How This Value Investor Beat the Market and Grew His Hedge Fund | Yaron Naymark | 1 Main Capital
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this compelling episode, Yaron Naymark, founder and managing partner of 1 Main Capital, shares his journey from launching with under $2 million in 2018 to reaching $80 million in AUM today. (01:38) Naymark discusses the challenges of growing a concentrated long-biased hedge fund, including a particularly difficult period in 2022 when a $100 million investor fell through during a drawdown. (05:58) The conversation covers his evolution from analyst to portfolio manager, the importance of consistent communication with investors, and recent operational improvements including a $20 million strategic investment from Cannell Capital. (42:57)
- Core themes include the operational and psychological challenges of scaling a hedge fund, the importance of maintaining investment edge while growing AUM, and building sustainable investor relationships in the alternative investment space.
Speakers
Yaron Naymark
Founder and managing partner of 1 Main Capital, a concentrated long-biased equity fund based in New York City launched in 2018. Naymark has grown the fund from under $2 million to $80 million in AUM over eight years, maintaining a Warren Buffett-inspired investment philosophy focused on finding good businesses at good prices with aligned management teams. He is active on social media discussing investment ideas and has been featured in various podcasts and the Graham and Doddsville newsletter from Columbia Business School.
Max Wiethe
Host of Other People's Money podcast, focused on interviewing fund managers about the business and operational aspects of running investment funds. Max covers topics ranging from fund launches to scaling operations and investor relations in the alternative investment space.
Key Takeaways
Launching a Hedge Fund Isn't Economically Rational, But Can Be About Regret Minimization
Naymark emphasizes that starting a hedge fund is not a smart economic decision on a risk-adjusted basis, as most funds fail and working at an established fund often provides better guaranteed compensation. (08:09) However, he framed his decision through Jeff Bezos' "regret minimization framework" - he wanted to know if he could truly excel at managing capital his way. As he puts it, "investing is a very personal thing. Everyone who is passionate about investing wants to do it their way, and it's like art. You wanna draw the art your way." (09:42) This mindset shift from purely economic to personal fulfillment can help ambitious professionals make difficult career transitions where the upside potential justifies the risk.
Sustainable Growth Requires Matching Fee Base to Operating Expenses
The critical milestone for fund sustainability isn't about hitting a specific AUM number, but rather reaching a point where management fees can cover both personal living expenses and business operations. (04:17) Naymark kept both his personal expenses and fund operating costs deliberately low, but emphasized that at $3 million AUM, "it doesn't really matter how low your living expenses are" if you want to support a family responsibly. (07:24) The key insight is that entrepreneurs need to plan for when revenue streams will intersect with total cost structure, not just focus on growth metrics.
Build Authentic Content Distribution Before You Need It
Naymark's organic marketing approach through Twitter, podcasts, and detailed investor letters created a sustainable pipeline of interested investors long before he needed them. (30:20) He notes that around 2022-2023, he reached "escape velocity" in distribution list size where existing investors began naturally marketing for him by forwarding his content to their networks. (30:45) The lesson for professionals is that consistent, valuable content creation builds compound returns in network effects - each piece of quality content becomes a permanent asset that continues to attract opportunities.
Manage Investor Expectations Through Transparent Communication
Rather than treating LP conversations as pure sales pitches, Naymark approaches them as genuine dialogue with thoughtful potential partners. (14:33) He acknowledges that most institutional conversations end with "not now" rather than "no," and views this as building a pipeline rather than rejections. (16:11) This approach reduces the psychological stress of fundraising while building authentic relationships. For professionals in any field, treating potential partnerships as long-term relationship building rather than transactional interactions creates more sustainable business development.
Strategic Partnerships Should Align Incentives and Values
When Naymark accepted a $20 million strategic investment from Cannell Capital, it came after a two-year relationship building period where they got to know each other through shared investments and conferences. (44:04) He had previously declined other seed deals that didn't feel like natural partnerships, including offers that felt too focused on quick scale rather than long-term performance. (47:44) The key insight is that strategic partnerships work best when both parties share similar time horizons, values, and definitions of success, rather than purely transactional arrangements.
Statistics & Facts
- Naymark started 1 Main Capital in early 2018 with under $2 million, with $1 million of his own capital and a few hundred thousand from former colleagues. (01:29) The fund has grown to approximately $80 million in AUM as of the recording.
- The fund's top two positions represent approximately 45% of the portfolio, with the top five positions comprising 70% of total assets. (20:16) This represents a significant increase in concentration from the fund's earlier years when the top five positions were around 40% of the portfolio.
- Naymark runs the fund with approximately 95% net long exposure currently, compared to starting around 60% net long in the early years. (20:34) The fund maintains a 5% annual hurdle rate that has been in place since launch.
