

Soo Chuen Tan

lines on the record: 61
first: 2024-07-26
most recent: 2024-07-26
sittings or episodes: 1
sources: podcast

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“This exposure, you write that attribution, but really the limited partners in that partnership were just customers of the partnership. They're not really partners. You get your statements, you get your PowerPoint presentations, you get your investor days, and once a year you get your chicken dinner, but you're not really a partner, you're a customer. We wanted to dial the clock back all the way to what partnerships were and create a genuine partnership in its DNA, de facto, not just the URA. That was more than a little bit of self-interest in this. I was 33 when I started the firm. I fancied myself to be hardworking and well-intentioned and I fancied myself smart and all of that. But I was one person. And here we were trying to have this massive global mandate, look for value anywhere in the world. We were doing work in the Eurozone and me and which army. It was in our interest to co-opt our LPs to be part of our team. We're lucky our day one LPs included, endowments and families and why wouldn't we use the”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Discipline and demand absolute not relative holder rates for investments. Because of our structure and mandate, we have a willingness to do anything and the ability to do nothing. We know that is a rare privilege. I've just talked about legal structure, but back in 2010, I believe that setting the right culture for a partnership was even more important than getting the legal structure right. We sometimes forget investment partnerships were actually partnerships. There's a general partner, there's a limited partner, it's a partnership. If you roll back the clock to the early investment partnerships, for example, the Alfred Winslow-Jones partnership, people will actually go into business with each other. Someone contribute to sweat, which is the general partner, others contributed the money, which is the limited partners. But the DNA was really a JVE. Roll the clock forward to 2010. An investment partnership looked more like a product than a JV by this hedge fund product. You buy that private equity product, you buy this stream of returns, you buy”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Where GPs collect incentive allocations on the way up, but then when they suffer drawdowns and they're below the high watermarks, they just shut down the firm. Few GPs ever return incentive allocations to LP. We thought that was unfair and we created these clawbacks. In 2018, a number of years after we launched, we decided to return capital to our investors because cash balances were creeping up in our portfolio and we couldn't find anything we wanted to buy. We thought that this was the most intellectually honest thing to do. But we wanted to be able to call the capital back later when we next found compelling investments. So we restructured our partnerships and incorporated the capital commitment feature similar to those of private equity partnerships. Our investors commit capital to us and we call the capital only when we found investment opportunities that meet our investment bar. We also sweep cash back to our investors when we exit our investments so we're not forced to reinvest proceeds from one exit to another company in our portfolio. The structure allows us to maintain a strict investment”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Quarter, it just doesn't work. This is especially true for emerging managers. Emerging managers need to put up numbers in the first three years or they're out of business. Most don't have the luxury to think and invest long term no matter how well-intentioned they are. Our thesis was that if we want to invest and act differently from other players in the industry, then we have to structure the firm differently. So we structured our firm with three year, five-year, and 10 year investor level gates, which were highly atypical in 2010. You can imagine just in the aftermath of the global financial crisis. In fact, they were anathema to so many investors because so many partnerships had actually thrown up gates. During that time to prevent redemption. And here we were launching a new fund with three, five, ten year investor level gates. Now, these are still highly atypical today. We also wanted to align incentives, so we created three-year clawbacks on our incentive allocations so as to avoid the headside win, tails you lose, structure of many investment punishments,”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“That over our own investing lifetimes, we should invest with a global mandate to take advantage of capital markets inefficiencies and to find wonderful businesses around the world when they're out of favor. Now, I just described value investing. I believe was and still is that these are so easy to describe, but they're actually really hard to execute. Everyone wants to invest like Buffett, but few can because of the structural asset-like mismatch in the modern investment management industry. Asset likely mismatches were back in the news in recent years because of Silicon Valley Bank and First Republic, etc. But that has even bigger asset life they mismatch in the asset management history itself. Most public markets funds offer daily, monthly annual, if you're really lucky, two-year liquidity terms, yet equity is ostensibly have a generational duration. You cannot tell folks with a straight face that you want to invest with a generational investment horizon when your capital can be pulled.”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Here we made a conscious decision to depart from Buffett a little bit, or at least the early Buffett. So, Buffett famously compounded over a generational time horizon and more by owning primarily US businesses. But Buffett lived through Pax Americana. A lot of wealth was created in the United States. So if you owned Geico or Cease Candies or American Express or Coca-Cola, over Buffalo's lifetime, well, you've done really well. But Disney was launched in 2010, not 1950, not 1960. The world was and remains a much more global place. Barriers to capital, barriers to labor, barriers to entrepreneurial talent, barriers to technology had all come down like North American. I'm here in the States. Yet there was still significant informational language, cultural time zone barriers that make capital markets around the world not efficient at all. For example, the capital markets in Malaysia are not at all efficient. They look like the US looked in the 50s and the 60s. I believe wars and still is”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Had just been passed that created a lot of uncertainty for both payers and providers, and that caused a sell off in US healthcare stocks. Sometimes it's a whole country. The whole country goes to recession or inflation or unemployment, you name it. And sometimes this whole world, like a global pandemic. The human mind is not wired to take uncertainty well. Uncertainty breeds fear and fear breeds for selling. In those times, otherwise healthy businesses come up for sale. And it's our job as a value investor to be a provider of liquidity to force sellers and to quote Buffett to be greedy and others are fearful. The goal is to become the lead underwriter of the business, to say, hey, at this price, sell the company to me, I'm willing to buy it, not because”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Going to own companies generationally. That's two. Three is being contrarian. This is a crucial element of value investing, but this element itself has fallen out of favor lately because it has paid off to buy businesses that are riding high and own them as they keep riding higher. That's been the story for the last decade or so. But our belief was and still is that if you want to own a business generationally and generate supernormal returns from that, then you have to have a large margin of safety when you make the investment. It's a necessary condition. Now the markets are generally too efficient for those prices with large margins of safety. To be available all the time. It's rare. Usually companies are available at such prices when there's some uncertainty around the business. Something's gone wrong. And sometimes that's because of something company specific. For example, a company loses a big customer. Sometimes there's a whole industry that goes through a convulsion. For example, in 2010 when we launched, there was a US healthcare industry, the affordable.”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Know the business will have good and bad times is given, and no business owner says, Oh, my dealership is going so badly. Let me go dump it. And then when earnings recovered, I'll buy it back. That's crazy. A business owner owns the business through both good and bad times. And of course, if you don't like the business and don't have to be in the business at all. But if the through cycle economics of the business are good and the business is a worthwhile one to own, then expect to own it through full economic cycles, through both good and bad times. That's a direct lead to the second element, which is being long-term. In public markets, when investors say that they're long-term, sometimes they mean holding a stock for one year. That's long term, or sometimes it's two years, and sometimes three years, that's very long-term. But really, an economic cycle is seven to ten years. So if we want to own a business through economic cycles, we're talking about a generational time horizon. So we put a stake in the ground. You can imagine that was quite countercultural in 2010 to say we are”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“The journey that we've been in together. That was something that, in my mind, I really wanted to do, and it's still very much the plan today. And that's what we're working towards. Now, in order to try to do that, I wrote a white paper on what a 50-year investment program would look like from first principles, not anchoring on what the industry is, but what we thought it would be if we had to design it from scratch. In it, I said that we would invest pursuing a fundamental long-term contrarian global value investing philosophy. Of course, we were not reinventing the wheel. These are all elements of classic value investing. These terms roll off the tongue. Few stop makers ever say, oh, we're not fundamental or we're not long-term. But I was quite specific about what each of these terms meant. The first was fundamental. And sometimes people say fundamental, they mean as opposed to technical. But for me, it was not the case. Fundamental means owning businesses, not owning stocks. And there's a big difference. If you're a business owner, even if your business is a small business, say you run an auto dealership or you run a gas station or you're on a laundromat, you”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT
“Great question. Well, I'm gonna start with compliance disclaimer because I have to about compliance policies restrict me from discussing performance in a forum like this and a compliance team has asked me to point out that nothing I say is an offer to sell or solicitation of offer to buy any security so an investment decision should be made based on customary and thorough due diligence procedures which should include but not be limited to a review of all relevant documents as well as consultation with legal tax and regulatory experts To answer your question I started this train when I was 33 years old and sometimes it's good to be young and idealistic. I didn't know how hard it was going to be coming out of Lehman. I was and still am a big fan of Warren Buffett when we launched I wanted to do the Buffett thing which is to run an investment program over a 50 year time horizon I said I want to throw a big old 50th anniversary party and have a bunch of septogenarians and octogenarians and neurogenarians partners come and sell”
2024-07-26 · We Study Billionaires · TIP647: Value Investing Masterclass w/ Soo Chuen Tan · IDENTIFIED FROM THE TRANSCRIPT