Lately, while wasting time on FinTwit and its derivatives, I have found myself noticing the number of future promises appearing in the retail investing landscape. New faces, investment theses, charts of cumulative returns, screenshots of annual reports underlined in two different colours. I have the feeling, perhaps wrongly, perhaps not, we shall see, that this constant trickle will sooner or later turn into a large number of manager-led funds. I think this is nothing more than the logical conclusion of personal branding in investing.
And since I have not come here to solve anything, but rather to plant doubts, I started thinking about what might happen if this actually takes place.
The first thing that comes to mind is poker. More specifically, that habit professional players have of staking each other. If we translate this to the new scenario, the idea makes a fair amount of sense: if I am Person A and my style is X, it could make sense to buy a piece of Person B if his style is Y, uncorrelated to mine. Not because Person B is necessarily a better investor (in fact, maybe he is not), but because he sees things I do not see, moves through territories I would never even think of stepping into, or tolerates risks that would make me feel as uncomfortable as listening to my brother-in-law explain why Bitcoin is a scam.
Although Ortega was not exactly thinking about fund managers when he wrote this, it helps me get to where I wanted to go. Staking each other among investors would make sense if each person brought their own way of seeing, a different way of being positioned in front of the market. The problem (and this is, I think, the interesting part) is that most of these young promises1 are not as different from each other as I would like.
They hold similar portfolios. Not so much in the specific positions, although also, let’s be honest, but in something deeper: the philosophy. Lots of quality businesses, lots of compounders, lots of quality at a reasonable price, lots of economic moats, lots of if it falls, I buy more. It is as if they had all read the same book, underlined the same sentences, and memorised the same Buffett anecdotes from the Berkshire meeting (which, to be fair, are also always the same ones and I love them).
And here my little obsession with observing what surrounds me comes in again (which I consider the true engine of anything interesting one can do). If everyone looks at the market from the same place, with the same glasses and the same references, staking each otherloses its meaning. You would be buying a slightly different version of what you already do yourself; it would be like me spending my time reading books by authors I adore and then also paying someone else to read books by those same authors for me and tell me, in their own words, what I have already read.
Full text: https://www.jeravalue.com/en/blog/founder-led-funds-and-poker-players
Posted by Jera_Value
1 Comment
Pro poker player here. That’s not why players stake each other. Players get staked when they can’t afford to play in a game. Say the big fish wants to play bigger and a pro doesn’t have the bankroll. It’s not for diversification. It’s just simply investing in someone’s poker business. Also theoretically you don’t want someone to play differently you want them to play optimally in their lineup. If I staked someone and they played too differently they’d lose their staking