The Tax Whiz With the Strangest Hustle on Wall Street

livemint.com:

Andy Lee is the king of a lucrative niche in the financial markets. Being king isn’t easy. Lee invests in tax receivable agreements, increasingly common arrangements that put cash into the pockets of early investors in companies.

Not many investors know how they work, and a surprising number of people don’t even know they have them. That gives Lee an opening to buy up the cash flows from TRAs, as they are known, at a discount and count his winnings as they pay off. To get to that point requires deep knowledge of taxes, investing and the law, plus lots of persistence.

To close a recent deal, Lee needed to obtain wet signatures, meaning handwritten, from as many as 114 people in seven days. “I want to punch myself in the face," Lee said. “It’s not rocket science, but there aren’t many people in finance who like to do this kind of thing." Lee does.

He has an average of 32 conversations a week in hopes of drumming up deals. He has pursued prospective sellers to extreme ends, once running a charity 5K race in hopes of pitching a deal to its guest of honor, a TRA holder. Lee, 33 years old, founded Parallaxes Capital in 2017, creating a fund that seeks to turn TRAs into a new asset class by creating a secondary market for investors.

“In a relatively small and not super well-known space, Andy is by far the biggest fish in that pond," said Albert Chang, head of M&A, tax and structuring advisory at RBC Capital Markets. Lee often starts with cold outreaches to people with TRAs who are surprised to hear from him. One company founder responded to Lee’s pitch with a cry laughing emoji.