YouSaid · the spoken record

David Zorub

lines on the record: 75
first: 2025-03-03
most recent: 2025-03-03
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

“Another key learning that I've experienced in my career is that when you think about the analyst job from identifying to breaking down a business to ultimately monetizing it, most spend far too much time analyzing and trying to monetize at the expense of really identifying effective setups. Ultimately, what we have found is that getting the setup right is really where you get the most leverage to a positive outcome. So once we find something that we think is inefficient, we have a battery of questions that we ask. What's the nature of the inefficiency? How tangible is it? What will it take the market to potentially realize it and remove that inefficiency? We're very focused on the credit mindset.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“I actually don't think it's that different because we run a concentrated portfolio where we're deploying maybe 20 long securities and ideally the top 10 will be 65 to 80 percent of the risk. We have sort of the opposite challenge, which is we're trying to find one to three ideas that we can be very levered to and then maybe another five to eight that can be quite impactful. So we're going to miss things all the time or not even be aware of them. But I don't think the underlying base rate of opportunities is that different in terms of their availability. Now what can be more transient is our ability to underwrite them. So for instance in 2022 when there was just a tremendous amount of uncertainty about the business cycle, about all these different macro things that were happening, the interest rate cycle, it was definitely harder for us to forecast fundamentals of businesses in general.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are making non-fundamental based decisions. So here we think about things like asset class silos. Oftentimes an opportunity may sit at the intersection of credit and equity or equity involve and lack logical sponsorship. We think about time horizon arbitrage and being able to extend our horizon when others can't. We think about generalist versus specialist or retail versus institutional or simply pretty reliably each year the market will spit out one to two opportunities that are so polarizing because people are simply afraid to lose their jobs or get fired if they even mention the name of that company. And our best idea is will typically exhibit characteristics of all three of those buckets and really be demonstrably inefficient in a way that we think we can exploit.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“A new fact pattern through the research process. Informational sources of inefficiency will be essentially asymmetric either availability or understanding of information. So think cross cap structure, credit versus equity, or it could be cross-border. How do actors in one market view something versus actor in another market? It can overlap with maybe regulatory considerations as well, but it's going to be some sort of asymmetry in available information. And then, of course, the other bucket is behavioral. Now here we're all familiar with behavioral finance and decision making. And to a degree, that's what we're talking about. But really what we're talking about is the classic noise trader model that Schiller and those guys got the Nobel Prize for. The idea that there are actors in markets who think they are making rational fundamental-based decisions but in fact are not. And due to behavioral bias or constraints on their decision making.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“For us, our taxonomy, if you will, really break sources of inefficiency into three principal buckets, what we call structural sources of inefficiency, behavioral, and then informational. And within each of those buckets, there's probably seven to ten different fact patterns that we might consider. So for instance, structural sources of inefficiency are going to be quite tangible. Chances are you'll read about them in a research report or hear about them on a conference call or even see them in the newspaper. They're going to be things like corporate actions, spins, divestitures, restructuring, M&A, changes in management, judicial or regulatory decisions. But what they all have in common is that up till a certain point in time, the market was using a fact pattern to discount those securities. And now something has happened. And it's rendered that fact pattern obsolete or inoperable. Maybe it's permanent. Maybe it's temporary. But perhaps there's an entry there to create.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Market cap, liquidity, geography, business model sector, and subsector, and you can very effectively identify them and begin to then triage them for suitability to your process.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Focusing in on places where there's a higher probability that a pool of alpha exists. So as a team, we spend our days asking ourselves why do securities tend to get mispriced by the capital markets? Do these sources of mispricings recur? Can we identify them on an ex-ante basis? Can we exploit them through our process? And when I reflect on my career to date, Ted, I think this has been one of the most impactful realizations of my career when you tilt your lens away from asking, hey, is this business cheaper expensive? Is it good or bad? And instead ask, is it mispriced? If it is mispriced, why? And to what degree can I exploit it through my process? It becomes a very powerful algorithm for then filtering a global opportunity set. Because as it turns out, these inefficiencies do exist, they do recur, and they recur across”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“We break our process day to day down into three functional areas, one of which you just named, identifying. We have to be able to replicably and reliably identify opportunity. We then have to be able to analyze them. And then in turn, monetize them. And those are three very different skill sets and processes. But the lifeblood of what we do is a maniacal focus on the concept of inefficiency. Whereas I think most managers probably define their search strategy along either some sort of evaluation axis. So I'm a value manager, I'm a growth manager, I'm a quality manager, or some sort of qualitative aspect. I want to invest in great management teams or great capital allocators or compounders or something else. We care a lot about all those characteristics and many others, but that's not where we think about identifying new ideas. If our task is to generate alpha on some sort of replicable basis, then it seems pretty obvious to me that we have to first start by”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you take that combination of that concentrated approach with an opportunistic flavor, and you mentioned that the opportunities are transient, how do you go about identifying the opportunities that you want to pursue in this concentrated way?”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“We cross over into what I think would be classically defined as fundamental long short with a real emphasis on bottoms-up work and a deep commitment to short selling. And then we work across the capital structure. So not just equity, but credit and volatility. And so if you think about a three-story We don't think there are that many strategies that credibly deploy all three. Oftentimes you'll find maybe fundamental long short and event driven crossing over or event driven and maybe credit, but those areas tend not to do much on the short side. So really deploying those skill sets across those three, we think, not only yields differentiated portfolios, so the types of opportunities we're traversing in, but ultimately diversifying results for our partners.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“We deploy what we call a concentrated cross asset opportunistic mandate. Practically what that means is we want to take advantage of the inherent flexibility of the hedge fund model to allow us to go where we think opportunities are most compelling, take that risk, but not be forced to do things that we think are suboptimal because of artificial or institutional constraints. I think as alternative assets have institutionalized, managers have been asked to take on narrower and narrower strategies with very strong financial incentives. But the nature of investing is such that opportunity sets are transient. So what we do at Parsifal is you can think of three core functional areas that overlap. The first is event driven in special situations or complex situations investing, areas where we think we get rewarded for taking a bottom-up deep research view on untangling complexity and extracting alpha.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's better to fail conventionally than to win unconventionally. If I have a high active share portfolio, by definition, there are going to be periods when I underperform maybe even quite severely. But the opportunity that comes with that is the opportunity to really outperform. But both I as a manager or an allocator may prefer to fail conventionally rather than to take the risk that leads to the excess return. It's that simple. And markets reinforce this. Thinking back to the film, the point that Pacino is making in his speech is, hey, you have two young men on the stage. One is trying to do the high integrity thing and the other is not. And you're going to reward the one who is not doing it at the expense of the one who is. And that's really what the market mechanism does. It tends to reward the expedient solution at the expense of those willing to take the path that will ultimately lead to alpha, but albeit one that might be much more challenging.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Contemplate why the combination of high active share concentration and volatility tolerance yields alpha over time. It's simply because it's too damn hard for most people in our industry to actually invest that way. It's too damn hard for managers to build that model and it's too damn hard for allocators because of all the incentives that they're beholden to to allocate to that model. But if you can break through that, it can be a really powerful way. But the nature of capital markets, of public markets, is they will always tempt you to take the path that you know is the wrong path, even when you know it's the wrong path.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's basically business model alpha. As a manager, I can control my active share in my concentration. But if I can't find partners who are willing to align themselves with it through the cycle, good and bad, and stick with it, it's very hard to do. In competitive capital markets, the most sophisticated and thoughtful allocators have a lot of competition for their capital. It's hard to find those partners and build those relationships. And it's particularly true if you're a newer manager starting out where the adverse selection can be substantial. I've tended to sometimes communicate it through what I call the scent of a woman challenge, which is if you recall the movie Scent of a Woman, there's the famous scene at the end where Al Pacino's character gets the Oscar for this. He talks about how regularly in his life, he's gotten to the fork in the road. And without question, he's always known the right avenue to take. And he's always taken the wrong one. And the reason he's always taken the wrong one is because it's too damn hard.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“We know that based on very significant bodies of research that has been replicated over and over again, that there is a combination of strategies or factors, if you will, that do drive replicable scalable alpha and basically strategies that do three things over time really outperform. And those three things are invest with high active share so you don't by definition look like an index. Second, concentrate in your best ideas in recognition of the fact that actually markets are reasonably efficient most of the time, more so than most people like me want to admit day in and day out. And therefore, when you find something that you can have a superior understanding of, you take risk to it. The third is being able to invest with appropriate duration and volatility tolerance that is consistent with your strategy. And the reason that the excess returns exist in that model is because it's very hard to create those three factors.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“The rise of the pod investing model. I would also add to that the rise of style factors, which are big business on Wall Street right now have all conspired to, I think, create more non-fundamental short-term volatility, which has made the monetization mechanism of active security selection more challenging at times. I don't think it's impacted the actual underlying availability or dispersion of opportunity or the ability to analyze these opportunities through a fundamental lens, but it has required more patients and the ability to arbitrage medium and long-term fundamental outcomes against much more short-term volatility.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you look back over the last 30 or 40 years, the central reality of investing has been that we've been in a world of structurally declining cost of capital and a world where for most of that period, the volatility of macro indicators, particularly inflation, has been quite low. And that's been against a backdrop of relatively benign socio-political economic indicators globally. Up until 2020, everyone, public or private, has been investing in a world where their multiples have been expanding. And that has been a very forgiving environment to do that. Post 2020, we now have a higher cost of capital than we've had in some time. We have much more macro volatility and geopolitical tensions are in a bit of a different place than they've been for a long time. That's created a lot more volatility. And then specific to our markets, the continued rise of passive for sure, but also the rise of each.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if their objectives have changed candidly. Our whole industry exists to seek out and generate alpha, ideally alpha at scale in a replicable manner. But the truth is that most strategies that can generate alpha don't scale and aren't even necessarily replicable.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Particularly in the early years, to allow us to get through periods of adversity and hopefully thrive on the other end. But ultimately, I think it just comes down to we've been very blessed to have a stable of amazing partners who've allowed us to execute what we think is a unique strategy and laboratory which has been both rich with opportunity and challenges. So supporting us through those challenges while allowing us to go after those opportunities has been what's allowed us to succeed and thrive.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think goes to a few different things. It wasn't my first go around it trying to build and launch a strategy. And so there was a lot of lessons learned in prior lives to lean on. We anticipated that there would be challenges along the way in setting up the firm and how we built our capital base, defined our strategy, built the team, and then ultimately deployed it. We didn't know what the future would hold, but we tried to”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Whole concept of how challenging it's been in the hedge fund strategy in particular, I'd love you to talk a little bit about how you think you've been able to make it work in an industry that's had so many headwinds these last six years.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“I went back and looked at it. I think when we did the live talk at Columbia, it was the day after Valentine's Day 2019. So it's almost exactly six years to the day since we did that. I don't think any of us could have imagined what would transpire in the world during that time. But I'm happy to report that the things that we talked about at that time in terms of the vision and what we were hoping to do with launching Parsifal have played out really beyond our expectations, all the goals that we would have had for ourselves. For the most part, we've met or exceeded. And as we sit today, we have a fantastic team that has executed really well. And we've built a firm that manages about a billion and a half dollars a capital. It's been a really interesting, if not challenging, and trying time to be in the public markets. But we've relished the opportunity and it's been a really fun ride.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“We were overwhelmed by the quality and quantity of interest for the role, but in truth we started talking to Tamar before we announced the position. She and I met a while back in her early years in the business and were fortunate that her timing, interests, and skill set match perfectly with our needs. In short order, prospective podcast guests, Summit, and Capital Allocators University attendees, and sponsors will all get a chance to connect with Tamar. We're thrilled to have her and excited to see where we go next. Thanks so much for spreading the word about capital allocators 25% weekly growth for about 10 million percent compounded annually. How about that for lies, damn lies, and statistics? Please enjoy my conversation with David Zorb. Dave, great to see”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guessed on today's show is David Zorup, the founder and chief investment officer of Parsifal Capital Management. A billion and a half dollar hedge fund that invests in a concentrated portfolio of longs and shorts across geographies, sectors, and cap structures. David joined me on the show a few months before he launched Parcel six years ago to discuss his plans. We got back together to talk about what's happened since. Our conversation covers the headwinds facing fundamental investing. Parcel's approach to counter those challenges, and the investment and business processes that led the firm to reach this point. Along the way, David shares keen insights into research, portfolio construction, and partner relationships that have combined to take Parceful from a startup hedge fund to a thriving organization in a difficult environment to do so.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source
“Opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions in securities discussed on this podcast.”
2025-03-03 · Capital Allocators · David Zorub - Navigating Hedge Fund Headwinds at Parsifal (EP.434) · IDENTIFIED FROM THE TRANSCRIPT · source