#90 - Adam Blitz: The Hedge Fund Playbook

29:15Or even if they do find some up-and-coming stock, they might not be able to size it in a way that's meaningful in the context of their portfolio. Within credit strategies, we look for managers who might have experience in past credit cycles and restructuring events and people in today's environment where you have more of these sort of creditor-on-creditor types of issues who we think would be very strong at the negotiating table. So those are the sorts of things that we're looking at, really defining that investment edge. The other thing I'd say on investment edge, and I think people in our industry spend a ton of time, probably too much time on, give me your best stock idea, right?

29:57Or tell me about this one distressed deal that went well and not nearly enough time on portfolio construction, right? How do you size things? When do you get in? When do you get out? How much illiquidity are you willing to withstand? How would you be able to get out of the position if you're wrong, right? how do you imagine your portfolio evolving as your assets evolve over time? All of those sorts of things are the actual things that matter to performance much more than a one-off example of an individual stock that the manager might be excited about. So we really try to spend a lot of time on portfolio structuring and implementation.

30:39So all of that's what I'd call the hard stuff on the investment side. We also pay a ton of attention to the soft side. Why is the lead person doing this? What's their motivation? Do they have a genuine passion and love for the industry? Are they doing it solely as a means to make a lot of money? What is really their motivation? Because we found that true staying power comes from a real passion for the industry, a real competitiveness to want to continue to do well. And the managers who might fizzle out, it might be more they say, boy, I've got great returns. Now I can raise a ton of assets. And they turn into business builders or empire builders.

31:21Or it's like, wow, I've done really well. I booked some nice incentive fees for a couple of years. Now I'm going to spend more time skiing and golfing and doing all of those sorts of things, which is great. There's nothing wrong with that. But from an investor perspective, it might suggest that they're taking their eye off the ball or aren't as engaged as they used to be. So really just trying to understand what's the motivation of these folks? What's the morale of their team? Have they set their firms up in a partnership sort of way where there's real alignment among the team? the best firms, the ones with the most staying power, they have an investment as you're very strong in portfolio construction, but they're so passionate and competitive that it's really for them that the scorecard that matters the most to them is the performance, not the AUM or, you know, or things like that.

32:13And that just involves judgment and experience. I mean, no one's ever going to get everything exactly right on that, but you know, you can see movies play out, you know, you know, you've seen things before in terms of how firms evolve and people evolve and we can make judgments on the ones that we think will continue to perform well. And then we can make judgments where we say, you know, yeah, someone's performed great in the past. That's wonderful. But the firm today looks so different from the way it looked three years ago when those returns were generated that it's almost irrelevant, right?

32:47In terms of trying to project how they're going to do in the, you know, in the future. You've probably met thousands of managers in your career. Is it a fair assessment to state that the average manager is relatively smart, you know, very successful, and they would probably be impressive to somebody who only met them. But part of your work is to get the lay of the land of all the managers, because in effect, they're competing against each other. And so effectively, the bar is higher for what can add value because the players are just so, so smart and so good at what they do. Is that a fair assessment?

33:23That absolutely is a fair assessment, right? And we always, and maybe this is an obvious statement, right? But when we're evaluating managers, right, you're not evaluating them on their presentation skills, right? You're evaluating them on how you think that they'll do in terms of managing the portfolio, managing the firm, and really being passionate about what they're doing. So there's some cases where the person you meet at the cocktail hour who's so impressive and articulate actually is a great manager. And it could be that the great manager is very shy. And, you know, the last thing in the world that they would want to do would be to be at that cocktail hour impressing people.

34:00And I think it's very hard to be completely objective or completely avoid, you know, the notion of if someone presents well, you think that that's correlated with their ability to manage the portfolio well. It's hard to ignore that completely. But again, that's really our job is to say, boy, that person may be bumbled over their words a little bit, right? But they really have a strong process, a strong team, a strong culture. I think they're an excellent manager. This person is, man, boy, they're really articulate and they're really fun to talk to, right? But I'm not as sure on that actual ability to manage the portfolio.

34:38Maybe they have some other end game in mind, you know, personally, which is not really, again, related to how we think they're going to manage the, you know, the portfolio. But I think it's right. But the average person you meet in the industry, very, very smart, but again, not smart enough maybe to overcome the fees that they charge on average. Obviously, part of the analysis is past performance, but do you find persistence in past performance considering that most of these manders are operating in a relatively efficient space of public markets? Or is it not reliable to just look at past performance and just take the great performance of the past and assume they'll continue in the future?

35:19I would think of past performance. It's just one of many data points in trying to project how they're going to do in the future. Our whole job, the reason we exist, right, picking managers, is to project how someone's going to do in the future, right? and investing in someone because they did well seven years ago, anyone can sort of do that. It's all about projecting the future. So certainly if someone has generated a good track record in the past, that's a positive. I mean, it's certainly not a negative, but one has to really dig into that track record, right? Like what were the assets that the manager was managing during the period where they produced a good track record?

35:57Was it truly alpha, right? Or was there some beta tailwind that they happen to ride during that period that once that beta tailwind turns into a headwind, it's going to really negatively impact their performance. Did they take a swing for the fences and got lucky and therefore have a really good track record, but you're not really sure what's the real edge here? Why is this person and team so good? To us, it's always about what is the edge that they're bringing to the table? Can we articulate it? Do we understand it? Do we think it's replicatable in the future? So certainly if someone's done well in the past, again, that's a positive, but it's just one pretty small data point.

36:39I think if someone's done poorly in the past over a long period of time, I mean, that's probably a negative data point as well. On the competitive point, I mean, it's interesting. I actually have a little bit of a I actually think it's one of the least competitive times for certain strategies that it's been in 15 years, especially in some of the more equity-oriented strategies. Because you have so much money in passive investing. You have so much money in a small group of hedge funds, pod shops, and others who generally do quicker turnover investing. I actually think the competition in true fundamental stock picking strategies is less than it's been in some time, which should create, we think, much better return opportunities, again, for the very small number of managers who really have an edge.

37:34And so I think if someone has demonstrated good performance over a long period of time and they're still very passionate about what they're doing and they have the right team dynamics, I think the setup going forward is especially, you know, good. So you talked about performance being part of the analysis, but not a huge part. But when you're evaluating managers, how do you prevent strong past performance from subconsciously influencing your broader qualitative assessment and even maybe some of the quantitative assessment? Absolutely. Yeah, it's hard. I mean, we certainly, we try, we try when we talk about it all the time, right?

38:11Trying to not be overly reliant on past performance because it's always in your face, right? I mean, if someone's doing well, you can rest assured that they're going to contact us, right? Their marketing person's going to contact us. And if they're doing poorly, you can rest assured that they're probably not going to contact you, right? Unless they're like, wow, I've gone through this tough period, but I'm just telling you, my portfolio is so incredible today, right? That even though I've struggled the last year or two, now's the time you should be investing. But look, we're all wired a certain way, right?

38:47And it's hard to completely avoid the periods of the managers where you look at their tracker, you say, hey, it's strong, and I really think these people are good, and I want to invest with them. But again, that's really our job is to not rely solely on the past performance. It's just one data point. And again, all understanding how are they set up in the future to continue to deliver that performance. I've noticed among investors, there's a great tendency to want to hire the managers who, obviously, you want a good long-term track record, but there's also an emphasis on the last, let's say, three or five years.

39:25And when they're shorter term, three to five years is strong, there's a greater tendency to feel like, oh, there's good momentum, I want to invest. How do you think about the shorter term periods, like, let's say, three to five years? And then also within that, how do you think about managers who have maybe underperformed three to five years, but have a really strong long-term track record. In many ways, I think that basic logic is backward, right? You know, like managers who you think are really good, but have had a difficult three-year period. Again, assuming everything else is set up, right?

39:57The person is fully motivated, the team is strong, and the morale is good. Investors aren't leaving, right? Which would cause the manager to be on their back foot. But let's say that all that checks out, then you're probably buying into a manager, right? who you think is very good, their portfolio has probably underperformed and is therefore probably attractively valued, right? And the opportunity set going forward is even more attractive than usual, right? Conversely, the manager that's done great over the last three years, presumably some of their key positions have done well and are probably less attractive than they were three years ago.

40:36I mean, not in every case, but maybe as a general statement, they're probably less attractive than they were three years ago. Probably the manager's assets under management is higher, if nothing else, due to the strong performance period. So all of a sudden, you've got a manager who's managing more money and their underlying positions have either played out or are less attractive than they were several years ago. That's not seem as strong a time to enter the manager. Now, there might be other circumstances. It could be the manager's like, okay, I'm about to close and this is your last opportunity to get in.

41:15If we think that the setup is still excellent with the manager and they're not managing too much and their motivation is good, we might go in after a strong performance period. and vice versa. There might be many cases where a manager, we really like a manager, we think they're good and they've struggled the last few years. But again, maybe the morale of the firm isn't very good because of the period of underperformance, right? Or maybe investors are fleeing. And so it could be that the manager's having to sell down positions that they like and it's causing some stress on their portfolio. So like, yes, in theory, I want to be adding in this manager, but just the reality of the situation makes it not a good decision.

41:59But you're exactly right. I mean, managers tend, what you're describing is kind of like, you don't want to sort of buy high and sell low, right? I mean, you want to buy low, sell high. And we've had cases where we've redeemed from managers after very strong performance periods, and they think we're crazy. How can you redeem after this strong performance period? Well, a lot of the ideas you talked about have played out, which is fantastic. You don't seem as excited about the new crop of ideas. You're managing double the assets you were before the performance run, and you have fewer ideas. Seems like a good time to pull back on our investment.

42:39And we've had cases where we've redeemed from managers who have struggled, where it's like, how can you redeem now? Are my portfolios so attractive? And it's like, well, your key partner just left, right? Or boy, other investors are kind of worried. And they're pulling, your portfolio is not that liquid and that might cause some stress. So again, yeah, in theory, we like you here, but given the totality of the dynamics, we need to redeem. So we really try to evaluate each situation individually, both going into the manager and also coming out of the manager. I think one assumption in the comments that you just made is that there isn't great persistence of outperformance through time and manager returns can be cyclical where you have good periods followed by bad periods followed by good periods.

43:26And obviously the turning points are not easily distinguishable, but there is some, you know, cyclicality in manager returns. And so you just have to be mindful of that as you're doing your analysis. That's exactly right. Is there a reason you tend to favor smaller managers or those with deep sector expertise for certain strategies and then also larger managers for areas such as distressed investing? Yeah. So we tend to favor smaller managers, particularly on the long, short equity side. And there's several reasons for that. One is more general in nature, which is when a manager's not managing a lot of money.

44:05And again, this is assuming that their business is strong and all of that is set up extremely well from an operational perspective. But when they're not managing a lot of money, they tend to be hungry, just fully focused on performance. We can get in and negotiate often fairly attractive fees and terms, certainly relative to the manager's rack rate. So you have all of those factors. But then on top of that, and again, especially in long, short equity, there's a ton of stock ideas that are not large cap in nature. They might be small cap. They might be mid-cap. They might not be super, super liquid.

44:41And so if you're managing $500 million, you can put positions on that in smaller names that really move the needle of performance. And especially in very fast-moving sectors, technology, healthcare, examples like that, companies can become obsolete very quickly, right? And so if you can put on a short position in a mid-cap type of stock, again, that's going to move the needle of a$500 million manager in a way that it wouldn't move the needle of a$10 billion manager. So that's just a built-in competitive advantage that the smaller manager has. Now, larger managers also have some advantages, right?

45:23Infrastructure and things like that. But again, if you're a smaller team focused on a smaller, narrow area, technology stocks, real estate stocks, financials, healthcare, energy, whatever it might be, you can really be expert in that particular area. And we think that that lends itself very well to smaller managers. There's some strategies, I think distressed debt would be an example where a higher level of AUM can actually be helpful. Too high a level of AUM might start to be a headwind. But a higher level of AUM, you can be in a driver's seat in terms of driving or restructuring, being a key person at negotiating table vis-a-vis other creditors in a company, vis-a-vis the company itself in terms of negotiating something that's in your best interest.

46:13If you're too small, it can be hard to do that. And I would say that that's particularly true in the distressed debt area, when you get into more on the run sort of credit that's not quite distressed, like again, there too, it might be helpful to be smaller and go into names that might not move the needle of larger managers. And then I'd say on the macro front, we've had managers of all sizes, right? I think there's certainly cases where larger managers with great infrastructure, great technology. That becomes one of their competitive advantages where the size really works in their favor. The underlying strategies have a lot of liquidity and they can execute it at a high level of AUM.

46:59But then there's also macro strategies that lend themselves to smaller AUM. If you're trading smaller commodity markets, for example, or emerging market interest rates, or things that would be hard to move the needle of a very large manager. So, again, it really depends on the individual manager and the strategy they're pursuing. But I think the broader statement is there's a ton of alpha opportunities that are not large in nature, right, that can only move the needle if you're not managing a lot of money. almost by definition, when you start managing tens or hundreds of billions of dollars, the opportunities to generate alpha narrow into a smaller and smaller set of opportunities.

47:45And there might be more overlap of underlying alpha just because the managers can only go so many places if they manage too much money. It sounds like you're looking for the sweet spot for each type of strategy where there's enough assets to be able to hire talent to evaluate the opportunities, but not too much in assets where you hit capacity constraints in terms of what you can invest in. That's right. Yeah. I noticed you tend to have either low or no allocation to managers that use high leverage or have quantitative approaches. Would you comment on that? Yeah, certainly starting with the high leverage part, I just think this continues to be an underappreciated risk in the market.

48:34There's justification for leverage, full stop. I mean, if you can combine strategies and risk parity is an example of this, right, where I might want exposure to traditional stock and bond markets. bond markets have much less volatility than equity markets. So I'm going to lever up the bond exposure in order to get to a similar volatility as equities. That's an appropriate use of leverage if properly managed. But leverage has a lot of fat tail risks that I don't think are fully appreciated in terms of you're reliant on a prime broker. This is where some of the prime broker experience is helpful, right?

49:13You're relying on a prime broker to extend you that leverage. If they start to see cracks in a particular strategy or cracks in the market, they might say, you know what? I was comfortable extending you six times leverage on your strategy, but given the new dynamics in the market or given the risks in the market, right? Or given some of the struggles in an individual strategy, you need to take that down to five times or four times. I mean, the margin call would be the term most people would use for that, right? And if you have a lot of people running strategies that utilize similar risk models, right, which are basically telling them you can run at similar levels of leverage, and the prime brokers are enabling them to do that, there are states of the world where those strategies can start to struggle at the same time.

50:06Multiple managers face margin calls at the same time, and you have a very rapid kind of unwind. You saw this in quantitative equity in 2007, where for a few-day period there, a lot of quantitative equity strategies really, really struggled, right? Well beyond what any quantitative risk management approach would say. I think in pod shops today, you have a lot of managers doing pretty similar things using high levels of leverage. In all likelihood, those risk models are fine. In the ordinary course of markets, everything's fine and that level of leverage is okay. But if you have something out of left field where all of a sudden some of those strategies are stressed and they all have to delever at the same time, leverage just quickly can exacerbate their returns.

50:54And you've seen it, you know, almost every hedge fund blow up, right? If you go through the past has been, again, some combination of leverage and illiquidity. So we much prefer to get the risk just from active exposure, right? To individual securities, individual trade ideas, themes, rather than taking, let's say, a mediocre idea, right, and trying to get my risk and return by levering that mediocre idea up. Quantitative strategies, you know, we have had some exposure to quantitative strategies. We have nothing against quantitative strategies. I think it's one of the harder strategies to really understand what a manager's source of edge is, right?

51:38So you can certainly look back historically, hey, here's how they've done. But most quantitative managers, not all to be sure, but most quantitative managers put up a little bit of a wall in terms of like, hey, you know, I'm not really going to tell you what my secret sauce is or what my edge is or what my factors kind of in a broad sense are. I'm not really going to tell you how they come together. you know, I've got eight different versions of what I'm doing and we're keeping all the good stuff for the internal partners and, you know, you're getting version two or three or four. How as an investor do you really know what's driving those decisions as to what goes into what particular fund that a manager might be running?

52:21And, you know, the only rule we have really is, you know, we just don't invest in something we don't understand, right? So I think Anyone can go back and look at a quantitative manager's historical track record and say, boy, that's a good track record I want to get in. That's not a ton of analysis goes into that. But the whole thing is about prospectively. Here's why I think this manager will do well going forward, right? Based on the strategy that I'm invested in today, based on the current team today, based on their AUM today. Here's why I think this thing will do well going forward. And often we don't have a lot of enough information to really have a strong, informed view of that beyond, hey, it's a brand name manager with a nice track record.

53:05So no one's going to fire me if I go into that manager. But that's not why we exist, right? And that's not, I don't think, good decision making to do that. So we have had, again, quantitative investments. they've tended to be with smaller managers or with managers where we we feel like we really understand you know what their edge is and what we know what they're doing and i suppose the reason that's important on the quantitative side is we know that every manager goes through a stretch of underperformance so when you hire that manager and knowing they're going to go through that stretch of underperformance if you can't really dissect why they're underperforming if you think that's going to revert back to some mean that's historical, then you're probably not going to have the conviction to stay in, in which case it's probably not good to get in in the first place.

53:55Yeah. So if I know it's a quant manager and early AQR days, value momentum, we're two core factors. And you can sort of tell, all right, here's how value is doing, here's how momentum is doing. I know it's been a bad period for value. Maybe they're underperforming, but you understand why. And it's probably to our earlier discussion, that's probably why it's more attractive prospectively after that rougher period than it was historically. If you don't really know what the manager's doing or what the strategy is and they're struggling, it's very hard to articulate or have a lot of confidence in a view that they're going to rebound from that.

54:36I mean, they might rebound, but you don't really know what caused the drawdown in the first place. Conversely, if a quant manager is doing great and you can't get your arms around why, it's like, wow, this is great. It's uncorrelated. They're doing really well, but they're not giving me any information. I'm sure there's many cases where it's like, yeah, they really are skilled at what they do, but it's just not something that we can invest in because there's far more cases where there's some hidden risk or exposure or leverage or something inherent in that strategy that eventually will rear its ugly head, right?

55:14And if you don't understand that going in, I think it's problematic, right, going forward. And eventually it's going to catch up with you. And going back to your comments about being very cautious about managers with high leverage, the way I think about that is you want managers with high alpha. If they have low alpha, with a lot of leverage to try to get to the same return, that's a very different type of return stream, particularly as it relates to the question we talked about earlier, which is during stress periods. You want managers that have good returns that are diversifying. If a lot of the parts of that return come from leverage and you have a stress period, then there may be much less diversifying than you originally thought.

55:57I think that's exactly right. And look, a lot of risk is is evaluated in our world in standard deviation format, right? Which assumes a normal distribution. And one thing that high levels of leverage can lead is an increase in the left tail of that distribution, right? I mean, when you lever, right, you know that you're paying costs to do that leverage. And you know, you have a fat tail on the left side of getting a margin call or having a forced liquidation or something like that, but you don't get any right tail of that distribution. There's no opposite of a margin call that's going to work in your favor.

56:36So again, that's not to say all leverage is bad or anything like that, but I think excessive levels of leverage or levering up strategies that you don't really understand or you don't really know what the risks are, or you don't have a good handle on their liquidity profile, or you don't have a handle on how often the investors can redeem, right? I think it can be very, very problematic. You've shared some great insight about picking managers in the world of hedge funds, but which elements of this type of analysis do you find broadly applicable across all asset managers outside of the world of hedge funds?

57:15And in which aspects do you feel are unique and particularly important for evaluating hedge funds specifically. Certainly some of the softer stuff I think is applicable throughout. What are the motivations of the people managing the firm today? Do they love what they're doing? Are they passionate about it? Are they returns-focused versus AUM-focused? Do they have a good partnership culture within their firm? How rigorous is the analysis they're doing? All those sorts of things I think would be true in any asset class. And I think that's important. And then I think having an area of expertise, it's not sort of required in every situation.

57:54But I think in general, the more you can narrow down and say, if I'm in PE or VC, right, and I'm really skilled at identifying software companies, right, or I'm really good at energy, right, or whatever it might be, and you're not managing a ton of money, I think you have a higher chance. of success, all else equal, and a higher chance to go into interesting ideas. Now, I think unlike in hedge funds, I think there's certain strategies where heft might be an advantage in and of itself, right? I mean, like in venture capital, being a brand name, even if you're managing more money, if you're the seal of approval for a new company, you might have a big competitive advantage over some small upstart, right?

58:39Maybe the small upstart could just as easily identify the new venture company to invest with, but because they don't provide the same seal of approval, the deal might go to the larger manager. You don't really have that in hedge funds where maybe there is slightly in an activist sort of strategy, but for the most part, there's not like a seal of approval if manager A is investing in a public company versus smaller manager B. And then I think always understanding, again, what's the leverage? What's the liquidity? You're seeing a lot of structures recently where, in my mind, the underlying investments are illiquid or fairly illiquid.

59:19And they're being wrapped in structures that purport to offer high levels of liquidity, or you can access them on a frequent basis. And it's easy to get into these things. But I think kind of concerning oneself with how am I going to get out of this right down the line five years, seven years, 10 years from now is very, very important. And I think you have those issues to some degree in hedge funds, right, where strategies can get more illiquid over time, or you could have a divergence between investor liquidity and the liquidity of the underlying positions, but probably to less of a degree than you might have in other alternative asset classes.

1:00:01You touched on this earlier, but how do you evaluate the shift towards passive strategies like index funds and ETFs versus long short equity managers opportunity to generate alpha? Yeah, I'm super excited about it. And I know there's a lot of disagreement on this or a lot of different views on this. But I think that the more people who are trading securities who are price insensitive, the better the opportunity set is for true fundamental stock pickers, right? Like passive management by definition, almost, you know, your money's flowing in and you're buying something at whatever the price is that day, whether it's an appropriate price or an inappropriate price.

1:00:43Same with ETFs, right? I mean, maybe not to the extreme of like an S &P index, but basically money comes into an ETF, money comes out of an ETF, stocks are being bought or sold, whatever the price is that day, no matter what fundamental price is justified. So all these people are trading securities. The bulk of the volume every day is probably due to people who are or actors who are really insensitive to the prices that they're buying or selling the individual stocks at. So on a daily basis, there's just a lot of noise, right? But if you're a fundamental stock picker and you say, you know what, I really love industrial company A.

1:01:23And industrial company A every single day is moving up or down based on ETF flows or passive flows and all this. But I feel really good about industrial company A's prospects over the next 12 to 18 months. And I'm going to live with this short-term noise because eventually I know that their earnings are going to be strong or there's going to be some new successful initiative or whatever it might be. Same thing on the short side where, boy, this company is really struggling and it's only being lifted because it's in some ETF that's getting inflows. inflows. Well, eventually over the course of time, the earnings matter, the company's fortunes matter.

1:02:04And so I think of it as having more price inefficiency, probably more volatility on the way to having that inefficiency reverse, but much more opportunity for really skilled, long-term stock pickers. I really think of it as a white space right now, kind of long-term fundamental stock picking. This should be true long only or long short. I think the competition, again, is as low as I've seen it in a very long period of time. And I would contrast this with the 2006, 2007 period where anyone could start up a long short equity hedge fund, it seemed, they'd get money thrown at them, huge commonality of positions, huge overlap of positions across managers.

1:02:50And you just don't have a lot of that today, certainly as much as you used to. So I'm really, really excited about long-short equity. We have been for a few years here. I think we've been outspoken about that. And I think it's a contrarian view. And obviously there's been massive inflows into index funds the last probably decade as those indexes have done so well. And again, as we know, markets can be cyclical. That's right. And some of my favorite charts are these charts showing passive versus active, which performs better. And if you look at it, it's almost like in 10-year cycles, right? Where passive will do better than active and then active does better the next 10 years.

1:03:36And the pendulum swings where everyone then goes into active managers and then that gets too crowded and then passive does well, right? And certainly last decade was a great one for passive managers. The decade before was a great one for active managers, right? This decade, active managers are starting to perform well again. And again, all this in the backdrop of like we've talked about a lot today of the average active manager isn't very good. But I think the opportunity sets for the ones who are good today is really outstanding. Evanston Capital has survived as a fund of funds, while many of your competitors have disappeared due to multiple layers of fees.

1:04:19But what has allowed you to persist in the changing landscape? Yeah, I mean, we really have tried to just stick to our knitting. I think we've always been fully transparent in the way we think. And I think the messages that you would have heard from us 23 years ago are very similar to the messages you would hear today, right? Our whole job is to identify good managers who have a real edge in markets, who are passionate and competitive about what they're doing, know when to move on from those managers, when the culture has changed or their AUM has grown too fast or whatever it might be. and just rinse and repeat that, right?

1:04:58And not try to get overly bogged down on, let's maximize our AUM, right? Or let's build a big business and have a gazillion separate accounts or set up daily mutual funds, right? Or all of these sorts of things that I'm sure would have added a lot of value from a business perspective. But when you cut through it, I think, and I hope our investors just appreciate the consistency of approach, right? In terms of just what we're trying to do and really find that alpha, find those skilled managers, package it in ways that are easy to access, you know, be open and transparent and easy to work with, be likable to our managers, you know, all of those sorts of things and just rinse and repeat and, you know, try to, you know, we talk about like, try to add a little bit of alpha each day just by making good decisions and doing good work, right?

1:05:53And, you know, rinse and repeat. And there's going to be time periods where you're not paid for that, right? And there's going to be periods where you're probably overpaid in terms of performance for that. But over time, just following that strategy, that process, rinse, repeat, right? Being very consistent in it, I think leads to that kind of persistent long-term, you know, long-term edge. And given that there's fewer players like us, right, I think in the market, I think the opportunity set prospectively is very interesting right now because the competition is less for what we do probably than it has been, you know, which is kind of the premise of your question.

1:06:36Well, Adam, this has been great. I appreciate you sharing all your insights and also for explaining some complex concepts in simple terms. I appreciate that. And I'm sure our audience does as well. Thank you. Thanks, Alex. Great discussion. Really appreciate it. Thank you.

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