00:00I know your ETF, obviously not a family office, and as family offices moved quickly to add SpaceX, I'm curious
00:07how your fund proceeded with adding SpaceX to its holdings.
00:11How quickly were you able to do just that?
00:14Yes, Scarlett, we were day one buyers.
00:17So we are 80 percent rule space, but 20 percent discretionary, and that includes founder led IPOs.
00:25So we were able to evaluate SpaceX, decide on a price we were willing to buy, and then participate.
00:31We own around 1 percent today.
00:34We look forward to adding to our position, but it depends on valuation.
00:38Gotcha.
00:39So let's hear the pitch here.
00:40Obviously, there's some work, some research out there that shows that founder led companies tend to outperform over different time
00:45periods.
00:46But this is obviously the foundation of the fund.
00:49So my question is, like, what is it about these founder led businesses?
00:52The idea makes sense, like this process makes sense, but I'm curious what the idea, what do you think the
00:56foundation is for the potential outperformance of the strategy versus the broader market?
01:01Yes.
01:01So Bain found that over a 25-year period, founder led companies in the S&P outperformed non-founder led
01:083x, and then they did a follow-up study, and in just 10 years, they outperformed 2x.
01:13So we believe that founders have the vision, the conviction, and the grit to do things that have never been
01:22done before.
01:23They're often doubted.
01:25There's a lot of skepticism around them accomplishing these new goals.
01:29But when they do, in hindsight, it seems obvious that they did it, and that perpetual skepticism creates an opportunity
01:35for us.
01:37So SpaceX, what you added, is something that kind of fits the bill there.
01:41And I'm curious, now that we anticipate Anthropic and OpenAI to eventually list as well, do you anticipate adding those
01:48names with the same urgency once they list?
01:51I'm curious whether you've begun to do a lot of the due diligence into these two companies.
01:57Yes, we're looking at both of those, as well as Andrel and Databricks.
02:02We expect all of them to list within the next year.
02:06We're looking ahead for Anthropic in October.
02:09So we have begun doing our work.
02:12It will depend on the valuation.
02:15You know, we'd love to own Tesla, too, but it's too expensive.
02:19So we do look at the top 200 founder-led companies trading on U.S. exchanges and invest in exactly
02:26half of those based off of the ones that have the most compelling fundamentals.
02:32So when I look at your fund, right, I see a lot of big names in there, a lot of
02:36very popular names, maybe not the largest in the S&P 500.
02:39But my question to you is, one thing I want in my active portfolio, my hot sauce, my theme investing,
02:45I want it to be very differentiated from my broader, you know, S&P 500 beta-type exposure.
02:50There is a decent amount of overlap here, but obviously your concentration is a little higher in these types of
02:54names.
02:55So I'm curious, is this pushback you're hearing from people considering allocating here?
02:58And, like, what is your response to that question about me saying, I want something more different and alpha-generating?
03:04Yeah, you would actually be very surprised.
03:07We did a study and looked at the 300 largest U.S. equity ETFs.
03:12That's 90 percent of category assets.
03:15And actually just 12.5 percent of the weight of that collective investment was in founder-led companies.
03:23We have just a 12 percent overlap with the S&P as of yesterday, as of the open, and we
03:30have just a 16 percent overlap with QQQ.
03:33So I would say FFF, the Founders 100 ETF, is diversifying and is different than what most people own.
03:42They tend to own a lot fewer founders than they would expect.
03:46You know, this idea is so simple, James, and I was wondering if it's come up before.
03:51And it actually has, right?
03:52There was a global XETF that kind of was premised on the same idea?
03:56Yeah, exactly.
03:57It was ticker BOSS.
03:57We call this the Lazarus list that came back from the dead.
04:00So we're wishing you, obviously, good luck.
04:02But I'm curious, like, when you saw that and you know that this has been tried before, obviously yours is
04:07different.
04:07So, one, talk about how you might be different from that passive-based strategy.
04:10And, two, what you think you have a different selling point now that can do what BOSS didn't do.
04:15Yeah, we did look at BOSS very closely, deciding whether we were going to come to the market or not.
04:21And what we found was they held additional companies beyond those that continue to be founder-led.
04:29Notably, those in tech, as founders left, they continue to own some of those big firms.
04:35We're very strict.
04:36So, once a founder leaves, the data says we sell.
04:40So, for example, Torsten Hagen was CEO of Viking Cruise Lines, ticker of BIK, for over 30 years.
04:46He announced that he was going to step down May 14th.
04:50We evaluated it, and within a week, we had sold.
04:52So, we do not stay in companies if they are not founder-led.
04:56We are different from BOSS in that way.
04:59And we looked at 11,000 companies over 27 years, quarterly, looked at when they were and were not founder
05:09-led.
05:10And we found very similar results to Bain.
05:12So, we have high conviction that this is a wonderful long-term investment.
05:16And my partner and I are fully invested ourselves.
05:19This is by far my largest holding.
05:22Yeah, so one thing I would ask.
05:24So, these are companies that investors are often willing to pay a premium for.
05:28They often trade at a premium to, you know, the broader market.
05:31What gives you the confidence that the growth here will justify the premium that you're ultimately paying when you invest
05:36in these stocks?
05:37Yes, the founders tend to grow much faster than the typical company.
05:45They trade at an 11 times PE multiple premium on average.
05:49What we see over time is at the beginning of a pullback or a sell-off, they do have multiple
05:58compression and more earning skepticism.
06:01But then, as we begin to enter a recovery, we see them tend to outperform in that they're at the
06:08top of everyone's shopping list.
06:10They tend to move first and very sharply.
06:12And so, over very long periods of time, we would expect that the founders continue to show that pattern.
06:20Obviously, past performance is no guarantee of the future.
06:23But we feel very, very solid on our thesis.
06:27We'll see you next time.
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