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Running a portfolio at 24
Launching Claiborne
Chad Cascarilla spent six months sitting next to Kevin Becker, helping launch the hedge fund Claiborne and traveling the world to raise money. The launch was due around September 11, and the attacks left it uncertain whether it would go ahead. It launched on October 1 of 2001, one of the biggest launches that year.
Getting the portfolio
Six or nine months in, Becker gave him the portfolio. An E-Trade account from age 18 wouldn't count as a record. Neither would working at Goldman on the sell side or as an analyst, which is great training but not running money. In a professional setting that opportunity was very rare back then.
Building a record
With a portfolio he could show people how he did every month and how he did over years. That record was part of what he brought to investors when he and a partner launched Cedar Hill.
How did September 11 disrupt financial markets?
US stock markets closed on September 11, 2001, and stayed shut until September 17, the longest closure since 1933. On reopening, the Dow Jones Industrial Average fell about 685 points, its largest single-day point drop to that time. The market had been shut for four trading days.
Why does a track record take years to prove?
Monthly returns are noisy, so a manager's strong stretch can come from luck as easily as skill. Andrew Lo of MIT showed in a 2002 paper on the statistics of Sharpe ratios how much data is needed to tell the two apart. A fund with a Sharpe ratio of 1, a strong result, takes about four years of returns before its performance is statistically distinguishable from zero. Weaker ratios need longer.
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