Weekend Reading #47
Photo by Eugenio Mazzone on Unsplash
This is the forty-seventh weekly edition of our newsletter, Weekend Reading, sent out on Saturday 14th December 2019. To receive a copy each week directly into your inbox, sign up here.
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What we’re doing.
This week we were glued to the UK election. At the time of writing, the good people of the UK are going to the polls and the result is very much uncertain. The old cliché wheeled out by financial journalists is that markets hate uncertainty, but of course, as hedge fund managers we don’t really mind – we have the flexibility to adapt to new political contexts. In many ways, this is the primary purpose of our mandate – to provide investors with absolute returns, regardless of underlying market conditions. This newsletter is not the right forum for political rhetoric, but suffice we always enjoy the drama of election day.
We also spent some time talking about Indian markets with partners on the ground there. Here is one statistic which really got us thinking from. In 2017 in the midst of the domestically driven bull market frenzy, 52% of domestic mutual fund flows went into the top 10 stocks by market capitalisation. That number today is 90%! This may have something to do with the many corporate scandals in the mid cap space or may be a result of rising ETF activity. Either way it’s pretty remarkable.
What we’re watching.
By way of respite from the onslaught of election coverage, we’ve been getting back into The Trip, the masterpiece sitcom directed by Michael Winterbottom, and starring Steve Coogan and Rob Brydon as (lightly) fictionalised versions of themselves on a restaurant tour of northern England. The first season of the show is brilliant (as is series 3 in Spain), but our favourite remains the second season, where Rob and Steve head to Italy. The very act of watching this show is like taking a holiday – just be careful that you don’t watch too much, as you might just end up buying a linen suit and relocating permanently to the Amalfi Coast!
We also enjoyed this GIF showing the world’s highest paid athletes from 1990-2019. It’s strategy mesmerising!
What we’re reading.
We enjoyed this Fortune piece about "crypto's crown prince', Olaf Carlson-Wee, who wrote his 2012 college thesis on Bitcoin and joined Coinbase as its first employee. In 2016 Carlson-Wee started Polychain, “an investment firm committed to exceptional returns for investors through actively managed portfolios of blockchain assets.” Polychain was the first major crypto investment firm and immediately notched huge inflows reaching $1 billion in AUM in early 2018. Then came the crash. Reading between the lines, this piece exposes the immaturity of the crypto fund management space – and its huge promise. The meteoric rise of Polychain hints at an opportunity for experienced managers with crossover experience of traditional markets and digital assets to profit from the maturation of crypto as an asset class.
And we couldn’t help but notice this article entitled, Active Fixed-Income Strategies Don’t Deliver Much ‘True Alpha’, which suggests that active fixed income strategies tend to beat their benchmarks, but much of that excess return just comes from passive exposures to traditional risk premia. Sound familiar?
What we’re listening to.
This podcast from Ted Seides on “How to Get an Allocator’s Attention” really got us thinking. Our strategy with the Three Body Fund is not to target institutional allocators straight off the bat – we’d rather focus on high-net-worth individuals and family offices and build a track record with sticky investors who really identify with what we’re seeking to achieve and who we are as people. But that doesn’t mean we’re not keen to refine our process and positioning to appeal to institutional investors, now and in the future.