What happens if you lose money as a fund manager?

This is a big question. What happens if I lose money? As you're considering and watching videos on starting a fund or raising capital, doing a syndication, this is a huge question. Like, okay, Bridger, what happens if I lose money? Am I going to jail? Like, you know, am I going to get a ban, a lifetime ban? Like, I don't want to do this the wrong way, which is the perfect way to approach this. You need to think through this at the beginning. And I want to make this video to kind of hopefully alleviate some concerns and make sure you're attentive to other things as well. But again, the question of what happens if I lose money is a very important question. This is great for your partners, maybe your spouse even, to send them to watch this video because it can be a little scary. The moment you take other people's money, it's a serious endeavor. This isn't just some, oh, well, hope it works. Like, you're working with real people's money and you're a money manager. You have a fiduciary responsibility to those people. And so you got to be serious when entering this game. Now again, in Fund Launch, I've worked now with thousands of people that have started funds, ran funds, been in the fund space. It's been very cool to see this all play out. Now unfortunately, I have seen some people lose money. And guess what? That is part of the game. I'm just going to say that upfront. Part of the game of investing is you're not going to bat 1,000. Nobody is. There's going to be points where you lose money. Your investments drop. You go down. It goes back up. Back and forth, but there is different ways, in my opinion, of losing money. We are going to talk through that because that is the game we are in. The game of money management, we are investing. Investing is inherently risky. So let's talk through this game a little bit. Now there is 2 different categories of what I would call of what happens if I lose money. Category number 1 is we made a bad investment. A very technical term. All right? So this is a technical term. It's, I just made a bad investment. The investments just didn't turn out good. So that's category number 1. All right? The investments just didn't go good. And I'll give you an example. For example, I've invested in a lot of venture capital deals with startups. And what happens is we put money in and I have actually lost money. We put money in. They had hired a team. The team built a product and the product just didn't fit the market or another competitor came and wiped them out. And we lost money. Money. And as an investor, Bridger Pennington, like me, I've literally invested in a couple of deals. I'm OK with that. Like, we just, we lost some money. We took a bet on a company and the company didn't. They had a competitor come in. Somebody else beat them out. They made a better product and the money was spent on employees and software engineers. And I'm OK with that. That was part of what I believe is part of investing. If a venture capitalist company comes and says, yeah, we lost money, that's part of their game. But the other category over here is the differentiator. Was there fraud committed? Did someone lie, steal, cheat? That's the differentiator of what happens if I lose money. Now, if you're here watching these videos and you're going through this program, if you have a propensity to lie or not be truthful Or dishonest in any shape of your life at all, I would tell you to not be in this game. Just close this course up, send it to somebody else, whatever. Don't get in the game of money management. Don't do this because it's too— for some people, it's too tempting or they're just, they have a propensity to lie, steal, cheat. It's not worth it. You, if this happens, if fraud happens, then you can go to jail. You can be banned. You can— it'll ruin your life and your family and everything else. It's not worth being there on this fraud side. But if you just make bad investments, that's OK. And before I do that, I want to make a commitment with all of you. Like, if we're going to play this game, we're going to do it with honesty, integrity, and do this the right way. So wherever you're at, like, literally over the screen, I'm talking to the camera here, but like, say it like, I will not commit fraud. Like, I will do that. I will play this game with integrity, honesty, even if— I'm going to do it. Our investments are losing money, I will be honest and transparent with my investors. Okay? Make that commitment to me. Otherwise, I don't want to work with people like that. I don't want to work with fraudsters. If you're that— if that's kind of the place that you're in, I don't want to work with you. Go somewhere else. Okay? But if you're someone who is honest, who can manage money, who can do this, yeah, we're going to have some bad investments. Your portfolio is going to drop every once in a while. That's okay. And we're going to be honest and upfront about what we are doing. Now, I don't believe most fraudsters start out as fraudsters. In my opinion, I don't believe most people go like, oh yeah, I'm going to like defraud all these investors. I think most people actually start out with good intentions that turn into fraudsters. They start out with good intentions. But what happens is they either get impatient and want to take outlandish risk or more commonly is they lose money. But what happens? Let's say we were doing a real estate deal. OK? And they just started going bad. The real estate— and they don't want to— they have all these investors and they don't want to tell their investors that they're losing money. So what they do is they say, well, you know, everything's good and going good. It's fine. Don't worry about it because it's going to come back up. Remember, the market's coming back. It's going to come back. So let's just not tell our investors anything because we're losing tons of money. Let's just kind of just not tell them anything. And then what happens is they continue to lose money. And then they say, well, OK, you know what? I'm going to make it back for everybody. I'm going to be the one who makes it back. So I'm going to go and I'm going to use an analogy here, but go to Vegas and gamble on something else that's even more risky. I'm going to go to Vegas and put it all on red and we're going to make the money back and then the money will come back. No one will even know the difference and we'll pay everyone their money back. What happens is they go and they leave their mandate. They were supposed to do real estate, but then they take that money they lost and they come to earn it back. They take that money somewhere else, invest it in something else even more risky, which is, again, you're committing fraud at that point. Because it was not part of the original plan. And they lose even more money because they put it on red in Vegas and it hit black and they lost more money. And they go, oh man, I can't believe I'm in this situation. And then eventually down the road, they either investigate or someone comes in and they go, this is the trail of what happens. Do not do this. Stop it all right here. I'll put this in red. Don't do this. If you are losing money, I actually, I'll tell you a real story. Our, my first year of our fund in Ugly Unicorn, our fund fell 17%, which was not good. Now, Bitcoin fell. We were in cryptocurrency. Bitcoin fell, I think, 76%. So, we still felt pretty good. But we fell. We fell 17%. And guess what we did? I reported that on my quarterly report. We reported to investors and we said, hey, When you work with Bridger, I'm going to tell you the good, bad, and the ugly. I'll tell you exactly where we're at with our fund. We're down 17%. We're negative 17% right now. But we believe we're in a good spot because of X, Y, and Z. We're going to stay to our mandate of what we're doing. If you want to withdraw, you can withdraw, but we're still doing this. We kept in the process of the next year. This is 2023. We had a 63% net rate of return to investors. So, we bounced back very well. We kept our mandate. We didn't change. We didn't go do something crazy. We didn't go into more risky investments because we got scared. I reported honestly. I just said, hey, this is the honest report. This is where we're at. This is what we're doing. I will always be honest with you. And that's what happened. And investors were— they loved it. They were totally fine. Nobody pulled out. They said, this is totally fine. We love where you're at because you're being honest and straight up with us. Now let me run you through a scenario here again. So back to the top. I'm going to erase some stuff here. So back to the top. What happens if I lose money? If you do an investment and it loses money, investors will sometimes get together. And look, they're going to— they want to determine, or an SEC or a regulator. So, I'm going to put, I'll write here regulator or SEC. They're going to get together and they want to determine one of these 2 things. Was it a bad investment or did fraud take place? That's what they— when you hear about like, we're under investigation from the SEC or whatever, all they're trying to determine was, was it just bad investments or was fraud committed? That's the only differentiator. And if it really was just a bad investment, you're usually fine. They go, well, that's what investing is like. It's inherently risky and tough. That's why over here, like with my venture capital deals, like, yeah, I lost money. I know everyone was honest with me. We just lost. We just made some bad investments. But if there's fraud committed, that's where people go to jail, get banned, etc. So again, play this game with honesty, integrity. It is OK. You will not bat over a career of 50 years. You're going to have a few investments that go south. Be honest with people. Be straight up. Be transparent. Tell people what's going on and you'll be totally fine. This is a beautiful game. And actually, people, because there's been a number of notable fraudsters in this industry, like Bernie Madoff or other people, investors love it when fund managers like us are honest, are straight up and just tell them where they're at. Hey, I promise you, I'll be straight up. I'll tell you exactly where I'm at. If we're making a bad investment, a good investment, I'll tell you straight where we're at. There's also other things that can help you with this. The final thing I'll say, I recommend every single fund that comes through this program to use third-party auditors and third-party administrators. Those are both 2 different things. We talk about this more at the end during the launch phase. But an auditor, we have it like, for example, in my fund, we use a third-party auditor, Berkower, out of New Jersey. Every year they audit all of my books. Additionally, we have a third-party administrator out of Chicago called NAV Consulting. In our resource section, you guys can use the same group that I use. They check every single number, every single thing I do, and again, report that to investors. So, it's not even really, it's not even possible to commit fraud because these people manage and check every single dollar, and investors love that. We send that straight up to them, and so they know that we're making good, bad, medium investments because it's confirmed by third-party auditors and third-party administrators. That keeps you extra safe and makes sure you're doing it the right way. We want to play this game with integrity, honesty, do it straight up. This is the way to do it. And hopefully that clears up maybe some concerns that you guys have. This is an amazing game to be in. This is the game you want to be in. You stand out like crazy when you do stuff like this and treat investors with honesty and integrity.