Hedge fund managers Barry Sternlicht and Dan Stern founded Starwood Capital in 1991 after one night in a hot tub.Sternlicht was the guest host on CNBC this morning and told the anchors this story.
Dan Stern is a huge money manager who currently runs $5.5 billion Resevoir Capital, but he might be more well known for seeding hedge funds.
He told CNBC he’s seeded more large hedge funds than anyone in the world (Och Ziff, Glenhill, SAB, Falconhead). Before he decides who he’s going to invest with, he puts them through a rigorous, sometimes year-long interview process.*
So during that getting-to-know-you time, Sternlicht and Stern were out in Colorado looking into real estate investments.One night, they went to a friend’s house near Aspen, Colorado and hopped into his hot tub. The property was actually called, Starwood, and they decided hey, this would be a great name for Sternlicht’s hedge fund. Starwood wasn’t pretentious, it didn’t have Sternlicht’s name in it, they thought it was perfect.
So that’s how the hedge fund, Starwood Capital, was founded. Obviously Stern had already pretty much made up his mind that he wanted to invest with Sternlicht in his new fund venture, but the night in the hot tub sealed the deal.
We can’t help but think of the South Park episode, Two Guys Naked In A Hot Tub.
* This is pretty normal. David Paresky, who owns a big Boston travel agency, typically asks others who want to invest his money to take personality tests. We read in “The Greatest Trade Ever,” that John Paulson didn’t pass the test.
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