The Meb Faber Show

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Dan Rasmussen - “The Crown Jewel of the Alternative Universe is Private Equity" | #90

E90 • Jan 18, 2018 • 62 mins

In Episode 90, we welcome Founder and Portfolio Manager of Verdad, Dan Rasmussen. We start with a brief walk-through of Dan’s background. It involves a Harvard education, a New York Times best-selling book, a stint at Bridgewater, consulting work with Bain, then his own foray into private equity. Turning to investments, Meb lays the groundwork by saying how many people misunderstand the private equity market in general (often confusing it for venture capital). He asks Dan for an overview, then some specifics on the state of the industry today.

Key Points

Dan Rasmussen, the founder and portfolio manager of Verdad Capital, challenges the conventional wisdom about private equity, suggesting that the industry's historical outperformance is unlikely to continue due to increased valuations and excessive leverage.
Verdad Capital's investment strategy focuses on leveraging small-value equities, which Rasmussen argues can replicate and potentially exceed the historical returns of private equity by investing in highly levered micro to small-cap companies that are likely to pay down debt.
Rasmussen highlights Japan as an attractive market for Verdad's strategy, noting its lower volatility and bankruptcy risk compared to the US, and the unique cultural and financial dynamics that make leveraged small-value equities particularly compelling there.

Follow Dan: Website

Resources: American Uprising: The Untold Story of America’s Largest Slave Revolt Forbes 30 under 30 list Dan’s white papers “The Gospel According to Michael Porter”

Speakers

Meb Faber

Host • 26%

Dan Rasmussen

Guest • 74%

Chapters

0:00	Introduction and Guest Introduction: Meb Faber introduces Dan Rasmussen
1:32	A Deep Dive into Private Equity: Discussion on private equity, its potential dangers, and how it differs from venture capital
10:06	The Evolution of Private Equity: How the private equity model has changed over the years and its impact on institutional investors
20:32	Verdad Advisers and Their Investment Approach: Dan Rasmussen explains the investment framework at Verdad Advisers and the effectiveness of implementing private equity strategies in public equity
27:06	The Role of Debt in Investment: Understanding the dynamics of investing in leveraged companies and how Verdad Advisers approaches it
33:21	Balancing Quantitative Rules and Human Insight in Investment: The role of qualitative analysis in assessing bankruptcy risk and portfolio selection
36:40	The Potential of the Japanese Market: Discussion on the volatility of the Japanese market, case study on DFA's Japan fund, and how Japanese companies manage their capital allocation
45:57	Global Investment Strategies: Discussion on currency risk, hedging, and differences in trading between the US and Japan
51:01	Sharing Investment Ideas: Dan Rasmussen shares his controversial views on private equity and the importance of sharing investment ideas
58:11	Memorable Investments and Further Information: Dan Rasmussen shares his most memorable investment and where listeners can find more about Verdad Capital

Transcript

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