Twenty years after Dan Niles started running his tech-focused portfolio at Lehman Brothers, he’s looking to grow.
Niles, a longtime money manager running the Satori Fund and a frequent market commentator, has only recently taken over the fund entirely. After the collapse of Lehman Brothers, which the fund was a part of, Niles spun the fund out. His most recent partner was a third-party fund administrator, which didn’t have any marketing capabilities.
Now, under a new brand — Niles Investment Management — and with the current market environment, Niles is eyeing hundreds of millions in new capital for the fund. The fund plans to soft close at $500 million, a person close to the firm said, which would triple the fund’s current AUM.
“Since 2007, it’s been the right product at the wrong time,” Niles said about his strategy in an interview with Business Insider. Following the financial crisis, the low-interest-rate era fueled growth across companies, good and bad, but soon there will be winners and losers again.
“I think the world is going to get rational for the first time since Lehman failed,” said Niles, who moved from the West Coast to South Florida earlier this year.
Performing under pressure
Niles’ point of pride is the strategy’s ability to perform during market duress. He holds between 20 and 40 positions, both long and short, and “every position is expected to make on its own.”
“I don’t have shorts, just as a hedge. We are trying to generate profits, not accumulate assets and fees,” Niles said.
This year, the fund is up close to 14% through mid-May, thanks to a strong April, when the strategy returned 4.5% despite the overall market downturn, a person close to the firm said. In 2022, when the S&P 500 fell by double-digits, Niles was up 4.5%. Last year, the return was 13.4%.
Niles believes his ability to be unsentimental about his holdings helps him avoid serious losses.
“If you’re wrong, you don’t try to justify your position. You admit you were wrong, and you get out,” he said.
“My goal is to make money, not to be intellectually right.”
How he’s thinking now
Niles said he’s bullish on Meta because he believes a TikTok ban would boost the megacap’s video advertising revenues. However, he’s skeptical Google can continue to grow given its near-monopoly on search and the artificial-intelligence advances of competitors like Microsoft.
But if the market moves against him, he’s quick to cut — and makes sure not to “confuse a bad outcome with a bad decision.”
“It could be a great idea but at the wrong time,” he said.
The rise of interest rates globally has Niles believing fundamentals will finally drive a stock’s performance again. And he’s not afraid to make big bets on his top ideas, saying he is in the same camp as billionaire investors Stanley Druckenmiller and George Soros when thinking about position sizing.
“If it’s your best idea, then there should be a lot of money in it,” he said. One example was Impinj, a Seattle company that makes a radio-frequency identifier. In Niles’ eyes, Impinj could grow 20% to 30% a year, and the company was 20% of his portfolio at one point. He believes a partnership with Amazon could be in the company’s future.
The stock has doubled so far this year.
“Why would I want to limit that to 3% or 5% of my book?” he asked.
His experience in different market environments — Covid, the financial crisis, the tech bubble — is what gives him confidence today.
“I’ve been through a lot of stuff with a lot of companies,” he said.
“This is the right time for what we do.”
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