It’s NOT SUPPOSED TO BE EASY.
“Make no little plans. They have no magic to stir men’s blood.”
Daniel Burnham
My last job was a good opportunity. I was the Director of Research at one of the fastest-growing advisors in the region and managed a department of six, all of whom were bright, driven, thoughtful people that I was proud to call colleagues. We had the privilege of allocating capital for many of the state’s prominent civic and business leaders and had resources that smaller firms could only envy. I felt my talents were appreciated and was given significant autonomy. Plus, there was underground parking.
This May, it’s been exactly one year since I left the relative security of gainful employment to launch Epigram Capital. I traded my palatial digs for a home office where my only coworker happened to be a toddler. While cute, she also had the habit of interrupting Zoom calls (which we addressed during her performance review). I often found myself researching obscure industries to the strains of Daniel Tiger’s theme song (Won’t you ride along with me? Ride along…) I’ve since upgraded to a coworking space beneath a bowling alley, which somehow is an improvement.
While the fund has only been active since January, I’ve been doing this for a year now and I find myself in a reflective mood. Bootstrapping an investment partnership from zero was never a modest goal, especially without seed capital or an anchor investor. Among investment products, I’m not an easy sell. Prospects are required to read a 64-page private placement memorandum, a 46-page limited partnership agreement and complete a 31-page subscription document. Therein, subscribers must acknowledge the partnership involves a high degree of risk and may expose them to substantial losses. While I never hide this fact, I don’t exactly lead with it either.
Attention spans aren’t the only gating factor. I can only solicit qualified clients, those with an investable net worth in excess of $2.2 million, exclusive of their primary residence (should you not qualify, my attorney politely requests that you stop reading). Any advisor can manage a portfolio of appreciated securities, but I can only accept cash, which drastically reduces my addressable market.
Regardless of these challenges, I’m humbled and grateful for your encouragement and support. I stopped counting how many meetings I’ve held when I got to 200 but many of you have sacrificed significant time to give me a fair hearing. Whenever I send one of these letters, I get at least a half dozen notes of encouragement.
Like most humans, I find whining enjoyable but unproductive. Early on, I would point to the exceptional returns I’d delivered in the past, expecting capital to fall into my lap. Or I’d take comfort in reciting how few partnerships had successfully launched in Nebraska, so if my plan failed, it would be the market’s fault, not my own. While there has been no shortage of difficulties (including a bear market and its rapid recovery), the longer I do this, the more I realize it’s a gift to run one’s own fund. It wasn’t meant to be easy. I wish I could say I was disabused of that notion sooner than I was.
I’m pleased with the fund’s progress. Raising capital is lumpy and probably always will be. While absolute returns aren’t anything to brag about (yet), I’ve done an adequate job at preserving your capital through a very volatile period. I’ve bought 34 stocks, exited nine and harvested tax losses along the way. 16 have positive returns and 19 have beaten the market. The idea of finding idiosyncratic ideas that don’t need a strong market to appreciate seems to be working, even if my year-to-date numbers aren’t worth writing home about.
Next month, I plan to cover how the fund is positioned and what I’m working on. But given it’s the one-year anniversary of my firm, I thought thanks were in order. All founders rely upon the generosity of those that want to see them succeed. If you’ve read this far, I count you in that camp, and offer you my thanks.
Sincerely,
Dan Walker
General Manager