YouSaid · the spoken record

Will Cook

lines on the record: 62
first: 2021-12-02
most recent: 2021-12-02
sittings or episodes: 1
sources: podcast

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“So my dad always used to say moderation and everything. And I think what he meant by that was a good idea taken to an extreme becomes a bad idea. And I think that's true in life and it's definitely true in investing. As an example I mentioned earlier, people have gone from talking about 20 to 30 times earnings for a good growth company to 20 to 30 times EBITDA and now 20 to 30 times revenues. Well, it's a good idea to have innovation on your side. It's a good idea to be on the right side of change, but it's not a good idea if you take that to an extreme. Moderation, everything, and a good idea taken to an extreme becomes a bad idea. It's just a really good life mantra, but it's a really good thing to remember in investing as well. And it can really keep you out of trouble.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“If I can answer it this way, Ben, the toughest set of questions was when an allocator came in on site to our shop and asked for our three worst performing securities in the last year and then wanted to pour through every single detail of those securities, meaning obviously our investment memos, every single research call that's been done, and then also email traffic. I went through in painstaking detail those three biggest money losers that we had. And we do a lot of that. We try to be introspective and look at our own mistakes, but having an independent third party that is a very experienced interviewer and allocator look through all those details with you was incredibly humbling. And in some ways difficult, in some ways really eye-opening to see how a third party thought about those mistakes as opposed to my own views of them. But I would say that was probably”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Seven years is I just feel a great pride in the team that we've built and we've been fortunate to be together for a long time. Like I mentioned earlier, we've had an incredible employee longevity. We have a lot of fun. We do ski trip every year. We go different places depending on how much value we added for LPs. And we do off sites to be kind of more introspective about our jobs. But it's a joy coming to work and working with these people. And I'd say that's changed because when I started this seven years ago and we did our first trade, it was me and one analyst. And now we have 11 people. And there's definitely a sense of pride I have in the team we have and how much we all like working together.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is perhaps not the most original answer ever, but I'm a really competitive person and alpha generation means you're beating other people. It means you're beating the market. And that's how you define value add in our business. And I take a great source of pride in knowing that we're adding that value for LPs. The most simple answer is you have to be competitive in this business. There are so many smart people in this business. And one thing that my dad said to me when I was little was, you know, whatever you decide to do in your life, make sure you love it because it's the only way you're going to be really good at it. Doesn't matter what you do, whether you're a teacher or whatever. You got to love it because if you don't love it, other people are going to spend that extra time investing in themselves and they're going to beat you. And I truly believe that. And I love this business and I'm a competitive person. And when you put those two things together, that's really what drives me and makes me come to work every day. I'd say the other thing that I guess probably has evolved over the last”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Earlier, I believe we do now. If you're generating an adequate either in long-only product amount of alpha or an adequate alpha spread and long short product, I think that's how you need to measure success. I mean, if we can't generate adequate alpha over time, we're not going to have a business and LPs should index their money because it's a lot cheaper than hiring a hedge fund. It really all comes down to alpha generation over the longer period of time. But in the short run, I can't control that. All I can control is our decision making.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“So on a day-to-day basis, all I can do is control the quality of the decision making that we're doing. I can't control short-term returns, of course. And so I define it, I guess, short-term and long-term. Short-term, are we continuing to get better? Are we doing what we say we're going to do, which is be humble, learn from our mistakes, make better decisions tomorrow than we did yesterday, all those types of things, not be emotional, be very even-keeled, which is something I learned from my old boss as if he was a very even keeled guy in the face of adversity. I think it's really critical thing for a portfolio manager to have. So all those day-to-day decision-making things is how I define success on a day-to-day basis. But longer term, we're in a results business. And the equity long short business is an alpha spread business. We also have a long-only product. That's an alpha product too. And so at the end of the day, as long as we have the right portfolio construction, which I mentioned,”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Understand what's going on with us. And so I think that's a really important part of how we've approached partnership with our LPs and I think is, at least from my perspective, somewhat different. The other thing we've done is just aligning our interests with LPs in terms of fees. So we have a sliding scale management fee, which disincentivizes us to be asset gatherers and keeps us focused on performance. We also have an incentive fee that gets better with time. So the longer you're an investor with us, the better your incentive fee gets. So I think these all align incentives in the right way.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today, we are seven and a half years old. We're 100% employee owned today, which is, I think, really great for our employees. We have really close relationships with really good LPs. And when I think about those LPs, right, we're never going to be a huge hedge fund just because of our strategy. So we don't need to be all things to all people. We know we're not right for everybody. But what I've tried to do is, one, be really transparent and really upfront about what we do. And the reason I do that is that when I think about myself and how I act with a stock, I act well when I understand everything about that stock. And then when something goes wrong, because it inevitably does, almost with every stock. At some point, I act well when I really understand it. And so I want our LPs to really understand everything they can about us. We're super transparent with our LPs. And I think what that does is it puts our LPs in a position to when we hit the inevitable bump in the road and we're not going to generate alpha every month or every quarter that they”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Challenges of that earlier on because it can also be really distracting for me as a portfolio manager to have to take time to try to do that too when I'd rather be focused on the portfolio. I'd say that's probably the biggest thing is underestimating that part of the business.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish I had known how important and challenging it can be to build a business with the right types of investors in retrospect really took for granted what an incredible platform it was to work for the ZIF family for 10 years. Not only are they really good and really smart people that were wonderful to work for, but the stability of that capital base, I think really gave us a significant competitive advantage. If you're worried about somebody firing you after you have a bad month or quarter, it can really get in the way of making good investment decisions. And so I wish I had known how difficult it would be to make ourselves known out there, make ourselves known to the right people, to the right LPs. I think I naively thought that it's a returns business. And if I just put up returns, capital will flow. And so we really underinvested in the marketing part of our business for years. We actually didn't even have a partner relations person for many years. And so I wish I had thought about that and understood that.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“We stay disciplined with the number of names in the book, so I mentioned earlier 20 longs and 35 shorts. I think that's a really good discipline to have because it creates competition for capital and it forces lower conviction ideas out of the book. So that's happening. That is the case. There is competition for capital. What I would say is that our gross exposure tends to tick up when we think we have better bets on and more asymmetric bets on. I mean, this business is all about the asymmetry of the bets you're putting on. People complicate the investment business, but it's really pretty simple. If you're right, how much are you going to make? If you're wrong, how much you're going to lose? And then what's probability of being right or wrong? When you've got a lot of investments, you think you're going to make a lot if you're right. You're not going to lose that much if you're wrong. And you have pretty high confidence. You should put more capital to work. And so that's what you have seen and what our portfolio has exhibited as I think our IG generation's been good and the opportunity set's good is you've seen our gross exposure tick up. Our nets don't tend to move that much. We tend to keep our nets.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“So good today, we actually have high sentiment tracker on both sides of the book, which is an unusual setup for us and I think is encouraging. Time will tell, you know, there's no guarantees in this business, but it's encouraging from my perspective.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“For the long term, there's a lot of those companies that have had a ton of multiple expansion and are now trading at real multiples, you know, mid-teens, high teens multiples for businesses that used to trade at 8 to 12 tons earnings. There's just been a lot of multiple expansion in some pretty bad companies. And so that makes us pretty excited on the short side. We think we're good at identifying longer-term structural shorts. There's a lot of those that have had a real bid in the market because of this cyclical upswing. And then on the other end of the spectrum, there's companies that I think have very questionable profitability, very questionable customer value propositions, which is something that we talk a lot about. Companies that maybe have never generated a dime of free cash flow in their lives but are trading at big revenue multiples. That's kind of the other end of the spectrum where I think on the short side, we're seeing good opportunities as well. So the short book right now actually has the highest sentiment tracker it's ever had so it's an unusual setup for us usually you have one side of the book with really good sentiment tracker and the other side not”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“18 months, and we tend to have a quality bias in our style. So I think what it's done is created an opportunity for us to really, on the long side, buy some really high quality businesses that we think are going to compound earnings at good rates, at big discounts to the market. So if we can own a super high quality business that we think is going to compound earnings 15% plus, and we think it's 20 to 30, maybe 40% discount to the market and markets at 20 times, we have plenty of stocks that are 12 to 14 times earnings right now. That's a really good setup for future outperformance on the long side. So that makes us very excited about the long book. I mentioned the sentiment tracker earlier. The sentiment tracker is among the highest it's ever been right now for our long book. On the short side, I also think it's a good opportunity particularly to identify two types of businesses. One is taking the other side of the barbell I mentioned, but businesses that have had maybe a little bit of a cyclical bump but are really poorly positioned.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's always something interesting going on in the markets, but over the last COVID period and recovery, I think it's been an interesting market in that there's been two types of stocks more generally that people have seemed to gravitate towards, neither of which we tend to gravitate towards. So on the one end of the barbell, if you will, has been lots of very cyclical stocks people really wanted to capture the cyclical beta uptrade. We don't really do cyclicals. And then on the other end has been everything super, super growthy. The markets seem to want both of those. We don't really do either one of those. I don't know how to buy a stock at 50 times revenue. I just don't know how to do it. I don't know how to think about that risk reward, nor on the other end do I want to buy stocks that are really terrible businesses but are having a cyclical upturn. What's happened is there's been a whole bunch of companies in the middle that have not necessarily been in the favor of investors. Quality has been by our measures one of the worst performing factors in the last 12.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've found that those tend to be periods for us to set up the portfolio for future outperformance and alpha as opposed to being something that we need to be worried about.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“It tends not to impact us as much as others, at least from my perspective because of the nature of the ponds we're fishing in at any given point in time when I look at, say, for example, the Goldman Sachs VIP list, we'll have maybe one stock in there. So that's like top 50 hedge fund names. Given the nature of the opportunity set that we're trying to take advantage of, we don't tend to be as impacted, I think, as many others. We tend to think about it and look at it as a period of opportunity for us and we can certainly tell often when that's happening because you can just look at the screen and you know all the popular hedge fund stocks are getting crushed and often a lot of the popular hedge fund shorts are going up at the same time. You kind of can tell what's going on. We tend to think that's a source of opportunity for us. We're humble in that we don't know how long it will go on or when it will cease. We tread somewhat cautiously and don't try to be a hero in any particular day.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Good news about our strategy is that from my perspective, a really great opportunity to generate alpha and outperformance. The less good news is that it can only scale to a certain level. We own and we're short more on the short side than the long side, but some stocks that just aren't that liquid. So what we have said is that we probably start to have some liquidity issues, particularly on a couple of our shorts at around $1.5 billion in AUM to stay in our sandbox and generate the kind of returns that we think we can and should generate for LPs, we need to be cognizant of the growth of the business in a way that maintains the opportunity set for us.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think about really three big high-level risk levers that we can pull, and we need to optimize those for what our process is good at and what we are good at. So you can take concentration risk, of which we definitely take some, and I think we should take some, because I think there's only so many good investment ideas out there. We take some market risk. We're roughly on average low 40s, 40% net. So we're taking”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the long side, we exiting pretty well on the long side, but on the short side, we were exiting too early. And so that really, I think, every time we now talk about exiting, particularly a structural short, we ask ourselves, are we doing this too early? Is there still more juice to squeeze out of this lemon? Because really good short ideas are hard to come by and the market's pretty smart. The longer you give the market, the more likely it is to be efficient. That I think was an important process change for us on the short side as well.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“And really, not much value in trading at all. Good news was we weren't destroying value in trading, but we weren't adding a lot of value in trading. And so it made me think a lot about some of the smaller position tweaks that we do that take mindshare, only so many decisions a human being can make in a day. Are these really small position tweaks really making that much of a difference? Or should we be spending more and more time thinking about big position sizing changes and security selection? Because that's really where we're adding the most amount of value. The other thing that came out of looking at our data on this, the framework point I mentioned earlier was that we were exiting some of our shorts, particular structural shorts, too early. So we were taking a gain and then the short kept adding alpha even after we had exited. And so the data said, gosh, if we had just, I think we hold our shorts longer than the average hedge fund does. But if we held them even longer that we would have added even more value on the short side, it was actually not the case.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, is the answer. As I mentioned earlier, we do off sites. And we did in off-site somewhat recently because we have so much data now, there's more signal than noise. And we were able to go back and look at all of our past investments. So we tag every investment when it goes into the portfolio by what framework it's in. So then we can look over time and we can say what frameworks have been working, which ones haven't. Is that a point in time or are we doing something wrong? That was, I think, a rich vein of discussion. The other really interesting thing that we did was we went back and looked at and we use a piece of software that helps us do this. We looked at where we're adding value and where we're not adding value in the investment process meeting. Are we adding value in security selection or are we adding value in sizing or are we adding value in trading? That was a really interesting and in some ways humbling for me is the portfolio manager exercise, but it really showed that we are adding a lot of value in security selection and a large amount of value in”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“And having run money at Sun River for this amount of time, there's a lot of data that you're able to look at in terms of historical positions that you've been involved in. Do you look at that data? Do you go back and look at it? And if you do, has that revealed anything that has led to... Maybe refinements around the margin.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Also, kind of covered by people that follow the big prime contractors. And each one of those pools of analysts have a blind spot. And so you can find companies that when they're in between this industry classification, they can be really poorly understood. And if you combine the tweener aspect of a company with also being more small mid-cap and kind of off the run, you really have an opportunity to generate a very large difference in what you think the earnings power of a company can be. So if we combine those elements, we can find companies where we think consensus is wrong by 30 or 40 percent, not three or four percent. So your margin of safety on those companies ends up being really big because you think consensus is wrong by so much that you can be even a little bit wrong yourself and you still make money and you still make alpha. So I think that's why being in the mid-cap area is a great place to be over a long period of time and really puts us in a position to generate the kind of alpha.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then you can get along that goes from 2 billion to 4 billion to 8 billion and not 200 to 400 to 800, which is a lot harder to find. So generally speaking, over a long period of time, I think mid-caps are actually very good place to be for both our long-only product and also our hedge fund, which is net long the market as well. I also like midcaps on the short side too because there are still greater opportunities to find businesses that can really fail and have really bad balance sheets as opposed to very large caps as well. So I think mid-caps are actually a great part of the market to be in over a longer period of time. And the other thing I like about mid-caps too is that we do a lot of what we call tweener investments. So it was actually my nickname at Ziff was the Tweener guy. I've always loved these companies that fall kind of in between industry classifications. And the reason is because they're more likely to be inefficiently priced. So we do a lot in a sector like government IT services, a sector I've been covering for 20 years. You know, it's an industry that's kind of covered by technology guys, but then”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I'd say two reasons then. One is if you look over a very long period of time, mid-caps have actually been the best performing part of the market over, say, 30 years. It's actually hard to remember that because large cap growth has been the place to be for a better part of a decade. But to us, it makes a lot of sense because we think about the mid-caps that we invest in. So small caps are some great small caps, but there's also a lot of risk there. There's a lot of single product companies. There's a higher failure rate. And so you can have a wider range of outcomes. And then if you go to the very large companies, you start to hit a headroom problem, maybe not with some of the best technology companies in the world now, but with, generally speaking, large caps, you have more of a TAM or a saturation issue. When you go to the mid-cap part of the market, companies are a little more proven and they enter what we call the replication phase of their business. So they've figured out their mousetrap and they have a competitive advantage. Probably the markets evolved and hopefully it's like a duopoly or oligopoly structure, which we like. And then they kind of can replicate.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not as much on our side as it used to be. We can adjust sizing and because we're smaller we don't move the stocks. If you're at a very, very big firm, sometimes that can be problematic. So the sentiment tracker has been really helpful to us and it's really a mix of looking at where's the relative multiple of the stock versus itself and versus history, looking at things like change in short interest, things like change in sell-side rating. You kind of want to do the opposite of what the sell side tells you to do in our business. And it can actually be a very powerful predictive tool for future alpha generation. So we can look at where the sentiment is in any one of our positions at any given point in time. And we can say, hey, if you look back historically, this has been a really good time to be long or short the stock. This has been a very high probability hit rate for future alpha generation or the opposite. And it really helps inform the sizing of a position. The other thing it helps us do is it really aids our ability to be contrarian. And I've found over the years some of the best investments.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“A couple things that have changed. I mean, one is the ponds we're fishing in are different. We're in much more off the run, much less well-known stocks than we used to be. And part of that is just that because our capital base is smaller than the firm I used to work at, that we can just do things that other people can't do. We want to go where the bar is lowest for us to outperform. And so I'd say that's the biggest strategic evolution of our firm over the last seven years. More tactically, some of the process changes, I would say there's two that I think are relevant to perhaps discuss. One is that we instituted something called a sentiment tracker. This is probably five, six years ago now. And this was really an effort by us to have a better understanding of whether or not the sentiment in a stock is a friend or a foe for our positions. And this is more relevant for us because we are smaller and we can be nimble. And so if we feel that sentiment is not on our side at a particular point in time or”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Markets are another challenge for short selling where businesses with problems can access capital markets cheaply that makes the level of business failures lower. It makes it easier for companies that have really problematic balance sheets to get through it and muddle through for longer than they would otherwise. I'd say those are kind of the headwinds. I'd say that the tailwinds to short selling right now are that there's been quite a lot of speculation and quite a lot of I think willingness of investors to embrace fanciful business plans with hockey stick projections that are currently unproven and in businesses that may have never made a dime in their lives and that that should be I think filling the pipeline of some pretty interesting short ideas right now. So I think there's headwinds and tailwinds for the short selling business right now. In some ways it's better. In some ways it's worse than it's been at other periods.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's been different periods when it's been better to be a short seller for sure. I'd say more recently when you have a really rip-roaring economy, the cyclical tends to outweigh the secular or the structural. For a period of time, these tend to be fleeting periods of time historically speaking, but the market will essentially lose sight of or not care about longer-term structural issues with the company because the cyclical tailwinds are so strong with a particular company. That is a difficult short-selling environment because what we tend to be good at is identifying businesses that have really longer-term structural issues that aren't able to be fixed. Historically speaking, that tends to mean that low quality outperforms, which is what you've seen over the last call 12 months, and that tends to be a difficult short-selling environment. The good news is those periods tend to be kind of fleeting. So I would say more recently that has been the case, but I think history gives us confidence that that won't last forever. Very accommodative capital.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Client typically, and something that we say is if you flew in the best CEO in the world tomorrow, if he or she couldn't fix the business problem, that's our kind of definition of a structural short. And then we wait for the right time to get involved. So we have a bunch of those. We also like to have a fair share of accounting shorts in the book, and those tend to be very idiosyncratic, and they work at very unpredictable times. And then we also like to have a fair share of what we call booms that go bust, which are essentially companies that create more or less the illusion of either higher demand or sustainable demand by aggressively utilizing credit or extending credit. And those can be spectacular blow-ups. But so on the short side, we try to have a mix of those types of frameworks, and I think that really helps with some of the risk management on the short side because they tend to work at different times.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, there's a couple of different angles I can take that. One is just purely from a concentration perspective that we are much more comfortable being concentrated on the long side than the short side. We have about 20 longs, typically top 10 longs or 60 to 70 percent of capital. Short side is less than half as concentrated as that. We have about 35 shorts. There's a risk management element to the short side, just given the nature of that business that requires different portfolio construction than the long side does. Another angle that we think about with the short side is do we have enough diversification of idea types, we call them frameworks, but it's dangerous to have all one type of long or all one type of short because they can be correlated in ways that you didn't foresee and all at the same time. And that can be very detrimental to performance. So we have different what we call frameworks along on the short side, but on the short side, we're always trying to make sure we have a mix of what we call structural shorts, which are businesses that have some kind of structural demand.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“So this difference in profile then between longs and shorts that you're talking about there does that manifest itself in how you construct both a long and short portfolios? How would you compare and contrast how you tackle both of those sides of the portfolio?”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have to have a couple of other things. You have to have a pretty facile knowledge of accounting. I know that sounds really boring, but accounting is the language of business. And back when I went back to business school, as I said, it was after the days of Enron and WorldCom. And one of my favorite classes was actually called earnings quality. And it was digging through the footnotes to see what clues could you have seen in advance that there were going to be problems at some of these companies. And so I think you have to have a facile knowledge of accounting. We are pretty good at that here. We also have an external forensic accounting firm that we work very closely with that helps us in really complicated accounting issues. But I think that's really important. Lastly, I would say you have to really have a comfort and a knowledge of how the short selling business works in terms of alpha generation. So what I have found over the years is that long alpha generation”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say it's a mix. So you have to hire the right people. I guess I mentioned that a couple times now, but it's so critical to know the personalities of the people you're hiring, the motivations of the people you're hiring, what their natural proclivities are, what is their personality set them up to do successfully. And so we have on purpose hired an investment staff that has a mix of personalities. And I think to be a really successful short seller, you need to have a certain level of skepticism. One thing that I remember back when I took John Griffin's class and he said that the kind of right posture, I think, was what he used of long short investor is to be a skeptical optimist. So I thought it was just a really great way to describe the right kind of personality and mindset of a good long short investor. And that's really what I look for in people. You have to have some level of skepticism, but you also can't always think the glass is half empty. It's really a mix, but you have to have the right personalities. Then I think...”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when I think about differentiation when it comes to Sun River, one of the things that always is towards the top of my list is the short side. Could you talk a little bit about your approach to shorting and what you think it takes to be a successful short seller”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Paired to dislocation. And if you've got a long that used to have a 17% IRR and now it has a 28% IRR and you're not deploying capital into that you're not doing your job. It's that kind of combination of things that really helps us deploy capital into periods of dislocation both within individual securities and also portfolio-wide.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“and the more continuity of those results and it really gives the internal investment staff confidence that, hey, this is what we do and it really, really works. The other thing I would say is just you have to hire the right people and have people that think about investing in the same way that you do. We are not great at very short term things around here. Other people do that a lot better than we do. So when we have these periods of dislocation, we don't kid ourselves that we are going to call the bottom, that we know where things are going in the next week or month or even quarter. What we'd say is, wow, on a three-year basis, this looks incredible. And if we are not deploying capital when something looks incredible on a three-year basis, we're not doing our job. And then we have some various tools in place to help us use a piece of software to help us that I look at every day. And what we can see is how the IRR of the portfolio, both as a whole, but then also individual stocks changes during”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Some of it is just training. How I was trained in the business, particularly for my 10 years at Ziff, is that one of our great competitive advantages at ZBI was our permanent capital base, emphasized quite significantly that we need to take advantage of that. And that's one of the ways that we're going to be able to create outperformance. And so that's really how I was trained in the business. And then I can now go look over history, both as if and then in our seven and a half years at Sun River and what we can see is that the evidence is, it's not just us saying this creates value, we can actually see. We create a lot of value by being active during those periods of dislocation, not only capturing the market rebound or the rebound in a particular stock, but we generate a lot of alpha as well. So we're generating alpha and we're capturing some data. And so having that history really gives people confidence that the strategy that we've laid out that sounds really good actually produces results. And the more results you see,”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we've evolved over our seven plus years in business. And my perspective has changed as the market has changed and as the hedge fund business has changed. I mean, if you go back to the early 2000s when I entered the business, there are assets under management hedge funds were much smaller. Crowded trades weren't really a thing yet. The availability of information was very different. There were no expert networks. You could count cars in a parking lot and that was an edge at a retailer. And so the business has really changed quite a lot in the last 20 years. And what we've tried to do at Sun River is position.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“We do case studies on prior mistakes. Usually you need a little bit of time to pass depending on the size of the mistake to analyze things objectively without emotion. Emotion is the enemy in the investment business. But we do case studies on prior mistakes. At the end of every year, I go through all the big losers in the portfolio and I try to separate process and outcome as best as I can and really try and talk to each of the analysts about what I think are process mistakes as distinct from outcome mistakes and really try and learn from those. And that's really the only way that I know of at least to really try and get better. I have a saying around here, avoid the losers and the winners take care of themselves. And so I think that's a critical part of how we approach things here at Sun River. And if you're not trying to be introspective and look yourself from the mirror about your mistakes, it's going to be really hard to not repeat them in the future. So I think it's a critical point.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“everyone's ability to learn from those mistakes and get up and be better and smarter the next day. So I think that's a really important part of how we've tried to build a culture here. And the last thing I would just say back to the notion of ZIF kind of investing in ourselves, we really do a lot of that. We do off-sites. We spend a lot of time talking about ways to make ourselves better five years from now. And that does not make us better tomorrow and it does not help our returns this quarter. And if we were really short-term focused, we probably wouldn't make those investments. But we are making those investments in ourselves because we think that's the way we're going to maximize returns for our investors over the long run, which is our goal and our job.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Create that type of culture, I think you put yourself in a position to do that. I'd say the other thing that I think about when I thought about creating the culture of Sun River is that I wanted to hire people that had had some kind of bump in the road or setback along the way. And perhaps that sounds odd, but I think one of the most important traits you can have in investing is resilience and grit. You're wrong about 40% of the time in our business if you're doing a good job. And when you're wrong, even on some very high conviction positions, you need to be able to get yourself up off the mat, dust yourself off, and come back the next day sharp and ready to go. And if you've never had a real setback before in your professional career, that can be a difficult thing to do. And so if you look at the people that I've hired, they're all really smart, really motivated, hardworking people. But each of us, to some extent, I would say for me was probably my experience in the internet bubble have had a professional bump in the road. And I think it really...”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, it's not long and hard about this. I personally feel that thinking about investing in your employees and employee management and culture is sometimes not as emphasized in the investment business as maybe it should be. And some of that came from ZIF where we really emphasized that quite a lot. So I thought about a couple things. One, I wanted to create a culture of humility. I find the investment business to be incredibly humbling. I'm sometimes humored by the egos that are in our business because I find the business to be very humbling. But I wanted to create an investment culture that is respectful of the markets and also humbling. The reason that's important is because if you maintain humility, you can really learn from your mistakes and you can get better every day. And that's really what we try to do. All we can control every day is making a better decision than we did yesterday. We can't control results today or tomorrow. We can all control making better decisions.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really focus on what we did at ZIF, which is let's make ourselves better such that we can maximize returns three years from now and five years from now, not next week, next month, and next quarter. And so we do things to invest in ourselves. We do off sites, which we did a lot of at ZIF. Sometimes they're internal, sometimes they have external speakers, and we really try and take a longer-term view in what we are doing, both with investing in ourselves and also the investments that we make. in an increasingly short-term world where everything seems to be about what did you do for me today taking that longer term view on both the development of your people and also your investments I think is an increasingly rare trait and for the right type of investor and the right type of person it's a really wonderful thing that's not easy to find it creates employee loyalty and longevity”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“I thought and still think to this day that Ziff really struck the chord correctly, finding the right balance of really motivated, really hungry, really smart people, but also curious people and people that were interested in making themselves better and also people that you liked to spend time with. It's a really hard combination to find on Wall Street. You can find people on kind of both ends of the spectrum, but Ziff really found that right balance. And there's a reason why many of us worked there for a very, very long time in an industry with a lot of turnover because I think they hired the right type of people. And I've taken that to Sun River today where we've had incredible longevity here at Sun River. We're about seven and a half years old and we've had employees that have been working here since day one and soon afterwards and that is unusual in our business and I think that combination of things that I mentioned.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“thrust of what we do at Sun River today. And so I spent 10 years at Ziff, a fantastic firm, learned a lot there, and then launched Sun River after Zif closed at the end of 2013.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like many things in life, a mix of luck and happenstance, but Ian McKinnon, who was the person that ran Ziff Brothers Investments, which is where I went to work for 10 years after business school, was actually a guest speaker in Griffin's class. And I found him to be incredibly impressive. He ended up being not only my boss for 10 years, but a good friend and a mentor. And I pounded him after class for a job and ended up being able to work at Ziff. And it was a really wonderful time to enter the public markets. This was the early 2000s and a great time to enter Ziff, which was a fantastic firm as well. I was the last person hired that reported directly to Ian, and it was a great experience for me because I ended up being essentially a utility infielder for my first three years at Ziff. So I covered everything that nobody else wanted to cover, which was great training for the job that I eventually got being a portfolio manager. And so I did that for about three years and then took over what was then the software group, renamed it the software and business services group. And that's really the”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“when one finds a business model that seems unsustainable. And that really appealed to me. This was also at the time of a bunch of accounting frauds and accounting scandals started to come out. So Enron, WorldCom, some smaller ones like Global Crossing and others. And the combination of that ICG experience and being exposed to these accounting frauds, when I went back to business school, made me really interested in learning about short selling, made me really interested in taking a bunch of forensic accounting classes, which I did at Columbia Business School, which is where I went. At Columbia, I was fortunate enough to take a class that was taught by John Griffin, who was still running Blue Ridge Capital at the time. And John's a really passionate short seller and passionate investor. And that really made me excited about the idea of getting into the public markets. And that's really why I made the shift from private equity into the public markets such that I could have the opportunity to profit on both sides of the book, not just the long side.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source
“After General Lannick, I was going to go back to business school at the time and deferred admission to business school to take a job at a firm called Internet Capital Group. And this ended up being a really impactful period in my life. This was 1999. I got there about a month before ICG went public, so we went public ourselves. We were an investing firm. We were really a rocket ship for about six months. The company peaked at a market cap of about $55 billion when we had a little over 100 employees at the time. This was really the peak of the internet bubble. And then subsequently the stock fell something like 90 or 95% in the next six months. So it was an incredibly volatile period. But that chapter in my career really changed my perspective on investing. I'd done private equity up until then. It made me really interested in the concept of short selling and the concept of being able to profit.”
2021-12-02 · Capital Allocators · Will Cook - Sunriver Management (Manager Meetings, EP.22) · IDENTIFIED FROM THE TRANSCRIPT · source