A Fresh Perspective on Long/Short Investing

June 20, 2025

Friends,

I am excited to share this interview with David Orr, General Partner of Militia Capital and the Militia Long/Short ETF (Nasdaq: ORR).

A former professional poker player, David has generated incredible returns for his investment partnership and recently launched an ETF.  He is also a prominent poster on Twitter: @orrdavid.

After following David on Twitter for some time, we met in person in 2024 and have since communicated on numerous occasions.  I find him to be one of the more out-of-the-box, thoughtful and sharp young investment managers that I know, and I have learned a lot by following him.  He has also had incredible success while also actively managing a diverse short book.  Recently, I purchased shares of ORR for my family trust.

I think you will enjoy this interview with David, which includes background on his hedge fund; why he started the Militia ETF; why he’s short numerous Business Development Corps; thoughts on Trump and energy geopolitics; and information on his favorite AI research tools.

I am also excited to announce Raging Capital Ventures’ 4th annual Ideas & Networking Conference on October 9, 2025 at the Standard Hotel – High Line in New York City.  We have confirmed four outstanding speakers, including:

• Robert Robotti, a legendary and well-known value investor who runs Robotti & Co.
• Sumit Agarwal, co-founder of Shape Security (acquired by F5 Networks) and founder of Ario, his current AI start-up.
• Alok Agrawal, previously ran Bloom Tree Partners, a long/short hedge fund seeded by Tiger.  Began his investment career at Bessemer Venture Partners.
• Phil Colicchio, an expert on the restaurant and hospitality industry who has represented over 60 James Beard Award-winning chefs.

The event will start with lunch at 12:30 PM and conclude with cocktails on the High Line River Terrace starting at 3:30 PM.  See below for more information on the Speakers and Agenda and click here to register.  Space is limited — I hope you can attend!

I hope you find value in this interview.  Enjoy the summer.

Best Regards,

William C. Martin

Topics in this Issue of An Entrepreneur’s Perspective:

• Interview with David Orr, GP of Militia Capital:  A Fresh Perspective on Long/Short Investing
• Save the Date: Ideas & Networking Conference, Thursday October 9, 2025
• Favorite Podcasts & Media
• Recent Tweets from @RagingVentures

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Interview with David Orr, Militia Capital: A Fresh Perspective on Long/Short Investing  

When did you start becoming interested in equity markets?  Are you a self-taught investor?

College taught me that having an edge over low-cost index funds is impossible so I always just owned an S&P 500 ETF.

In 2017 I recalled another academic idea: that people could generate a higher return by taking on more risk.  I set out to do this with my own money.  But early on I stumbled upon the paper Betting Against Beta which showed that this academic idea is wrong.  In fact, assets with more risk had a lower risk adjusted return.  This was true across countries, timeframes and asset classes.  This is the most thorough and convincing paper I’ve ever read.

I kept researching markets and I kept finding more anomalies.  I began doubting what college taught me.

Then a catalyst hit.  I saw what happened when the XIV short volatility fund blew up in February 2018.  In the after hours I could sell my shares for $14 even though the clearly stated value of the fund was just $7/share.  At first I thought this must be a glitch on their website.  But then a good friend put me in contact with Rob, who would become my mentor for years.  Rob confirmed that the website was accurate.  He advised me to sell my shares and told me he was trying to short every share that he could possibly find across all of his brokers.  This blew my mind.

At that point I questioned everything that I had learned in college.  For the first time, I began looking through stocks one by one.  Within a few months I’d looked at every stock in the Russell 3000 and it was screaming obvious that stocks are not priced efficiently.

When did you start your formal fund and tell us a little bit about its development?  Congrats on your amazing success!

I generated 75% annualized alpha in 2019-2020 in my personal account over hundreds of bets.  Due to this strong performance, strangers on the internet began reaching out to invest with me.  In February 2021 the fund launched with $3 million.  Since launching, the fund has generated 46% annualized alpha with a 3.25 Sortino and no market correlation.

In 2024 I started backing uncorrelated portfolio managers, guys I found on the internet.  I had two goals:

1.  Increase the firm level Sortino ratio.
2. Delay scale problems in my own partition.

This model has worked beautifully so far.

If anyone reading this has generated 25%+ annualized alpha (or 15%+ unlevered) over 200+ bets and a couple of years, please reach out to me if you’re looking for backing on generous terms.  My hedge fund runs on a partnership model, long term paying out 90% of the performance fee to early PMs.  PMs have more autonomy than most firms.  I am especially looking for long/short biotech and long/short credit PMs but I am open minded to more strategies.

Your hedge fund today has $130 million of assets and you’ve mentioned on Twitter that you often have around 300 positions. How do you construct your portfolio and how has that evolved over time?  How do you find time to manage so many positions?

My own partition has 300 positions and the firm level portfolio has 700 positions.

I look for low IQ ideas that seem obvious, long and short.  I make bets within a couple of hours of finding an idea, if it takes any longer that means it’s too hard.  I don’t overthink investments.  When the facts change, or when the market says I’m wrong, I can easily quit bets since I have no emotional attachment.  I am constantly finding new and better ideas.

The main thing I’ve changed over the years is avoiding all crowded shorts except a few that have a hard catalyst.

Crowded shorts have a bad risk profile.  When too many people are short the same basket of stocks, all of the individual stocks in that basket become correlated when short sellers broadly are forced to cut leverage.   These are called “degrossing” days.  Crowded shorts become a single big bet in these moments and what might have seemed like a diversified portfolio of shorts, in reality, was not.  These short sellers are essentially betting way too big.  This is a catastrophic mistake because risk management is everything in short selling.  And no matter how many times I tell this to short sellers, they do not listen.

Last year, you formed the Militia Long/Short Equity ETF (NASDAQ: ORR).  Tell us about your premise behind creating your own ETF and how is the ETF’s strategy similar or different from your core fund?

Other hedge fund managers raise capital up to the equilibrium point of their fund not having an edge anymore after their enormous fee.  This happens because large scale degrades an investor’s edge a lot and after the enormous fee there’s nothing leftover for the LPs.  You see this over and over again in this industry.  I find it extremely distasteful.

The ORR ETF has a much lower edge than my hedge fund so its 1.3% management fee is a fraction of what I charge in the hedge fund to match.  This works out to .65%/year for every 100% gross exposure managed.  The fee should match the edge and be low enough to provide true value.  The ETF vehicle lets me sell the larger scale, lower edge portion of what I do for a low price.  Note that the headline 18% expense ratio of the ETF doesn’t reflect the economic reality.  The number is only so high because of quirks in how the regulators force the expense ratio to be reported – mostly from short dividend expenses, but also because the cash generated from short rebates does not offset margin interest.

ORR’s strategy is similar to my hedge fund.  Both vehicles are long/short and the long positions mostly overlap.  However, ORR has these key differences:

• Runs closer to 200% gross leverage while my hedge fund runs over 300%.
• Cannot short the same stocks as the hedge fund.  They are too volatile, illiquid and I do not want them to get crowded.
• Has positive beta versus zero in the hedge fund.
• Doesn’t include positions from other PMs in my hedge fund.

Because of these large differences, the results of the ORR ETF will be uncorrelated to the results of my hedge fund.

You are short numerous BDCs such as Runway Growth Finance (NASDAQ: RWAY), Eagle Point Credit (NASDAQ: ECC), and Oxford Lane Capital (NASDAQ: OXLC), as well as various “synthetic” ETFs, such as the Russell 2000 Covered Call ETF (NASDAQ: RYLD), YieldMax Option Income ETF (NASDAQ: YMAX), and and the Global X SuperDividend ETF (NASDAQ: SDIV).  Is there a common thread in these shorts?  Is there a structural flaw in some of the synthetic ETFs?

The appeal of these products is that they have less upside volatility.  I short these in the hedge fund to protect against market melt ups.  However, in the ETF they’re much larger positions because I cannot make short term trades in the ETF vehicle like I can in the hedge fund.  I want to avoid tough spots with a margin of safety.  Lower upside volatility thus has more value in the ETF vehicle.

Short term trading isn’t suitable in ETFs because you have to coordinate with the market makers daily.  They need to know what’s actually in ORR so that they can quote accurate prices.  If I constantly moved the goal post midday they would stop market making for ORR.

SDIV is different from the rest of those.  SDIV is appealing because it hedges international value oriented longs, which I have many of today.  We still have a factor mismatch but this ETF helps a lot.

I’m curious to get your take on the policies of the Trump administration has been pursuing around tariffs and trade. What are your thoughts?

I wrote on X.com in March that:

• Trump watches his approval rating closely and he’d interpret his high approval as the American public supporting an aggressive trade policy.  Thus, he would surprise to the upside with tariffs.
• The correct game theory approach was telling the world that any retaliation would be met with an immediate counter retaliation.

That ended up happening.

On April 7th, Trump proposed that the EU should buy $350 billion of US energy.  When you do the math, this number is absurd and more energy than the EU could possibly need.  Ignore the surface level number, which simply leaves room for the EU to save face.  The real goal, I think, was to force the EU to start buying mostly US energy long term – particularly gas.  I realized within 5 minutes of hearing that proposal that the crisis was over, that the EU would almost definitely agree behind closed doors.  This is because the larger, quiet variable was the ongoing Ukraine war.  Trump could have said, “Not only will we keep the tariffs, but also we’re pulling support from Ukraine if you don’t accept.  And we might start talking seriously about leaving NATO.”  What other choice would the EU have in that case?  I think this max pressure approach worked – two days later the 90 day tariff pause was announced.

Extreme profits from natural gas are what empowered Russia to do so well in Ukraine.  And Europe’s energy blunder cost the USA $100+ billion in aid.  Trump forcing an end to this long term status quo was excellent policy.  A minority of people are claiming that the EU wasn’t going to buy Russian energy again, anyway.  To those people I say: go talk to way more Europeans if you think that, that was just not the case at all.

The new energy deal with the EU is incredibly bullish for US natural gas pipelines.

The beauty of this thesis: Even if I’m completely wrong here and nothing happens, I still have a likely good investment.  And since nobody is talking about this energy deal, nothing will even happen if no deal is ever announced.  That is, I won’t get punished for being wrong because people aren’t positioned for this to happen.

Besides that narrow energy policy goal, another big goal of the trade war might have been to alienate China.  People talk like Trump capitulated on China, but I’m reading it a lot differently.  If you were a manufacturer in China, or if you were buying your products from China, your business plan is far different today than it was in March.  This damage seems permanent.  Meanwhile, China never really got to do anything in response, there’s no long term damage on the US side.

What are your favorite AI tools for investing research?  How important have these become for your workflow?

ChatGPT pro with deep research is amazing.

There’s usually a single variable that drives a company’s earnings over the next 3-5 years.  I used to spend half of my time thinking through and ultimately guessing what that key variable is, and the other half went into answering it.  Now with AI I can simply ask those questions and get fantastic answers automatically, saving half my time.  And I believe that AI is already more accurate, has a larger breadth of knowledge and is more impartial than a human analyst could possibly be.

One of my hedge fund’s PMs set me up with an automated system for Japanese company filings using Gemini.  Now I get emails daily with a bullet point summary of every filing of every Japanese company in my portfolio, automatically translated to English.  This is an incredible time saver.

Thank you and good luck!

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Ideas & Networking Conference – Speakers & Agenda

 

EVENT DETAILS

THURSDAY, OCTOBER 9th, 2025 – 12:30 PM

THE STANDARD HOTEL – HIGH LINE, NEW YORK CITY

THE HIGH LINE ROOM – 3RD FLOOR

LUNCH, SPEAKERS, & COCKTAILS ON THE RIVER TERRACE

 

HOST

William C. Martin, Raging Capital Ventures

Bill will lead a series of Fireside Chats with our featured speakers, including legendary value investor Robert Robotti, former hedge fund manager Alok Agrawal, successful entrepreneur Sumit Agarwal, and renowned restaurant industry consultant Phil Colicchio. Together, we’ll explore the latest developments in AI and technology, analyze the current market landscape, examine trends in the commodity and energy sectors, and identify actionable investment opportunities — plus much more. You can view Bill’s bio here.

 

AGENDA

12:30 PM // Meet and Greet

1:00 PM // Welcome

1:30 PM // Guest Speakers

3:30 PM // Cocktails on the River Terrace

GUEST SPEAKERS