18 | Pratyush Rastogi, Playing the long game

My guest today is Pratyush Rastogi (@FarrerWealth). Pratyush is the CEO & Founder at Farrer Wealth Advisors, and was previously Head of Sales at Grab for Business, as well as prior experience in private equity and capital markets.

In today’s conversation, we cover Pratyush’s investment philosophy, Farrer Wealth and starting your own business, and the benefits of sharing your ideas online.

I had a lot of fun with this one so I hope you enjoy my conversation with Pratyush Rastogi.

Show Notes:

[00:00:36] – [First question] – Background
[00:04:23] – Going from advisory to a money management model
[00:05:34] – Challenges facing the advisory business
[00:06:33] – Advice for those thinking of starting their own fund?
[00:09:49] – What’s an average day look like for Pratyush?
[00:11:54] – Managing time and balance
[00:13:20] – What more people should know about his role
[00:18:01] – How has publishing ideas and research helped Pratyush?
[00:21:56] – Recommended books and newsletters
[00:26:41] – How did Pratyush get interested in investing?
[00:28:39] – Being a 32-year-old intern
[00:34:37] – A lowest low of his investment journey?
[00:37:11] – Thoughts on leverage
[00:39:36] – Underrated skill or experience?
[00:41:38] – Influential books shaping Pratyush’s worldview?
[00:44:29] – If Pratyush was 18 again?
[00:46:38] – Plans for the future?

Connect with Pratyush :

Mentioned/Recommended Content:

Listen to this episode on Apple PodcastsSpotifyStitcherCastboxGoogle Podcasts, or on your favourite podcast platform.


Kalani Scarrott (00:36): My guest today is Pratyush Rastogi. Pratyush is the CEO and founder at Farrer Wealth Advisors, and was previously head of sales at Grab for Business, as well as some prior experience in private equity [and capital markets].

In today’s conversation, we cover Pratyush’s investment philosophy, Farrer Wealth, and starting your own business, as well as some of the benefits from sharing your ideas online. I had a lot of fun with this one today. So please enjoy my conversation with Pratyush Rastogi. Maybe just to introduce yourself to listeners who may be new to you. Could you give a quick maybe sketch of your life and career up until today?

Pratyush Rastogi (01:08): Sure. My name is Pratyush, and I run Farrer Wealth Advisors. We’re an asset manager based out of Singapore. My background, so I’m originally from India, but my family’s been in Singapore since 1998, on an off. I’ve actually lived around the world. And for studies, I was in the UK and I was in the US. I started my career at Barclays, what was then called Barclays Capital, and now I think is just part of the investment bank, about three months before Lehman Brothers collapsed.

So it’s a really interesting time to start in the markets when you basically saw everything melting down around you, but it is a great time to learn. And it’s a great time to really understand the dangers of leverage and what a bear market really looks like. So I started my career at Barclays, then I moved into private equity in India for a while. And then I went off to business school in University of Chicago in the US. And there, actually, I start to take a different path and I went more into entrepreneurship. So I started some companies while I was there.

Unfortunately, the way the visa process works in the US is a lottery system. So I didn’t get through that the end of school. So came back to Singapore where my family lives and joined Grab, which most people would be familiar with, which in case you’re not, it’s basically the Uber of Southeast Asia, and was running B2B sales for them and running up their B2B product, heading up their B2B product. Around that time, I started getting back to investing through family office route, initially just managing our family capital.

But what started happening, and this is really the interesting part in the creation of Farrer Wealth, is I started getting a lot of people, high net worth individuals and other family officers coming to me to ask help for investing. And I started to think about why that was happening. And basically, two, three reasons came out. In this part of the world, when you have upwards of $5, $10 million, you’re starting to get banked by the private banks, and those are really the service provided for you.

And a lot of customers were getting quite annoyed with the way private banks run, which is generally there was three key problems. One, it’s a sales driven model. So you are initially approached by investment relationship manager who may or may not be a very good investor. And so, really that model works is when they gather AUMs and then churn more. Two, just low returns. In general, they felt that the returns they were getting, especially during a very long bull market was low.

And three, there’s also a decision fatigue issue that gets into private banks, because they’ll offer you about 1000 products to choose from. And it’s very difficult when you’re not necessarily that keen on going through all these offerings. And choose that for yourself is quite difficult. So those are reasons clients are coming to me, to get unbiased and aligned advice. And then, so what we did is I created Farrer Wealth, which was, at the time, just an advisory business. And I turned my family office into condominium or clients.

And then three, four months ago, we evolved from just a pure advisory model into starting to manage money. We got a proofers license from the Monetary Authority of Singapore. So, for the last three, four months, we’ve also not only been doing advisory, but also directly managing money as well.

Kalani Scarrott (04:23): Yeah. So what was the thought process between going from advisory to that money management model?

Pratyush Rastogi (04:28): It was more just a scalability issue, to be honest. I think with advisory, it’s a great place to start to really build your track record and confidence with your client base. But when you give advice, it’s pure advice. You can’t execute for the behalf of the client. So it’s not a very great customer experience. So for example, it was great in 2020 when nobody was traveling, but now when customers are traveling and then they have to execute on your ideas, that can be a bit difficult.

Secondly, it’s not necessarily scalable when you have to basically action your device across various accounts. So for those couple of reasons, it made more sense to go into a model where you can directly manage money. So it made it far more scalable. And the last thing about advisory is, at times, investing can be a very personal game and it can be sometimes hard to convince somebody why something is a good idea. I’m sure you’ve seen it across your career where you think this is a really good company to invest in, but most people disagree.

And so, you spend a lot of your time trying to basically convince your client that this idea is right. Whereas when you are managing money directly, you can just execute and then explain after the fact. And that’s also a bit easier in this process.

Kalani Scarrott (05:34): Yeah. What do you think are maybe some of the challenges facing the advisory business or maybe some things you didn’t expect when starting your own business local?

Pratyush Rastogi (05:42): Particularly for Singapore, the advisory business is … Or just a pure advisory license, which called an external financial advisors license, it’s quite restrictive. And basically, I think regulation will become more and more strict on how that can be done. And so, just having a pure advisory becomes difficult. Secondly, as I said, I think scaling is a huge problem. And that’s one thing I didn’t quite predict going into it because everybody’s needs are slightly different. So you do have to cater a solution, the solution to that particular client. That takes a lot of time.

And when you’re a small shop, you can only take on so many clients. So it creates a scalability issue that I didn’t foresee and was one of the big reasons why I decided to go get licensed and get the approval to basically manage money directly.

Kalani Scarrott (06:33): Yeah, for sure. Any advice for someone thinking about either starting advisory business or either selling their own fund? What would you say to them?

Pratyush Rastogi (06:39): Well, honestly, I think if you think you’re starting to find my answer be don’t do it. And I say this, and I don’t mean to be negative here. But if you just think about it … I mean, just looking at some stats, just in the US itself, I think there’s 1500 hedge funds over a billion dollars in AUM. I mean, if you just think about how many more hedge funds are under a billion dollars in AUM, and that’s just the US, if think globally, I’m sure there’d be at least upwards of 10,000 funds in the world. Does the world need 10,001 funds? I don’t know if the answer to that is yes. Right.

And if you think about the funds that do pure funds that do really well and start off well, you either need to have some sort of pedigree where you’re from a top tier hedge fund and you have the backing of those … Your former colleagues and bosses, or even former investors, or you just need to have, in the first couple years, just have an amazing track record that skyrockets you to the point where your business is sustainable. But on the whole, and I spent … One of our solutions is we invest in emerging fund manager. And so, we do the diligence on the fund.

And thought our clients look … We’ve invested here. And I think when I talk to them, a lot of them have really struggled to break past that our initial AUMs that they’ve got. Because it’s very, very difficult to break past a lot of noise, right? And you’re competing against a lot of different options. So unless you have a very specific niche, where you say, hey, there is this base of clients that I can help because of this purpose or you have a particular pedigree, I don’t know if just starting a fund is such a great idea.

Kalani Scarrott (08:23): It’s interesting you said that as well, because my boss said something similar, because he had the track record. But sometimes you just need the numbers and the size before people are willing to even invest. They only invest once you have X number, like you know what I mean. There’s so many challenges. And even the other side of it’s not just investing, you’ve got all the business compliance.

Pratyush Rastogi (08:40): Yeah. And this goes back to Farrer Wealth in a little bit, and if I can just touch on this. And sometimes I wonder what value add to the world another fund, like the 10,001 fund is really having. And so, when I started Farrer Wealth, I didn’t want to just be a fund. I actually try not to call myself a fund manager. We’re asset managers. And I thought, why am I doing this business? But for me, I was meeting a very specific … Trying to solve very specific problem that my client base had, which was that they weren’t getting the level of service they acquired.

They wanted online advice, and they wanted … One way we set ourselves apart from other asset managers is we’re investors first. Most other asset managers are set up by ex-bankers or ex-relationship managers. They wanted somebody who knew how to invest and would put their money where their mouth is. So everything we recommend to clients, I personally invested alongside them. So I think, for me, it was very important that I was solving a problem rather than just creating another fund or creating another asset manager. That’s what gave me confidence to go ahead with Farrer Wealth. But in general, if you would ask me, “Hey, Pratyush, do you want to start a fund?” I would probably say no.

Kalani Scarrott (09:49): Yeah, justified and fair enough. What’s a day in the life look like for you, managing clients, what are you looking at, what are you doing?

Pratyush Rastogi (09:59): You mean a day in my working life or just from wake up to go to sleep?

Kalani Scarrott (10:04): We’ll go both, why not, yeah.

Pratyush Rastogi (10:06): Okay. I tend to wake up pretty early. I’m up around 5:30. So it’s usually the time of day right before the baby wakes up. We have a small baby at home that I usually spend for myself, catch up with the wife, start doing some work, then maybe we’ll wake up around 7:00. So, I’ll spend some time with her. And then I’ll go be at work by around 8:00, between 8:00 and 8:30, depending on the day. And then it’s just really the day is predominantly split up. Depending on where we are in the calendar, it’ll either be on looking for new ideas or reassessing the ideas we have.

During earning seasons, it’s more of a time to reassess the ideas we have or companies we have in our portfolios. And then the rest of time, it’s really spent on new ideas. And that’s really just a fundamental research, expert calls, on the ground diligence as much as we can. And then there’s always some part of the time that I spent in the morning on some sort of client communication. Because usually, we’ve had some inquiries from clients or something like that. Then around lunchtime, I’ll probably stop. That’s where I usually go exercise and eat lunch.

And then back, and then the rest of day continues similarly. And then what’ll happen is I’ll peel off around 6:00, 6:30, and I’ll head home. We’ll put the baby to sleep. My wife and I will spend some time together. We’ll eat dinner, spend some time together. And then I’ll usually log back around at 8:30 usually, and then finish work. Or if I have calls with the US, which sometimes happens when we’re doing diligence. And then actually, funnily enough, most days, I’m actually asleep by the time the markets opening in the US.

Because I don’t really care what’s really happening on a daily basis. So for most of the time, I’m actually asleep from about 10:00 at the latest. So a lot of times, that means I’m actually asleep throughout the market. And then in the morning, I’ll wake up and try to figure out what happened.

Kalani Scarrott (11:54): And obviously, congrats on the kid as well. But you got a lot on your plate. How do you manage time away from investing and balancing all that? Any daily routines or rituals? How do you keep your focus and maintain that balance, I guess?

Pratyush Rastogi (12:07): Balance is really … It’s really important concept in my life. If you just heard the story of my day, there’s time for everything. I still get in a good 10 hour workday, I still have time for family, I still have time for myself to exercise. And it really comes down to basically being disciplined about your schedule and being very, very concentrated on what you need to achieve that day. So if you get into a routine and you maintain that routine with discipline, there’s plenty of time in the day to do everything.

And I talked about this in a little bit in our first inaugural, in our first newsletter, that we published just a month ago, is that portfolios tend to be a reflection of the person managing them. And if you look at our portfolio, it’s a balanced portfolio. We have high growth stocks. We have value stocks trading at 10 times or less. We have companies from all around the world. We have tech companies. We have cash and carry businesses. And it’s just a balance in itself. And it’s a very good reflection of how I live my life with balance. So I think balance is a super important part of my day, getting time for everything that I need to get done. And I think a good amount of discipline helps you keep that balance.

Kalani Scarrott (13:20): Yeah, that’s great. In terms of running your own business, has it been anything that’s most surprised you about your role or profession? What do you wish maybe more people knew about your role and what you do?

Pratyush Rastogi (13:29): I think it comes down to how you really want to position your business and how you want to carefully curate the investor base you have. A lot of times, when you start an asset management business, people think that all AUMs are equivalent. So sometimes you’ll get recommendations or you’ll get people coming through the door who may not be right for your business. But when you’re starting, you’re in a desperate need to grow AUMs because you need to pay the bills.

And I think a lot of times, I’ve seen as managers and even funds make that mistake is where they just let the wrong people through the door. And that doesn’t mean those are bad people, that doesn’t mean that they have ill intent. It’s just that they’re wrong for the way that you invest in the way that you manage your business. So you have to be very clear about product market fit and who this product that you’re creating is really right for and who is not right for. And you have to be quite cutthroat in terms of who you let into your business and who you don’t.

And again, it comes off as a little bit snobbish, but I don’t mean it that way. Because it’s really you’re not doing a favor to the person you’re letting into your business either if this product is not right for them. So they’re going to have a miserable time, you’re going to have a miserable time, and you’re going to spend a lot of time dealing with clients who are not a match for your business. And it’s really hard to begin with, but one piece of advice I got before I started this is be really careful about who you take AUMs from and to take money from.

And I think it’s been excellent advice. And I think people don’t think too much about it when they start a business and they think all AUMs are the same. And they’re really not. And it’s something really worth thinking about. But it is tough to begin with. Because initially, you need to pay the bills, and you’re trying to get to the spot where you can make the business sustaining. So you’re willing to take AUMs from anybody. But if you do that, I think you’re going to run into problems down the line. I think a lot of people don’t understand that. And it’s important that you as somebody who’s starting that business and running that business, really take some time to think about that product market fit.

Kalani Scarrott (15:36): And so, how do you maybe solve that problem specifically? Is that just being super clear and upfront with the communications and sales or chatting to potential investors? How do you do it?

Pratyush Rastogi (15:43): Yeah. I mean, I think one thing that sets Farrer Wealth apart from some of the other businesses, as much as coming in is that we don’t mind volatility. We think it’s part of the game. And I think maybe it was Morgan Housel who put this nicely, it’s just the admission fee to investing. And so, on everything, all of our products, we label in big letters that, look, this is going to be a volatile product. And if you’re going to worry about it, this might not be right for you. If 10%, 20%, 30% drawdown, it’s going to hurt, going to really freak you out.

Then perhaps this is not right for you. And so, we’re very upfront of that. Two, it’s also in the sense you get when you speak to customers, potential customers about the questions they ask. And again, they’re not wrong questions, you can just tell that they’re looking for a different product. So, for example, if customers come to you and they’re interested in just your next greatest idea. Now you know, as well as I do, not all your ideas are going to work out. You’re going to think this idea is really good, but it’s my feeling.

Even having a 50%, 60% hit rate is actually a pretty good deal in our line of work. So when they do that, they’re really looking for more of a research type product, where you can churn out somebody who’s churning out research. And that’s not really what we do. So when you get that sense, you can understand that, and maybe perhaps tell them that, hey, we don’t do that kind of work. So this is about really paying attention to the questions that customers ask. And as I said, being really upfront by what your product is.

And we’re very clear that gains are not going to come quickly. We’re not traders. We love to invest over and make up perform insurance for three to five year period no matter what the product is. And so, we make that clear. And I think that’s helped, because I think that’s really created a self-selection of really what I think are really wonderful investors, one for clients. And I know that for a fact, because in March 2020, when everything was melting down, I didn’t get a single panic call from any investor, any client.

I mean, I got calls to just discuss, hey, how should I think about this or that. Those are great discussions, but not a single panic call. And that was a real blessing to help me keep my head straight during that period of time. And luckily, we did really well during that year.

Kalani Scarrott (18:01): Yeah, that’s something. It’s hard enough as it is, let alone when you got clients breathing down your neck. So getting that thing started on the right track is a lot easier, I guess. In terms of … Because Farrer Wealth posts a lot of … On Substack and Twitter and stuff, how is putting your thoughts and ideas out in public affected, maybe you, your career, and also your business?

Pratyush Rastogi (18:18): So there’s a couple of reasons I do it. For one, there’s a discipline thing. It’s very easy to, say, invest in a company without doing a lot of diligence. It’s a click of a button. It can be done in an instant, especially public markets, obviously, I’m talking about. And a lot of times, and I find this with people who manage money for themselves now, don’t get me wrong, they’re amazing investors who just manage their own money and their level of diligence is super thorough.

But on the whole, because you don’t have to show that to anybody or necessarily talk about your diligence process, your diligence process may not be as deep as it should be considering how much money you’re investing in a particular position. But for me, I know I have to publish research publicly. So I need to know, I need to make sure, and I need to show it to my clients. Because if they ask, I need to be able to talk quite extensively about why we chosen opposition, and they’re in their right to ask.

So I need to write and make sure I have these thesis formed so that at least I can talk about the position. Now, again, that doesn’t mean that forces me to stick to the position necessarily. I’m very open to changing my mind. But at least that base diligence is done. So that’s one reason to do, just to maintain that discipline that, hey, if you’re going to invest, make sure you invest properly. The second part of it is I found the more you give out in the world, the more you get back.

So I’ve had great conversations with people who’ve read my research or picked up on my research and reached out to me and we’ve had great discussions and I’ve learned a lot from them, and they’ve gotten some value from the research. And the third thing is there is a little bit of a branding component to it. You are a business, there is a marketing aspect of it. And I’ve never spent a single dollar on marketing. The only things I’ve done are posts on Twitter, create my Substack. So they’re low cost marketing channels for me that have actually had quite high ROI, because I’ve gotten clients from those avenues.

Kalani Scarrott (20:21): Yeah, what more can you want? Any tips or advice maybe for someone starting out with a Substack or sharing ideas online? What do you think is some key points do you think to keep in mind?

Pratyush Rastogi (20:30): Yeah, good question. So I think first, define really why you’re doing it. What is your purpose? If you’re doing it just for fun and you’re doing it just to get some ideas out there and build relationships, then great. Go ahead and do it. Just make sure you don’t become a slave to it. Because what sometimes happens is you’re like, oh, man, I haven’t posted in a week, I must post. Or haven’t posted in a couple days, I must post. But then I don’t know, not that many people have that many interesting things to say that often. Great. There are a few, of course, but it’s rare.

So, post when you have something interesting to say. Don’t post for the sake of posting, I would say. But obviously, if you’re doing it where you’re really trying to monetize the Substack or you’re really trying to do that, which is a game I’m not playing, but if you are doing that, then, yes, frequency matters. But I would say is so really define those two reasons why you’re creating the Substack. And if you’re doing it in terms for interaction purposes, just make sure you do it so that … Continue to do it to a point where it’s enjoyable.

When it stops becoming enjoyable, the quality of the work won’t be very good. And you’re going to start seeing that and your readers will start sensing that that, hey, this person is just posting for the sake of posting. I would say, don’t really understand why you’re doing it and don’t become a slave to it.

Kalani Scarrott (21:56): Yeah, that’s great advice. In terms of maybe other people’s new sales and stuff, for me, newsletters probably give me a way to have a consistent stream of ideas and information. Whereas maybe books are more to improve mindset and principles. Do you agree? And maybe what are some newsletters or books that jumped to mind that you’d recommend do you think?

Pratyush Rastogi (22:11): That’s a good question. So I think one thing I’ll push back a little bit on that newsletter a bit, if you don’t mind is … And I’ve talked enough people, I know this is a problem that’s beyond just me, is there are a lot of newsletters now. And the benefit and the impact of Substack has been very apparent. There’s too many newsletters. You could subscribe to a new one every day and never run out of newsletter to subscribe to. So at times, your inboxes gets flooded and you feel the stress of catching up with it.

And I felt that for a while, because I was subscribing to all these newsletters. I thought everything was great. And then a quick way to filter that out is very quickly, you will start to see which newsletters you will open immediately and which ones you like, oh, I’ll read that one later. The ones that you read later and if you keep pushing them down the line, just unsubscribe to those. I think maybe there’s … I don’t know what the right number is, but I have assumed somewhere between maybe 5 to 10 something is the amount of newsletters that maybe you can consume in a given week.

Maybe it’s even less than that. And I think just really try to curate the newsletters that you consume. It’s the same thing with any kind of diet. You need to balance it and you need to manage it. But I think there’s couple of newsletters that I think I opened almost immediately every time I get them. One is Ben Thompson’s Stratechery newsletter. I don’t know if I’m saying that right. I’ve never known how to say it. I don’t know how to pronounce that, but that one. Actually, it’s funny because I think even he’s really recently starting to publish last.

I think even he thought it was getting too much, three times a week, whatever he was doing. But I think that one I read quite religiously every week. The second one is there’s an NYU professor named Aswath Damodaran, who writes his listings on the markets. And I just like the fact he’s just super frank. I like he says to the point. He runs his valuation the way he runs it. And I appreciate that he sticks to and says, look, this is the way I value businesses and I’m going to stick to it. And I’ve always found a very high amount of quality to output in those newsletters.

And then the last one, the one that I read every very recently, and I’m not entirely sure how I found it or I subscribed, but there’s a newsletter called Rational Research, which is essentially just an update and the sent weekly. It’s an update of every kind of major announcement of a company that’s been come out with last week, whether its earnings or something about it. And it’s just a great snapshot to really catch up with a lot of companies during the week. And I’ll read it over five minutes. I’ll double click on something that might be interesting to me.

But I’ve really found in terms of just the ratio of information to usefulness is really high in that newsletter. So I read that one every week. In terms of books, there are three that come to mind. One is Thinking in Bets by Annie Duke. I don’t know if you’ve read that one, but it’s a fantastic way to understand decision making. And it really taught me to not treat the quality of the decision by the outcome. So it was an incredible book. The second one is Setting the Table by Danny Meyer.

So for people who don’t know Danny Meyer, he’s the guy who started a lot of really successful restaurants, including Shake Shack, was probably the most famous chain, and Gramercy Tavern in New York. And he’s a very successful restaurateur. And he wrote this book about setting the table, and I think anybody who’s ever in the service industry, and I include financial services in that, should read that book. Because it really teaches you how to treat your customers well. And the last one is the Rational Optimist.

I think we live in this world where I think the negative news cycle gets to everybody and makes people more and more negative. But the reality is, if you take a big picture view, we’re actually doing pretty well as a society. If you look just 50 years back, the education rates are up, child mortality is down, we’re all living longer. We are living healthier, almost on every metric perhaps, besides environmental metrics, we’re doing better as … The humanity is doing better than it was 50 years ago. And I think that gets missed in our day to day conversations.

And I think as investors, and most of us, you need to be a bit of an optimist to invest. If you think everything’s going to be terrible and you think everything’s going to go badly, then investing is perhaps not for you, or maybe just running a short book is probably better for you. So I think it’s really important for people to keep that in mind, is that things have gotten a lot better and are probably more likely than not going to continue to get better. So having that optimist mind frame is important as an investor.

Kalani Scarrott (26:41): Exactly. So in terms of your investment journey, was it always a passion growing up? Or because you started at Barclays and developed from there. How did it all go?

Pratyush Rastogi (26:49): No. Actually, it’s funny, a lot of my peers and people have become my friends in the investing space. They all have these stories that they read, The Intelligent Investor, when they were 13. And they were running money from high school and all sorts of stuff. And that wasn’t me. Honestly, I think it took me a while to figure out what I wanted to do. And I always told myself, the 20s were going to be about exploration. And I’m very glad I did, because it gave me … I worked in banking, I worked in private equity, I ran startups, I work for companies.

It really helps, I think, shaped the way I look at investing now, because I have that kind of level of experience that I think a lot of investors who just only been investing the beginning don’t work. But to answer your question, no, I think it’s only in my late 20s when I really started getting back to investing. About the time when I was leaving Grab and we were starting these family offices, I started rereading all the great stories the Warren Buffett way and rereading Intelligent Investor and all these books, and really ignited the passion again. I’ve been late to the game.

And we might talk about this, but it’s one of the reasons why I chose to become an intern at 32 years old, and so on and so forth. But that being said, I mean, I won’t exactly say my age, but let’s just say … I mean, I’m still in my early 30s. I’ll say I’m still in my early 30s. We’re going to be living, we’re going to be doing this for another 50 years, whether you start in your 30s or 20s scheme of things, it’s probably not make a difference. But obviously, the earlier you struck the better. But to answer your question, no, I started much later than most people in this business. I constantly feel like I’m playing catch up, but I think I’m getting there.

Kalani Scarrott (28:39): Exactly. It’s a long race anyway, so we got plenty of time. So, if you could, I’d love to hear more about your story and experience as a 32-year-old intern. What was that like? And just walk me through it.

Pratyush Rastogi (28:48): Yeah. So as I said, one of our products that we have … So we have three products for clients, one is a managed solution, which is from the equity. One is an income solution, which is Singapore REITs. And one is a fund of funds solution where we recommend other funds to our clients. So one of the funds that we have come across a while ago was a fund called Haven Capital that’s run by a guy named Fred Liu, who’s based out of New York.

And so, after falling thread for about six months and talking to him a number of times, I was very impressed with the way he thought and the way he analyzed businesses, and he was probably the best mind I had met in terms of understanding flywheel models and any economics of the business. So I invested with him. And I also recommend that to my clients, my clients also invested with him. And around, I think, December 2019, he put out a call for interns, which he does regularly. I thought about it and I said, look, there’s two reasons why you might want to do this.

One is because, well, first of all, it’s just another way to do due diligence. I’ve invested with them. Or most of my clients have invested with him. I need to be constantly doing diligence on our investments like I would for any company. And the second part of it is like, here’s a chance to learn from somebody who knows a lot about stuff, a lot about certain topics where I want to improve my knowledge. But there were three things that held me back. One is just pure ego. I was already running a business. What does it mean to become an intern? What was your client’s thing?

Two, I’m a bit older than Fred. Not by much, a couple of years, but older than him still and technically have more experience than him. Alright, in terms of just overall. And then the third was just this kind of feelings that are, am I okay to work for somebody? There’s a reason I run my own business. I am not great. I don’t love working for other people. But I approached Fred about it, he was very happy with the idea. And because … Good on him, he had no qualms about these issues. And we worked together for four months, and it was fantastic. It was a fantastic experience.

And we have a lot of fun working together, it helped me really, really cement my thinking about him and his funding and that’s what … I’ve increased my investment in Hayden and solved the clients. And it was a really good story how just, if you put your ego aside and you just focus on learning, you’re going to have a lot of benefit. And I really recommend people do so. And the other reason why I recommend people do so, and especially with people younger than them is, if you think about a lot of things that have cropped up didn’t exist 5, 10 years ago.

Social media is anything, YouTube is a new thing. Cryptocurrency is a new thing. So really, the experts on this field are going to be quite young. So, if you want to learn about these things, you’re going to have to go to people younger than you and say, “Hey, can you teach me or can I learn from you?” And I think this is just going to continue. I don’t think somebody who’s 56 years old will have an advantage in these fields, because they’re also new.

So I think it was super important lesson to me that, hey, no matter how old you are, if there’s somebody younger than you and with technically less experience from you, but if they know something you don’t, you should really reach out to them to try to learn from them. So I highly recommend people do it. Now, I don’t think most people will do this. So I think it’s difficult for a number of reasons. But in any small way, if you can put your ego aside in order to learn, you’re always going to benefit.

Kalani Scarrott (32:18): Yeah. Similarly, I spoke about this the other day in regards to data science and fund managers. A lot of times, you got 50, 60-year-old fund managers bringing on a data scientist who might be mid-20s and just like … You know what I mean?

Pratyush Rastogi (32:29): Yeah.

Kalani Scarrott (32:29): And getting them to get on board with that is a pretty tough gig. So do you think maybe that’s a source of edge, I guess, putting your ego aside and just …

Pratyush Rastogi (32:35): I think putting your ego aside in anything you do is an edge. If you let ego get in the way, and there are times an ego is important. It’s important to have self-worth, it’s important to have self-confidence, it’s important to value yourself. But you should never put yourself up to this pedestal that becomes a hindrance. You should absolutely think about doing things that may hurt your pride in the short run, but in the long run, will do wonders for you. And this is beyond investing, you can be in any kind of … For example, I’ll give you just one example. I trained Brazilian jiu-jitsu.

And I’ve been training for a bit, but it’s a young man’s game. And I’m not that young anymore. So I’ll show up to class and there’ll be somebody who’s only been trading a month or two. And all of a sudden, they’re able to do things that you haven’t … Or you’re just starting to learn even though I’ve been doing it for a few years. And you end up competing with them, and they might beat you. And it’s very easy for ego to get ahead of you there and you say, you know what, screw this, I’m not doing this anymore.

But the reality is, is really the only person I need to compare myself to is myself. Am I better than myself six months ago? Am I better than myself a year ago? And it’s the same thing with investing. You want to learn as much as you can from people so that you can improve and compare yourself to yourself six months ago, a year ago. Bottom line, if you can put your ego aside, it’s going to benefit you a lot in life.

Kalani Scarrott (34:06): And its something that you control as well. You can only control yourself, you can’t control what other people are doing or how fast they progressing.

Pratyush Rastogi (34:12): Exactly, right. Exactly. And I think this is how … I don’t know if you felt this. But growing up in an Asian household, you’re constantly compared to other kids. And I think it’s a terrible thing that Asian parents can do. So I think, really, comparing yourself to yourself is really the only thing you can and should do.

Kalani Scarrott (34:33): Yeah. And it’s hard to rewire that, isn’t it? Because it’s just ingrained.

Pratyush Rastogi (34:35): Yeah, it’s very hard.

Kalani Scarrott (34:37): Let me talk about your general investment journey. Has there ever been a lowest low as an experience that really question what you’re doing and why you’re doing it all and most painful investing list you’ve had?

Pratyush Rastogi (34:48): Luckily, I think I mentioned. I never had any go puke in a bucket moments where something just goes so badly that you’re just in shock. But certainly, and this is the nature of putting out ideas publicly, sometimes some of those ideas go wrong, and a lot of them will. So for example, recently, I think it was February, we put out a recommendation on red bubble. And that obviously, within very quickly fell about 40%. And that wasn’t good. And I had to realize that there were certain parts of the thesis that broke throughout that process.

And we actually ended up selling out at a loss. I mean, and again, it wasn’t that I think the company is terrible. I think our thesis was wrong and we had to stay disciplined and reevaluate the thesis is wrong. And it can be a bit “embarrassing” at times. You put out something publicly, to your clients, to the world, and it just goes wrong. But that’s part of the game. And you have to just learn to be okay with that. And I come back to that fact is that in this game, and Peter Lynch says this, he said this, “If you’re betting above 50%, 60%, you’re doing quite well.”

So even if you’re getting almost close to half your ideas wrong, that’s okay, so as long as you manage the other half well and you let those work for you. So those are the moments that sometimes are tough. And you’re going to go through periods of underperformance. And those are the times when you really start to think, am I doing something wrong? Or should I be doing something differently? And it’s always good to reassess, but it’s never good to change just because of underperformance. But same way, if you’re outperforming, you also want to reassess.

Look, is this been lucky or have I done something right? But certainly, periods of underperformance or periods where you’re losing money for clients is never fun. It’s inevitable, but it’s never fun. And you just have to go through it. And I was talking to a friend the other day, and he said something interesting, “It’s not that people have been in the game like losing money or like underperforming. It’s just that they’re more used to it, so they can stomach it better.” I think that’s an important lesson.

And those are always the hard parts I find of the investment journey, is because your clients are trusting you to do the job for them, and you want to do the job, but you just know that you’re never going to be able to do the job all periods of times and just being okay with that.

Kalani Scarrott (37:11): Yeah, that’s a tough one. I’d love to hear maybe just your thoughts on leverage. And we spoke about this previously, but maybe how your viewers change towards it. And just walk me through your thoughts on, I guess.

Pratyush Rastogi (37:21): So initially, when I was advising, I was advising a lot of clients with lot of fixed income portfolios, and they operated with a certain higher leverage because the thinking is that, oh, well, fixed incomes thought to have an equity, so leveraging fixed income should not be a problem. And honestly, from about 2010 to 2020, that was a very good trade. And a lot of people made a lot of money off it, is basically buying bonds, leveraging it. And because of declining interest rates, those bonds did really well. And your cost of funding also fell.

And so, that spread just kept getting bigger and bigger and you made lots of money. So it was a very reasonable way … Sorry, I see in hindsight, looking during that period, it seemed like a reasonable way to make money. And at the time, I was still wary of leverage, but I was like, okay, if you want to leverage just a little bit on the fixed income side, again, that’s okay. And I would tell clients, “Okay, that’s fine.” Personally, I don’t run leverage that way. And I don’t actually have leverage in my portfolios. But if you want to do it, it’s okay.

But then March 2020 rolled around, and that changed my view of everything. Because what were pretty liquid bonds, even double, even a rated bonds became very liquid very quickly. And you started seeing write-downs in prices go for things that were trading at 95 cents on the dollar quickly go to 60 cents on the dollar. And because you’re leveraged, we started getting capital calls. So I was talking to one of my clients bankers in March, and he said, I think in a day, he had to make something … During that week, he was making about 10 to 15 margin calls a day to his clients.

So it was aggressive. And what happened is when you have drawdowns, you still owe the same amount of money, but the asset value is obviously written down. And people had to sell out at 60 cents on the dollar, 50 cents on the dollar of assets that were actually worth 90, 100 cents on the dollar. And so, that changed my view a little bit, that leverage is fine in most circumstances. But then in those couple circumstances, when things go really bad, it’s your worst nightmare. During that time, that’s really going to make you lose sleep. So I’ve become more and more opposed to leverage in general. I basically told all my clients to de-lever as much as possible and most of them have.

Kalani Scarrott (39:36): Yeah. That’s totally fair enough. I’d love to move into my closing round of more broader questions. So, what do you think is the most undervalued life experience that maybe university-aged students don’t give what to? What’s an underrated skill or experience that you think maybe they should have?

Pratyush Rastogi (39:48): That’s a great question. And my answer is always sales. I think sales gets this really bad wrap, because it’s associated with scamming people or it’s associated with bad practice. But the reality is, you are selling every single day of the week. Whether you are selling your business to a VC fund, you’re selling your fund to a client base or investor base or even if you’re not in a sales role within a company, you’re selling your ideas to your colleagues or even your personal life.

You’re trying to convince your partner why you want to go make a life decision or why even something smells, why you want to go somewhere for a holiday and you’re constantly selling to your kids. Because you’re constantly trying to get them to do stuff. So sales is a really important skill that people just don’t value. And again, I say this because I talk about emerging managers. I think they’re just bad … A lot of them are where they are when they haven’t grown, because they were just bad salespeople. They don’t value the sales process.

But it’s super important to really understand just a couple basic things. And you don’t have to be a sales expert, but you need to understand how to pitch something, an idea or a product. You need to understand how to deal with objections. You need to understand how to qualify a client or an investor. And these things are really … These form the basis of sales. And I think people just don’t spend enough time understanding how to sell, and it’s treated like this icky word. And it’s an end. Fair enough.

Obviously, there have been some terrible salespeople who have sold snake oil to people, but it is a very important skill. And I’m very lucky. Actually, in business school, I took a course, or a couple of courses in sales. And it’s really been one of the most beneficial skills I’ve picked up throughout my career.

Kalani Scarrott (41:38): Yeah, that’s great. I love it. We spoke previously about maybe some investment books and stuff. But has there been any other books, ideas, experiences that have been influential in shaping maybe your worldview?

Pratyush Rastogi (41:48): So this might be off topic, but let’s go there. And if you think it’s not relevant, then we’ll get there. But I read this book called Die with Zero. It’s written by a guy named Bill Perkins. And I don’t know when it first published, he did his rounds in these printing press, but I think it’s died out since then. And the concept is pretty simple. Basically, his points, if you die with any money in your bank account, you’ve wasted it. And the more I think …. And basically his point was this, a lot of us, especially investors are notorious at this, and I am fully guilty, is when we look to spend something, we first think about how much that could compound over how long with time.

So, say you want to buy something for yourself that’s going to cost a couple thousand bucks. Or you take a trip. That money compound for a long period of time adds up, and then it keeps you from spending money. Because like, well, I want this money to compound and compound and compound. But the reality is, is that you’re trying to save this money for when you’re 60, 70 plus, when you’re too old to enjoy it. And so, that becomes a bit of an issue, is we save all this money for life experiences, which are only going to happen later in life, which is bonkers if you think about it.

So, what you want to do is spend that money in a more measured fashion now, so you can enjoy the experience. And that could be taking an extra trip or paying up for an extra house or doing something like that. But the counterpoint is that, well, I want the money to compound so that I can give to charity. The reality is a lot of charities would prefer your money now rather than 20 years from now. So you want to start giving that away? Or people say, oh, I want to give that to my kids. Right, okay. I get that.

But your kids … Let’s say your kids are getting … Especially I have this concierge with my clients. Your kids are in their 20s or 30s now, because some of my clients are older. Wouldn’t they benefit from the money now, rather than when they’re 50 and they already have their own money? That book made me really think about spending and how to manage my money. And I think to put it bluntly, I think I’ve loosened the purse strings a little bit since that. And I can’t say I’m all the way there. I think that the compounding effect still weighs in my mind. But I’m getting there.

And unfortunately, we’ve had some experiences in the family where some terrible accidents that led to generation getting wiped out in an instant. And we’ve had some experiences. And the world has experienced now with COVID where life is quite short. It’s really important to think about how you want to spend your time on this world. And money is a big part of that, and how you want to spend that money. So I think that book has got me, over the last year, thinking a lot about that. I mean, put it this way, when things get a little easier and travel gets a little easier, I think we’re going to take a few nice trips.

Kalani Scarrott (44:29): Yeah. That’s a lovely answer. I’ll get onto that book that you said because of that. So in terms of opportunities today, what do you think maybe their life? If you’re 18 again today, where would you be spending your time and how would you be spending it?

Pratyush Rastogi (44:40): I think if I was 18 today, I would really try to think about how I can make money for myself without having to join a large corporation. I think being the option is available to you to be an individual contributor to society or to be an individual artist, even an investor … So, I’m very impressed by people who have created entire business instead of investing Substacks. They’ve done a fantastic job. And I think there’s a lot of opportunities for you to build businesses and build a career for yourself without necessarily having to work for anybody else.

That doesn’t mean don’t go join a company and don’t get some experience from working for somebody who’s really good or somebody you admire. Obviously, those are really important opportunities. But I think if I was 18 all over again, I would really focus on myself and how do I really start to become an individual creator. I think the world is allowing you those opportunities now. And if you think about it, and the reason I say this, is that I spent some time catching up with my MBA friends, and it’s been five years since we’ve graduated.

Most of them are not very happy with what they’re doing. And they’re working for big companies, and they’re working for a lot of companies that you know well and are known for good employee relationships and things, but they’re still not very thrilled about working and working for them. So the more you can set yourself up for yourself and by yourself, I think the greater benefit and more satisfaction you have in life going forward. It’s not an easy route. But there’s certainly far more opportunities to do that now than there ever were.

I think that would be my … How I would approach life when I was 18. Now luckily, I’m living that life because I run my own business and I’m doing things myself. So I’m very happy with where I am. I think it is something I would recommend to somebody who’s 18 and coming out of … Or just starting your college experience.

Kalani Scarrott (46:38): Yeah. I’m loving those answers. And the final question, maybe what plans or vision do you have for the next 5 or 10 years? What areas are you most curious about going forward?

Pratyush Rastogi (46:47): Yeah. So I think the vision ideas is really just to grow Farrer Wealth. I think we have a real opportunity here in the market to build a really good business and asset management business built by investors. That will be done two ways. One is by making sure our returns are good and two, making sure that the products that we release to our clients are top notch, and it’s more quality over quantity. As opposed to a typical asset management business where growth is really driven by gathering AUMs and heavy sales and hard sales.

So I think the vision for Farrer in 5, 10 years, if I can say, hey, look, most of our products or at least overpriced and outperforming insurance, it’s added significant value to clients. The amount of fees that we’ve taken from clients pales in comparison to the value that we created for them, I think in 5, 10 years, I think I’ll be very happy with that kind of outcome. And we’ve really saw these pain point for clients where they don’t have to deal with private banks or just generally unaligned service providers.

I think in terms of where I’m curious to spend some time, I think I’m woefully ignorant about crypto and blockchain and anything related to NFTs or DAO. So these are things I think I need to spend more time. Again, I’m not saying that I think it’s an amazing investment. Actually, I just don’t know. I just don’t think I’ve spent enough time on it. So I think if I get some time in December, I’m going to maybe take a week where that’s all I do, is spend a week just trying to learn more and more about each of these areas. And it might turn out that I say, hey, you know what, this is not for me, this is not investable for me, but at least I’m doing that in an educated way rather than dismissing it without spending much time on it.

Kalani Scarrott (48:51): Yeah, that was great. I love it. Put your ego aside and learn something new, and yeah.

Pratyush Rastogi (48:52): Yeah, yeah. So we’ll see. But every year, I say in December, I’m going to take some time off to do something. And then for one reason, in other words, it gets ahead of you. So I’m hoping this year that it works out.

Kalani Scarrott (49:05): Yeah, fair enough. I’ve loved today’s conversation. Before I forget, anything else you want to plug? Where can people find you?

Pratyush Rastogi (49:09): I think the best place to go is our website, it’s farrerwealth.com, F-A-R-R-E-R, wealth.com. And through that, you can subscribe to our Substack where we usually mail out things once every two weeks, or sometimes it’s three weeks. Again, depending on if it has something interesting to say. And I think those are two ways to keep up with us. We do have a Twitter account, which is @farrerwealth. So you can follow us there as well. We post some things on there occasionally. But I’m always keen to meet and talk to interesting people. So if you ever want to reach out, feel free to reach out directly, and looking forward to fun conversations.

Kalani Scarrott (49:53): Yeah. Perfect. Pratyush, thank you so much. I had an absolute blast. This has been great.

Pratyush Rastogi (49:58): Great. I’m glad you enjoyed it. And this is really fun. You have an amazing platform with some amazing investors on it, so it’s an honor to share the platform with them.

Kalani Scarrott (50:06): If you enjoyed this podcast episode, be sure to check the website, compoundingpodcast.com. On the website, you’ll find every episode complete with transcripts, show notes and other related resources. Also be sure to sign up to my weekly newsletter, Curated by Kalani, where I share what I’ve been reading, learning, and watching for that week. Same as the podcast, it’s compressed to impress and I aim for maximal return in the time invested. So sign up at kalanis.substack.com. You can also connect with me on Twitter @ScarrottKalani. But until next time, have a good one.