Key Takeaways

  • Trinity Wall Street, led by Nicholas Csicsko, maintained a long-term investment with a long-short manager through a near 50% drawdown in 2020 because of radical transparency.
  • The manager's open, detailed communication about deteriorating positions and personal resilience during the crisis built essential trust, allowing Trinity to hold their position.
  • Csicsko argues that true transparency is tested during stress, making it critical to anticipate and prepare for potential "worst moments" with your partners during good times.
  • This commitment to transparent, enduring relationships paid off handsomely: the investment turned around from 2021 to 2026, delivering a 5x return.

Why You Need a 50% Drawdown Conversation (Before It Happens)

Imagine staring down a 50% loss on a key investment. Most people would bail. Nicholas Csicsko, head of Trinity Wall Street, found himself in exactly this scenario with a long-short manager. The market stress started in 2019, but 2020 hit harder, pushing their investment to a near 50% drawdown. It was a “real moment of soul searching,” as Csicsko described it.

Yet, Trinity didn't fold. Their conviction came from one place: transparency. The manager didn't hide. He communicated openly about the underlying issues, the holdings, and his plan. He didn't just give vague assurances; he shared the raw data and his thinking, even when things looked bleak. Csicsko recalls, “He kept saying, ‘you know, I really want to earn back your capital. I want to reward you for your patience.’ ” This wasn't just talk; it was backed by consistent, vulnerable communication that built deep trust.

Csicsko puts it plainly: “Transparency builds stability and duration into relationships. And it's really tested during periods of stress.” Many founders talk about transparency, but few truly practice it when everything is on the line. This specific case shows its power. It’s the difference between a panicked exit and sticking around for the eventual rebound.

The Ugly Truth: Preparing for Your Worst Moments

This isn't just a story about surviving a bad year; it's a blueprint for preparing for any worst-case scenario. Csicsko lives by a simple, brutal truth: “If you imagine yourself in your worst moment, that's how you behave in the good times.” This means you need to define, articulate, and agree upon your communication strategy when your startup inevitably faces its own drawdown.

What happens when your primary product launch tanks? When a key investor pulls out? When growth stalls by 30%? Most founders scramble to put on a brave face, often at the expense of genuine communication. But it's in those moments that transparency either reinforces trust or shatters it. Trinity's long-short manager didn't wait until the drawdown was over to start communicating; he was transparent during it, detailing his every move and feeling.

And the payoff for this kind of enduring, transparent partnership? Substantial. After the brutal 2020, “Things started to turn in 2021. And from 21 to 26, it's been a 5x.” That's not a small return; it's the kind of outcome that only comes from conviction, patience, and a relationship built to withstand near-catastrophic stress.