Old Dog, New Tricks.

The most successful leaders in hedge funds tend to be restless – in a good way. At every level of development on the way to the top, they learn new tricks, aphorisms be damned. This note focuses on needed changes that may come with growing responsibilities as leader in a firm, setting you up to teach new tricks to dogs of all ages.

Change is hard for everyone, even those that come with an open mind and are willing to try new things. Making changes to technologies, resources, or people in the name of improving/sustaining fund returns and fueling future growth brings challenges. These challenges are different based on where you sit in the organization. But such decisions can separate good fund returns from poor ones. Decisions about tech and AI increasingly matter, but it’s about much more than that – it’s about the people in charge.

Now here’s some good news: we have been here before. And depending on just how old a dog you are, some of these priors may not only look familiar, but the visceral scars from lessons learned around failure to adopt may still itch when you scratch them. The key takeaway here is not some overarching adapt or die slogan (although it is catchy), but a motion to recognize change’s impact and a recommendation to be open to it. It is also a reminder to be sure that when you decide NOT to make a change, the reasons always relate to efficacy, implementation and cost, as opposed to fear around your own ability to change or because of some sense of a loss of control.

There are plenty of funds with shrinking or stagnant assets and limited prospects. Just ask them why spending money and allocating resources to growth was so hard for them. And then listen closely. Their mouths will move, you will hear sounds, but the impact of that dialogue over time becomes clear – something held them back. Often, it was a rigid commitment to process or people or tools that simply no longer worked. They will evoke a sense of longing for why something that delivered success consistently for some period (which could have been years…) had been rendered neutral. But sad laments don’t make investors happy – action does.

To coach for effective change in leaders, ask “How Old is That Dog”?

• Just a puppy.

We have a growing cohort of leaders in our business who are in their 30s. In most cases and at most funds, this means they have spent 10 years or more working a process that generated excellent returns from 2015 forward. Their reward is often more capital to run because the best funds play the hot hand, just like the best card players play the best odds. Sometimes their investors top them off with more capital or sometimes the founder or internal allocator raised their deployment max. Sometimes, they just have more names in the book than anyone else, owing to their consistent track record of success. But damn, they got there. Their goal of becoming 30-something and wealthy is now a checked box. They have something to lose.

The challenge: What kinds of technology bets should they be making to sustain a long-term future in our business? Let’s begin by assuming that some healthy level of self-awareness exists within them. They are also confident, because one needs a steady hand to have a cold eye around making decisions. Net, they have realized a dream they set out back in B-school, or while banking, or as QB4 on the roster.

Let’s also consider their world view. Big tech was already a thing when they started. Most of the best alpha generated by the fund came from TMT, or possibly healthcare or consumer-leaning internet. So, the willingness to use technology enablers is often high. Tools that check their models, vet their hypothesis with LLMs, or scrub their visualizations statistically are already in place or nearby. Often, it is not a lack of understanding or the ability to adapt to something that holds them back. It is scar tissue that forms as a reaction to a setback - a down year, a bad stock, a sustained hit rate under 50% for months, having to fire someone or change the team in a way that’s not easy – and they can become rigid and lost their adaptive instincts.