Gavin Baker
+ Your AuthorsArchive @GavinSBaker Managing Partner & CIO, Atreides Management LP. Formerly Fidelity OTC Fund. No investment advice, views my own. Aug. 22, 2020 1 min read

1) Ken Grant was the head of risk at Tudor and SAC.

The analogy he made in his book “Trading Risk” between Julius Caesar and Augustus always stuck with me.

Here are his “10 Commandments” 

2) “No matter what your market orientation, you are likely constrained, in gravity-like fashion, by one unshakeable reality: there is a finite amount of money that you are able to lose and still remain in the game.”

3) Permanent loss of capital is the most significant risk, but there are many forms of risk and uncertainty when it comes to investing.

Volatility is a legitimate way to think about risk because LPs don’t always control when they have to withdraw capital.

4) Ultimately, if you run with more volatility and drawdowns then your LPs can tolerate you will be out of business at some point. That is just a reality.

5) And of course, Julius Caesar was charismatic, brilliant and along with Subedei, the only general I am aware of who never lost a battle. Yet he took huge risks and was assassinated in the Senate.

6) Augustus was arguably less talented, but was careful, measured, rarely took risks and ruled Rome for 50ish years.

In all fairness, Augustus had Agrippa and suspect Caesar never would have been assassinated if he had Agrippa instead of Antony. But still a lesson of sorts.

7) One of the best fund managers I have ever known said that he came into every year focused on what stocks in his portfolio could cost him the most money relative to other PMs who came into every year focused on which stocks - new or in the fund - could make them the most money.

8) But it’s always the bullet you don’t see that gets you - they are always coming and no matter how carefully you look, inevitably you miss some.

You can follow @GavinSBaker.


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