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7 Unusual Lessons from 20 Years of Investment Failures

by trusted insight posted 5years ago 269 views

Now a re-created Victorian city, Gold Reef City in Johannesburg South Africa, was built on the grounds of the former Crown Mines.

The buildings and part of the mine, mine shaft no. 14 to be exact, is included in the park. Actually it was the 13th shaft but they skipped this number due to superstition.

Equipped with a helmet and a miners lamp visitors go down the shaft in a cage to the top level of the mine where they get to see the bedrock :-

As in mining, great investments are extremely rare. Expect to go through many layers of dross to find that fantastic investment.  

In my experience great investments simply don't POP up, they are usually dirty and covered up with lots of hair (complexity).

Peter Thiel summarizes it well in this quote which is as applicable to finding a great investment as finding the next Facebook:

“I think in some ways the really good companies often couldn’t even be articulated…we didn’t quite have the right words. Or maybe they were articulated but were articulated in terms of categories that were actually misleading,” – Peter Thiel said.

I for one have had good success when an investment or a manager hits my desk at the SAME time from multiple different sources.

Perhaps it speaks to the marketing success of the manager, they spread themselves far and wide, but there is no particular reason why such serendipity should result in a good investment.

First brought to my attention by Mark Thomas of Marblewood Partners, a tough SOB of a client if ever there was one. Mark was an investor in my Northview Alternatives fund and was brought into the fund thru the marketing efforts of longtime friend and soldier in arms Daren Block of Round the Block Funds.

What made Mark so tough was his unrelenting pursuit of investment excellence through  EXTENSIVE due diligence and a take no prisoner attitude. Getting his clients out at the first hint of trouble and asking questions later.

Within months of hearing about Wendywood's existence I found myself sitting next to Steve, the manager of Wendywood, at a local Alternatives conference.

He left H&T in 1994 for Optimist Capital where he ran a Merger Arb fund and honed his skills even further, then later at Alexander Miller which became Gold & Sons where he met Tyler Carson -  a serendipitous event we will discuss later.

Fiercely independent Steven is the 100% owner of Wendywood which at that time was a tiny $28 million hedge fund of funds (now $84m in Jan. 2017).

Steve draws a low Buffettesque salary. Instead relying on his families $4.1m coinvestment to be the engine of his personal wealth and alignment with his investors.

He has assembled around him a group of limit partners who are partners in the truest sense ... some grizzly old guys and gals battle hardened in the field of investments.

Then build an asymmetric portfolio such that 1 or 2 managers play off the BIG theme and make up 25%+ of the portfolio.

Supplement the core managers with 7-9 arbitrage type managers/strategies that provide lower but more steady returns should the thematic binary bet/s fail to deliver … protect capital!

Keep inter-manager correlation low and hence the overall fund will have low volatility - the Golden ticket and maintaining as close as possible a ZERO correlation to the market.

Unfortunately even though I’ve told you about some of my most expensive mistakes - not adhering to those 4 rules - it is unlikely you will do so either.

Because at the University of Wall Street we each need to make our own unique mistakes … tailor-made for our own psyche before we are willing to listen and obey.

Thank you for reading my post. I regularly write about private market opportunities and trends. If you would like to read my regular posts feel free to also connect on LinkedIn, Twitter or via Atlanta Capital Group Investment Management.

Nothing in this article should be interpreted as a recommendation to buy any security. Please conduct your own due diligence.

Greg Silberman is the Chief Investment Officer of Atlanta Capital Group Investment Management [ACGIM]. Atlanta Capital Group Investment Management specializes in creating custom private market solutions for RIA/Family Office clients.

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