SaaS Interviews with CEOs, Startups, Founders
How Did This Guy Retire at 35? EP 284: Todd Tresidder
13 Jun 2016
Chapter 1: How did Todd Tresidder get started in finance?
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Again, text the word Nathan to 33444. Top Drive, you are listening to episode 284. Tune in bright and early tomorrow morning to hear from Finn Kelly, where he answers the question, what if an accounting firm was built specifically for young entrepreneurs? Wait till you hear what he's doing. Top Tribe. Good morning. Good morning. Good morning this morning.
Chapter 2: What led Todd to retire at 35?
Our guest today is Todd Tressiter, who graduated from the University of California at Davis with a BA in economics and a passion for creating successful businesses. As serial entrepreneur since childhood, he went on to build his own wealth as a hedge fund investment manager before retiring at age 35 to teach others.
Today, he provides advanced investment retirement planning education at financialmentor.com, showing you what works, what doesn't, and why based on a depth of proven experience. Todd, are you ready to take us to the top? I'm ready. All right, let's do this. So first things first, you graduated and then you jumped. Did you jump right into hedge funds or no?
No, I had a short stint at Hewlett Packard. You have to go back to the day the book was In Search of Excellence, which was a bestselling book, and those were one of the top companies to work for. So I was pretty heavily recruited coming out of college, went over to Hewlett Packard. And the bottom line is I'm not much of a corporate guy.
Chapter 3: What is the importance of risk management in investing?
I lasted about six months, even though I produced amazing results there. I got fired.
Yeah.
I love that. Hopefully they really fired you in front of everyone. It was super embarrassing, very dramatic, right?
Oh gosh, no, they're way more politically correct than that. It's all about political correctness, not results. And I'm all about results, not political correctness. And so anyway, I produced amazing results. I brought in a couple million bucks that they had been having sit outside. I solved problems they couldn't get solved for years. And yet I turned the office upside down to get it done.
And that didn't go over so well.
So my next question, I'm going to reframe.
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Chapter 4: How does Todd define knowledge leverage?
You have obviously a lot of experience doing the hedge fund thing before retiring at 35. Was this your own hedge fund you set up?
No, no, no, no. There was a gray haired old guy. I was a young guy at the time. Now I'm the gray haired old guy, but there was a gray haired older guy and he had already got it started, but wasn't really taken off. And we got introduced and I was already doing research in the area and we just totally hit it off, had very similar concepts, started working together.
What was the concept?
Everything's quantitative. So it's all about statistical and mathematical risk management systems is the proper way to manage money. And, you know, we had just both been developing stuff on our own that was remarkably similar. And we just ran with it.
And how much I assume he did most of the fundraising. How much did the hedge fund raise? I mean, how much were you investing?
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Chapter 5: What are Todd's views on asset allocation strategies?
At the time, 20 million. OK. And what was your thesis? What were you investing in?
Well, it was a bunch of different products. So there was commodities, mutual funds. I had a long, short equity market neutral for equities. I did market timing on mutual funds. I did trading in commodities. We were profitable in all of them.
So tell me what mind traps I might step on. So I just sold my SaaS company, which I recorded the whole negotiation and how we sold it back at nathanlaca.com forward slash sold. But Todd, one of the things I'm looking at doing now is I'm analyzing publicly traded companies with market caps at $10 million or lower.
And many times these companies went public just for no other reason than the CEO had a big ego and wanted to say he took a company public or she.
Chapter 6: How can entrepreneurs manage financial risk effectively?
And so one of the things I'm researching is what is just the pure GNA cost, the pure admin cost of being public on some of these companies is 500 to a million dollars a year just because of all the reporting you have to do. So buying these companies and taking them private, then sucking out the administrative expenses and getting it back to cash flow positive is a model I'm looking at doing.
Now, I've researched about 100 companies, haven't pulled the trigger on all of them. But what are potential minefields I might step on if I go that path?
I don't know. It's not my field of expertise. So one of the keys in investing is having, there's a lot of different niches. You're developing a very specialized niche. It sounds like you might have an edge there that might make good business sense. And that's the key. You have to develop an edge that makes good business sense. But you also have to know your limitations.
You have to know what you've got nailed and what you don't know. And I think that's one of the biggest foibles that people run into is they're not aware of what they don't know.
Yep.
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Chapter 7: What advice does Todd give to aspiring investors?
Okay, well, good. Well, hey, I appreciate you being transparent on that. So why did you retire at 35? Because I could.
I wanted to, the business had run its course, the hedge fund business. I had learned what I was going to learn there. And, you know, I had already, I developed the methodologies by which I still use today.
Was it too, did you get paid a salary there or was it just pure two and 20?
Well, it wasn't 2 and 20 back then. See, I was in the very early days, right? So now 2 and 20 is common for listeners that don't know. That's 2% management fee, 20% incentive fee. Back in the day, you know, I did this before they were called hedge funds. They were called private placement partnerships, and they only got the sexy name of hedge funds later on.
You know, there were just different legal structures that we had to operate under in order to do what we were doing, because you couldn't do them under conventional legal structures.
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Chapter 8: What lessons does Todd wish he could share with his younger self?
And so... I lost my train of thought, though. Where was I?
I was talking. I was asking about how you got paid two and 20 only or not.
Oh, no, we're straight three percent. I'm sorry. Long winded answer to get to the short answer, which was we were a straight three percent management fee.
OK, so on 20 on 20 million raised, you just took three percent of that annually. Yeah. And were you the only one working at the hedge fund? So you took all of it or what? Two of us. OK, two of you. So you got one point five percent and he got one point five percent.
Uh, no, I wasn't half. Okay.
But you split the 3% somehow.
Yeah. And again, we raised 20 million. It grew from there. Got it. Got it. Got it. So anyway, um, yeah, yeah. I mean, you're, you're good at the numbers, dude. You dissect them quick.
Well, I just wanted to look, there are too many people out there that just, they make this stuff up. They put self-made millionaire, millionaire on the homepage of their website. And then I get them on the show and they don't know any, they don't know any of their numbers. I'm like, come on, like you're full of it. You're a guy.
You are because wealth is numbers, right? You have to. Oh, yeah. It's a numbers game completely. And if you don't know your numbers cold, that's why I was impressed because almost nobody does. And you're just ripping through the numbers like nothing. I can tell what you're doing is you're dissecting the asset center management relative to percentage fee to figure out income produced.
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