Episode #500: Soo Chuen Tan, Discerene – Contrarian, Lengthy-Time period Worth Investing
Visitor: Soo Chuen Tan is President and portfolio supervisor at Discerene. Earlier than founding the Agency, Soo Chuen was a Accomplice and Managing Director at Deccan Worth Advisors. Previous to Deccan, Soo Chuen labored on the Baupost Group, Halcyon Asset Administration, and McKinsey & Firm.
Recorded: 8/21/2023 | Run-Time: 1:02:39
Abstract: On this episode, Soo Chuen Tan shares his experiences working below Seth Klarman at Baupost and discusses the perfect construction for an funding agency. He emphasizes the significance of constructing true partnerships with LPs and even returning cash when there aren’t engaging alternatives available in the market. Soo Chuen additionally delves into his investing philosophy, answering questions on companies with community results and the impression of a sure enterprise going away.
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Hyperlinks from the Episode:
1:26 – Welcome Soo Chuen to the present
2:03 – Overview of Soo Chuen’s skilled background
4:43 – Launching Discerene at 33
17:32 – Fostering 50-year funding partnerships
24:11 – The choice to return capital in 2018 when he didn’t see engaging alternatives
26:21 – Present funding methods in 2023
27:40 – Specializing in enterprise potentials in Turkey, China, Argentina, and Japan
36:06 – Evaluating investments primarily based on predictability and sustainable aggressive benefits
44:33 – Causes for ending long-term partnerships with firms
49:53 – China’s valuation rollercoaster
55:32 – Investing in particular firms, not total nations, throughout excessive inflation
58:28 – Soo Chuen’s most memorable funding
Study extra about Soo Chuen: Discerene
Transcript:
Welcome to The Meb Faber Present, the place the main focus is on serving to you develop and protect your wealth. Be part of us as we talk about the craft of investing and uncover new and worthwhile concepts, all that will help you develop wealthier and wiser. Higher investing begins right here.
Disclaimer: Meb Faber is the co-founder and chief funding Officer at Cambria Funding Administration. Resulting from business laws, he won’t talk about any of Cambria’s funds on this podcast. All opinions expressed by podcast contributors are solely their very own opinions and don’t mirror the opinion of Cambria Funding Administration or its associates. For extra data, go to cambriainvestments.com.
Meb: Welcome, podcast listeners. We bought a particular episode right now. Our visitor is Soo Chuen Tan, founder and president of the Discerene Group, which has a basic, contrarian, long-term worth investing philosophy. In the present day’s episode begins off with classes realized from working below the nice Seth Klarman at Baupost. We spend a number of time round what the perfect construction is for an investing agency, methods to construct a real partnership with LPs, and that even consists of giving a reimbursement when there aren’t alternatives available in the market. Then we get into his investing philosophy. He solutions broad questions like. “What companies even have community results? Does it matter if a sure enterprise goes away tomorrow?” This was such a enjoyable episode. Particular due to former visitor, Chase Koch for serving to make this episode occurred. Please take pleasure in this episode with Discerene Administration, Soo Chuen Tan.
Soo Chuen: Meb, thanks for having me. I’m delighted. I’ve been listening to your present for some time and so wanting ahead to this.
Meb: The place do we discover you right now?
Soo Chuen: Simon Stanwick, Connecticut. Hand around in my workplace on Summer season Road. It’s a good looking day.
Meb: For listeners, we simply went by way of what I’d describe as probably the most hyped hurricane ever right here in Los Angeles. As a considerably East Coaster, the one factor that did shake it up somewhat bit is the earthquake in the course of it, which was truly an honest sized shaker, however we survived, so we’re right here somewhat bit extra damp. It’s the tip of summertime. I’m excited to be speaking to you right now. We’re going to get into rather a lot. I need to hear somewhat bit about your background. Chances are you’ll be new to many of the listeners, so I need to hear somewhat little bit of the origin story. The place do we start? You need to start? You labored at Baupost, is that proper? Beneath Seth, is that appropriate?
Soo Chuen: Earlier than we dive into the background, simply nothing I’m going to say here’s a suggestion to purchase or promote any safety. We’re not going to high up efficiency and any funding determination must be by way of customary due diligence paperwork, authorized tax, regulatory consultants. I truly needed to cease earlier than Baupost. I joined a agency referred to as Halcyon. They’ve modified their names since now referred to as Barden Hill. It was a credit score misery agency and albeit, that was my principal worth proposition. I had zero investing expertise earlier than enterprise faculty. I didn’t come from a conventional banking, non-public fairness, et cetera background, and so my worth proposition for a hedge fund was I do know legislation. I used to be fortunate there was a man at Halcyon referred to as Richard Horowitz who was a mentor in studying simply the fundamentals of investing. I all the time knew I needed to be a price investor as a result of I caught the investing bug. I needed to suppose when it comes to intrinsic worth when it comes to proudly owning companies for the long run. Even in credit score misery there are alternative ways to do credit score misery. You should buy issues after which purchase to a catalyst, purchase to an exit, or you should buy one thing and maintain it for 10 years. The totally different approaches to credit score misery investing, I needed to scratch the itch of simply being a long term investor, and that’s why I truly then moved to Baupost. That was my transition, Seth, after all, as a price investor, and I realized that a lot of being a price investor can be simply psychological, being contrarian. Enthusiastic about grasping after I was fearful, fearful after I was grasping, the construction of the agency was necessary. Baupost has very long-term capital. It has a consumer base that enables it to be fairly contrarian. These have been truly eye-opening for me after I went. Then I then joined a startup referred to as Deccan Worth Traders. Once I joined the agency was one 12 months previous and it was my probability to hitch a agency on the bottom flooring and see how a agency will get constructed and agency truly took off and raised a few billion {dollars}. We grew when it comes to each property and other people and institutionalized and all of that. There was a number of studying, not simply on investing entrance, however simply observing the enterprise of cash administration, seeing how a agency truly grows and builds shoppers and builds a workforce and creates a course of. It was a special time. We’re speaking concerning the mid-2000s, corporations grew rather a lot faster through the time, it was the Haiti of hedge funds, so it was in some methods a compressed sort of model of seeing how a agency grows. And clearly, as a result of it was a a lot smaller workforce, there was much less to cover, you had extra accountability and extra autonomy, and it was additionally a agency that centered extra on moss, so the psychological mannequin of understanding was useful too. That was my expertise at Deccan. In order that was my subsequent cease after which I launched the agency after that.
Meb: So wait, right here’s the nice half. You’re like, “That is straightforward. I’ve seen this development. It’s a chunk of cake beginning your individual agency.” After which you might have the identical with each entrepreneur, however we are saying this for startup fund managers too. Everybody has to have the naive optimism that that is going to work out. And we are saying naive, as a result of everyone knows that almost all fail, and this can be a powerful sport that everybody performs, entrepreneurship coupled with capital markets. So, you had this naive optimism. What was the choice there? You needed to name your individual pictures, you need to begin your individual biz? What was the inspiration?
Soo Chuen: I…
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