Jeff Wang
speaker
190 appearances
1 recordings
1 series
first heard Oct 2024
last heard Oct 2024
Jeff Wang’s voice in public audio — every appearance, attributed to the second.
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Appearances
But I think when you take them all together, I think clearly something was a little off. And so, again, that's why I think it's important to regularly underwrite these investments each quarter and have a discussion with the full investment team.
And so, again, I think that's where one of the ones where the devil's advocate point of view actually was really helpful to get a fresh dispassionate perspective.
Oh, yeah.
I think it's really hard to do in practice. I think most people are fearful when other people are fearful and most people are greedy when other people are greedy. The best way to do it is just to be really long-term about it. This really long-term, let's not trade all the time. You know, there was that day, I think it was just last month where the Nikkei was down 12% in a day.
I mean, we just don't trade those days. Sit there, try to figure out what's going on, be long-term about it, and not overreact. I think it's hard in those moments, but it's also hard to act in those moments, right? What are you trying to do? You're just running around with your head cut off.
I think you'll be right there. I think you'll be right there, by the way.
Yeah.
It was difficult. The history of venture PE firms launching public funds has not been a good one. It was difficult to go convince LPs that we're going to go do this. We have fortunately some very supportive LPs, some of who will take the leap of faith with us because we've had such long-term relationships with them, but It was very difficult to be able to convince folks.
It was a lot easier once we got a track record and got things going. But the initial, you know, $50, $100 million.
I think it's really just to be the best tech public-private crossover firm in the world. And with our advantages, I think we can go deliver on that. We still got to go execute. The other thing that we're not selling though is we're not Citadel. Citadel, I have a ton of respect for Citadel and Ken Griffin. We're not selling a product that is not volatile.
We're selling a long-term product because I think our advantages are long-term, right? It's seeing these long-term themes that will play out over the next 10 years. And so if we measure ourselves on a short-term basis, I don't think that is productive.
One other thing that we did to set up the structure is because we have this long-term investment horizon, we have a long-term capital base, but we also have long-term incentives. And I think that's really important. So three or more year investment time horizon, three year minimum capital base, i.e. it takes LPs three years to take your money out.
That is not standard. That is not standard. And then the least standard part of what we have is we have also a three-year incentive crystallization. And so what that means is most hedge funds, as you probably know, just take carry at the end of each calendar year. We take carry once every three years. And we also vest ourselves over a three-year period.
And so we have that 3-3-3-3 type of framework here where I do think it helps us, encourages us to think long-term. If you were a fund where you had monthly redemptions and you paid your people an annual bonus, I think it would be really hard to really truly be long-term. I think you're really setting yourself up to incentivize your team to think short-term.
I don't think you can. I think it's really hard to think about business building if you're making investments and you don't know what your capital base looks like in the next six months.
So I think that's why most hedge funds fail. It is really hard to go build a real business. If you are one of the large hedge funds like Citadel, you have strong LP relationships, you have lockups, you've got an incredible long-term track record. That makes it a lot easier when you have periods that are not up to your expectations.
But if you are a $100 million hedge fund today, you don't know if you're gonna be in business in a year. It's hard to go recruit. It's hard to go spend money and say, we're gonna go build out a data science team. and you don't know how much time do I spend on recruiting, how much time do I spend on management, business building, LP, relationships, and that's before you get to the investing.
I think for us, one of the things that was most helpful actually in going through that period is that Sequoia does a great job of injecting Sequoia DNA while also allowing these individual businesses to grow up in a way that fits their specific area. The Doug and Michael, and I give them a lot of credit for this, the way they set up the various businesses.
So SEG, Sequoia China, now Hong San, Sequoia India, now Peak 15, and Sequoia Heritage was to give each individual team and set of partners full investment discretion. That's very different. So obviously we shared a brand, administrative functions, office space, leadership. So Doug's on the SEG, was on the SEG board, now it's Ruloff, and we collaborated closely.
But the day-to-day management and investment process is up to that specific team. And I think what it was, was it was a recognition that is really hard for an American investor to go make great investment decisions about Chinese startups. Similarly, it is very hard for a venture investor to go make great decisions about managing a hedge fund or family office.
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