Nicolas appears in the Top 100
People in Finance and
Top 40 Under 40 magazines.
Twelve years ago, Nicolas Hurst was on the fast track to NASA, just as his grandfather, who worked on the Mercury program, had done. As an undergrad at Texas A&M, Nicolas was already making a name for himself, racking up academic awards and published articles as he pursued his degree in aerospace engineering with minors in mathematics and physics. But by the end of his senior year, he foresaw the industry’s bureaucracy and narrow scope squelching his passion to explore, forge new ground, and solve the seemingly unsolvable. After receiving his degree, he leapt into a master’s in finance. “I knew I could bring a lot more tools to the sand pit and work more freely, and that’s what excited me,” Nicolas recalls. In 2017, he vaulted out of grad school into Avalon Advisors, where he co-managed and helped launch a preferred equity and hybrid securities investment strategy that grew in assets from $0 at inception to roughly $150M, and materially outperformed comparable indices and peers.
In February 2022, Nicolas’s analytical mind, passion for numbers, and desire to add value to people’s lives converged into the founding of Caiman Capital Group LLC (CCG), an investment advisor and manager for Caiman Quantitative Fund (CQF), an innovative fundamentals-focused, quantitative, long-short equity hedge fund. From Houston, Texas, headquarters, they’re blazing a new trail through a conventional industry —with their clients’ best interests at the center. Nicolas and his team develop and use sophisticated algorithms to underwrite companies and use that to construct and manage an investment portfolio to generate long-term and robust value for their clients—and help them avoid jumping into the frenzy of parabolic stocks or fleeing strong positions in a downturn.
“We aim to generate value by designing a quantitative and highly methodical process that is scalable, measurable, robust to various market environments, and can be continually improved upon, ” Nicolas explains. “At the same time, we want to be aligned with our clients. We only do well if they’re doing well.” To this end, CQF allows clients to select their own hurdle rates, and focuses on a performance-based fee charged on returns above this chosen rate. “So far, Caiman has performed very well, and I’m excited for the growth, expansion, and continued performance of the fund and company,” he says.
We met with Nicolas to hear more about what inspired this would-be rocket scientist to start CCG and CQF, how they’re different, and what drives him to innovate.
What compelled you to start your own firm and hedge fund, and how are they different from others out there?
It started simply as a way for me to manage what little capital I had and as an outlet for my own research. What started from curiosity quickly caught the attention of my colleagues and, they began wanting to invest, which was difficult because I was simultaneously co-managing a very different fund for my employer, so I had very limited time. Eventually, those efforts paid off and allowed me to leave the comfort of my full-time employer and institutionalize what I had been building.
When building the firm, we wanted to structure it in a way that focused on adding value to our clients—not simply selling them something. We wanted to offer investment strategies to investors that were interesting and different from what they could find elsewhere and price them in a way that incentivized adding value to those investors. The fund itself is a bit different than most in that we design, build, and utilize quantitative methods to analyze the fundamentals of companies. From this analysis we are able to evaluate the investment merits of stocks and options, the two asset classes that comprise our fund.
You’ve helped your investors not only avoid the fallout of emotion-driven, parabolic stocks, sector bubbles, and periods of market volatility, but Caiman has actually outperformed. How does your all-quantitative strategy allow you to identify strong stocks with potential upside versus those driven by the “fear of missing out?”
We avoid emotional investing through our approach, which is both fundamental and quantitative—we use quantitative tools to analyze the core of what makes a company valuable over a long-term period. This allows us to objectively and analytically evaluate whether a company’s price reflects its fundamentals—a combination that helps us to avoid buying into lightly supported stories or chasing companies because of that “FOMO.” Another added benefit of having a quantitative approach is that we can easily diversify across a large number of stocks and sectors as our analysis can be simultaneously applied to a wide range of companies. This diversification helps to further limit the impact of any irrationality that may be present in a handful of stocks and/or industries. To this point, we invest in two asset classes: stocks and options; and while options don’t really have a generally agreed-upon index to compare against, our stocks have materially outperformed stock indices.
Your fee structure is also unique in that it's primarily based on your performance. How does this benefit your investors?
At the root of our business, we want our success to reflect our investors’ success. When an investor comes into our fund, they select an index such as the S&P 500 to represent their “opportunity cost” or where they would have invested their money, if not with us. We base our fees on how well we do relative to that opportunity cost—that way our investors do not have to pay performance fees if we aren’t adding them value. Investors have seemed to really like this structure.
What do you enjoy most about your work, Nicolas? What drives you?
I’ve always enjoyed working on complicated and open-ended problems, and analyzing companies is definitely both of those. A problem this broad and deep allows you to really explore your curiosity and rewards you for continually learning—it is almost impossible to get bored when working in this field! There is also a strong sense of accomplishment that comes with working on a problem with this much depth and seeing your work get better and better over the years.
Founder & CIO — Caiman Capital Group, LLC