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The Road Ahead

I get e-mails from those that want to invest with me, and those that want to work for me.  My, but I am humbled.  I never thought that this blog might produce a business; I only started it to give back to the general public.

But as I get more of a response, I begin to think, “Okay, what if I succeed? What would I do?”

Here is my short outline: At AUM of $10 million, I am viable.

At AUM of $20 million, I would do the following:

  • Hire an assistant
  • Get a Bloomberg terminal.
  • Hire a permanent legal counsel.
  • Plan on starting a bond fund.
  • Engage those that invest in emerging managers.
  • Pay to get a failed mutual fund to hand the fund management contract over to me.  After that, my investors could have tax benefits for a time, and I would reduce fees to reasonable levels.

At AUM of $50 million, I would do the following:

  • Hire someone who could replace me if I died.  There are a number of people offering this to me now, and they aren’t low-quality.  But I am not there yet; I look forward to getting there.
  • Get office space near where I live.
  • Consider inviting “dirty money” to invest with me from the wirehouses.
  • Submit my performance to databases.

Beyond that, I am not sure… if I get that far, there may be other opportunities that I have no concept of now.  I know that I will outsource more the larger that I get.  That said, I think that I may have the acumen to take advantage of the situation.

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5 Responses to The Road Ahead

  1. says:

    A quote comes to mind – “Give, and it shall be given unto you; good measure, pressed down, and shaken together, and running over”.

    What is “Engage those that invest in emerging managers”?

    Delighetd to get in at start up.

    • ljoneill says:

      There is a huge amount of institutional $$ that is specifically designated for “emerging managers” – in other words, asset managers that are still very small in terms of AUM. In the institutional asset management community, a manager qualifies as emerging if the AUM is less than $2B. Pension funds typically (certainly not always) use a “manager of managers” to invest in these small managers. That allows them to put a more significant dollar amount to work but have it automatically diversified among a group of 5-10+ managers. Most pension funds don’t want to represent more than, say, 20% of a manager’s AUM, and it makes little sense for a $10B pension fund to give $10M to Aleph Investments, and so they use these one-stop shops that will diversify the assets for them.

  2. microcap says:

    David, I had a very hard and fast rule that I offer you: I never ever would have anyone between me and the client. No brokers, intermediaries, nothing. Assume success—if you are calling it “dirty money” now, I promise it doesn’t get any cleaner later on.

    • “Dirty money” is what Ken Fisher called it. The money is only dirty because wirehouse brokers use a manager until he makes one mistake, and then abandon him.

      The money is dirty, because it is directed by fools who don’t understand the markets, but do understand how to manipulate client assets. For me, the fun of the game would be to deliver good asset management to them until my next major drawdown, which happens about once every five years, and then manage the withdrawal.

      Also, the fun would be establishing an independent connection with the beneficial accountholder, and trying to wean him off the loser who is his broker. Tough battle, but could be fun.

  3. microcap says:

    David, as I am sure you are aware, your most precious commodity in the new venture will be TIME. Every second you spend arguing/discussing/explaining anything with a less than bright intermediary is counterproductive to your clients and your investment results.

    Keep it simple works not just for investing, but also the management of your investment business.


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.

Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.

Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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