Key Takeaways
- Brandywine employs a 'beginner's mind' and 'restless humility' in its investment approach, balancing curiosity with a drive for improvement.
- Both Partners Capital and Brandywine utilize structured deep dives to explore new investment areas, such as crypto, affordable housing, and insurance.
- Brandywine adopts a phased investment strategy, growing small initial positions into full allocations over two years using Key Diligence Indicators.
- The firm shifted its crypto strategy from trading to a long-term private equity approach to mitigate volatility and tax inefficiency.
- Brandywine's due diligence includes extensive reference calls and a focus on assessing manager team dynamics, culture, and alignment.
Deep Dive
- Partners Capital prioritized crypto as a key deep dive research area for 2021.
- The team, sparked by personal interest in 2019, explored decentralized trust, mathematical guarantees, and use cases like DeFi and creator monetization.
- A large manager's fundraise in the crypto space prompted Partners Capital to accelerate their investment process.
- They made a small initial investment, acknowledging significant risks in regulation and token volatility, comparing it to the internet in the 1990s.
- Brandywine makes smaller, initial investments in hedge fund or long-only portfolios, aiming to grow them into full positions over two years.
- This phased approach is guided by specific Key Diligence Indicators (KDIs) that test initial assumptions about a manager.
- KDIs typically assess a manager's market access, unique advantages, sourcing capabilities, and the team's performance process.
- Brandywine shifted its cryptocurrency investment strategy from considering trading approaches in a hedge fund format to a long-term private equity approach.
- This change was driven by a desire to avoid tax inefficiency and daily volatility inherent in trading strategies.
- The firm emphasizes not taking excessive initial risk with new managers, advocating for a phased approach to building positions.
- Brandywine transitioned its team hiring needs from valuing entrepreneurial 'jacks of all trades' to prioritizing collaborative and humble individuals.
- The firm aims to retain an entrepreneurial spirit without succumbing to bureaucracy.
- Common manager assessment criteria include investment philosophy, process, perceived advantages, team dynamics, leadership, incentive structures, and business structure.
- Brandywine conducts extensive due diligence, including over 20 meetings for one strategy in the past year and up to 15 reference calls for newer managers.
- Managing Directors are held to a high standard, requiring all substantial questions to be answered or acknowledged as unknowable risks.
- The firm evaluates cultural dynamics, interpersonal relationships, and co-founder strengths to anticipate potential issues within investment firms.