Ari Paul and Matthew Goetz at crypto fund manager BlockTower Capital experienced a meaningful drawdown in 2018 as Bitcoin collapsed (disclaimer: I'm on their Advisory Board). As they looked to the future, the fund needed to make up substantial ground to recoup their highwater mark. Almost anyone would have folded the tent at that point in time. They didn't; they saw the long game. In the three years since, Blocktower never wavered, changed firm strategy, or lost hope. They innovated with new strategies, hired key team members, and grew their capabilities. In 2020, BlockTower recouped the highwater mark in its flagship fund. This year, well, let's just say they blew past it and have significantly outperformed Bitcoin (which is up more than 100%). The once "battered" 2017 start-up manages over $700 million today.
This week I caught up with Anthony Scaramucci, the colorful founder of Skybridge Capital and guest on the show shortly after he returned from the White House. A year ago, Skybridge's flagship fund got caught in the crosshairs of structured credit and took a beating. They lost the support of distribution partners, shed assets, and read reports of their demise. But Anthony is nothing if not a soldier with incomparable positive energy. They stayed in the game, bounced back, recouped their highwater mark, and manage $9 billion today.
A quote from Andy Golden of PRINCO ((#7 of the Top Ten List in Capital Allocators) epitomizes the biggest lesson I learned about investing since leaving Yale's Investments Office: "To finish first, you first have to finish." Almost everyone - from fund managers to allocators - reports to someone else who scrutinizes performance. That chain of command inevitably shortens the idealized long-time horizon over which we all aspire to invest. It's just not ok to be wrong for too long, because you might get pulled from the game before it's over. Even the 30-year tenured Scott Malpass from Notre Dame shared the inconvenient truth that "we're not willing to have 10 years where value is out of favor and have 90% of our book in value managers. We just can't."
Investment styles come in and out of favor. Being right over the long-term only matters if you are around for the long-term. Structural lock-ups (private equity), balanced risk exposures, and alignment of governance are all effective methods to extend the game. To win, we need to play for a long time. Some of the greats, like Buffett and Swensen, are well into overtime. This week, I'm tipping my cap to BlockTower and Skybridge for staying in the game.