YouSaid · the spoken record

David Eichhorn

lines on the record: 72
first: 2024-09-02
most recent: 2024-09-02
sittings or episodes: 1
sources: podcast

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“But they work, they get the job done on hedging, and they're great collateral. So we're a big LDI manager as part of that risk control to fixed income. The other main physical asset portfolios we run are equities. We're not as strong believers in active equity as we are as an active fixed. So what we've done there for large institutions that pay taxes, we run equity products that are tax smart. So we harvest losses, defer gains. Some of our clients have very unique dividend treatment on the tax code. And so we'll try to tie passively and enhance after tax. So that's our physical side of the house, which is well north of $200 billion now. The remaining AUM are in derivative overlay strategies. And those are quite heterogeneous. So I mentioned it grew up as a commodity strategy. But if you look at it now, about half of those assets we manage are in LDI overlays or now the term we use more commonly are completion engagement so think of those where you”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“We often joke we only do things we understand, so we do very few things. I've kind of adapted that a little bit lately. We only do things we believe in, so we do very few things. Those are not the same, but they're related. So we're a pretty focused shop, even with over $400 billion in AUM. A couple things. So key areas, risk controlled, fixed income, and truly risk-controlled were stingy about using risk budgets. So fixed income that we believe delivers true alpha over benchmarks. That's what we did from day one. If we said we had a product on April Fool's Day, 94, that was it. And of course, we run against a lot of benchmarks, but predominantly US investment grade, fixed income. A big, big portion of our risk-controlled fixed income is for LDI clients, so liability-driven clients for corporate pension funds. So think of long zero coupon treasury bonds, long corporate bonds, et cetera. We are a very large manager of U.S. treasuries. Our physical assets, over half of them are boring old U.S. treasuries.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then we just innovate over the years, often driven by what clients' real needs are as opposed to what we think they are. I don't know, we always get that perfectly right, but we're always trying to listen.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're over $400 billion in assets. We have almost 400 employees. All those things are blessings and curses. Of course, you like growth, but it's always something, particularly in the role that I have. I'm a finance person at heart, but running NISA, I'm not sure it's my comparative advantage, to be honest. So one thing I have tried to do is keep those core competencies, which is very client-centric. Listen to clients. We have very smart clients. lo and behold, if we can help solve one client's problem, maybe it's unique to that one client. Often there's at least some overlap in the Venn diagram with other clients. And then, wow, then we've got a product. And, you know, Jess used to always say our best ideas come from our clients. And they really have. Our derivative business, which started just before I joined, was a commodity engagement, not an LDI engine engagement. It was someone wanted a client wanted exposure to commodities. And unless you're going to own pork bellies or something like that, it's futures-based. And so we began running that and figured out how to do that well.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've evolved, and so maybe I'll compare and contrast what we've always wanted to be is wildly client centric and strategic partners. And when I say client-centric, there are firms in our business that are more product-centric. Okay, let's go in the lab and build something and let's see who I could say with a pejorative, who can we sell it to or who would want it. With our client base, which is institutional, large asset owners, we've always been client-centric. That was partly the early days. I'm not sure if that was completely because it was a perfect business plan or we just had to be. We had to be scrappy and had to be helpful and we'd be a strategic partner. What analysis can we do? What can we do for you just to get ingrained? So maybe it was a perfect foresight or maybe it was intentional or maybe it was a little lucky. And we said, well, that works, but we've always wanted to be a strategic partner. I think if you brought our clients in and polled, then we'd say we tend to be there, if not the one of their key strategic partners. So I think that hasn't changed at all. What has changed, everything, AUM growth, of course.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“This day joined from Goldman with the intention of buying them out, which they did in 94. And so when I joined, I still remember Lucky 13, we had $13 billion in AUM. I think the client service team, which is technically what I joined, there were three of us. So it was definitely a startup still.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“So Nissa was five years old, almost to the day. So we just celebrated our 30 year anniversary, April Fool's Day of this year. And so I joined just before the 50th year anniversary. So maybe quick backstory there. Jess Yowitz, Bill Marshall. They were professors at Washington University and left in mid-80s to go to Goldman Sachs to kind of build up their financial strategies group. That was the competitor to Marty Liebowitz group at Solomon. Built a huge, very successful group. Jess never liked New York, could barely tolerate it. and then wanted to get back to St. Louis. So for a while, he worked out of Goldman Sachs' office in St. Louis just became the first chief investment officer of GSAM when they started it. I could be off by a year, 88 or 89, but finally gave up on New York and flying back and forth. And so he left and they went to a company called National Investment Services of America, which was based in Milwaukee that had a bit of a generational gap issue. And Jess and Bill and some others, Ken Lester, who's still with Nist.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“The missile was a fledgling startup. No, in a lot of ways at that time and really liked the culture of it. I think it was mostly, I want to come back to St. Louis, but then I was like, that's neat and it's employee owned and it's private. I probably thought private and one day we're going to sell it and make a bunch of money or who knows what I was thinking but then took a flyer and started interviewing. But the funny thing is, and Jess, yeah, it's the founder of Nissil. He was concerned about hiring me because my three years at JP Morgan made me too experienced. When I talk to him, you're interviewing. So I'm like, oh, I talked to client XYZ. It made him very nervous as his comment was, you'll never be satisfied here. And actually, as I look back, I could see why he had that concern, but I guess I'm just more patient. A little bit of missilore, a little bit of an internal argument. And I think Jess would still agree to this comment. He said, fine, but you'll have to be the one to fire him to someone else who then ultimately hired me.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“Checked out. I wasn't thinking about a journey, I already had a job offer. So he connected me with Bill and started talking and got interested. I was like, this looks really fun. And the other thing it shows you'd rather be lucky than smart at the time, that was the lead up to the dot-com bubble at Read Wired Magazine and all this startup, employee-owned, and I'm probably showing too much of my ignorance, certainly my youthful ignorance, but I didn't appreciate, well, that's very different depending on what industry you're in. And, you know, there's not a tech industry.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I knew I always wanted to get back to St. Louis. I hoped I was going to get back, but I really loved institutional asset management. And I love St. Louis dearly, but we're not a hotbed of institutional asset management. We have some great financial services firms, Edward Jones at the time, A.G. Edwards, but all retail. So I was beginning to lose a little bit of hope, but as things happen, my group was being poached to go over to Credit Suisse. And that got me thinking, and I was getting married in July of 99. This is a time when my wife was graduating. She was still in St. Louis going to pharmacy school. And I was like, this is probably time to look around. And I was like, boy, St. Louis is going to be tough. I did decide my loyalty to Mike. I wasn't going to go to Credit Suisse. I just owed him that. But a great firm, certainly at the time. And so I reached back out to Phil at Washu and said, is there anybody in St. Louis that I should talk to? And he said, one. And he said, Nissa. And I'd forgotten I'd actually taken a class with Bill Marshall, one of the founders. But it was like second semester, senior year.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“Learn from them, and then the opportunity to learn from clients and learn how to talk to clients. It just couldn't get any better.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“I could see myself living here at least for a while. And so that's how it started. And then what serendipity there to be an undergrad, a little quantity at heart, but dropped in with 17 PhDs and all acid classes. Mike was a fixed income duration matching, now what we call LDI, but immunization, a guru of past. But there was every asset class imaginable. We set the capital market assumptions for the entire firm. I was in a subset of the group. I think they still have some version of it called the Strategic Investment Advisory Group. It consulted to clients. It was like an early version of free consulting. Of course, you have to be a big client, but help you on asset allocation topics eerily early in my career, I was speaking in front of clients and talking to them about strategies and mean variance optimization or simulations or whatever it was. So it was a combination of just an unbelievable amount of resources the firm writ large, but my group was really smart.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“First thing I did was turn down that job, which was probably the dumbest thing I've ever done. I was a little wimpish to move away to school when JP Morgan and Mike Bernito gave me that job. Just an amazing act of kindness by Mike that I'll never be able to repay. So I lived at home. So Mike, managing director of JP Morgan, calls and talks to my mom about a job offer. Can you imagine? I mean, it just almost silly. I called him up and I told him I was going to pass. And he said, why would you do that? And I said, I don't really want to live in New York. I don't like New York. He said, oh, well, how much have you been to New York? I said, well, I took the TWA flight that got in at midnight on Thursday and interviewed all day. And I went to Lagordian caught 6 p.m. out. He's like, well, you've never been to New York. You were in our office. And so he did something that for an undergraduate coming into a group of all PhDs, to this day, I don't know why he did it. He said, why don't you come up and have some of the guys take you out next weekend? And he did. And I immediately fell in love with JP Morgan. Fell in love with New York.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“Started JP Morgan right out of school. I won't say luck and serendipity the whole time because it'll get silly, but a professor of mine stopped me in the hall. I never wanted to leave St. Louis. And Phil Dibvig, who's now Nobel laureate, Phil Dibig, bumped into me and said, hey, I do this consulting for the Capital Market Research Group at JP Morgan. I learned later at 17 PhDs that do the asset management capital market research. They're looking for some undergrads. maybe grunt work, whatever. Can I send your resume? He sent that resume and they had me in and ultimately decided to hire me.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“Always a geek at heart as before being a geek was cool tech geeks have made that easy. I went to a high school, St. Lucy High, that probably celebrated nerdiness earlier than its time. I was always a math quant guy. My dad, because he was involved in insurance industry, actuaries make a lot of money and whatever. So I thought about doing that. So ended up at Washu and was going to major in math. And they didn't actually have an actuarial program. So I was also a major in finance at that time. I love the math. The math were the hard classes for sure. I mean, those are the ones I didn't skip those classes. The business school, you know, maybe I didn't make every class there. So that was a time where really the quantitativeness of finance wasn't common certainly at an undergraduate level. So I was the only math major in the finance program. I mean, now there's whole programs that are quantitative in nature would love to say that was some perfect plan. It gave me just a huge leg up because I could kind of code a little bit in 96 or 95 and knew a lot of math.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“But his name was on the building, and it said something about employee owned. I'd love to say I was smart enough, aha. You know, I figure that out. But something got ingrained in me in that employee ownership's a big deal on quality. And he was asked millions of times to franchise, and he never did. He thought that would lead to mediocrity. And so I think I also learned things about measure your growth. I'd love to say I was learning that at 18, 19, and whatever, far from it. But as I reflect back on it, I certainly remember that. And perhaps most noteworthy, I met my wife of now 25 years. We both work there.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, for folks who know St. Louis, there's a custard stand, two of them, Ted Roose, Rosen Custard, which is kind of iconic. And I started working there right at the end of high school, actually. And it was hard work. They paid way above typical rates, and they expected to own you, including the hours. So people don't believe it through college. In the summer, we would typically work 50, 60 hours a week. And in the school year, because I went to school in town of Washu, I would work quite a bit. frozen custard sales fall off, but then sell Christmas trees in the winter. And so right when exams hit in the winter, it would be time to be out on the tree lot. So I work tons of hours, but they paid really, really well. And it just paid a lot of bills. So certainly what did I learn hard work? Ted Drews as a person, so proprietor own. We'll talk maybe about NISA and employee own, but maybe I didn't like it then because he could be hard. He'd come in and literally test the temperature of the hot fudge and where the banana is ripening too quickly. And he was a hard guy to work for.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“My dad, who's just about to turn 96, still carries one of those business cards in his wallet. Certainly learn that I have my kids work. It's important to work jobs when you're younger. As a janitor at a convent, I worked at a local custard store that's kind of a big deal in St. Louis.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“30 times on a tiny lawn that took me 20 minutes to cut. And so occasionally I'd get tips, and I think it was just out of pity. Certainly learned a lot Up business cards and all those things and learned a lot about. Business, certainly hard work. Expectation my dad was great. He pointed out things like hey, you know, I was still a kid, so sometimes I wouldn't cut. Mrs. So and so's lawn today. It'll be tomorrow. He's like, you know They're waiting for you. You better let them know. Manage expectations. They don't need a cut today There's just little things like that. Was summariest learning and also just the difference between doing that versus a lot of my buddies would go work, child labor for. Lawn care around I mean, Tripled up or quadrupled up per hourly rate.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lawnmower is bigger than So I started cutting laws. I started cutting her lawn. I'm like, wow, there's a lot of money in a short amount of time. And so got flyers out. Say eighth grade, where I really started to accumulate a client South City lawns, you can picture them small All have usually like a five or six foot horse. The funniest Really had bad allergies. And so there'd be times. I may have sneezed.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“I grew up in South St. Louis City, and I guess my first business was lawn mowing service, started with my one elderly neighbor Either in sixth or seventh grade. Gen X So, to just cut somebody loose with a Pretty dangerous machine, and I was”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess on today's show is David Icorn, the CEO and head of investment strategies at NISA, a $400 billion employee-owned asset manager of risk-controlled fixed income and derivative overlays that's widely respected for its highly collaborative client relationships. The firm is one of the largest derivative overlay managers in the world and the largest US manager of LDI strategies. Our conversation dives into Dave's 25 years at NISA, its client-centric focus, approach across fixed income and derivative strategies, culture, and opportunities and risks in the markets.”
2024-09-02 · Capital Allocators · David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403) · IDENTIFIED FROM THE TRANSCRIPT · source