Prince Henry Cui Bono Fund Overview

This overview, which can be read in under a minute, has details on the new fund. The Prince Henry Cui Bono Fund (pronounced Kwee Bono, Latin for “Who Benefits?”). Cui Bono gives investors unparalleled access to proven investment managers, all of whom have phenomenal long-term track records. For investors with at least $250,000 but with less than $10 million to invest, I do not know of any other way to access such a pool of managers.

Here is the breakdown on how Cui Bono is invested with a salient point on each manager:

✔    NGP (Ken Hersh’s fund) and affiliates, 33% of Cui Bono’s assets: NGP has generated IRRs over 30% since 1988.

✔    TriPro (Eric Conner’s fund) and affiliates, 33% of Cui Bono’s assets: TriPro continues to target mid 30s IRRs.  We have invested with TriPro since 1995.

✔    BP Capital (Boone Pickens’ fund) and affiliates, 24% of Cui Bono’s assets: Fund I did 46X over twelve years.

✔    Spitfire (Julian Allen’s fund) and affiliates, 10% of Cui Bono’s assets:  Spitfire is up 80% since inception vs. 7% for S&P 500.

✔    Semper Vic (Tom Russo’s fund) and affiliates, 10% of Cui Bono’s assets: 50X return since 1984 vs. 14X for S&P 500.

cb_piechart

Tri Pro & its Affiliates 33%
NGP & its affiliates 33%
BP Commodity Fund II 24%
Spitfire 10%
Semper Vic 10%
Total 110%

(For arithmetic fans who wonder about the 110%, the fund uses $10 of borrowed money and $100 of investor money to control $110 of investments, analogous to buying a $110 house with $100 down payment and $10 borrowed from the bank.  It is a small borrow that allows us to get what I view as the optimal balance between the fund’s five investments.)

Breaking it down, The Prince Henry Cui Bono Fund is designed to have the following benefits:

  • Capital Allocated to Proven Investment Managers With Extraordinary Track Records Whom The Investors Could Not Otherwise Access.
  • Investment Managers With Tremendous “Skin In The Game” or large percentages of their own net worths invested in their own funds.
  • A 3% Annual Cash Yield At inception.  If, for example, the fund doubles in the first year (very unlikely), then the cash yield to new investors entering at the beginning of year two would be 1.5%.  If, by contrast the fund halves in first year (also very unlikely) then the cash yield to new investors entering at the beginning of year two would be 6%.  In this environment with five year CD’s yielding just north of 1%, I believe the yield component that Cui Bono offers is an especially attractive feature for investors.
  • Massive Alignment of Interests between investors and Cui Bono’s Manager, me. This alignment pervades everything The Prince Henry Group does as reflected in our motto “Backing People We Admire Whose Incentives Align With Our Own.”  (Discussed in more detail below.)

We picked the Cui Bono name because we received a good deal of feedback telling us that as we prepare to market beyond our core group of Navigator investors, we need to make sure people understand how unusual it is to have a fund family that has the following positive features. (As you know, Navigator has similar features, but it cannot accept additional investments.):

  • Manager invests his $250,000 under the same terms and conditions as other investors.
  • Manager rolls his management fees into an additional investment in the fund each year.
  • Manager shares his success fees with investor: Cui Bono’s Investors participate in Navigator’s Upside and Navigator Investors Participate in Cui Bono’s Upside via my sharing the manager’s incentive fee in each fund with investors in the other fund.

If there are other funds offering investors these benefits, I have not seen them. These features benefit investors by:

  • Making me hyper focused on preserving capital so I do not lose my $100,000, which I lose before investors lose a dime.
  • Making all fees dependent upon success: Unless the fund compounds at 6%, I receive no success fee.  If the fund does poorly, I lose my invested management fees in addition to my $250,000 at the same rate as investors.

Lee Iacocca issued the famous challenge, “If you can find a better car, buy it.”  Navigator has been closed for years, and investors have requested a vehicle such as Cui Bono.  I love what this fund offers investors and believe that if investors can find a better fund that offers them concentrated diversification with outstanding managers with phenomenal investment track records and the alignment of interests that Cui Bono provides, they should buy it instead.  If not, Cui Bono seems a logical fit for part of many investors’ portfolios.

If helpful, here are two videos that we shot with Eric Conner from TriPro and with Brian Bradshaw from BP Capital.

Hopefully, this information proves helpful to those who may have an interest in learning more about Cui Bono.

Sincerely,

Dan Anglin