A Billionaire’s Legendary Investor Playbook

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In David Rubenstein’s new book, How To Invest: Masters On The Craft (Simon & Schuster, 2022), in its introduction he openly admits that he does not consider himself a great investor. Rubenstein is an attorney who spent time in the Carter White House and started his own Washington, D.C.-based private equity firm in 1987 when he decided to leave law for something more lucrative. Despite his modesty, Rubenstein has amassed a net worth of more than $3 billion in a private equity titan, largely because his buyout firm, which manages $375 billion in assets, has more losers than others. has a lot of winning investments. Carlyle’s gross internal rate of return, before fees, has averaged 26% per year for more than 30 years.

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Rubenstein’s book includes his interviews with 23 of America’s greatest investors, ranging from value stock connoisseur Seth Klarman to hedge fund god Ray Dalio, real estate star John Gray, infrastructure investor Adebayo Ogunlesi and macro trader-turned-crypto hodler Mike Novogratz. Huh. At least 12 of them are billionaires, according to Forbes’ count, including James Simmons, a brilliant mathematician who left a career leading Stony Brook University’s math department to pioneer quantitative investing on Wall Street. For more than the past 30 years, his Medallion Fund and its computer model have achieved net returns of 40% per annum and Simmons has a net worth of $28 billion. While you shouldn’t expect specific strategies on how to find or evaluate great stocks or funds, there is much to be learned from the fascinating life and career journeys of these outstanding investors and the way they Think about the world and the markets in your research. additional returns.

Forbes: Why did you want to write this book considering all the books dedicated to investing?

david rubenstein: I have been in the investment world for 35 years. The other books I’ve written aren’t really about investing. People told me, why don’t you do anything for what you have done in the last 35 years? I wouldn’t say I’m a great investor, but I’ve been in the investing world. Second, there was a book written many years ago that I read when I was young the money masters, by John Train. (Originally published in 1980, the bestseller profiled nine great investors including Warren Buffett, Benjamin Graham, and John Templeton.) It was a great book about famous investors of that era. It wasn’t an interview book, but it did a great job. So, I thought maybe something where you take the best investors and explain what they did. I’m not saying that anyone is going to become a great investor by reading my book, but it may give the average investor some ideas of what they should or shouldn’t do, and maybe give some young people some ideas on how to invest. Get inspired. What I am also trying to say is that investors are doing a useful service to our country. If you allocate capital to Moderna, it is a good thing. What I was trying to say is that investors are not just greedy people looking to make money. They actually do useful work for the society.

Forbes: Looking back at all the people you’ve interviewed and the people in your book, were there any in particular who impressed you the most in terms of their journey?

rubensteinA: Many of them were journeys that you might not have anticipated. For example, Jim Simmons was a world-class mathematician, but no one thought he was an investor. Then he ended up, in fact, essentially inventing quantitative investing, Stan Druckenmiller was going to be a forester or something like that and he was an economics Ph.D. was trying to get And eventually he becomes one of the best investors. This is a great interview; I really appreciate that. I interviewed a woman who is now a Chief Investment Officer at Rockefeller University, Paula Volant. She was an arts patron, and she went to business school to help with her art conservation business and outdid David Swenson of Yale, who was a master at rates of return (for endowments). So you can never predict.

Forbes: Are there any great investors who you think had a really unorthodox approach?

rubenstein: Stan Druckenmiller has a very interesting perspective. He does macro. He also stocks and then he sometimes short things and sometimes goes long. He does whatever he likes or thinks but then he likes to say, I may change my mind the next day. So he says, I don’t like giving advice to people because I can change my mind the next day and I don’t want people to think I told them something. So he’s a smart guy, very introspective and very humble.

I think there is a lot of decency in all these people because they all made mistakes. They have lost a lot of money on all the deals and they have become used to it. Being able to correct your mistakes very quickly is a mark of a good investor. Because otherwise if you hang on to your mistakes you will never get anywhere.

Forbes: Druckenmiller was a major investor for George Soros.

rubenstein: He was the man behind it. Absolutely. And that was when a billion dollars was a huge amount. He broke the Bank of England and made a billion dollars. Then, of course, John Paulson (also featured in the book) made $20 billion. You will remember the economic crisis of the 1990s. That was Long Term Capital Management, it was about to collapse. The Treasury didn’t know what to do. That loss was one billion dollars. He was talking about so many things. Today it seems trivial.

Forbes: Are there any great investors you wish you could feature in the book?

rubenstein: I couldn’t include five other people in the book because of page limits—they’re in the audio version of the book. One of them is Bill Ackman, a very good investor. I did an interview, but I didn’t put it in the book, because I decided to make it American investors only. Another person is Neil Shen, who built Sequoia China into the largest venture capital operation in China. That’s just awesome.

Forbes: What characteristics and skills do you find common among these great investors?

rubensteinHere’s what the greats have in common: They came from blue-collar, middle-class families. They are well educated. They are not high school dropouts. He has a great facility for mathematics. They have immense intellectual curiosity. They really like to read as much as they can even if it is not about the field they are investing in. They are sponges for information. They like to make the final decision. They don’t want to delegate decisions and when they make a bad decision, they accept it and move on to the next thing. They are also very charitable. Obviously not everyone who works in the investment world gets rich as some do in endowments, but if you are in the business of making a lot of money and you make a lot of money, they give away large amounts of money. are this. He also has a fair amount of humility. Obviously there are always some cocky people, but humble people are people who have made mistakes and all of these people have made mistakes. They recognize it.

Forbes: If you had to choose between the types of investment styles profiled in the book, which would you choose?

rubenstein: The safest are going to be value investors because value investors are not going to pick on the high fliers. But I will say that if I could invest in any of these people in the book—I think they’re all good—look at what Sequoia has done to revolutionize the world of enterprise. This is so wonderful. And Stan Druckenmiller’s number is not yet known, but he is a brilliant man. If he takes new money, it would be good to give him money. Even mutual fund guy Ron Barron, who is apparently the super cognoscenti of the investment world, doesn’t look favorably on mutual funds, but they’ve done a lot of good for their investors.

Forbes: What has been your best investment at Carlyle and what lessons did you learn?

rubenstein: We made an investment in China years ago, China Pacific Life, which was a company that was almost bankrupt. It was a life insurance company and we turned it around with some local partners; He revolutionized the way he worked. And we made a huge comeback. We recently did a deal called Zoom Info, which is not Zoom. It’s a different kind of company and we’ve made a huge amount of money on it. People told us not to do this. He said that this Zoom Info was nowhere to be found or China Pacific Life was nowhere to be found. You have to be very suspicious of people who tell you don’t do this or don’t do that. You really have to check it out. Because once again, as I say in the book, defying conventional wisdom is what makes great investors. You have to go against the rules and that’s what we’ve done sometimes at Carlyle.

Forbes: Are There Any Investments You May Have Missed?

rubenstein: a few words. We had a company called Carlyle Capital, which was more or less a bond fund, and we took advantage of Ginny Mays and Fannie Mays. But when the Great Depression hit, banks wouldn’t let you borrow against securities that were out there and weren’t yet guaranteed by the government. So, it went down.

The lesson was that just because someone will lend you 98 cents on the dollar doesn’t mean you should take it. In those days, you could get repo loans that refinanced every day. Basically you can borrow 98 cents against government securities, but then at some point when the banks come along and say we’re nervous about these securities, we’re going to lend 90 cents on the dollar, so You have some challenges ahead of you.

Forbes: Do you think the market is more risky now than when you were…

Credit: www.forbes.com /

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