Growing up as a sports fan, you learned that players enter the league, playing for the love of the game, and some, after a few flush years, stop caring as much, feeling entitled, distracted by their lifestyles and their paycheck.
Growing up, you realize this works in many professions, You encounter those partners, a decade when they last gave good advice, much too worried about the size of their paycheck and their mortgage for their upstate log mansion and Jackson Hole ranch to care about their clients or show up on calls. As one hedge fund GC recently told me, he never hires the senior partner, because he knows that person does not care, but the hungry junior partner might care.
Here is how this works
One chief investment officer at a $5 billion institution breaks down the typical hedge fund life cycle into four evolutionary stages. During the early period, when a fund is starting out, its managers are hungry, motivated, and often humble enough to know what they don’t know. This tends to be the best time to put money in, but also the hardest, as the funds tend to be very small. Stage two occurs once the fund has achieved some success, when those making the decisions have gained some confidence but they aren’t yet so well-known that the fund is too big or impossible to get into.
Then comes stage three—the sort of plateau before the fall—when the fund gets “hot” and suddenly has to beat back investors, who tend to be drawn to flashy success stories like lightning bugs to an electric fence. Stage four occurs when the fund manager’s name is spotted as a bidder for baseball teams or buyer of zillion-dollar Hamptons mansions. Most funds stop generating the returns they once did by this stage, as the manager becomes overconfident in his abilities and the fund too large to make anything that could be described as a nimble investing move.
You maximize your chance at success by understanding where folks fall in that cycle.
takingpitches 