Skybridge Capital “HOtRH” Book Review and Background
by Pj de Marigny, DITMo Capital, Newport Beach, CA (06Nov16)
Fund of hedge funds (FoHFs) have had a hard time substantiating their existence. The value proposition benefits are: due diligence, dynamic manager allocation, liquidity/leverage, and perhaps, an equity kicker if the structure includes emerging managers.
The costs for these potential benefits are: added fees (management and performance), allocation risks, additional operational risks, loss of transparency, and for non-bespoke structures, loss of customization. The cost and benefit criteria of FoHFs, Registered Funds, HF Advising and Bespoke Funds create highly volatile operating environments when financial market scenarios wildly vacillate. What would be your response and paradigm in a personal or business hostile environment that threatens your existence? Read on.
In Scaramucci’s new book, “Hopping Over the Rabbit Hole” (HOtRH), he chronicles the Rise, Fall and Rise again of Skybridge Capital over the many idiosyncratic and market related challenges . As a concurrent background to Skybridge Capital, the CAI unit of Citigroup that would later become part of Skybridge along with its CEO and now Skybridge co-Managing Partner, Ray Nolte, Scaramucci’s “HOtRH” book is better understood in context.
The Citigroup company over the years has had to shed certain businesses in alternative investments as part of regulation requirements or as part of an acquisition requirement. After the Citibank merger that created the current structure, the private and investment banks expanded into alternatives through the CAI business unit. The consumer credit area fed all expansion.
The retail brokerage and private bank units were run by truly great bankers (Jamie Dimon and Peter Scaturro, respectively). The retail unit fell to former Kidder Peabody CEO Michael Carpenter who was reassigned and soon displaced after the Chinese firewall restructuring to the CAI (Citi Alternative Investments) unit. The CAI unit was not able to prove out dynamic allocation and unbeknownst at the time, there would be cataclysmic events coming. Some of these events included the fallout and subsequent regulatory intervention from the mortgage debacle. Skybridge acquired the Hedge Fund Management Group of Citigroup Alternative Investment (CAI) in June 2010 that trumped its organic growth by multiples and Ray Nolte, CAI’s CEO, came with the deal without an equity buy-in as Managing Director.
Scaramucci’s newest book, “Hopping Over the Rabbit Hole” recounts Skybridge Capital’s rise, fall and rise against a subsiding market condition persisting even to threaten its dissolution. The story will inspire the reader same as Elon Musk faced with a decision to dissolve his fledgling electric car project or risk it all. This article offers a little more background of parallel events that later intersected Skybridge’s path. I offer the following review of “Anthony’s” newest book with an added comment that even path-dependent choices can be rerouted by intervening events.
Book Review of “Hopping Over the Rabbit Hole” by Anthony Scaramucci, Founder and Managing Partner, Skybridge Capital:
A Rudyard Kipling Story: “Risk it all in one turn of pitch-and-toss and rise again ….”
By DITMo on November 4, 2016
Pj de Marigny: This is an entrepreneur’s book of proverbs (though I highly suggest the Solomon version!). I would suggest this book not just to the hedge community, but to anyone who is waning in hope, wallowing in self-pity or wanting in optimism. Scaramucci leads you to self-examination and conclusion that pessimists accomplish nothing. “Anthony” monikers a bravado in the hedge community akin to “Hillary,” “Cher,” or “Elton” but reflects genuine substance and humility in his writing offering an unwritten introspection to the reader and a want to read “IF” by Rudyard Kipling.
Pj de Marigny, DITMo Capital
Newport Beach, CA