The True Cost of Capital for Hedge Fund Investors

Published on
May 30th, 2017
Topic
Investment Framework, Credit Market, Europe
Duration
29 minutes
Asset class
Bonds/Rates/Credit, Currencies, Equities

The True Cost of Capital for Hedge Fund Investors

The Interview ·
Featuring Scott Davies

Published on: May 30th, 2017 • Duration: 29 minutes • Asset Class: Bonds/Rates/Credit, Currencies, Equities • Topic: Investment Framework, Credit Market, Europe

Scott Davies, Founder and CIO of CDAM, details his interesting investment approach, which involves a concentrated portfolio and a hedge overlay to capture mispricing, with a relatively long hold period to catch cycles. Eschewing traditional revenue models, CDAM is focused on what CEOs are doing with the money they invest with them because misunderstanding the cost of capital leads to misallocation and value destruction. Filmed on May 23, 2017, in London.

Comments

  • RM
    Richard M.
    30 May 2017 @ 13:28
    Nicely done!
  • SV
    Stefan V.
    30 May 2017 @ 19:57
    Interesting. Thank you Ian.
  • RA
    Robert A.
    30 May 2017 @ 22:23
    Excellent one and I think the interviewer, whom I have seen before, is doing a really good job! Like the new summary by the interviewer, but one quick thought----if there are more than 4 "bullet points" could you try to leave them on the screen a bit longer so we can digest them.
  • RL
    Rodrigo L.
    31 May 2017 @ 02:24
    Would have been interesting to delve a bit more on the relationship between interest rates and dividend paying stocks or utilities as the low interest rate environment has blurred the differences.
  • CR
    Chris R.
    31 May 2017 @ 07:12
    Great bullish view on Europe. I still missed some comments about the indebtedness of the southern countries like Greece and Italy. Also the econonmical performance differences of those countries and for example germany what requieres different monetary policies within the currency union.
  • JT
    John T.
    31 May 2017 @ 09:13
    Good interview and very interesting approach. Would have been really useful to have picked a company to demonstrate the detail around the selection process.
  • AC
    Andrew C.
    31 May 2017 @ 11:00
    Thanks Scott, great discussion. About the cycle of 7-10 years; do you find yourself close to 100% cash towards the top (where euphoria is becoming obvious), or are you still able to find some sectors or individual companies worth owning even though a crash might mean correlations approach one, and even those stocks you own will go down? You mentioned a hedge; would that just be a short (or put option) on the appropriate index? So then you can just ride out any loss on a stock you want to own for the next 3-4 years?
    • SD
      Scott D. | Contributor
      5 June 2017 @ 16:28
      Our cash levels tend to rise near the end of an up cycle but we can still be well invested. We view our equity portfolio as a set of unique opportunities that should have merit beyond the market. In our experience, there are always opportunities regardless of the market (market of stocks vs stock market). Our hedge is a combination of puts and outright shorts. It's designed to protect the downcycle and when "things" happen.
  • JC
    John C.
    1 June 2017 @ 09:00
    interesting views thanks. Just wondering about when all this 'Europe looks attractive' stuff starts to peter out...Euro at 1.12+ and the migrant crisis /terrorism will heat up this Summer I bet. He tends to cast aside these poltical events but I wonder if the above + more election noise in Italy might cause some bumps in the road
  • HA
    Hamed A.
    2 June 2017 @ 17:46
    why does one of the camera angles have a smoke machine? maybe turn that off for the next interview

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