Mark Carhart: More Info

Mark Carhart enjoys the intellectual give and take of academia, and apparently that is what he and Iwanowski tried to recreate at Goldman. But the challenges — and obligations — of working within such a large organizational framework with both client and management responsibilities distracted them from that mission. It seems clear what he hopes to build at a smaller firm is something similar to the collegial ideal he attempted at Goldman.

Carhart also had time to reflect on some of the big issues facing the asset management business, such as fee structure. Carhart says investors need to better understand where their managers returns are deriving from — alpha or beta. They shouldn’t be paying 2 and 20 for beta, the way that so many investors were doing during the bull market. Rather, investors should use quantitative analytics to determine true alpha. Carhart says that many times managers are not upfront about this and investors are too quick to assume that all upside is alpha. ‘Investors are too easily attracted to performance.’

Mark Carhart says that the ideal asset management firm should only charge high fees for actual alpha, not beta,. Ray Dalio, founder of Bridgewater Associates in Westport, Connecticut, has been declaring this for over 20 years. Since that Bridgewater is among the largest hedge funds in the world with over $37 billion in assets under management, Dalio certainly has his adherents. Carhart, like Dalio, may see that the future of asset management leads in this direction, but we will see how much of the investment community will follow.

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