I called Reza Satchu’s mother at the time.
Please let me explain why that title is strange. Around 2005, I read about Reza Satchu for the first time in the Globe. After that, I started calling a lot of big business people to start a hedge fund. Reza had something called Stellation Asset Management, which was a fund of funds. I tried to find him, but it was hard. He could have been in New York, Connecticut, or Toronto.
In one article, he used the names of his parents. And it was much easier to get in touch with them. I still have a note that says his mother was “nice and supportive” to me. Because of this, I will never say anything bad about Zarina Satchu.
On the other hand, Reza never replied. So you can kill him. Reza says that he’s not afraid to try something and fail. In the media, his main affiliation has been called NorthCoast Capital, Guildwood Capital, and Stellation Asset Management at different times since 2005.
None of these names are in his official bio right now. I’m not too interested in finding out if there were name changes, mergers, failures, etc. I like to throw things against the wall sometimes. No matter how good his business record is as a whole, I don’t think he has much credibility when it comes to the specialized craft of money management, especially when it comes to public securities. He is an outsider, kind of like an MBA Hospital CEO giving advice on how to treat cancer.
Stellation, one of his most successful asset management companies, went out of business in 2009. Based on regulatory filings, this is how the AUM looked. Keep in mind that this chart shows the reported levels of AUM, not how well they did. Still, I think you’re smart enough to think of a few reasons why an ambitious person in their thirties might close a fund of hedge funds after 2008.
Before the fund ended, of course, the Globe was there to rave:
“In 2005, he started his most recent project, Stellation. UBS ranked the highly successful hedge fund company as one of the top global equity long/short hedge fund of funds for 2007. It has investors from some of the largest private equity funds in the world, such as Citibank.
Kerry Stirton and Randolph Cohen, two of the most important people at Stellation, are now working for Reza’s new money management company, Alignvest Investment Management. One of them was a Rhodes scholar, and the other taught at both MIT and Harvard.
Reza never buys anything from the Ryerson University bargain bin, that’s for sure. But as you know, pedigree doesn’t matter in the market (see LTCM). In 2006, these two wrote a paper with the title “Are hedge fund fees a good deal?”
I think we all know the answer to that question now, but many people still refuse to see it. Even the name “Alignvest” is silly, because performance fees are not at all like having your interests aligned. I get the sense that they back their deals with a lot of their own money, which is a good thing.
I could go on and on about Alignvest’s ups and downs, but let’s get to the point. I’ve already told many stories about rich people who did stupid things. Alignvest is a great example of this, with its macro predictions, market timing, two layers of fees, and ability to move money into and out of funds. It’s the least useful thing I’ve ever seen.
Even though Alignvest failed at Stellation with its long/short equity funds, it is now a “Multi-asset manager” that invests directly or through external managers in stocks, Australian water rights, credit, Cat bonds, etc. Is there anything they can’t do? The idea was to change the old 60/40 model, which doesn’t seem to work. How is that going for you?
Let’s look at some of the words used in advertising:
Investment management on a world-class level
ASPF takes a long-term, best-of-breed approach that is similar to pensions and endowments across a number of global asset classes. The best way for Canadian investors to get the most out of their investments is to use state-of-the-art portfolio design, implementation, risk management, and a mix of active and passive management.
Now let’s look at how things turned out.
So, a losing record since the fourth quarter of 2016. Some of their fund classes have a $10 million minimum purchase, but Tangerine is a better choice. The University of British Columbia gave them $75 million to manage and $1.5 billion to give advice on. Alignvest also gives advice to Sagicor, an insurance company that its SPAC affiliate bought and is traded on the stock market. I think Sagicor should do a little shopping around. Have they ever heard of GICs?
Reza is the main person behind two publicly traded blind pools of capital (SPACs) under the brand name Alignvest that have raised hundreds of millions of dollars. In filings with the SEC and OSC, he talks about his experience with SupplierMarket in the following ways:
Mr. Satchu has co-founded, built, and/or managed several businesses from the start. These include SupplierMarket, a supply chain software company with more than 125 employees and investors like KKR executives and Sequoia Capital. SupplierMarket was sold to Ariba for stock consideration, which gave the company an enterprise value of $924 million.
If you read my last post, would you say that Reza co-founded, built, or ran SupplierMarket? Did he start from the beginning? Even the way the sentence is put together is strange. It’s kind of like me saying, “I have won or watched races in high school and at the Olympics.” What’s what? I remember that in Ontario, the rule for this kind of information is that it has to be “full, true, and plain.”
About 90% of the first Alignvest Acquisition SPAC’s stock price has been lost. The second SPAC is doing better; it’s only down 40%. In a SPAC, you put all your faith in what the sponsors have done in the past. I think investors would have liked to know about some of the details I brought up. If someone’s bio requires you to draw a matrix to understand it, you might want to skip it.
Here is a chart of the beautiful butterfly that came out of the first SPAC:
Reza has said, “I’ve always felt like I wanted to do something for Canada.” He feels like he owes his success and gratitude to the country that took him in. Why not stop putting out bad SPACs? That’s a good place to begin. He says that KKR and Onex gave him money, so why does he need Joe Tim Horton’s money?
Reza has talked about how his family moved to Scarborough and started over in a one-bedroom apartment. He has also talked about how his father’s success as a real estate agent inspired him. So, they really got better. By the time I called his mom, his parents had moved into a nice building in Yorkville where Jim Doak also lived. I should have kept in touch, because I could use a place to stay in Yorkville.
Lastly, keep in mind that I am always interested in new points of view. Reza must have had some real successes, but naming them here would be the same as what the media has already said. KGS-Alpha, a fixed income trading company that opened after the 2008 financial crisis and was sold to BMO in 2018 for “close to half a billion dollars,” might be an example of a recent apparent win. Satchu is what the “S” in KGS stands for. Call his mom if you want to know about his wins. The Globe and Mail is even better.
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