The 5 Aces Of An Investment Advisor

0
3
Poor Charlie's Almanack

At the DJCO AGM two weeks ago, Peter Kaufman, one of the directors and author of Poor Charlie’s Almanack, had his very interesting comment on the list of qualities an investment advisor should demonstrate. He calls them the five “Aces” to find in a money manager. I’m posting it because I will find very important.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Check out our H2 hedge fund letters here.

Here’s Kaufman’s list verbatim:

Top value fund managers are ready for the small cap bear market to be done

InvestorsDuring the bull market, small caps haven't been performing well, but some believe that could be about to change. Breach Inlet Founder and Portfolio Manager Chris Colvin and Gradient Investments President Michael Binger both expect small caps to take off. Q1 2020 hedge fund letters, conferences and more However, not everyone is convinced. BTIG strategist Read More

  1. Total integrity 
  2. Actual deep, deep fluency in whatever you say you are going to do on behalf of the client
  3. A fee structure that’s actually fair in both directions
  4. An uncrowded investment space
  5. A long runway (meaning that the manager is reasonably young in age)

Kaufman also added:

“I further add that if you ever find a money manager who possesses all five of these characteristics, there are two things you should do. One, you should put money with them immediately. And number two, put as much money as you are allowed to put [with them],”

This is how it all came up:

“I came up with this list in giving reference to a very exceptional money manager,” Kaufman explained. “And I not only wanted to give what I thought was a correct reference, I wanted the person I was giving the reference to in turn be able to relate this to the real shot caller so that a compelling narrative would be transferred from me directly to the ultimate shot caller. So, I came up with what I call the five aces, five aces being the highest-hand of cards in a game of wildcard poker.”

The list is not only useful for evaluating where to allocate money, but it’s a great list for money managers to use as part of their own aspiration.

Article by Brian Langis