Founder & Portfolio Manager,
AuM: USD 1M
Strategy: L/S Equity with Long Bias
Alcohol: Islay Scotch
Food: Elk tenderloin under a creamy peppercorn sauce paired with sweet corn
City: Farmington, NM
Book: The Bible – an eternity’s worth of wisdom
If you could time travel back to day one of your fund and have 15min with your former self to communicate any lessons you’ve acquired with the intention of saving yourself headaches, what would you tell yourself?
Trust yourself, commit, and go, all the while don’t underestimate the power of the advice of honest and hard-working people along the way.
How do you manage your portfolio?
We rigorously research, analyze, and test each investment strategy. Once we believe a particular strategy will generate solid returns, we implement it in our portfolio. This leads us to an objective and systematic approach to the management of our portfolio.
What is the difference between you and many other fund managers out there?
Our plan is to build wealth over the long term, with our partners, not from them. HIT Capital is structured as a team that invests together. For example, I am invested, the management firm has reinvested all of its revenue to date, and the limited partner’s performance fees include a high-water mark. The high-water mark ensures we do not get paid for losses but instead compensates us for gains.
How do you generate alpha?
We generate alpha through combining economic growth with market and structural inefficiencies.
And what is the real difference?
The real difference is the efficiency in which we distinguish the meaningful from the meaningless. There is an extraordinary amount of information available today, some beneficial but most of it junk. Our advantage is the ability to discern the good from the bad and act accordingly.
Is your alpha sustainable?
Yes. We have a long term outlook, we are continually evaluating new strategies, and we eliminate unnecessary costs. We understand that markets and their products are inefficient. We translate these inefficiencies into gains through our beta slippage, contango and value investment strategies.
You returned 74% over the last 2.5 years while the S&P 500 only returned 46%. How did you do that?
The S&P 500 is a general barometer for the overall market performance. HIT’s outperformance of the S&P 500 was driven by capitalizing on structural and market inefficiencies. So while the returns relative to the S&P 500 will vary from year to year, we will continue to employ strategies that put us in a position to outperform the market over time.
What does your risk management look like?
We plan to maintain a net exposure of about 120%. This is done with solely long positions or a combination of long and short positions. If the latter is used, the gross exposure may exceed 120%. When the market moves against our positions, and exposure naturally climbs, we reduce the positions to maintain an exposure of 180% or less.