What is the Idea behind 2 Gray Beards?

 And just for the people who don’t know what Two Gray Beards is about , it’s not an alpha generator. It is not some sort of a hedge fund. What it is, is how I guess Andy and myself like to manage our money long term by being longer assets and trying to keep the volatility of returns down and doing a little bit of market timing and switching between the assets that we employ.

I just want to tell you how this idea came about and really it came about through my experiences back in the early 90s when I started my hedge fund. Very naively, I thought that I should not put all my money in my own hedge fund, that I should have the bulk of it managed independently at arm’s length and basically not interfere with it.

And what I did was I went to a guy at Merrill Lynch at the time. I don’t think there’s any harm in saying the name of the company. And I said, here it is, carte blanche, X amount of money, manage it for me while I manage the hedge fund. So that I don’t have a conflict of interest or anything like that.

Don’t ask me anything, just do whatever you like. I used to get the statements once in a while and I thought it was odd that the, the money that was being invested in a whole load of structured products, which I knew, uh, you know, sort of making money for the issuer, i. e. Merrill Lynch, and not for the guy who was buying them.

And then a whole load of geographic distributions between, I don’t know, Japan and other countries. A whole load of things which Never really performed very well. And the one thing that was missing was NASDAQ, which was going up 50 percent a year back in the early nineties. And there was a lot of bonds.

And if you remember that period, that was a period of huge risk on basically equities were screaming higher and bonds were doing. Not very much. Fine. The final thing that there never was any kind of attempt at market timing. So the portfolio remained constant and it just got invested in more and more rubbish.

And basically the performance was always between five, six, 7%, which in the early nineties was absolutely pathetic. Three or four years of that, I realized what the game of these guys was, which was to maximize their own fees and revenues. And I paid a lot of fees for this performance, really not try to do the best for the customer.

Now, I’m sure that they. did as well for me as they did for all the high net worth individuals. It’s not like I got penalized somehow in, in my performance. I think this is just what they do this time last year. In fact, a month earlier, I thought would it not be great if people had a product Where some investment professionals actually showed them and told them how they manage their own money and why they make changes when they do make changes to their allocations.

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