hey everyone ben here and welcome to motivation to invest today we’re going to be joined by a legendary former hedge fund manager large crojo and he’s also the author of two books on investing we’ve got investing demystified and confessions of a hedge fund manager so lars is incredibly well educated with an mba from harvard business school and in this video lars is going to give us some insight into what it’s like managing a hedge fund and hopefully some investing tips to help you guys get great returns in the market why don’t you tell us a little bit about your background and why you got started investing what was your motivation to invest well my background.
i’m danish um
but i haven’t lived there for over 30
years so i went to school
undergraduate and graduate school in uh
in the u.s at harvard uh and ended up on
wall street frankly originally because i
had a lot of debt from university and
they paid really well so i ended up
working as an investment banker for a
short while and then after a business
school
is really when i got into um
investing originally i had looked at
doing private equity because i did my
internship in private equity actually in
london funnily enough but i ended up
choosing
hedge funds because i i took the view
a bit silly in hindsight but
that if you worked in private equity on
many portions of investing the
overwhelming driver of how well you did
was depending on something that you
really had no insight into or control
over namely the movement of the markets
so i thought if you invested in as a
even a real estate investor but also
private equity over a 10 15 year horizon
first of all you did fairly few
transactions and second of all if the
world economy went to then
that was going to be a major driver of
your uh profitability in the coming
decade meanwhile in hedge funds it’s
sort of in the in the term right you
could hedge so your ability to perform
was not depending on any one thing
because whatever you didn’t understand
or didn’t like you could hedge and make
go away the reason i say this is a
little bit silly was i graduated
business school in 98
which was the beginning of the internet
boom yeah and one of the greatest bull
markets in the coming decades and you
know someone my best friend in the world
is president of one of the world’s
largest private equity firms and you
know he’s done okay as well right so
so it’s not uh you know it’s not like uh
uh you know that that was necessarily in
hindsight
the most clever choice but yeah that’s
how i ended up in hedge funds
that makes so you got into hedge funds
just as the dot-com bubble was sort of
just about to peak is that right
yeah i’m the guy who you know
immediately graded harvard business
school in 98. it just if you look at the
number of people from that era that went
to silicon valley and later did
phenomenally well
been one of the greatest things of my
career is to be close to a lot of those
folks and see how they operate and
frankly learn from it and contribute to
it do you have any tips for anyone who’d
like to start maybe a hedge fund or
start managing
money it’s a bit like when you write a
book frankly everyone says oh i want to
write a book yeah
everyone says i want to run a hedge fund
so let’s say what does it take to start
a hedge fund well what is a hedge fund
it’s an investment phone it’s a it’s a
pool of assets right so the reason it’s
called a fund is because there is a fund
sitting somewhere
and i know you’re in manchester but
let’s say how would you run a hedge fund
if you want to start a hedge fund right
now well first of all you have to go get
regulated in in the uk by the financial
conduct authority that’s that’s
for good reason that’s serious stuff
right
um and then you have to set up this fund
but when you think of where is the fund
well it depends a little bit on who are
your investors very often hedge funds
sit in one of these
tax exile places cayman islands bbi
places like that and people naturally
associate that with something dodgy
that’s not the case
it’s because that is think of it this
way that’s where investors from all over
the world can put the assets and only be
taxed while they take it back to one of
them if you have an investor in in from
from
uh brazil well it’s easy for that
investor to invest in a cayman island
fund that’s into a manchester front
yeah reasons go into but
then what if you sitting in manchester
do you’re actually an advisory business
that advises that fund that’s
so in a sense and for that you get paid
a fee so that’s where you make big bucks
right so so what do you need to do to do
that well so you set up this fund and
there are about a million people that
wear expensive suits that can help you
that for a large amount of money um but
then the real trick is can you get
anyone to invest in your fun you know
what do you plan to do yeah how are you
going to convince people
how are you going to convince them not
just the next who’s trying on a
get rich quick team which a lot of
people are yeah um
how are you going to cover all those
costs that you’re not going to
have covered by your investors uh yeah
and it’s it’s substantial
yeah and then
once you get all of that together
then um
you guys you gotta invest the money and
then you use the returns from those
investments hopefully you raise more
money and if you do it successfully over
quite a while
you can eventually run a ton of money
and
and
be very successful but failure rate is
very high hedge funds like many other
businesses are you know we tend to talk
about the winners we tend to talk about
yeah the the
the tiger or the citadels or the whoever
they are
and we sometimes forget that there are
perhaps
10 12 000 hedge funds out there might be
500 that have done really really well
and 50 that have done astronomically
well right and a lot of those guys they
started out tiny so what do you need you
need some money to set up the fund and
all the expenses associated with then
you need some investors then you need to
go invest that money and and produce
returns and for that you’ll get paid
incredible fees if you do really well
and then yes you you can go buy that
yacht if you yeah
that’s what makes you happy i feel even
to be a great investor if you’re really
motivated by materialistic things and
you’re not just motivated by the actual
act of doing the craft of investing then
i feel your returns will be less most
likely from just a lot of the great
investors i’ve studied like even if you
look at warren buffett how he lives and
he still studies companies and invests
and sits there’s the same house same car
goes to mcdonald’s get his mcdonald’s
breakfast like he’s very humble really
for somebody who’s worth billions
misconception really with a lot of hedge
funds and you see like like wolf of wall
street and by the way i’ve met him
through a weird set of coincidence when
i was just out of business school very
funny oh you met jordan belford
well he interviewed me i didn’t know
but
um he wasn’t really a hedge fund brother
first of all oh yeah he’s a brokerage
wasn’t he yeah yeah and a fraud right
that’s not yeah yeah yeah
um
but look i think first of all like
hopefully
you know successful hedge fund managers
tend to be
well-informed well-educated people and
hopefully those people have choice in
their careers they don’t have to be
hedge fund management really
those people that choose to be hedge
fund managers do it for the love of the
work because they have yeah it’s
certainly i agree with you very very
much that the people that do better in
the long run are the ones that just love
the work mm-hmm yeah i mean warren
buffett could have stopped investing
money probably 50 years ago and he would
yeah could have put the lifestyle on
your list yeah exactly
yeah
and you know it’s just a lot of those
people could have stopped running money
when they were 30. yeah yeah they just
love what they do some of them probably
also caught up in the rat race the ones
that i know that have done the best they
just love it
they get up saturday morning and they
wish the markets were open yeah yeah
when they go to the beach they bring an
annual report yeah yeah yeah they’re the
kind of people where if you have dinner
with them they can’t shut up about
trades
yeah reflective on my own career i
didn’t love it as much as those guys
yeah yeah
it was so easy for me to walk away
yeah and and also one of the reasons why
the very first thing i said was it was
interesting because i graduated from a
prestigious school at a time
of a great beginning of a great run
sort of suggesting well maybe i
shouldn’t have done it right so it’s
kind of you compare that to people that
just live and breed investments yeah
if with your fund let’s go back to your
phone then but how many assets did you
have under management approximately
well so we were at a
we were at a billion dollars in uh
invested capital when we okay which also
i mean coming back to your argument
about it’s a lot of money to throw
around cheers that’s been great stuff
and comment your thoughts below guys if
you have any thoughts any questions for
laws because um we’d love to hear from
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