Patrick O'Shaughnessy: recommendation

Transcript context

…We could debate the latter part of that statement these days. I think it's just capacity. The reality is if you were to give me in our US large-cap strategy $1 billion tomorrow, we'd execute it in a day or two, and we wouldn't move the stocks that we're trading. When you think of the challenge of putting $1 billion to work in almost any venture context, it's incredibly hard to do. There's just not enough capacity to go around. Therefore you need to incentivize the managers with potential rewards, and because the capacity is capped, you need to have that be something like an incentive fee like carried interest. There's a lot that we could talk about in this space, the alignment of incentives, and how this should work. You could argue that someone that gets paid carry should not be able to get rich on management fees. Obviously, in practice, that's not always the case—and usually not the case—for successful firms. They get rich both ways. That's the primary driver is that a strategy like ours in public markets could accommodate billions tomorrow with no real marginal cost to us and without affecting the market price. We've seen this experiment play out over the last 10 years in the private markets and particularly in the "venture flavor of the private markets." Billions of dollars have come in, and they have impacted the market hugely.…

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