The Prince Henry Navigator I,

II, and III ValueX Vail

Presentation
June 16, 2011

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With Apologies to Jared Diamond and
Yali

“Vitaliy’s Question.”

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Today’s Guarantee:

“How To Get Fired As An

Endowment Manager.”

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The Pitfalls of Investment Bureaucracy:
Credit To Howard Marx

“Active management strategies

demand uninstitutional behavior from
institutions, creating a paradox that
few can unravel.” David Swensen

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One of Munger’s (Two) Most Helpful
Lessons For Me

“I think I've been in the top 5% of my

age cohort all my life in understanding
the power of incentives, and all my life
I've underestimated it.” Charlie Munger

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Request:

“Devil’s Advocacy”

n T
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Coach Wooden’s Secret #1

“THE TEAM WITH THE

BEST PLAYERS
ALMOST ALWAYS
WINS.”
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By Allan Sloan

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Munger “Invert, Always Invert.” So, How
To Destroy Capital?
n Invest in hyper efficient markets where we
have little or no edge
n Invest with same time frame as most others
n Invest with people who have no Edge: “why
are we getting so lucky?”
n Invest with people whose incentives do not
align with our own:
n No exposure to the downside
n Agents collecting non-success based fees
n Agents collecting fees prior to principal i.e.
hedge funds
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Munger Again “More Accepted To Fail Conventionally
Than To Succeed Unconventionally”?

n Harvard Management Case

n Cui Bono? Who Benefits?

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Common Threads
n L-T orientation: years not days, months, or quarters
n Large percentage of personal net worth invested in
fund
n Comfort with making mistakes: 2 types of investors:
n Investors who have made mistakes
n Liars
n Focus on weighted average batting average
n Process above results

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Churchill’s Advice
n“However beautiful the strategy, you
should occasionally look at the
results.”
n 3 Criteria for Navigator Funds:

n Preserve Capital: Yes

n Beat The Indexes: Yes, S&P by 16%

n Compound North of 13% Per Annum:

Not Yet
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Another Sanity Check: Prince Henry Cui
Bono Fund
n 0 % Management Fee
n 6% Preferred Return
n 25% Incentive Fee: 15% to Manager, 10% to
Navigator
n Navigator Takes 1st $1 Million of Losses
n 5 Year Commitment Period
n All Managers “Invested” In Each Other Via
Fund

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Animal Orchestra

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THANK YOU

n Thank You
n Questions?

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