Fund Management Differs From Investing

Martin Shkreli shares his perspective on the differences between being a good investor versus being a good fund manager, drawing from his personal experiences in hedge funds. He emphasizes that success in investing doesn't automatically translate to success in managing funds.

Key Points:

• Fund Management vs Investment Skills:

  • Being a good investor and being a good fund manager are "pretty different things"
  • You can be a brilliant investor but fail at managing the actual business
  • The business side requires growing assets and satisfying clients, which many good investors don't want to do

• Hedge Fund Industry Challenges:

  • Hedge funds have the shortest lifespan of financial businesses
  • Of the top 10 hedge funds of all time, roughly 5 were shut down by regulatory intervention
  • There's approximately a 10% chance of "going to jail" being a hedge fund manager
  • Most top hedge funds from the 1990s don't exist today

• Personal Investment Psychology:

  • The hardest challenge is fighting "2 or 3 different demons that are psychologically based"
  • Key struggle is avoiding the desire to double down when wrong
  • Must accept being wrong 35-40% of the time, which most people can't handle
  • The market constantly humbles you and challenges your opinions

• Fund Management Reality:

  • Investors don't want you learning these lessons with their money
  • Need to have these skills before starting a fund
  • Started his fund too early before mastering these psychological aspects
  • Never made significant money from hedge funds despite having good investment ideas

• Industry Evolution:

  • Hedge funds were a very small asset class in the past ($50-100B total)
  • Today's industry has grown significantly but faces more challenges
  • Modern hedge funds require different skills than in the past
  • The industry has become more institutionalized and regulated