Mohnish Pabrai blog

[augustabound]

For anyone interested Mohnish Pabrai has a new blog and Twitter.

http://www.know72.com/blog

[tombgrt]

Guess he needs new clients.

[DooDiligence]

Guess he needs new clients.

 

I guess Fiat & Horsehead didn't turn out so well for him (or rather his investors which is your point I guess.)

 

That 2 & 20 is a real sweet deal (am I speaking out of turn or is a good chunk of what he does basically coattailing nearly every hedge fund out there?)

[augustabound]

Guess he needs new clients.

 

That was my first thought when I saw it.  ;D

 

[cubsfan]

I thought his fund was still closed to new investors?

[Travis Wiedower]

That 2 & 20 is a real sweet deal (am I speaking out of turn or is a good chunk of what he does basically coattailing nearly every hedge fund out there?)

 

Maybe I'm misremembering, but I thought his structure was 0/6/25 or something similar? I was under the impression he hasn't made any money in quite a few years because 08/09 ruined his high water mark (which is a good example of how high water marks can unfairly screw managers, but I digress).

[cubsfan]

Guess he needs new clients.

 

I guess Fiat & Horsehead didn't turn out so well for him (or rather his investors which is your point I guess.)

 

That 2 & 20 is a real sweet deal (am I speaking out of turn or is a good chunk of what he does basically coattailing nearly every hedge fund out there?)

 

Pabrai doesn't charge 2 and 20. He makes money when his investors make money. Up to the first 6%, there is no charge - then he takes 25% over 6%. He's talked about using Buffett's early model. I do not think this has changed at all. Sounds pretty investor friendly, when you put your money where your mouth is.

[valcont]

I never understood his appeal. He talks a good game but most of these are parables that gives me no framework to think about his strategy other than him being a master cloner. A good fund manager is typically a great marketer and I think he appeals to people with money who absolutely had no desire to learn investing like Silicon valley types. They can understand his simple message.

 

In one of his lectures, he talked about how any one can be a great investor by spending an hour or two every week. I find that message very troubling. It makes him sound like a genius since he is doing it but others who follow are guaranteed to fail.

 

He is a very generous person and someone you want to be friends with. People would invest with him the same way they typically choose their leader.

[cubsfan]

Much of his appeal has to do with his great LT record. As I remember, he runs 3 funds. 2 of them have been around

for 15+ years and have absolutely crushed the indexes (after fees). The 3rd one has lagged by a small amount.

So his fund have been volatile, but if you stayed invested you did very, very well. How many mangers can you say that about?

 

Cloning or whatever - something is working long term.

[indirect]

That 2 & 20 is a real sweet deal (am I speaking out of turn or is a good chunk of what he does basically coattailing nearly every hedge fund out there?)

 

Maybe I'm misremembering, but I thought his structure was 0/6/25 or something similar? I was under the impression he hasn't made any money in quite a few years because 08/09 ruined his high water mark (which is a good example of how high water marks can unfairly screw managers, but I digress).

 

The structure is 0/6/25 with high water mark that accrues at 6% so he has made minimal money since 08/09 and still may not make for couple of more years.

[tombgrt]

I thought his fund was still closed to new investors?

 

Idk. But his blogpost 'The Rule of 72' is basically framing. Readers are supposed to link the simple idea of "amazing compounding" and the skills needed for it with his name.

 

I named this blog know72.com because it does pay off (bigtime!) to know the Rule of 72. It is one of the most important tenets for us diehard compounders . Warren Buffett had probably mastered this rule before his 10th birthday. He knew he was going to be the richest person on the planet decades before he got there. He knew his rate of compounding, knew his life expectancy - and didn't need to know anything else.

 

How the f**k would it pay off to just know the rule? Yeah sure, Buffett just went around not knowing s**t about anything and got rich because he knew how to count. Is money magically going to appear because you can add 1+1? Are investments going to turn into FCF waterfalls because you know it takes two years to double your money at 36% CAGR? Amazing!

 

 

It's also why he relentlessly quotes people like Munger. Furthermore it's completely unclear whether Einstein ever said something like "Compounding is the 8th wonder of the world." and I'm sure he knows this.

 

He does this all the time in my experience. In his book Dhandho Investing the premise is "Heads I win, Tails I don't lose much." accompanied by a nice story on Indian American motel owners. Pro salesmanship and framing.

 

In fact, I'd add that this is one of my main issues with popular investment books today. The authors are all so high on mental models and frameworks but all they can manage to scribble down 95% of the time is a rehashed quote by Munger, Sun Tzu or some other intelligent being that actually had something insightful to add.

Maybe it's a cultural thing, idk. The same goes for the crazy TV ads you see when you're in Canada/US. You'd never see things like that in Western Europe. I often feel like I'm reading some kind of pamflet.

[AJB96]

Guess he needs new clients.

 

I guess Fiat & Horsehead didn't turn out so well for him (or rather his investors which is your point I guess.)

 

That 2 & 20 is a real sweet deal (am I speaking out of turn or is a good chunk of what he does basically coattailing nearly every hedge fund out there?)

 

Fiat has done very well so far. He began buying in June of 2012 and at this point has made his investors 118% in Fiat when you include the spin offs.

[DooDiligence]

That 2 & 20 is a real sweet deal (am I speaking out of turn or is a good chunk of what he does basically coattailing nearly every hedge fund out there?)

 

Maybe I'm misremembering, but I thought his structure was 0/6/25 or something similar? I was under the impression he hasn't made any money in quite a few years because 08/09 ruined his high water mark (which is a good example of how high water marks can unfairly screw managers, but I digress).

 

The structure is 0/6/25 with high water mark that accrues at 6% so he has made minimal money since 08/09 and still may not make for couple of more years.

 

Sorry; I spoke out of turn.

 

Isn't that a similar fee structure as the early Buffet Partnership?

 

I still wouldn't put money there but kudos to the guy if he's truly putting shareholders first.

 

As some of you have discussed on another thread; doing this successfully for investors is a very difficult thing...

[valcont]

Much of his appeal has to do with his great LT record. As I remember, he runs 3 funds. 2 of them have been around

for 15+ years and have absolutely crushed the indexes (after fees). The 3rd one has lagged by a small amount.

So his fund have been volatile, but if you stayed invested you did very, very well. How many mangers can you say that about?

 

Cloning or whatever - something is working long term.

 

I am not talking about his investment record. I am sure he had made some good returns for his investors. I just don't think I have learnt anything from his lectures, presentations etc. That tells me he is getting good results not knowing why to some extent. There are people who can distill something so profound in such a simple way that keeps you wondering. Hate to quote Munger but his idea about thinking of stock market as a pari mutuel systems is a great example. Such an elegant way of explaining betting in the stock market. That is a great framework and everything else becomes a strategy. Similarly Ray Dalio's thoughts on credit cycle and the macro economics are worth read. If you are mathematically inclined, Richard Dennis's turtle trader strategy. These people look at the markets that millions looked but came up with insights that are so powerful and simple. I still can't figure out what Pabrai' strategy/framework is other than cloning the greats. Well that is just race to the bottom.

 

 

[Picasso]

In fact, I'd add that this is one of my main issues with popular investment books today. The authors are all so high on mental models and frameworks but all they can manage to scribble down 95% of the time is a rehashed quote by Munger, Sun Tzu or some other intelligent being that actually had something insightful to add.

 

It's also my beef with popular blogs and investment books.  If you wants lots of eyeballs or to reach the mass investor market, you need a watered down regurgitation of simple concepts that come from old Munger or Buffett quotes.  It's difficult to find someone who can add something truly insightful that we haven't already read in Berkshire letters or whatever.  It makes me want to start a blog, but I think it would be a waste of time.

 

But going back to Pabrai and his fee arrangement.  I've thought about this topic a lot (thinking about how I want to approach it for myself going forward) and I understand the comparisons he's drawing back to the Buffett Partnership by copying that incentive structure.  But 1) interest rates were a lot higher back then.  I think Buffett set the hurdle at the Treasury rate. 2) The opportunity set was much, much better than today. 3) Buffett put himself on the hook for 25% of potential losses.  4) He stopped taking in new capital/closed shop when opportunities dried up. 5) He didn't have a proven record yet.  People were really taking a shot on him.

 

The 0/6/25 model probably works if you take in a moderate amount of capital and stop taking in money or eventually close up.  I don't think it's something that would work indefinitely if you keep bringing in new investors.  Your returns will inevitably decline closer and closer to the "market" returns and market returns are probably close to or lower than 6%.  Which means Pabrai has to work much harder than Buffett to beat the hurdle.  He's probably better off returning 50% of his capital and focusing really hard on getting past that hurdle.  Otherwise he'll likely end up with 100% of nothing, incentive fee wise.  But at least he's not closing up and starting a new fund to reset the hurdle.

 

Also I'm not sure Buffett knew he was going to be the richest person in the world.  He just knew he was going to be rich.  Unless I'm wrong about that.

[augustabound]

In one of his lectures, he talked about how any one can be a great investor by spending an hour or two every week. I find that message very troubling. It makes him sound like a genius since he is doing it but others who follow are guaranteed to fail.

 

I find it hard to believe he ever said that. An hour or two a week?

[cubsfan]

 

 

That tells me he is getting good results not knowing why to some extent. I still can't figure out what Pabrai' strategy/framework is other than cloning the greats. Well that is just race to the bottom.

 

Are you really serious? Pabrai has blown away the indexes over 15+ years, managing $500M+.

 

You call that a race to the bottom?

 

You chalk it up to blind luck?

 

Give me a break.

 

 

[tombgrt]

Just found out Fund 3 is still open for investors so he could very well be looking for new investors. His right of course.

 

In fact, I'd add that this is one of my main issues with popular investment books today. The authors are all so high on mental models and frameworks but all they can manage to scribble down 95% of the time is a rehashed quote by Munger, Sun Tzu or some other intelligent being that actually had something insightful to add.

 

It's also my beef with popular blogs and investment books.  If you wants lots of eyeballs or to reach the mass investor market, you need a watered down regurgitation of simple concepts that come from old Munger or Buffett quotes.  It's difficult to find someone who can add something truly insightful that we haven't already read in Berkshire letters or whatever.  It makes me want to start a blog, but I think it would be a waste of time.

 

Also I'm not sure Buffett knew he was going to be the richest person in the world.  He just knew he was going to be rich.  Unless I'm wrong about that.

 

Absolutely agree on the investment books issue.

 

You're right about Buffett too. He was actually seriously considering retirement around the time he made his first million at age 30. And I believe he actually told someone (his mother?) he'd jump from the highest building in Omaha if he didn't reach his goal (a million by age 30) in time.  ;D

 

[tombgrt]

 

 

That tells me he is getting good results not knowing why to some extent. I still can't figure out what Pabrai' strategy/framework is other than cloning the greats. Well that is just race to the bottom.

 

Are you really serious? Pabrai has blown away the indexes over 15+ years, managing $500M+.

 

You call that a race to the bottom?

 

You chalk it up to blind luck?

 

Give me a break.

 

 

 

Just saying but one of his funds has underperformed the benchmark by a decent margin.

 

And if you dont include the first few years, which were value investor heaven, performance drops a lot. It's a lot less than 12,7% (2015 YE). (The other funds did  10.7% and 7.3% since start.) If you look back 10 years (YE 2005 until YE2015), CAGR is almost 6%. Is that the performance of someone who blows away the indexes?

Plenty of funds have a few amazing first years and then performance drops like it a rock. AUM boom but they can always fall back on the return of those first few years when AUM were tiny and were it was hard to tell how much luck was involved given the time frame. Fairfax is another one that is fun. Remove their first few years and them selling stock at multiples of BV and you get another picture. Doesn't mean they are bad, just a lot less spectacular than some think.

 

One fund of Pabrai did 96.5% in 2003 with a super low capital base. Idk if that is luck or skill with smaller capital. Too hard to tell. One hell of a salesman though!

[valcont]

 

 

That tells me he is getting good results not knowing why to some extent. I still can't figure out what Pabrai' strategy/framework is other than cloning the greats. Well that is just race to the bottom.

 

Are you really serious? Pabrai has blown away the indexes over 15+ years, managing $500M+.

 

You call that a race to the bottom?

 

You chalk it up to blind luck?

 

Give me a break.

Reread what I have said. I said that I haven't gotten any insight listening to his lectures/presentations other than his reference to cloning. As an investor,

I am interested in finding new frameworks and strategies and learning from people who have a unique way of looking at things. Some good examples are WEB's capital allocation in a conglomerate, Henry Singleton's buy back strategy at Teledyne, Tom Murphy's use of leverage in a capital intensive business with predictable returns, Bezos focus on customer experience, Greenblatt's special situations, Richard Dennis's strategy of capturing fat tails.

 

Now think about Pabrai. What is his strategy? From what I gather its cloning and parroting Buffet and Munger ad nauseam . Essentially he is screening 13F and apply some value investing principles. I have to check on his returns but I doubt he has "blown away" the indexes. You need to explain what that means first. His trajectory should be no different than other value investors. Great returns initially because of low AUMs and then averaging towards the index over period of time.

[cubsfan]

Obviously you don't know anything about Pabrai's investment record. That's your problem and I can't help you.

Try using google.

 

 

 

 

 

[augustabound]

He has 3 funds. One has outperformed by 7% over the life of the fund (since 2001), one has pretty much equaled the index and one has lagged by about 4%.

[valcont]

Obviously you don't know anything about Pabrai's investment record. That's your problem and I can't help you.

Try using google.

 

Alright fanboy. You are obviously too star struck to get it. good luck.

[Tim Eriksen]

 

That tells me he is getting good results not knowing why to some extent. I still can't figure out what Pabrai' strategy/framework is other than cloning the greats. Well that is just race to the bottom.

 

Are you really serious? Pabrai has blown away the indexes over 15+ years, managing $500M+.

 

You call that a race to the bottom?

 

You chalk it up to blind luck?

 

Give me a break.

 

To be fair, he blew away the indexes for his first 7 years but since then has really struggled.  His underperformance is while managing $500 million.  Most of his outperformance years were when he managed less than $50 million (1999-2003).  2000 to 2006 was a value investors dream.  You didn't have to be great to do 20% plus or even 30%.  Every manager has bad stretches, but his is going on ten years, and his five year performance is worse than his ten year.  His five and ten year numbers have almost zero management fees due to his structure, so it isn't the impact of fees.  I enjoyed his book.  He may be great if he managed substantially less but his track record managing large sums is really poor. 

[tombgrt]

Shit I think I might be shadowbanned.