Lecture Notes: Discussion with Chris Brown, CIO of Aristides Capital

Introduction

• Speaker: Chris Brown, Chief Investment Officer and Founder of Aristides Capital.
• Interviewer: Max, discussing growth and strategies of Aristides Capital.
• Disclaimer: No investment advice or marketing.

Background

• Chris Brown's early career as an internal medicine doctor in the Air Force.
• Transition into finance, starting with a state-registered investment advisory.
• Developed first quant strategy in 2007, started trading with personal and family funds.
• Launched Aristides Capital in July 2008 after leaving the military.

Early Challenges and Growth

• Initial funding was mostly friends and family.
• First outside investor: Andrew Tobias, notable finance author and treasurer of the Democratic National Committee.
• Used personal credit to meet initial trading thresholds at Goldman Sachs.

Building a Track Record

• Importance of demonstrating real money trading results.
• Early success allowed attraction of high net worth individual investors.
• Strategy focused on consistent alpha, quantitative focus, and strong performance attribution.

Fundraising and Networking

• Personal connections crucial for initial investor base.
• High net worth individuals and their networks played a significant role.
• Importance of performance databases in attracting savvy investors.
• Building a business requires a realistic view of costs and income.

Strategies and Operations

• Started as a one-man operation; gradually expanded team.
• Business model emphasized hiring young talent with investment and admin skills.
• Modern automation through software developers has been transformational.

Hiring and Company Culture

• Culture focuses on sincerity, autonomy, and professional development.
• Quarterly 360 reviews with open feedback and focus on investment process.
• No traditional point system; compensation based on trade credit attribution.

Investor Relations and Institutional Demands

• Large institutional investors viewed as partners; important to meet their needs while maintaining alignment with existing funds.
• Willingness to adjust fund structures (e.g., funds of one) to accommodate large investors.

Authenticity and Communication

• Authenticity seen as a strength in building relationships and attracting like-minded investors.
• Chris's identity and beliefs are consistent and openly shared.

Fund Management and Growth

• Importance of maintaining a focus on performance while planning for steady growth.
• Navigating the challenges and opportunities of taking on large investors.
• Decision to start an offshore fund to capture international interest, despite the initial challenge of finding seed investors.

Closing Thoughts

• Emphasis on taking opportunities when they arise, especially when in a strong position.
• Importance of strategic growth planning and maintaining a good track record for future success.
• Networking and partnerships play a crucial role in fund growth and sustainability.