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Tony Davis

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2020-06-29
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2020-06-29
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  1. “So it came up with a model where we lent them money to increase their capacity, and the repayment plan was we asked students only if we placed them in high-paying jobs to pay a portion of their income back into the system to allow us to continue scaling. So I think there are these really interesting models in terms of how we can approach addressing social challenges, sometimes grant making and a pure not-for-profit is the best way to do it. I sit on the board of achievement first, a charter management organization that's high performing the board of series, which is a convener of large capital allocators and large corporates on issues of climate. They're wonderful organizations that rely on grant money. We were very fortunate and honored to be part of just recently Next Street put together a program to help CARES Act PPP dollars get into the hands of small minority owners.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “High skilled volunteers with not for profits that need their help and creating a ton of value for them in the process. So we started to be much more flexible in terms of how we use the whole endowment and we also pursued so-called blended finance opportunities. So from some of the things we learned from Sir Ronnie Cohen about how to think about outcomes-based payment models, we led a financing for a not-for-profit coding boot camp in Queens that focused on that population that really wasn't the for-profit coding bootcamps weren't accessible to them. These were non-college grads, median income of $18,000 a year that over nine months would learn iOS, HTML, JavaScript, and after nine months would graduate and be placed making $85,000 and higher extraordinary. I've never seen anything like it in job training. We went to UK who founded and runs pursuit.org and said, you know, how do you scale this? And he said, look, I got to pass the hat every time for philanthropy.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “That we had a goal to have all of our assets be impact aligned. And so what that's meant over time, it's a more defensive portfolio, just given that it's the foundation. But it's bank debt in a healthcare analytics company. We put money into a firm that's providing financing solutions for mid-market renewables and energy efficiency. We've invested in funds like ecosystem integrity partners or KKR impact. We've invested equity, but market rate of return equity into social entrepreneurs. For example, one terrific company called Catch afire.org and the entrepreneur there, founder, Rachel Chung, that is connecting”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Yeah. So again, it was a journey. Like, we didn't know. We knew we wanted sustainability to be at the core of all of our activities. So with the foundation initially, it was two things. One, getting smarter about how we measure the impact or the social return on investment from our grant making and tracking that, what are the key KPIs that we're tracking to make sure our dollars are being put to work effectively. And then secondly, the big focus was how do we use the left-hand side of the balance sheet, the endowment in a way that actually promotes and is aligned with our mission as a foundation. And I've never understood in the foundation space, people spend so much time programmatically on the 5% that they put out each year, which is, of course, incredibly important. But the other 100% of their assets are sitting on the left side inside of balance sheet. And sometimes being deployed in a way that totally antithetical to what the mission is, that's probably not. The majority of cases, but oftentimes just not being used effectively. And so we decided.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “People that were investors in really addressing these issues through their investment activities, and the light bulb went off for me. And I probably at that time was thinking more I was going to head towards public service or the not-for-profit world, but all of a sudden I realized, hey, I can do what I love doing, investing, and also play a part or be part of the conversation on how we address some of these challenges that we face. So that was kind of the light bulb moment. And initially it started with inherent as a family office. And I'd say day one, it was getting a little bit more sorted out in terms of the foundation and how to really think about being effective in our foundation activities. And with more traditional impact investing.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “I reached a point in my life and career wasn't about the money, and I wanted to feel like I was contributing in some way to Issues that are important to me, climate inequality. And I frankly wasn't sure how I was going to do that, but I felt like I needed to go figure that out. And so I announced I was leaving Anchorage, but it was a one-year transition. And for the first six months, I was actually quite busy talking to investors and transitioning responsibilities internally. And for the second six months, frankly, I had a lot of thought on my hands. It was amazing how quickly that happened, right? You went from being critical to not as critical reasonably quickly. I had some time on my hands. I was in London because I had moved over to build out a European business and I had a chance to spend time with some of the early pioneers in this space. So Sir and Ronnie Cohen on impact investing and social impact bonds, outcomes-based payment models, David Blood on ESG, a class beta mine from Wharton, Matt Christensen, runs responsible investment at AXA. He introduced me to folks like Bridges Ventures. And so I started meeting.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “And make sure you don't use leverage unless it's really well thought out and termed out, et cetera. Clearly, I think the lesson that was hammered home too is you're only as good as your people in this business. How do you attract and retain great people? We have just a wonderful team. They continue to have a great team at Anchorage. I'd say those are some of the key lessons that stuck with me.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Are a few big lessons. I mean, one, we approached it as a business. I think a lot of people start funds and think about like I'm smarter than everyone else. I'm going to put up better numbers. But I think our approach was to say really focus on the customer, the client, what do they want? What of their needs are we solving and design products around that have multiple products so that it creates some stability of revenues to the GP and management company and allows us to invest in the business and infrastructure and people over time? From an investing standpoint, the biggest sort of takeaway was just make sure that you're in a position to go on offense when the markets are under pressure. And so that's really informed how we think about managing the portfolio risk here at Inherent as well. But you want to make sure when the market's offering really, really good risk return, you want to be in a position to buy it. And when it's not throttled back, don't try to take on bad risk to put up great numbers.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “I'm sure the anchorage could be a whole show in and of itself that experience over whatever it was close to 20 years. But why don't we just touch on some of the key things you learned at Anchorage that you've sort of embraced and didn't know at the time when you started?”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Compelling to pass up, and we would never imagined it would turn in and become what it did. Sometimes you can see people early on definitely want to have their own thing and definitely are leaving. That wasn't the case for me. It was more that it was an opportunity that I felt like I kind of had to go pursue.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “As I said, I really enjoyed people in a lot of aspects of that job. It was an offer that was really too good to pass up. A colleague of mine was running the Bank Debt business, and he had come up through the ranks as a salesperson and a trader and then ran that business and ran risk. And I was on the distressed bond desk more focused on bonds and capital structure ARB. He had been in touch with Reservoir Capital, Dan Stern, about seeding opportunity and came to me and asked if I wanted to be part of it. And the upside downside was really.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Mod exposures out of JRN and counterparty exposures, and anytime we had to meet with someone senior or the CFO, he would always bring me along and let me be the one to present. So I got introduced some of the senior folks of the firm early on, and we were able to navigate that well and make money off the desk. And that's really what gave me an opportunity to take on a leadership role there eventually. I mean, as it happens at Goldman, especially back then, all the senior guys kept leaving to start their own funds. At one point, they looked around and they were like, can you keep an eye on this thing while we find someone to run it? And they went out and interviewed people to try to find someone. And in the end, they asked me and another guy to co-manage the distressed Bondes there. I think we were doing a reasonably good job, but I also found out after the fact that everyone else was asking three times what they were paying me to come in and take the job. So that's the good and the bad of Goldman, I guess.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Had a really great experience there. I mean, I worked with really smart people, very hardworking, very client focused, high integrity, and very competitive. And so I think all those things were great lessons to learn early in my career, I was asked to manage people. I kind of fell into this. It was right time, right place because I moved up to the distress desk and for a year, a mobility program, so to the fixed income division. And they didn't really know what to do with me. So they put me at the end of the desk and asked me to look at utilities. So, you know, at that point, I don't think there had been a utility bankruptcy in two decades. And lo and behold, we had Enron. And then we had Pacific Athenelectric the first time around. And they were like, Davis, get over here. We need your help. And I had a great boss, John Savitz, who really tried to put his people first. And so every time, you know, we were advising the firm on their exposures.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “And I will say as an aside, that's probably the hardest I ever worked in my life. I do remember telling them an interview. I think this might have gotten me the job. I said, I know you guys have a lot of smart people at Goldman, and I think I'm smart, but there's lots of smart people. But one thing I know, no one's going to outwork me this summer. And I think I was true to my word on that. I worked very hard and was offered a job to come back to the FIG group and carry Chris Flowers bags and worked for Chris Cole and Peter Kraus and really terrific people and learned a great deal from them. But I sort of figured out reasonably early on that I liked the analysis part more than the process or sales part of investment banking. So I was angling for an opportunity to move into one of the capital committing areas of the firm.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “But I only made it to the waitlist. And so all my friends had left for spring break, I remember, and I was still sweating and didn't know what I was going to do for the summer and Goldman called and said, you know, if we give you the offer, will you take it? I was like, are you kidding me? Of course. Walk the wall with you guys. So I took the summer job in the fig group in banking.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “And I took not the Amtrak, but the local transit to Penn Station and then the subway down to Wall Street. I remember climbing the stairs of the subway and kind of stepping outside and just feeling the energy and the intensity and thinking like, I want a piece of this. I want to be part of this. So that's kind of how the initial interest was spawned. That informational interview was, in fact, with Goldman Sachs. And then I applied for a summer internship. And I was really humbled. I didn't get any of the interview slots that I applied for. And I thought I was a little bit cocky. I guess I was doing well at Wharton and I had graduated Magna Cum Laude from BYU. At the time, you could take points and put them on one firm that you really wanted to interview with. So I'd taken all my points in a very risky move and put them on Goldman. And so I got the interview with Goldman.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Tony, great to see you, man. Great to see you. Thanks for having me on. Why don't we just start at the very beginning of your path and your initial interest in investing? It wasn't really till I got to Wharton. I didn't grow up in a household where we talked about Wall Street at the breakfast table. It was all about education, get educated. And I went and studied engineering and physics, and I was about to take a seat for a PhD in biomedical engineering. And I had to change a heart at the last minute and joined a consulting firm as an analyst for two years. But after that, I went to Wharton and I was attracted to Wharton for a couple reasons. One was the quantitative bent and brand of the institution. I think secondly, the Lauder Institute, which is a joint degree that they offer an international studies. But once I got there, of course, there was lots of talk of Wall Street. I remember the first time I went up to New York on an informational interview.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “I recently got involved with the Alliance for Decision Education, an educational nonprofit dedicated to the belief that better decisions lead to better lives and a better society. The alliance is building a national movement to ensure decision education is part of every middle and high school student's learning experience. I wish I had learned the science of decision-making back then, and I'm keen to spread the word and do my part so that my kids and yours learn to make better decisions throughout their lives. To learn more and join me in this movement, visit alliance for decisioned.org. That's alliance for decisioned education.org. Please enjoy my conversation with Tony Davis in this seventh episode of Sustainable Investing the Next Frontier.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Sustainability, constructing the portfolio, and engaging with portfolio companies. We close with a few investment examples, potential opportunities in distress debt, and tips for allocators researching ESG managers. To learn more about Tony's activities, visit inherentgroup.com.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “My guest on the seventh episode of Sustainable Investing The Next Frontier is Tony Davis, the CEO and Chief Investment Officer of Inherent Group, a value-oriented hedge fund that invests across the capital structure and uses ESG factors to source and underwrite its investments. Prior to founding inherent group, Tony was co-founder, present, and portfolio manager at Anchorage Capital, a multi-billion dollar hedge fund. Our conversation covers Tony's early career experience at Goldman Sachs, key lessons from 20 years at Anchorage Capital, and his retirement and subsequent philanthropic work in impact investing that led to the formation of Inherent Group. Sourcing longs and shorts, incorporating ES and G factors in underwriting.”

    2020-06-29 · Capital Allocators · Sustainable Investing 7: Tony Davis – Hedge Fund Perspective at Inherent Group (Capital Allocators, EP.145) · IDENTIFIED FROM THE TRANSCRIPT · source