Ted Seides and Brent Beshore – The Future of Asset Management

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
I really underestimated the impact that this podcast would have on my life. I owe a huge thank you to everyone listening, especially to those who have shared the ones they've enjoyed most with their friends. I haven't done a single thing to quote, market this show. It has been 100% organic word of mouth growth. So the large audience size is thanks to you all. I deeply appreciate it. What I appreciate even more however, is that the show's success has pushed me to be more thoughtful about what admittedly remains an informal process, searching for the most interesting people I can find that will share lessons they've learned with me and with you. Were it not for the podcast, I would never have met most of the people you hear each week.
Some of those guests have become dear friends, including the two in this week's episode, Ted Seides and Brent Beshore.
Ted and I flew out to St. Louis to spend a day with Brent. While we are all passionate about investing, we've had very different careers. Ted in alternatives, hedge funds and fund to funds, Brent in lower middle market private equity, and my own in quantitative equities. What we share is a passion for investing in general and a deep interest in where the asset management business and profession is going. This conversation starts like most episodes, a somewhat structured exploration of the investing business, but morphs to be a bit more fun and informal as we work our way through a bottle or two of wine. In the latter half, we talk about how to dissect an industry, common features of good businesses within a given industry, books we'd like to write, books we wish existed, and things we've learned in our careers.
We spent a long time talking about Ted's famous bet with Warren Buffett, but I've removed most of that and saved the conversation for another time. You'll hear us reference it here and there, mostly giving Ted hell, but rest assured we will explore the entire thing in more detail at a later date.
I could spend all my free time having conversations like this one and die happy. Thank you again for listening and sharing because your doing so has allowed me to find people like Brent, Ted and many others and led to friendships which have quickly become an important part of my life. For show notes, visit investorfieldguide.com forward slash Brent and Ted, all one word. We begin in the middle of a conversation we are having on the future of hedge funds and the fees they charge clients. Please enjoy this conversation with Ted Seides and Brent Beshore.

**Ted Seides** (3:34)
But there's some structural headwinds that hedge funds have today that they didn't nine years ago, most notably the level of interest rates, which imposes a cost to getting in business for really for the generation of returns in hedge funds that has nothing to do with the market.
So with short-term interest rates at one or 2%, you're earning nothing or negative on your cash. Whereas nine years ago, short-term rates at four or 5%, you were starting off up three or 4%. So there's a big cost at the beginning. The fee arguments a funny one because fees are certainly coming down for hedge funds today.

**Patrick O'Shaughnessy** (4:07)
Where do you think they are? What's kind of the spot market?