The investment world paid attention to Jamie Mai, when he was mentioned by Michael Lewis in his book “The Big Short”, when buying credit default swaps in CDOs before the 2008 financial crisis, Jamie’s firm, Cornwall Capital, Increase your capital more than 80 times.
Before founding Cornwall Capital in 2002, while most stock investors invest only when they are sure they will not lose a significant amount of money, Jamie thinks of the safety margin in probabilistic terms.
Cornwall looks across the risk spectrum to detect opportunities that are often “off limits” for most value investors, low-probability / high-yield investments, for ambitious trading opportunities
Cornwall’s strategies range from fundamental thematic operations to operations that seek to benefit from esoteric market inefficiencies, the only feature that unifies virtually all of Cornwall’s strategies is that they are structured and implemented as highly asymmetric positive bias negotiations, that is, , operations in which the upside potential far exceeds the downside risk.
One of these operations, a short bet on subprime mortgages, led Mai, Ledley and Hockett to become key characters in Lewis’ book, although this particular operation was unusually profitable for Cornwall, ultimately producing around 80 Sometimes the initial premium that they paid for the protection of the subprime, by default was entirely representative to the types of operations Cornwall seeks.
As of May 2011, Cornwall changed to a new fund structure open to outside investors, over the years, Mai had found several trading opportunities, which could easily accommodate much more capital than her office could invest, in Some of these cases, he explored the possibility of raising money from external investors to participate in trading ideas, but decided that the delay involved was too long.
The catalyst that finally convinced Mai to restructure the fund to accommodate investors was born out of the frustration of not being able to participate in a rare pure arbitrage opportunity in 2008 because she lacked sufficient assets, Mai decided to open the fund only to a handful of sophisticated investors with whom you could be reasonably transparent and share ideas, instead of trying to maximize managed assets.
During the almost nine years since its inception, Cornwall Capital has produced an average annual net return of 40% (52 percent gross), the annualized standard deviation has been relatively high at 32% (37 percent gross), the Sharpe’s Cornwall ratio is 1.12 (1.23 gross), which represents a very good performance based on this return / risk measure, widely used, but greatly underestimates the true profitability / risk of the fund.
Originally posted 2020-10-25 15:25:13.