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A site dedicated to helping emerging manager stockpickers
Introduction
This page is written for new stockpicking funds who will be starting small. Quite a few highly successful investment firms bootstrapped themselves starting with <$20 million of AUM and a lean budget, before they scaled over time. See Illuminating the Garden Path for examples.
I will continue to add to this over time, and suggestions are welcome - you can submit by clicking the grey button below. Anything that resonates with me, I will include.
This is not advice, because 1) I have never started a fund myself and am not qualified to give advice and 2) investing is too complicated for one-size-fits-all advice that would apply to every strategy and every person everywhere.
This is simply designed to be food for thought for newly formed stockpicking firms who want to achieve amazing returns over a long period of time. The closest thing I have to advice is the simple observation that amazing results come from aiming high, being patient in building your firm, ignoring conventional wisdom, and being content being quirky. The world around you, from service providers to LPs, will try to move you back towards the mainstream - your job is to resist the pressure!
I have made sure to include content here about the difficulties of starting a fund and getting it to sustainable scale. I want to highlight what is possible, but I don't want to give an unrealistic picture of the work and challenges involved.
RV Capital Emerging Manager Meeting
RV Capital Emerging Manager Meeting
RV Capital has an annual emerging manager forum, videos from which can be found below. I have been an attendee and found the quality of the content and attendees to be very high. If you can make the trip to Engelberg, Switzerland, it is very worthwhile to learn from current and former emerging managers alike.
Joel being interviewed by Rob Vinall on emerging manager advice
I was invited to do a fireside chat with Rob Vinall at his 2022 Emerging Manager Meeting. Please see the link below to learn more about me, MITIMCo, and our learnings from working with emerging managers.
Good Investment Community + Good Investing Talks - especially for Europe-based Investors
Host Tilman Versch has interesting interviews with under the radar investment managers, such as Rob Vinall. Many of these are (or were, but successfully grew) small, sometimes single-person shops.
Tilman has also created an excellent community called Good Investing Plus, which primarily targets Europe-based investors. If you are based in Europe, and are passionate about investing but early on in your career, I think the Good Investing Plus community could be very interesting for you. Tilman looks to be helpful in cultivating young investment talent, helping people in his community find investing jobs and launch investment businesses at the right time.
https://www.youtube.com/channel/UC5Z-C01O2VlpeD1rMs_HS2Q
https://www.good-investing.net/
The Zurich Project by MOI Global
Longtime friend of both me and MITIMCo, John Mihaljevic of MOI Global, puts on an annual conference that seems to help both current and aspiring emerging managers
Paul Graham essay on the Anatomy of Determination
Pretty much all the Paul Graham essays are excellent, but this one in particular struck a chord with me and seemed relevant to the emerging manager topic. Determination is a key success factor (though far from the only one) in which emerging managers seem to succeed, and some aspects of it can be learned (discipline and ambition).
http://www.paulgraham.com/determination.html
I especially enjoyed this paragraph - particularly if you are reading this and you are early in your career, make sure you are around ambitious people, and go to extra lengths to set your sights high:
And fortunately ambition seems to be quite malleable; there's a lot you can do to increase it. Most people don't know how ambitious to be, especially when they're young. They don't know what's hard, or what they're capable of. And this problem is exacerbated by having few peers. Ambitious people are rare, so if everyone is mixed together randomly, as they tend to be early in people's lives, then the ambitious ones won't have many ambitious peers. When you take people like this and put them together with other ambitious people, they bloom like dying plants given water. Probably most ambitious people are starved for the sort of encouragement they'd get from ambitious peers, whatever their age.
MIT undergraduate admissions concept of "applying sideways"
Here is a delightful excerpt from the MIT undergraduate admissions office, which I think emerging managers could also take to heart - if you re-frame your "marketing" as becoming the best version of yourself not just because you want to raise capital, but because you want to grow and perform even though people will turn you down, that is much more positive.
Look: we admit less than 10% of applicants. If you set your goal as being admitted to MIT, you are likely to be disappointed. If, however, you set your goals as learning a lot, developing a better sense of yourself, and being a positive influence on those around you, then you can succeed on your own terms and also be a better applicant to MIT.
You can think about this approach to preparing for college as applying sideways: one that encourages students to focus on becoming their best self, with the knowledge that it will also help them be a better applicant to colleges that are a good fit for them.
Phil Ordway, Elliot Turner, and John Mihaljevic Podcast Q&A on Emerging Managers
I thought this interview with Phil Ordway, Elliot Turner, and John MIhaljevic was a great resource on the topic of what it is like to be an emerging manager, and sharing lessons learned. https://twiii.podbean.com/e/on-being-an-emerging-manager-experiences-lessons-learned-success-factors/
Some points that resonated based on my experience talking to 100s of "EMs," often starting from zero, are below.
However, perhaps the most important high-level takeaway here is that being an emerging manager can be very challenging for a long period of time until the flywheel starts to take off.
1) Elliot on advantages of being an outsider and being able to be different: "As time has gone by I've viewed my outsider approach to the industry, the fact that I wasn't brought up in the industry and brought my own unique perspective, as huge distinct advantages."
2) Phil on the value of LP quality: "a bad LP is going to outpunch a good LP in a fight. Avoiding bad LPs is really important."
3) Elliot on writing: "Helps you clarify your thoughts, and once you get it out there you never know what life it takes on its own. If you write regularly, it gives a permanent resource people can look back on when they first meet you, and becomes the way they get to know you."
4) Elliot on LP quality: "I actually have this belief that with HNW clients the longer it takes them to come in, the better clients they are. The first people to make the decision, I think they could have been the first to leave. The slower someone gets to a decision the better."
5) John: "there are a lot of managers who are doing the same thing and there isn't enough differentiation. I think you have to think about, how are you going to be truly different. I think it is worth spending time talking to lots of our managers to realize, you're not that special, unless you really think about that and make that a focus."
Twitter threads I wrote based on observing successful newer managers
Be so good they can't ignore you!
A very impressive emerging manager shared this concept with me when he was narrating how he broke his way into the industry right out of college despite not having a traditional background.
I have seen this approach work both for people looking to get into the industry and for those managing small unconventional funds. Keep costs low so timing doesn’t matter and simply be so good they can’t ignore you.https://www.calnewport.com/blog/2008/02/01/the-steve-martin-method-a-master-comedians-advice-for-becoming-famous/
*Be so good they can’t ignore you!*
Advice from an emerging manager stockpicker in greater Boston
Joel,
I saw that you are helping new managers learn from others. For whatever its worth, I thought I would pitch in few takeaways from my own experience:
- Investment returns will be an important source of AUM. Six years in, our capital comprises $22m in gains and $20m in contributions. As another example, I know another manager who, nine years in, had approximately 200% cumulative performance and $30m AUM.
- Most of your capital base may come from people who are not direct connections but rather 2nd, 3rd, or 4th-degree connections. 80% of our capital base comes from people I had never had contact with before departing my prior firm. Therefore, leaving a good impression with people and maintaining relationships more important than explicitly seeking out investors.
- When looking at the chain of introductions that I experienced, individuals who could most credibly refer you are not necessarily the ones who do refer you most frequently. Similarly, the individuals who introduce you often may be knowledgeable but not necessarily deeply knowledgeable about what you do. They may not even be LPs. That’s not necessarily a reflection of the job you are doing as an investment manager; it just has to do with people’s personalities.
Kind regards,
[anonymous]
Different: Escaping the Competitive Herd, By Youngme Moon
This is ostensibly a marketing book, but we found deep insights for anyone looking to create a successful and differentiated value proposition. Some favorite quotes and insights:
“True differentiation…is rarely a function of well-roundedness; it is typically a function of lopsidedness. The same can be said for excellence.”
Part of the moat of being a “lopsided” brand is in the discipline in refusing to be pushed towards the center, to correct one’s weaknesses. Likewise with “lopsided” (I mean that in the best possible way!) investment firms.
“these idea brands don’t try to compete. That is key. They are more interested in separation than comparison…against a sea of homogeneity, true differences can be charismatic. For difference to be charismatic, it’s got to deviate AND it’s got to resonate.”