YouSaid · the spoken record

Andrew Tsai

lines on the record: 99
first: 2018-10-22
most recent: 2018-10-22
sittings or episodes: 1
sources: podcast

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“His point, and I think it's really ring street to me today, is that there's a certain energy that needs to be associated with an organization to attract exceptional people. And yes, you can get that in single family offices. And I know a lot of single family offices that have that energy and feeling, but not most. And I think a big part of it is that when people are joining something, it's not just that they want to be something that can be massive, right? Because I've told everyone here, like, our job, we're not going to be a very large asset management firm. We're going to be boutique firm that does a few things very well. And if we do that well over a long period of time, I think it's going to work well for our investors and work well for us. But I think there is a different kind of energy and focus that comes with different opinions and views that come with other investors. And Pete identified earlier, and I agreed with them, and that was always the plan from day one, was it taking some outside capital.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very early on, and this came from Pete as much as it did for me, he felt that it was going to be important for us to take another capital.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“And make those bets and try and find those asymmetric bets when they're there. And there's been some already since we've been around since 2004. So that was really the beginning of our framework.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“These asset classes are correlated to this way, and this environment means that they'll be correlated that way going forward. So our plan and our philosophy, and it's still a core part of what we do, is how do we focus on things that have an inherent lack of correlation to a lot of those things? And how do we focus on things that could have long tails? And that could be the result of a dislocation, that could be the result of something that's misunderstood and kind of build a firm around that. And so it was the opposite of, okay, we're going to fill this bucket with that, this bucket with that. It was like a blank slate of, okay, if you've got a long-term horizon to compound, and most of our investors, they came in after Pete were people like Pete, you know, senior partners with big hedge funds and private equity businesses. And most people like that have access to what we call mainstream alternative strategies. So how can we create something that's truly differentiated and allows us to go deep in a few things?”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we really wanted at the beginning, and I think this DNA has stayed with us the whole time, we really wanted to build something that was focused on long-term combining, and that's obviously what a lot of people focus on. But we wanted to do it in a way that was focused on areas that were less competitive, that were niche, and where we could concentrate our bets. And so we actually took the opposite of an asset allocation framework. And we had the view at the time, and it turned out that it was even more extreme than we expected, that too much money would flood into space, that historical correlations would be useful, but dangerous to rely on too much. And if you think about asset allocation, right, you're relying on your forecasts of volatility, expected returns, and correlations. If you believe that there are some distortions to that because of capital flows or in the case of where we are today potentially with kind of liquidity in QE, does the fact that”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bingo, like you bet on very statistical things. You know, he's like, not true. Like, I bet on people here at PDT. You know, we have an amazing team, amazing culture. I think we should build investment firm that is built around people, people that you bet on internally at the firm and the people that you partner with. And I thought that was such an interesting comment coming from a person who's an applied math guy who has built his career and success on that to have that perspective. And it just shows the kind of the type of person he is, multifaceted and deep. And for me, that was kind of an eye-opener. And so that was the blueprint and we started mapping out what we were going to do and that we wanted to be long tail that kind of talked about my kind of truisms that I learned about like, you know, the thing I want is long duration capital, being opportunistic, concentrating our bets, being able to play offense when others are playing defense because I'd been on the opposite side of that a couple times. And that was the formation.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So went away for a one-week offsite. And before that off site, he's like, I'd like you to read a book. Like, okay, he's going to have me read a book on statistics, on game theory, on whatever it is, right? That's what I'm bracing for. He's like, I want you to read Loenstein's book on Buffett, the making of an American capitalist. I'm like, okay. Yeah, sure. And talk about page turners. What a great book. Yeah. So read the book, and he's a big surfer, so we meet in Hawaii for offsite. And he's like, what'd you learn about the book? What'd you glean from that? Thank you for recommending the book. It's a great book. Obviously, what an amazing investor. And I said, for me, and I underline certain things in the book, this guy bets on people. And Pete's like bing”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thank me a lot for saying that. So Pete is a multifaceted, talented person. I think most people know, certainly in the finance community, is one of the greatest quant investors of all time. He runs a hedge fund called PDT Partners. It was originally And they spun out about five years ago. And then they run one of the best Stadarb fu funds in the world. He's got a lot of talents. He's a musician. He's a very accomplished poker player. He has his own crossroad puzzle that he does that attracts some of the world's best. He's written for the New York Times crossword. He's an interesting guy, not only a business partner, but a dear friend.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“And this is an important lesson that I'll always remember. He said the way you dealt with a bad time, the closure of our hedge fund, I was impressed by it. And it really spoke true to your character about calling aggressively when times are bad. And I thought to myself, well, isn't that kind of what everyone does? And, you know, he was like, look, you'd be surprised how many people kind of just curl up in a ball and don't want to deal with it. And I just felt like if I was on the other side, not that necessarily there was anything to do about it, right? It was such a quick violent kind of shift when long-term capital is blowing up. But I think being proactive has been a really important lesson, kind of like a life lesson, right? Teach my kids that, teach my business partners that. So that little action was the reason why Pete said, hey, let's do something again. And that was kind of the genesis of me setting up his family office. And then that became the core of Chalkstream. And from then on, we kind of, we've built it up.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So got married in Italy and had a bunch of my friends come out and Pete Muller came out to that wedding as well. And he's like, so what do you do next? I said, you know, I'm not sure. Not sure. I'm taking some time. At the time, I was talking to hedge funds, private equity funds, funded funds. I was talking to everyone. It was great because I had time. I could just go around and meet folks. And he's like, look, let me just put something in your head. I would love to work together with you. And I said, really, why?”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“I learned what I wanted to do the rest of my life, right? Because at this point, if you think about my background, fixed income trader. Hedge fund VC startup. Around company CO in the tech space. I spent a lot of time talking to people, thinking over these long runs and bike rides. Like, what do I like doing? And I realized that the widget I loved was investing. I loved running companies. I loved motivating them and I do that here and I love building cultures and processes. But the widget of what you're manufacturing in terms of investments goes all the way back to kind of my early days in college. What kind of got me excited to explore an industry and decided that point that I really wanted to get back into investing.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is like 2001, 2002, so like 30. Yeah, I'm just getting married at that point, worked out a ton. You know, I was doing a lot of travelons back then. And so, yeah, nothing to do. So I could do two a days and enjoy it and not feel guilty.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that was interesting. And that company ultimately got sold to VerSign, who was the big player in that space. And that was the first time I took a pause in life and really thought about what I wanted to do next.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was surprised. Finance Guide, it's transactional. This is expensive to that. This dog looks cheap to that dog And how do you arbitrage that? And these guys are like, okay, well, this is a good investment, but how can we actually affect change? How do we make a difference? And remember, those guys early on, and they've done it amazingly, brought in kind of incredibly high level politicians, business people. So like if they're getting a company to expand into China, we'll make a call. We're actually add values an investor. You know, if you're going to do this strategy in Southeast Asia, we've got these kinds of connections, really, really thoughtful adding value. And that was like, wow, you can actually kind of move the spread in your favor. That's kind of cool”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the next adventure was I was in London and was approached by the Carlisle Group. And they had a portfolio of tech investments. And like all those groups, some were good, some are bad. And they said, look, we think there's one company that can help us with. Will you consider being interim CEO? And if it works, you'll get a bunch of equity. And at the time, I kind of thought about different things and said, you know what? I'm here in London. It sounds like an interesting opportunity. Really enjoyed getting to know the Carlisle guys. I mean, what a fascinating organization. And you think about where they've come from there. It opened my eyes, you know, could you get invited as one of their CEOs to their CEO conference with real CEOs of real companies? And you get to see like, wow, these guys are approaching and thus in a whole different way. And that really opened my eyes to like long duration, illiquid private equity investing and kind of seeing some of the ways they approach that and the ways they dealt with company management, which I still hold dear.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Something happened. The whole reason we were sprinting to that S1 from our perspective was, and the whole reason why we, and again, we should have pounded the table, but the whole reason we're like, hey, look, there's a good sale. This is a huge exit is because fundamentally it was, we were long growth for the first time in our life and it felt uncomfortable. And so we wanted to at least be neutral growth. And that meant to us, how do we exit this? How do we get out of this and close, close, but no? March 2000 happened, and then all of a sudden it was a whole different world.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“At the time, Mr You had this experience from your hedge fund of investing world changing in a way you couldn't anticipate. Did you have that value lens during the dot com bubble saying, you know, we really probably should exit before something happens?”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, we're value investing, guys. What do you mean more? And, like, well, yeah, but, you know, our model is we have a bunch of companies, 80, 90% of them are going to be zeros. So we need the kind of one or two to work to work. So we think this is the one that can really work. So let's keep going. And, you know, at this point, we're now, I don't know, late 20s, standing up and pawning the table to kind of a seasoned venture veteran was something we hadn't done before in hindsight, obviously we should have. So that was the experience there.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So business shutdown, it was kind of a victim of the tech crash. And we actually had our S1 that was about to file with Deutsche Bank. And so we had all that stuff going on there. And we actually had prior to that another competitor try to buy us out. And this was halfway through that journey. So one year later after starting it. And this is another lesson in terms of lack of alignment. And all these things come back to everything I'm doing today. But the venture capitalists saw the exit, which would have been a pretty big exit. It was a multiple hundred million dollar kind of exit for a company we started a year earlier. It would have been life-changing for us at the time. And venture capitalists were like, look, you know, that's good, but we kind of need more.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“The concept was one hour delivery, and so it was basically Amazon one hour. And in fact, if you look at the old snapshots, which I'm sure are floating on the web somewhere of kind of the page had a striking similarity, Amazon. And the difference was you click and it got delivered to you within an hour. And so that was the business that people knew, like the retail B2C business, what people, most people did know unless you were kind of in the company or one of our investors was the B2B model, which was third party logistics. We actually ran third-party logistics for online delivery for some big companies that wanted to have a fulfillment agent into same-day delivery service. And again, it's all about keeping in business long enough. I mean, you know, I think our family has 10 boxes from Amazon every day, hit our doorstep, you know, from something like a toothpaste, unfortunately, to something more substantial. So the concept is early, but for us, it was really the real.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was similarly volatile in a different way, right? You had the kind of volatile explosion, and our company went from a handful of people to, I don't know, we probably had 700 employees at our NR peak, right? Because we had tons of delivery people, warehouse people, not all full-time. In London, we had probably 150. It was big operations and big management and kind of decent money raised. And there's so many lessons.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. It was kind of an eye-opener to a whole nother space. And the money was flowing. And I actually went back to London to set up the London operations. And just from a life lesson, from a business lesson, it was a fascinating experience, right? Because you think about everything up till then, I'm dealing with highly trained, highly educated finance people that are motivated, that are working their ass off, et cetera, et cetera. And now we've got delivery people. We've got factory kind of logistics folks. We've got the PhDs. And they all have different motivations and different ways. And you need to figure out different ways to inspire and motivate them. So that was a really important lesson in kind of how to manage different types of people.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we built up this business. We raised a bunch of money from venture capitalists. You know, it was, I would imagine it's similar now. You know, I don't know because I haven't raised money from venture capitalists in Ohio, but there were fewer of them, but it was equally crazy. It was, you know, you go into a room and you would do your pitch. And, you know, and I just come from the hedge fund industry where they're like, okay, we're going to do seven more meetings, ten more obstudially meetings, and then we'll consider you, right? And the VC space back then was basically like, hey, nice to meet you. Pitch your idea. They're like, we'll get back to you tomorrow, but I think we're likely to do something. So we walk out of the meeting, we're like, What? Like, really, like, we just.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was really simple. We had a team full of PhDs that we really liked and respected, and we were shutting down our hedge fund. And it was a lesson in how do we keep the band together? Like, what do we do? Like, this is a good team, right? We believe in the strategy. We just thought that at the time it was going to be hard to kind of raise money for Quant. But we thought that how do we keep this team together? And at the time, there was so much going on in technology. And we're all living in New York City, all dealing with the lack of convenience and lack of delivery. And to us, it actually was just a fascinating optimization question, right? So the geeks and us came out and it was basically, okay, if you've got X number of warehouses, Y number of orders, and Z number of delivery people, how do you do that? So it's actually a fascinating question, right? Logistics and operation management. And it was kind of, it wasn't that much of a segue from the team we had. And so we started building up that team.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's funny. Everything kind of comes around because the dot com, we built the same day delivery service called Urban Fetch. And this was built effectively with the team we had in our hedge fund.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we're going to get into that. But I know at the right age of 27, you took a little bit of a divergent path from asset management. There was this dot-com thing going on. So why don't you tell that story?”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“And you need to be in business. And they did an amazing job of crowling their investors and their team, right? Because you need both. You need the team to stay. You need the investors to stay. You got to have a sense of humor. And Cliff's got one of the best sense of humors in the world. And I think that's part of the secret sauce is how do you keep an environment to keep it a little bit light when it looks really, really bad? And I think they did a great job of that. And I think that lesson to me is really, really important. And one of the reasons why parting with Pete and Chalkstream was important, because I really wanted a foundation of capital that could really be very, very long tailed.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Business. If you believe in your strategy, if you believe in your team, what is the X factor that you need? You need duration of capital because you need to be around those times and every decade there's maybe one or two opportunities where there actually is lower hanging fruit and it is easier to make returns, but you got to be there.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a great question, and such tremendous respect for AQR and what they've built. And if you think about the different paths, they start and they go right into the 98 drawdown, right? So the same drawdown we went into, and it was an ugly time. And they were like all of us. Assets were flowing the other way. It was going to be very hard to raise capital, new capital in the space. And they did an amazing job of holding on to enough assets. And it was still, you know, that long valley short growth was also remember 99 wasn't really fun, right? Because that was when every tech stock was kind of flying through the roof. And that took out some other big kind of fundamental value managers. But then when the market's corrected, all of a sudden long value, short growth looked really, really good for many years. And so that experience and kind of how AQR was able to stabilize is maybe my one bullet point for being in the asset management business, which is stay in.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you look back, AQR started at around the same time, and similarly had a pretty rough start for the same reasons. What was it at that time that had you decide, you know, we should wind this down and they sort of clearly kept going and ascended from there”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we shut down. Yes, so we ran it for two years and we had fantastic investors and, you know, our anchored investors, Pete Muller, who's my partner here at Chalkstream. We had fantastic investors and it was a tough time. And we decided to give the money back. And at that time, maybe there was a word that was less popular, but Quant was probably, you know, top three least popular words for allocators. Yeah. So, we've done really well in 97 and gave it all back in 98. So it wasn't a disaster, but it was certainly a disaster in 98.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Blew up at'98, and they were so levered into so many different things that relationships that you can do the math till the cows come home and it will And so that was a really, really important lesson to me on when things go bad. They can go much worse than you expected. And things can really happen that don't make sense. And it doesn't matter if it makes sense or not because you're not around to take advantage of the other side.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so now this is part of the story where we start learning that, okay, maybe we don't know everything at the age of 27. And you and I have talked about this a lot. I'm 47 now and it's like the older I get, the more I feel like I don't know, right? Exactly. But at that time, I still feel like I know everything. And at 27, I'm starting to doubt that a little bit. And what you kind of see is that, you know, kind of correlations can really go to one. So long-term capital.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So this was one of the first spin offs from the Global Alpha Fund at GSAM. Quite. Quantitative, long value, short growth, multiple asset classes. And my good friend and partner, Ross Stevens and Clavazness had said of the original Globe Alpha Fund at GSAM, and Ross decided to split off and I decided to join him in building this business. And again, it wasn't directly related to what I was doing at Lehman Brothers, which is more fixed income arbitrage trading, but it was kind of a next iteration on applying quantitative methods to markets. And I was really excited at that point to expand into equities and commodities and volatility and other asset classes. So it was a great opportunity.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“It really is about going back to that thesis, that senior thesis, and that was kind of always my dream and vision to be on the buy side. And it was nothing about Lehman. I actually still to this day love Lehman. Some of my best friends in the world are from Lehman. You'll see behind me in my office a certificate of Lehman up on the wall, which is when I left, I sold all my shares, which looked really dumb for about 10 years and then looked okay. But I kept one share. And back then you could get a certificate. And to me, it's a reminder of what can go wrong. And it doesn't matter how established, how big of a brand you have, things can go bad if you're not careful. To your question, I always wanted to go to buy side. And my kind of infinite wisdom age of at this point, I'm 26, decide that now's the time to set up a hedge fund and partnered with someone who's still my best friend in the world today and he was at Goldman Sachs and we left together with a few other partners and said.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had a sense, right? Because being on the street, you had a sense of what institutional flows are doing. So you had a sense. My question was always like, how does it get here? And then you say, well, you know, this central bank's moving, you know, kind of big into this part of the curve for this reason. You start understanding from the salespeople what their objectives are, their client's objectives are. So you start kind of putting together a rough. And I say rough because you don't really know rough framework on kind of what's going on. And it kind of gives you some comfort that, okay, you know, there's a reason that happened and perhaps there's a reason that will revert at some point.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when you would see those types of trades, like negative basis trade, free option, massive convergence in currencies Could you tell who was on the other side of it to get conviction that this thing that doesn't make mathematical sense is worth the trade?”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“He was exceptional. And you don't really know exactly. You're not on the same desk, but you see the types of trades. You know, I worked with people that had worked with them before at Sally. And so you get a sense of the discipline, the tenacity, the kind of differentiation. You know, there's not that many traders on the street today that have that kind of persona because they've all gone to hedge funds or done other things. But back then, it was an amazing time, right? There were periods where you could do kind of negative swap spreads. There were times when you had people paying you to own a basis, which is paying you to own an option on delivery, crazy stuff. And you had the whole beginning of the euro process, right? So you had a big convergence trade on yields all over the place and you're having a little bit of deconvergence now”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was at Lehman for about five years and I was on the desk the whole time. They sent me to London two years later in 95 and I focused on the European bond markets, specifically German bond markets, and that was a really interesting time for German government bonds. This is when Alan Howard was running it for Tokai and then credit Suisse and kind of saw what a true trader was and is what do you mean by me?”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“imprinted on me that there's some things out there that are bigger than any kind of given view of the markets. So that kind of confirmed my Susquehanna view on kind of relative value, but it looked to your question. It looked really different. It was a tremendous amount of energy. It was this exciting shift where technology was just coming in larger than life characters, right? I mean, those Liars Poker was written, I think, a couple years prior to that. That left a big impression on me as well.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“So different, so different. You had stepping back, you walk on the trading floor, it's different than today. But back then it was hard not to be in awe. You could feel the momentum, you could feel the energy, right? This is before electronification. This is when there were big personalities. You were in the transition period between the lacrosse team players who are these aggressive old school traders, right? And then kind of the beginning of the quants. And my first boss at Lehman was kind of one of the wave of kind of early quants to come in to say, hey, let's use some computing power and let's really study these relationships between cash and swaps and TED spreads and basis trading. And again, going back to my Siskana days, it wasn't about like, hey, is the buying going up or down? Like, who knows? In 94, by the way, when the Fed, the surprise rate hike and kind of ask, it was all kinds of mayhem.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was trying to figure out what is the most complicated strategy right now? And this is, again, going back to 92. And it seemed like to me it was fixing a arbitrage. And so I was reading about the Sally Bond Arm desk and all these types of folks. And so that's where my focus went. And so I was lucky because there weren't many people coming out of school saying I want to work on a fixed income arbitrage desk. And so I was one of the few kind of nutheads who wanted to do that and get with the Susquehanna background was able to get an offer at Lehman Brothers and their fixed income arbitrage group. And that was the beginning for me in finance.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish. I wish. So wrote that thesis, and thesis is way too strong of a word. I wrote my senior year project on setting the hedge fund, and that was the bug. And then I started studying one strategy after another. And my brilliant master plan at the time.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“What was interesting is that you'd hear the hushes come when they'd say, Oh, yeah, you know, Morgan Stanley is about to come in with a big order and it's Tudor, right? And I'd say,”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Out of I went back. I took actually a semester off my junior year to go back and then I worked on the Mergantel Exchange. That was in the pits. The SP 500 option pits. And to me, this was the most primal visceral form of trading, right? Open outcry. Open outcry. I silve my hand signals. I still like when I see my buddies, I'm like, hey, you know, bias, you know, three beers and I'll make the three signal, right? It's visceral, right? Because it's like a person wins, person loses, and you're looking at that person. And so it was a real understanding of what was going on kind of at a very base level. Was that Wisquehanna? Wasn't Wiscke? It was with the small arc bank, futures broker in Chicago.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Famous for dog racing, we go there. So I'm in the bus and I'm sitting next to one of the partners and I'm looking at the sheet, right, of all the races. And he's like, so how are you going to bet? Like, I don't know. I've never really done this before, but this dog looks like he's got a good track record. You know, he's run strong recently. And the guy looked at me like I was a complete idiot. He's like, he's like, what are you talking about? How is this dog doing? I'm like, well, isn't that kind of what we're betting on? He's like, well, look at the relative value between this dog and that dog. And they started talking about spread trading and kind of trying to capture that basis. And I'm like, these are my guys. Yeah. These are my guys. So it really was like this culture of dissection that I loved. So you did the summer job with that.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is right at the fourth ending of their trajectory. And it was in Chicago and it was a foreign currency joint venture of Chase Manhattan for foreign currency options. Well, the interview process, right, is all about statistics and math and like, you know, game theory and all this kind of stuff. I'm like, okay, these guys are my guys. And I knew I liked them when first week of the job, they say, okay, we're meeting downstairs. Bus is taking us at four o'clock. Like, what do you mean four o'clock? We're going on a field trip, the whole company. So get on the bus, we go to the dog races. So outside of Chicago”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“Andrew, thanks so much for joining me. Ted, good to see you. Thank you. How'd you first get interested in investing? When I was in college, moved award in undergrad and most of my cohorts, the job to get was being an investment banking analyst. Back then, it was like DLJ. It was Goldman. It was Solly. And that never seemed to really appeal to me. Why? When you go to the interviews and you talk to people what they do, you know, they say, look, it's going to suck, right? And you're going to come here. You're going to work your butt off. You're not going to really do anything. And I have no problem with working my butt off, but towards something productive. So that was my impression right or wrong. And I was fortunate that I got my first summer internship with Susquehanna.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Andrew Sai, the chief investment officer of Chalkstream Capital Group, which he founded in two thousand three to manage the assets of Kwant Guru Peter Mueller. Andrew's fascinating background started on Lehman's Arb desk in the early nineteen nineties, after which he formed a quantitative hedge fund in nineteen ninety seven, built a dot com logistics business in nineteen ninety nine, and led the turnaround of a private equity-backed business thereafter. He combined his wide range of skills to focus on investing at Chalkstream. Our conversation walks through the stories and lessons from Andrew's background and turns to Chalk Street. His investment program is the opposite of asset allocation, emphasizing deep dive research, concentrated themes in niche spaces, low beta, long tails, and culture.”
2018-10-22 · Capital Allocators · Andrew Tsai – Catching a Theme on the Chalkstream (EP.73) · IDENTIFIED FROM THE TRANSCRIPT · source