YouSaid · the spoken record

David Snyderman

lines on the record: 67
first: 2024-03-01
most recent: 2024-03-01
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

“Yeah, this may be an atypical answer, but I think about luck versus skill a lot more than I ever did before. If you make a decision today and don't have an outcome for 10 years, you don't really know if you were good at it or not, right? Whether you won or lost. If you're able to have a much faster feedback loop, now you can really hone your skills and understand whether you're making good decisions or bad decisions. And so I think for me and as we look at people's track records, we really try to think about how often do they get to make the same decision and what's the process around that decision and how different is it over time?”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It's what we think about for the firm. I know what I tell my kids would be it's people on platform. You need to be around good integrous people that are great mentors. And the platform needs to be growing over time. So each seed should be more than the person in it.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So, my colleague and the head of our London office, Alan Chafferan, recommended the book The Missing Billionaires. And the reason I just started, but the reason it's interesting is it's very focused on asset allocation and mistakes in asset allocation and how much that can cost a portfolio over time. So it has a lot of parallels to the way we think about asset allocation in Magnetar.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“From Bear Stearns. Correct. And what was so interesting about his book is he's running the firm, but he's really in the minutiae of every detail. It was very interesting.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I always like Michael Lewis books. We had him at one of our off sites a few years ago. You may remember this book as one of my favorites, memos from the chairman by Alan Greenberg. Sure.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Know it always starts with their parents and then, you know, football coaches like Larry Kimbaum. But I mentioned Dave Bunning before. I think most people would say, you know, I'm a product of his teachings over time.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So I listened to one by Larry Bernstein. What happens next? And he's been doing it since COVID. And it's sort of six minutes of really relevant topics that come out every weekend.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I think this will be different than most of the people that sit on this show. But for me, it's been flow sports. So I have my older son is in between high school and college right now and he's playing hockey and juniors for a year. And so all of his games are on flow sports. So Christy and my son Jake and I sit around and watch every game together.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And we really want people to voice opinions, right? And that's how we're going to get to the best answer. We talk about it internally a lot. We're trying to manage investments by consensus. And so especially in private credit, if someone doesn't like something, we can change it. We can change what a structure looks like. And so we'll get to something where we actually get consensus. On the alignment point, it really goes back to”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's true. You know, first principles, it's always about integrity, but I think for most tenured firms, integrity is high. But for us, the North Star is always creating the best portfolios to deliver to our clients. And we really have two foundational points there. One is we run a very flat organization, and secondly, we thought a lot about alignment. So on the flat organization, it doesn't matter who has the right answer. We know we're trying to reach the right answer. So I'll take our investment committees as an example. We have bi-weekly investment committees, and it's not the top two or three people that sit on the investment committee. We have 120 people in that meeting every two weeks.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm very proud. I think we're very proud of that back then. I think it is very atypical. But the credit really goes to so many people at Magnetar. We're a global firm, but I think with a Midwestern ethos. So it's work hard, stay humble, be a good teammate, be a good person. And I think if we can consistently demonstrate those qualities, we'll attract people who value them, and it's a virtuous circle. And what's incredible about the firm is when we're focused how much we can get done. So I'll give you a simple example. We started a summer internship program several years ago, and we started with two interns, and we built a program around them. And this last summer, we had 60 interns for a 200-person organization. You know, it's pretty humbling when you think about all the exceptional people around Magnitor and how much we can get done.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And so the regulators came in to reduce that risk. So the simple question is that private credit came in and stepped in the shoes of banks and really took market share. But this scale was much larger than anyone could have anticipated. But for me, what I think about a lot is the more profound effect is the talent transfer. The talent transfer from the banks that went to the credit providers, the private credit providers, that set the stage for this mass growth in private credit.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“If you would have asked me going into the global financial crisis, I know we keep going back 15 years now, I would have said the banks had it all, right? They controlled origination of all of the different asset classes, especially finance and lending, so whether it was credit cards or mortgages or loans to their customers. But after the financial crisis happened, there was a spotlight flashed on their balance sheet. They just had too much risk.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Different calculus. And so we have a decision to make. We can stay at 11%, keep the same margin, but reduce origination, or we can take our margin down and try to keep market share either way the business is worth a lot less. That has a lot of affordability factor effect to it. On the other end of the stream is our music royalties business. So in music royalties, the simplification is you get some small part of worldwide streaming revenue, right? So take Spotify. Spotify raised rates recently, and they had no customer churn. So some percentage of that rate went directly to the royalty holder. Was very little affordability factor. So we're veering away from things that the business impact on affordability is high and we're investing in things where it's lower.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a very good question. And for us, we think a lot about the affordability factor. So I'll give you two examples at both extremes. So we have a partial ownership and an auto loan business in Ireland. And so when rates are at zero, we're loaning to consumers at somewhere between $5.5% and 6%, and we're gaining market share rapidly. All of a sudden, risk-free rate goes to 5%. That equivalent loan, we're going to have to charge consumers 11%. It's simply unaffordable.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“For credit investors, everyone thinks about fixed rate risk, right? But that's easily hedgeable and that's a choice that credit investors make. So for people like Magnetar, we swap everything back to floating rate. We don't have any edge on a macro risk like that. But the second order effect is much, much, more difficult. And that's the business impact of rates changing. So when we think about businesses, we think about do profit margins change as rates go up or down? Do originations change? What about the refinancing of their debt? I think those are the things that are going to keep lawyers and restructure advisors very busy for the foreseeable future.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“We found that to be the moral hazard. Who's the governor of how much risk a bank can take? So the federal government came out and they said you have a $250,000 limit, but people were putting in $100 million into the account because they got 25 basis points more of interest, right? So how do you actually control that? That's the moral hazard we saw. Now, I think at the end of the day, it was just too big of a risk to the economy.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Those were stressful events for the entire community. For Silicon Valley Bank in particular, I remember it was Friday night and the question of moral hazard appeared immediately. So it's California based, right? It was a lot of venture funds that had accounts there. And the question started coming out, is there cash safe? Will they be able to access it? If so, when? Will they be able to make payroll a lot of these smaller companies were very worried about payroll? And in California specifically, will the board of directors be liable if they couldn't make payroll? And then they started rolling it out to what about all the similarly situated banks. So we all know that by Monday morning, the contagion risk was too high and the government did step in. But the opportunities really arose from that. And so the first opportunity, which is very similar to doing regulatory capital investments with large banks, is being a risk capital provider to the small and regional banks. And I think we're going to see more and more of this over time. It's credit firms partnering with banks where we have access to all the diligence around their customers.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It is. It's very specific, but we always start with the assets. So it's assets, it's data, and it's structure. So first on the assets, we're usually focused on specialty finance because the assets drive the performance of the company. The next thing we need is data. We can't predict the future. So we're trying to do is use historical data to predict how an asset reacts in different states of the economy. And finally, we use structure around that to protect the downside of the investment itself.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Equity on credit. It's equity and credit and it's a true partnership between the firms. Towards the end of last year, in December, the firm got valued at $7 billion. And to me, it's just a start. This company just, you're just going to see it continue to grow over time.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“There are parts of this that are venturish, but what's interesting is the underlying asset, this high performance compute, is something that we can really scale with. And so I think that's been the innovation in the marketplace. So you mentioned in 2023 on the venture side, we actually led around for them a $400 million Series B round. But we also led a $2.3 billion financing on their high performance compute assets.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“A customer there is in Magnatar Labs just like you intimated before. And so we use them for Magnetar Labs, but we have Ernie Rodgers, our COO, sits on their board. We have daily interaction between our management teams. This company is growing so quickly. They need all the help they can get around them. And what we try to help with is mostly balance sheet management.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So they've had explosive growth. But what we haven't been is just a capital provider. We've really been a partner to them within the business.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Corweave is such an exciting story for Magnetar. I can't say enough good things about it. Sometimes the stars just align. You have the right time, the right product, the right team. And for the listeners that don't know who Coreweave is, Coreweave is the largest owner of GPUs outside of the hyperscalers like Google or Amazon Web Services. They sell as high performance compute, which is sort of the picks and shovels to enable AI. So, if you are a new AI lab, you need somebody like CoreWeave to host that specialized cloud for you. Now, we were the first institutional investor. So all the way back in 2020, and at that point, CoreWeave had just $26 million of top line revenue. And I think we were the first firm to really get comfortable lending against that asset called high-performance compute.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a good question. We maintain our diligence on other strategies, but we always have a strong research and development pipeline.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Some of its supply demand, right? And driven. But I think the most important part is we're not hiring desks of people to stay in an asset class. That's the status quo. That's not what we're looking for. We're looking to aggressively rotate our capital to get to the optimal portfolio, to get to the best risk adjusted return.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Eventually efficient, right? So we know that what works today may not work several years forward. Right. And so I'll give you the converts example. Like you mentioned, I've been in the convert market for 30 years now. And sometimes converts are very cheap. Convertible bond arbitrage. And when they are, we have a lot of our portfolio in it. But today we have less than 1% of our portfolio in the asset class. And it's just because it's not cheap or not cheap enough versus what we can invest in.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“We're not efficient market theorists, but we certainly believe that in the medium to long term, the markets are efficient.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if it's on purpose or not, but 80 million line items, 100 different files, 40 gigabytes of memory. So that's far too much for Excel to handle or any local Python. Right. It overloaded any one machine, but our Magnitar Labs team was able to take that in in just minutes. Right now we can analyze the data and then look at the attributes to that investment and see if it fits in our portfolio. We actually made the investment.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Magnetar Levs has been a great initiative for us. It's really the institutionalization of our data. So we're trying to produce infrastructure where we can ingest large data sets very quickly and not only use them in specific business lines, but use it across business lines. So I'll give you a few examples in our merger arbitrage business, we've tracked every detail and every characteristic of every merger and acquisition for the last 20 plus years. And even our recent restaurant finance business, we have itemized bills of every customer. This is really useful data. So here's an example from just a couple of months ago. We were looking at an auto loan transaction and the servicer tried to overload information. So they gave us 80 million line items of information.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's exactly right. And even when you get to what happened earlier in 2023 with Credit Suisse, that again put pressure on the banks to really think about how they're going to hedge their credit risk. This is their hedge to credit risk.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“People talk a lot about the importance of data, but it's usually in a different context. It's usually for these quantitative strategies or quantitative hedge funds. For us, that is the lifeblood of specialty finance. So for us, we use data to solidify our assumptions. What we do with the data is we forecast the performance of assets. By matching statistically significant characteristics. So back to the redcap examples, we've looked at hundreds and hundreds of these types of investments, and we've taken all the data from those transactions. Now when we look at a new transaction, a bank comes to us and says, I need to produce more regulatory capital on this hundred to 10,000 loans. We can take the characteristics of their portfolio today and out of sample price them through history.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and that's exactly right, but importantly, the first thing we're doing is we're using data to really understand what the credit risk is. And with that data, then we can start thinking about what the likely hedges are for the macro risk of the portfolio.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. So the solution to that are these regulatory capital solutions. And so you're taking a portfolio of credit risk and you're transferring that credit risk to a private credit fund like us, but maintaining the customer relationship. And what banks, I think, eminently realize is the customer relationship is how they drive revenues. So traditional banking, FX, advisory services, high net worth. And so without that, they start to lose their franchise. This is the product that allows them to transfer credit risk. And for private credit firms, we all of a sudden have access to some of their highest quality lending, right? It's been the fastest growing part of our portfolio.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So REGAP, or some people call them significant risk transfer transactions. That is a massive opportunity for credit funds today. And so a lot of people would think that the banks are selling assets, right? But in our experience, we're seeing them efficiently transfer the credit risk of assets, but keeping the customer relationship. It's a very important distinction.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Second, you can find assets or these payoff profiles that don't correlate to the overall market. So you're not worried about them moving with the S&P or the high yield index, right? And third and most importantly, they don't correlate to one another. And so I'll give you an example of a three-asset portfolio. So in our music royalty portfolio, returns could be driven by an artist's song downloads like Taylor Swift downloads. And in our solar finance portfolio, it's by how much sunlight there is in a particular region. Or lately, we've been lending a lot against NVIDIA GPUs for cloud usage, and that's driven by AI and machine learning growth. If I think about just those three assets, they shouldn't correlate to the S&P, but they certainly shouldn't correlate to one another.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so it's the cars we drive, so auto loans, it's the houses we buy or rent, so it's mortgages, it's the podcasts that we stream, right? So it's all the music royalties and streaming royalties. It's assets like that. And the interesting part about these assets is there's a very strong investment thesis around them because they have three attributes when combined together that most other asset classes don't have. And certainly I don't think direct lending has. So the first is you can find very stable payoff profiles.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so after the GFC, these private credit markets really develop So that's going to middle market companies and disintermitting the banks and lending directly to them. For us, we went in a different direction. We went in specialty finance. And specialty finance is a bit smaller, but it's been around for ages and it touches our lives every day.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“It always changes the landscape. And so no one's ever prepared for moves of that size, even though everyone says they are. And so it's opportunities that have come out of this mainly around the banks today, right? And so we can talk a little bit more about that.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“And so the pension funds are faced with this illiquidity problem. And so they're borrowing money against their portfolios. They're selling positions in their portfolios. But what they're not doing isn't taking on new investments. Now, there's a flip side to this. Whenever we have trouble raising capital, the investment opportunities are usually very good. So, our pipeline is extremely robust today.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So pensions have this mandate. They have a diversified portfolio they invest in. They receive cash flow from the portfolio. And that supports their retiree benefits. So they're always making this judgment will I produce enough cash to manage those liabilities. What happened over the last year and a half or so is rates went up and valuations went down. Now, the handshake agreement with the venture firms and the private equity firms was give them a dollar today. And in five years, they'll give you back two or three dollars, depending on how the fund did. They've stopped giving back that capital today”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's been the most challenging part of the business. Really? It really has. And pension funds, they're on hold today. They're not investing. And it's been not just a headwind for us, but for the entire industry. So I'll step back and I'll give you my view on it.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what they call that is delta neutral in the options world So we were hedging an option, and that hedge made us a lot of money in downside scenarios. But that was never the focus. We didn't know the housing market would crash. We had no idea. What we had was a trade or an investment that we'd make 20% a year on. And if anything happened in the world, we've really protected the balance sheet. It just happened quite quickly.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's exactly right. And so, what the modeling actually said, though, is if nothing happens in the world, we make this 20% return. But if anything happened, not only would our equity piece suffer, but the short side or our mezzanine pieces would make the money back. And that's the ratio. That's the ratio we had to be on.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's correct The firm was built on finding white spaces. And so I remember back in 2005 when we first started, you know, we think about the banks. The banks would have an equity trading desk and they'd have a debt desk. And they both value the same companies and both sides of the firm would value them completely differently. And so for us, those are exactly the opportunities we were looking for. But we didn't find it in the corporate markets. We found it in the mortgage market. It was so fragmented that the machine that sold rated products hit all the right buyers, but no one could sell the unrated piece. The unrated piece yielded 20, 25% where the rated piece would yield 3 to 5%. And so that difference was the arbitrage that we saw.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you never see that and you never read about that, but that's the way the market set up. It was just too fragmented. You had people that were willing to buy pieces of these structured products because of the ratings. And on things that weren't rated, no one was willing to buy. So we took the other side of that trade.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“That's exactly right. In this case, we were going to hold an option that we were going to get paid 15 to 20 percent a year to hold. Oh, really?”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“I talked about setting up the infrastructure to prepare to invest, and we looked at every asset class. So we looked at corporates, we looked at mortgages, we looked at credit cards, and what we found in the mortgage market is something you don't read about in textbooks. We found that we could invest on the long side in what they call the equity piece or the most risky piece of a CDO. And we could short the next level up so the mezzanine piece. And we could short two or three times the amount. But what was super interesting was we were getting paid to hold an option. That never happens. Right.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's a quality of earnings question embedded in, and I think what you said, and that's we're trying not to take macro level bets. For us are low quality bets. And so what we're trying to take is idiosyncratic bets, meaning we're focused on one factor and we're betting on that factor. Then we're going to hedge out all of the macro risks around the portfolio.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source
“We really did, and the systems and infrastructure we built were not only to measure risk, but to manage that risk. And so we'd find good investments both on the long and short side.”
2024-03-01 · Masters in Business · David Snyderman on Specialty Finance and Data in Investing · IDENTIFIED FROM THE TRANSCRIPT · source