YouSaid · the spoken record

Adam Blitz

lines on the record: 90
first: 2017-07-17
most recent: 2017-07-17
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“So the higher quality introductions, if you will, come from, we'll certainly always ask our current group of managers, who do you know that you like and respect or might be invested in personally? And then we try to keep a small group of, call it kind of like-minded investors where we share ideas among that group. And it's small enough that I think we avoid the groupthink that we're not checking and corroborating with everyone else out there, but we feel that if you can interact with a family office or two and an endowment or two, I personally love to interact with just what I think of as eccentric investors who have no institutional process whatsoever, but might have a good nose for it, might have good instinct, might have a way of asking questions that get at the person behind the fund a little bit more.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“We should talk about this in the past that I would surmise that that's impossible to have as a rule if your office was in New York City. Yes, that probably would be. You wouldn't have time to do anything but take those meetings. Yeah, exactly. I guess if you're in the suburbs or Chicago, it works a little bit better.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“That might corroborate the view or might have a very different view that might inform us asking a question of our manager on that position. And so we have a large enough investment team that it's not going to be seven or eight of us sitting around the table with that manager, but we do think it's worth one or two people's time to have that.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Know we don't have standing instructions or hard and fast rules, but they generally know the types of managers that we would tend to invest with day one, and they tend to be more what I call blue chip launches. So whether or not they've garnered a lot of assets, they tend to, maybe they've run money as part of another team within a larger shop and they're coming out. They have a very good pedigree. They're going to check the boxes in terms of having good operations and infrastructure in the business side from day one as opposed to the two people in the proverbial garage. So they tend to know that. Our view, though, has always been to take every meeting because almost in every meeting you're going to learn something about, even if you might know within the first minute, we're not going to invest in these people. You're going to learn something about the markets. You're going to get some idea maybe you wouldn't have heard otherwise. Maybe they have a view on a position that one of our current managers has in their portfolio.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Last year. Take a meeting. Exactly. They usually don't call up after a bad year. We'll certainly take that meeting. You never know. Might be a needle in a haystack. We'll learn something from every meeting. But the hit rate on those kind of cold call reach outs has been very low. The prime brokers certainly introduce us to, especially to new managers, I would say, coming through Chicago where we're based or through their conferences. That's always very interesting just so you feel like you're in the flow of those new managers.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Her hand. Most of them come to us for that initial meeting. Maybe I can kind of go through it from least likely to end up with us investing that maybe most likely. So the least likely would just be sort of a marketer calling up and saying, hey, you know, we had a great year. We're coming through town.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'm really curious to dive into your manager selection process. And a big part of the reason, as I've observed for many years. You and the team at Evanston have invested across hedge fund strategies, so long short equity, sure, but also macro, also an event-driven strategies. You've also invested in very large funds and startup funds. And so there hasn't been an easy filter from the outside to say, hey, we just don't do X. But at the same time, you've had great success in picking managers. And in some sense, you could say, hey, if there's a macro strategy, we're just going to give our money to Bridgewater because they're the biggest, baddest, and best macro manager. But that's completely different from the other end of the spectrum, which is backing a startup, of which there are many, and I happen to know a number of the decisions you've made, and they've, with great consistency, been great selections, which is really hard to do in the startup space. So I want to start with, let's just go through the process. How do you source?”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“from their track record. Now, how you would get access to that data, is it certain universities tend to produce better managers? Is it certain age groups, certain asset bases, certain investor-based types? How you get at that sort of softer stuff without issuing them a survey of, you know, do you have a yacht or a second house? I think that also means that some of these kind of newer quantitative managers or some of these newer funds that focus on factor-based investing could get really beaten by some of these funds who are a couple steps ahead of that. And so I think if you're going to invest in those types of strategies, however you do it, you really need to think that they're at the cutting edge of those technologies.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, we've started to think a lot about data analysis. I mean, certainly there's the simple data analysis of analyzing performance, looking back at historical periods, obviously simple stuff like their drawdowns been have they performed in a way that's consistent with our expectations We think so much of manager selection and trying to figure out who's going to do well prospectively is based on much softer factors such as why is the person doing this what what drives them do they really love this how competitive are they versus are they worried about their yacht or second house or something like that and those are very qualitative soft factors but I've always thought there might be a way to use data to kind of suss out those factors it's something we've started to think about a little bit like what are some of the common characteristics of successful managers above and beyond what you can glean”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you think about data analysis today, both in how you're operating and whether you're using data differently than you had a couple years ago? And then also what you're looking for in managers, because a lot of what you've described as fundamentally driven managers probably tend to be bottom-up stock pickers, which aren't necessarily the ones that are thinking as much about this sort of explosion of data and AI and all the things we're starting to hear more and more about”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“with a high amount of leverage, unless they're effectively getting that leverage, let's say through a swap or futures contract where it's on something like a treasury bond or something extraordinarily liquid like that.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's, you know, one of the biggest risks we think out there in the market right now is liquidity. We have a very high tolerance for, as I said, mark-to-market risk. So if a stock goes from 10 to 8 on the way to 20 and a manager owns it, we'll take that risk. We have a very low tolerance for when managers have to turn those losses into permanent losses. That can happen through investor redemptions, a weak investor base gets jittery at bad performance, they redeem, forces the manager to sell at probably the worst time. But margin calls on leverage can also spur that kind of activity. And when you start combining highly leveraged strategies with strategies that are crowded where people are looking at similar factors in a market that we still think is fairly illiquid, in our view, those are risks that you're not particularly well compensated for. And so it'd be the rare case where we would invest in something.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“It tends to be, yeah. If you look across the firm, probably about close to half as in long short equity, maybe 15 or so percent in macro, 20% event driven and the remainder in relative value. Very little quantitative strategies and very little in the way of strategy that in our view utilize a high amount of leverage.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably another 30 ish percent driven. Call it maybe 15 20% relative value types of strategies in the remainder macro and then that relative value macro piece I think a fair bit of that is more quantitatively driven types of strategies”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Something like distressed debt, which is very on the investors, tolerance for risk and that sort of directional exposure. But I think 30 to 40 percent for long short equity is the risk.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“A good question because it's different, different from different people, obviously. Yeah, I think maybe 30 to 40 percent long short equity, you know, there's certainly a performance chasing mentality in certain strategies such as quantitative CTA strategies like that have certainly been in favor recently. And so I think those quantitative types of strategies would find a role in most hedge fund portfolios. We have very little of that sort of exposure.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Circle back on portfolio construction. You mentioned that having a healthy amount of long-shared equity is out of consensus. What do you think a consensus portfolio construction of a portfolio of hedge funds looks like at the strategy level?”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Technology manager is going to do great, or the healthcare one's going to do poorly. It's going to really come down to their individual stock picks.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say though over time as time goes on, it's going to be those individual manager positions that are really going to drive performance, right? So we might have a manager's in six stocks and they're 80% net long. Certainly if the S&P is down 10% in a month, that manager is very likely to be down fairly significantly. But over a three or four year period, if the S&P is down 10%, probably the stock picking dwarfs the market return. So we pay much more attention to that longer-term lens, if you will, and have a much higher tolerance, I think, than maybe others for mark-to-market volatility if we think that over time from the managers we're getting different sources of edge. And I think that's borne out over time that if you said over a five-year period, the stock market's up 50%, it's very hard to say, boy, I think the tech”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“So if you look across our long short equity manager universe, I would say the net exposure is probably between 40 and 50 percent. So it's definitely the case then in any one month or quarter or even six month period, that net exposure is a large explainer. Each manager's return and then the group of longshort equity managers as a whole.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you dive into that a little bit more, a long short equity manager, if you think of it as the alpha piece is the spread long short spread, or how are the longs doing relative to the market, how are the short's doing relative to the market, therefore, how are they doing relative to each other? And then you also have the net exposure. So if you put together a bunch of different sectors, as you said, if they all have a certain exposure to the market, they'll be correlated to the market. And at some point in time, if their exposure is too high, that might dwarf the excess return they're deriving from security selection. What's your take on the sort of sweet spot of what you like to see in terms of the amount of market exposure? and the amount of presumably alpha or excess return they're generating?”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Consensus views of how to build hedge fund portfolios. We actually think long short equity is the strategy where you get the most diversification among underlying managers. I think prevailing wisdom is the opposite. But our view is that over time, a technology manager versus a real estate manager versus healthcare financials, very different sources of alpha or skills that are going to drive those managers' returns over a long enough period of time. So month in, month out, they might be highly correlated to one another if they have a positive beta to markets, but over a two, three, four-year period, we think the correlation among that manager group is probably going to be less than, let's say, among a distressed debt manager group or event driven manager group where there's much more similarity of positions, which is why it's always been kind of the biggest area of focus, I would say, throughout our firm.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“A framework we call our qualitative risk framework where effectively we think quantitative measures of risk work in 98% of the cases, but it's the 2% of the other cases that you really need to worry about. And it's thinking more qualitatively about each of our managers and how we think they'd fare in various stressed or shocked market environments. And it's not that we want no risk to those environments, but we want to be sure that we don't have too much risk in any one sort of negative shock. And if we ended up with 25 technology managers, it would probably scream off that page. We're going to do horribly in an anti-growth environment. Or if equities... On the other hand, I think we have some pretty.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. Yeah. So we really, through portfolio construction and risk management, and that's exactly right, that you have to have some sort of balance on that so you're not basically taking one gigantic bed at the end of the day.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“So even if you start bottom up and you create a group of managers, You do want to make sure you don't have 25 long short technology managers. So somewhere along the way, there have to be some bounds of what's acceptable on the playing field and when you're sort of going out of bounds. How do you blend those two?”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Effect. But even today, if we found a great distress manager, we would still want to invest in them, but we might size them more conservatively”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Much more bottom up. You know, we think the scarce resources are really great, great managers. And we've learned this the hard way, right? When you try to say, here's my view of the world, let's shove a mediocre manager in to fit that view of the world that we need to have more macro or whatever it might be, you end up making mistakes. Conversely, you might say, boy, I've already got two technology managers. You end up passing on a third one where you feel that the talent is outstanding and you live to regret that decision. So I would say we have much more confidence in our ability to select managers who have a real sustainable edge over the long term than on our kind of tactical market sorts of moves. When it comes to the top down, we're really looking for more fat pitches to overuse cliche, but distress debt, for an example, we're very tactical on. So when defaults are high and spreads are wide, we'll tend to be much larger than in an environment like today where you have the opposite.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in a classic like Markowitz mean variance optimization framework that Dave would have seen at Northwestern, the studies that tell you that asset allocation is what drives performance more than security selection. How do you think about that in the hedge fund space? Do you start with thinking about the areas of those just broad opportunity sets that might be attractive? Or do you start much more bottom up with individual managers and let the strategy buckets fall out?”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“to drive outcomes. And then I'd say on the macro and sort of relative value types of strategies, it's much more fluid than that. We have some folks who are big, some who are small. There's no kind of rule on that. But what we really are looking for is some sort of sustainable edge, something that's different about what they're doing as opposed to, hey, I'm taking a tiny little spread of something, levering the heck out of it, and delivering a return that way.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“And technology and healthcare, right? New scientific advances and whatnot. A sector like real estate is sort of a boring sector, right? There's not that many people who are looking security by security and saying, here's the characteristics of RET A versus RET B, right? It's not a particularly exciting area, but it's one with a lot of alpha in our view. And so that's a starting point for us on the long short equity side. tends to lead us into smaller managers all else equal. Distressed debt is very different. We generally prefer larger managers there, managers who can afford the infrastructure, the legal expertise. They've been through multiple credit cycles. I'd argue in the recent period, managers who've done great, you would probably want to be more cautious of the managers who've done sort of mediocre because they might be chasing risk rewards that aren't very attractive. So we like folks who've been through multiple credit cycles and have kind of the infrastructure and bandwidth to”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the first place, and it really is so hard to find is where's that skill coming from? And I think it's different in the different strategy areas. So long short equity, which is a good part of what we do. We've always preferred smaller managers and managers with a sector of expertise, you know, all else equal. It's just always made sense to us if you have a group of folks who are just looking at healthcare or technology or real estate or financials or what have you, they're not managing a ton of money. They can go into more interesting securities and names than if you're managing $15 billion and you might have a couple analysts in each sector. And so you're really looking for folks who know those sectors incredibly deeply. It's not so much a bet on our part that the sector is going to go up or down. It's more of a bet that there's going to be dispersion within that sector, winners and losers and there's constantly winners and losers.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, for the last 15 years, you've been managing portfolio of hedge fund managers. What set of beliefs about investing do you start with to narrow a filter of, I don't know, there are eight or ten thousand funds. I think you guys invest with 30 So, where do you start”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's probably true to some degree. I think the industry as a whole. And we've always felt the industry as a whole does not really add much value, if any value, net of fees. So the average manager isn't very interested. And so as managers have probably underperformed, they've, in many cases, probably transitioned the story of why they should exist. And there's nothing invalid about risk mitigation in a portfolio, but you can mitigate risk through many different mechanisms. You can just go to cash, for example, right? So hedge funds still need to provide some sort of alpha or unexplained skill or edge on top of what you would get from just going to cash. But I do think probably the disappointing returns have helped kind of shift the narrative more to that risk mitigation side.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“The risk mitigation aspect of it is probably usurp the return enhancement part of it, and that's not necessarily a bad thing, but I would say that it's definitely an evolution verse 15 years ago.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think back in 2002, so at that point, a lot of the top endowment and foundation investors had begun to go into the hedge fund area. And I think really it was to seek an alternative source of return. But I would say back then, it doesn't feel like that long ago. But back then, it really was more, it felt more return enhancing. You were trying to generate an absolute return that was very strong. And certainly some of the risk reducing characteristics were part of it. But it was really viewed as this is access to the very best and brightest investment minds in the world. It's a way to access their talent in a way that's unfiltered and unconstrained by boundaries or guidelines or benchmarks or things like that. And I would say the industry is transition and morphed more into, it's become much more institutional, quote-unquote a focus on risk management, diversification.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Skepticism pervades still today. But I decided I wanted to see kind of the industry from a different angle. So I went to Goldman Sachs Prime Brokerage, which is really the part of Goldman Sachs that services hedge funds more from a perspective of enabling them to have leverage in their strategies, help them go short securities and long short equity strategies, for example, and then was really fortunate, lucky break to meet David Wagner, who was the CIO at Northwestern University, and he was about to leave Northwestern, start a business, and met him through some acquaintances, and we hit it off. And that was really kind of how I got into the fun to fund business.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then just always seem like finance would be an interesting place to eventually go into. So I went to Penn undergraduate. It was fortunate to get a job in Goldman Sachs Asset Management out of college. And at that point, most people went into sales and trading, investment banking. So I kind of snuck into asset management, which wasn't very popular at the time. And I was fortunate within a few months to end up in Cliff Assis' group, which was the quantitative research group. And eventually the group that became AQR. And that's really where I began to learn the chops, so to speak. And so you left Goldman and joined Cliff, right? Yes, exactly. Yeah, it was a fantastic time with AQR team and kind of learned how hard it is to actually create strategies that have value kind of net of all the fees and all that and just tremendous insight, tremendous. So you started with skepticism. Yeah, exactly.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Adam, I'm so excited to have you here. Thanks for joining me. Thanks, Ted. Excited to be here. Yeah, we're going to be talking hedge funds today. Why don't we start with your path to getting to where you are today, managing just south of $5 billion hedge fund portfolio? Because I know you've been really involved in the hedge fund space from the beginning in different iterations. Sure, yeah. I mean, it probably started as a kid, not the hedge fund part, but the part of being interested in finance and numbers and all that. Just always loved. Where'd that come from? Math as a kid. I don't know. I just always from the time I was five or six reading the sports page and... Computing the winning percentages, and if my beloved Philadelphia teams and usually more L's than W's. But still, that was always fun.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“Hedge funds and the resulting unattractiveness of the average hedge fund today resonates strongly with how I viewed this widely discussed and recently scrutinized corner of the markets. Last week you may recall I suggested you reach out to your parents, help them learn how to use the podcast app on their phone, and recommend they listen to capital allocators. Well, my friend Matt let me know that after listening to that introduction while in his car, his nine-year-old son Aidan turned to him and his wife and said Hey guys, have you heard about the capital alligators podcast? Those crate stories coming, and I'll do my best to keep the alligators at bay. And now, please enjoy my conversation with Adam Blitz.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Adam Blitz, the CEO and Chief Investment Officer of Evanston Capital Management, a five billion dollars hedge fund of funds manager based in Evanston, Illinois with a decade and a half of industry leading performance. Adam joined Evanston at its inception in two thousand two and Leeds Investment Research and Portfolio Management. Previously, he worked in the prime brokerage area and asset management division at Goldman Sachs and served as head trader at AQR. Adam earned a BS in economics at the Wharton School of the University of Pennsylvania. Our conversation dives into the hedge fund category of investing, covering how a leading allocator in the space thinks about strategic asset allocation, portfolio construction, risk management, manager research, decision making, and monitoring managers. Adam's perspective on the evolution and how allocators perceive.”
2017-07-17 · Capital Allocators · Adam Blitz – Inside Hedge Fund Allocation (Capital Allocators, EP.17) · IDENTIFIED FROM THE TRANSCRIPT · source