YouSaid · the spoken record

Dmitry Balyasny

lines on the record: 109
first: 2023-10-02
most recent: 2023-10-02
sittings or episodes: 1
sources: podcast

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“I'd say probably hiring a really experienced people as opposed to trying to figure everything out yourself. This becomes easier, obviously, as you grow. But I think we were always very do it yourself and maybe a little bit too adverse to just paying up and getting somebody who really has already done it. And it's not just money. It's also delegating authority and figuring out the right balance of partnering with somebody to build particular areas. But once we got comfortable and we're always iterating and trying to get better at that, but I'd say that took the firm to a new level. And I think now we have the opportunity to do that again as we're looking to build different businesses and departments.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“He's like, it's a pain either way. You're always dealing with lots of different constituencies and lots of different people plus the markets. So if you're going to bother, you might as well do it big.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“We had an early investor, Tom Lee, who ran a successful private equity firm. And I think we had 300 million under management or something when he invested with us and he had a big family office. He was a prominent hedge fund investor. And we met with him. I asked him, we're just starting out, what's good advice? And he said something that always stuck with me, which is this business is a pain in the ass. If you're going to do it, you might as well do it big.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Work ethic and integrity. We had the classic immigrant experience of my dad was a college professor in Kiev. My mom was an engineer. They came here and they were cleaning motel rooms for $3 an hour. So just the work ethic, seeing them go through that and get back to their normal professions over time and the perseverance to do that and always having the integrity to do it the right way.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Time. But when I was there as a proprietary firm. And so Stephen gave me a really good opportunity to build kind of my own division and the runway to do that. And secondly, the opportunity to co-invest with him in hedge funds. When I was very young and just starting to make money and the opportunity not just to invest, but also basically be the fund to fund analyst trained all day and then call renaissance and try to get capacity after the market's closed. And so that was great learning because you really learned early on how to differentiate different firms and why some were successful and have those conversations with my own money kind of backing it. And so that was very foundational as we thought about how to build our business.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those type of conflicts where you could basically be a positive influence on a larger level and a society level, company level, et cetera, while being very individually successful, that it's not a trade-off between the two. So that was very impactful to me. And I've gone back and read it a number of times over the years and have gotten involved with the IRAN Institute on the back of that. We actually started a scholarship program last couple years called Atlas Fellows based on the title from that and their funds are called the Atlas Funds. We find really qualified top tier driven but under-resourced high school kids and help them with college scholarships combined with financial industry internships. And that's on the reading list. Professionally work, I would say definitely Stephen Schoenfeld, who was the owner of Schoenfeld Securities. Now, it's morphed into a hedge fund over time.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Say philosophically, I became a big fan of Ayn Rand in college. Became my favorite book. I'd say it had a big influence because a lot of this game is really mental. And so you have to have your philosophy aligned with what you do for a living. If it's not, it's very hard to have sustainable success. So if you have a lot of conflict and guilt around being successful, you wind up self-sabotaging yourself. And I've seen this a lot over time. And so she was very good at articulating a very cohesive, positive philosophy for being a successful, productive individual and for capitalism in general, not just as a positive economically, but as a moral positive, which really helped not ever have.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the fun, which was a huge miss. So we wound up making a little bit of money in 08 instead of making a lot of money because we're overly focused on that sort of investor risk mitigation as opposed to just saying we've modeled it out to where it didn't work. We were going to lose one or two percent on the fund level. And we're willing to risk that. And if it worked, we would have made a lot. Just being comfortable with that assessment. So that's something we learned from that.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably related to the old. With the subprime short, we had an early look at it and I was very attracted to it because of the payoffs that you had at the time on it. And we spent a lot of time trying to get different parts of the firm comfortable so somebody would put it on. But we didn't really have any mortgage traders. We didn't have credit traders. We barely had fixed income traders at the time. So we had some macro inequity and so we had the equity guys chatting with people on the trade, the macro guys chatting, but it wasn't in anyone's balloon. And we were overly focused on what the investor reaction to it would be if it didn't work. The question would be like, well, what are you doing trading mortgages, right? Like equity guys. We wound up not putting it on even though we personally had money in the Paulson mortgage short fund. We made some money personally on that and with employees, but we never made a big dent.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think sort of analysis paralysis. I think that applies on the business side as well. There's a healthy amount of analysis you need to do to gain enough conviction, establish a risk reward, and just get going. You could do analysis forever. And if by the time it becomes obvious, usually the opportunity is gone. And so a lot of times you're not really going to learn everything until you're involved. You just got to figure out how to get involved in a risk responsible way that you can then scale up or down depending on what you learn.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Summertime, I like to mountain bike, wintertime I like to ski. I like to play basketball, work out, just try to do something physical that takes your mind out of the markets. If your mind drifts, you're going to wipe out. So it really forces you to focus on something else and clears your mind.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“On site. We want to be in that conversation. So, you want to be the best in all the areas that you're really involved in where you've had time to get to that. You want to maintain your culture and your spirit of the firm and the partnership ethos of the firm and expand that really as you're continuing to grow. I think that's really important for us.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“We want to have world class businesses in all the strategies that we're engaged in. So if somebody says who's the best in equities, we want them to say BAMF, who's the best in macro, we want to say BAM. We want to get there. I think we're in the conversation and those first couple were earlier on in some of the other businesses, but we have good plans for getting there. Businesses that you're just starting off, you want to get them from startup to their solid business. Maybe you're not going to be the best in quantum five years. Can you be in the conversation as like a well-known and reputable, solidly P&L generating quant business? That will be great for the next five years. Then the following five years are like, okay, well, now we are, how do we get to the top three? And so you sort of want to do that across every business. And I think the same applies in infrastructure. We want to people to think about like where is the best technology in the hedge.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we have a credit investing business also relatively new that we started the last couple years. We started with a couple credit portfolios. We're looking to build out more. But we trade converts. We trade high yield. We trade investment grade. We trade in the US. We trade in Europe. But still relatively small. It's just a couple percent of our AUM. Whenever we start new businesses, we start them small. We figure we're going to be the worst at them when we start. And as we build the expertise and the teams and the infrastructure and they're generating P&L, then we look to grow them. So now we're in the process of scaling those teams. Plus, we're adding a few more teams with different geographic expertise, different types of trading style. And if we're successful with that, then you can look and go and say, okay, we have success at public credit. Should we look at private credit? You want to have success at each piece before you sort of go to the next piece. Same thing in commodities. If you had success in financial commodities, then you can look at physical and how do you leg into physical? So we're starting to work on that. So it's one step.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Whether we're investing in another private company. It's a very accretive strategy longer term. Now, like anything, it takes a long time to build if you're going to do it in a quality way. You can just open up and spray money. But if you're going to really try to build a team, build the process, build a brand, build your expertise. It's a multi-year strategic undertaking. And we started with a small amount of capital. And as you build it out and you have success, you raise dedicated capital. And I think if you look at firms like D Shaw that have done a good job at this across different strategies, they've taken the quant expertise and the business building expertise and leveraged it successfully. Now in private credit and private equity, solar investing, a lot of different tangential strategies which have added a lot of value to their investors. And we'd like to do the same over time.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“To build your brand. You need to build your value add to the companies. What are you going to do for them? Can you help them with your data expertise, which is one of our differentiators? Can you help them with your equity capital markets expertise and how to navigate the private to public transition as the public windows open up? So we do teach-ins between the private PMs, the public PMs, your equity capital markets desk, and a venture capital fund that'll bring a bunch of founders who are looking to go publica in the next few years, and we'll do a teaching for them. And so you build your brand and you have a line in a relationship with the founders. A lot of the skill sets are very complementary. And then even when you don't invest, you usually learn a lot about the company. So eventually, if they become public, you'll know more about them than others. And if they don't come public, but you still learn something about that business that you could apply to training a competitor.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“From a publicly traded company with a couple billion dollar market cap that you're public PMs are investing in. Most of the time it's not that different. And so you can use some of your skill sets from looking at the valuations and prospects in the public space and apply them to the private space. But there's also a lot of particulars in the private space. So you have to build that capability separately. You can't just have public eyes do it. You can leverage off of their skills and team with them, but it's different because first of all, you have to have dedicated time. So if it's an earnings period, how much time is your public VM going to spend analyzing this private investment that's going to take a ton of time to go meet with the management call, the customers, run the model? They're going to take zero time because they've got enough volatility in their public portfolio. So you need private people with that expertise. You need the sourcing capability. You have to be invited into the best deals. So you need”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's an extension of equities investing. So as you build these businesses, every year you kind of sit back and you ask, like, how do we grow this general franchise? What are the other areas that you can expand into that piggyback on your capabilities? So, you know, in equities, how do you do that? Well, when we started, we started with short-term trading, then we got to longer-term fundamental trade. So you expand by timeframe. Then you can expand by geography. So we have a lot of people in Europe. We have a lot of people in Asia. Those are continuing to grow. We're opening up Dubai. Like you're going to get more global coverage assuming these regions of the world continue to grow. So then you go, okay, well, what other artificial divisions are there? Well, there's the private-public division. So if you're looking at a private company that's a growth company raising a series D round, is that dissimilar?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we kind of like those areas where you can export some of your capabilities, but there are difficult and painful to build because it keeps competition up. It might take you a number of years, but if you can do it, you got a moat around the business.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have large technology teams, large data teams, large legal teams, and they work across strategies with specialists for all these different areas. And so when there's an opportunity that might be fleeting that takes a lot of analysis to figure out across the firm, we have the ability to get with the collaborative culture of the firm, the risk guys, the legal guys, the portfolio construction guys, the heads of different strategies. We can all jump on the phone together and really figure something out, whether it's bringing on a new team that might have a new strategy, whether it might be a particular trade that's off the run that somebody wants to do. More and more, I think, that's going to be a differentiator in return because the commoditized stuff that's fairly easy to do by definition, more and more people are going to do that. So commodities like, why are there so few places that have built out good commodity business?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Come up with different structures to enable people to be entrepreneurial and to build businesses and have that runway to compete with the smaller firms for those type of folks. So it kind of goes both ways.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to have enough capital to kind of make those bets to do that, but also enough opportunity that attracts those people, that sweet spot. So when you go too much lower, it's very difficult to have both sides of that equation because you have the opportunity side of the equation, but do you have the resource side of it? Are you willing to take enough risk? Are you willing to put enough capital behind somebody, not just on day one, but as they grow, if they have some success and now they're outperforming everybody else? How do you navigate that? Do you have the resources, all the technology and data and everything else to put behind somebody, the analyst development, all these different things? The smaller you get, the harder all those things are to offer. And then for larger firms, they have the opposite challenge, right? Like you have all the resources, but how do you offer somebody the growth opportunities? And so we started a second equities business, for example. Some of our competitors have multiple equity businesses. So you have to.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the time. So they're attracted to the offering where they could be part of architecting how a strategy is developed and built, part of having a seat at that table as a senior PM and helping to build that. And then having the opportunity that comes in the back of that, if they're successful with it, they could build a larger franchise where one might already exist at a place that has this built up. They can move into management over time. They can become a partner over time. So it's different trade-offs. I think you have to be big enough to where you can have the resources in terms of how much capital you're willing to allocate, how much risk you're willing to give out. Years ago, we were always hoping that we would have more than one or two people that would come to our top PM event every year and were up over 100 for the year. Now everyone that comes there is up over 100. And we have some sub PMs that are up over 100.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“They think the biggest firms have the advantage of being the biggest firms, and they have the disadvantage of being the biggest firms. The advantages are they have more really developed strategies than others. The Quant businesses there, for example, are very developed. Whereas we're in the process of building out a quant business. So they have the advantage of having that P&L stream where we don't yet. And they have the infrastructure for it where we're building. On the other hand, when you're recruiting, you have the advantage of being a smaller firm. So some people are attracted to going to a place where everything is built out and plugging in and being a cog in the successful machine. And that's fine. Other folks want to be part of the build. It's a way to attract people who are very entrepreneurial and who are real business builders. Whereas 20 years ago, they probably would have just started their own fund, but now the industry has evolved to where there's so many impediments to doing that and so many resources you need just doesn't really make sense.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Then the cycle repeats and rinses the other way, and all of a sudden talent in an area goes from overbid to no bid very quickly. And so you try to be a little bit contrarian. It's hard to be completely contrarian, just like in the markets. I think there's a balance. I don't think you want to sit with your value stock for 10 years for the one year that it's going to bounce. So we're always bid for the top talent in a particular area, but we always want to make sure we're getting a good return on that investment.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, I think there's a limited number of good PMs in general. So I don't think it's limited to this particular model. I think any type of high alpha content model where you really need to have a lot of skill, like by definition, there's few people that are going to have a lot of skill. How do you compete for that? It's a self-correcting mechanism to some extent, like any market at periods it's going to become overheated and at periods it's going to become depressed So if you have a strategy that's done well and everybody's making money in that strategy, the talent in that strategy tends to get bit up, then more people build teams in that area, more people overpay for the cost of building those teams, more capital gets deployed there, the returns come down and the management of these firms got to be successful for a reason we don't tend to keep doing the same dumb thing over and over again so if you start losing money on something you'll pretty quickly adjust and so”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Different pieces. You have the ability and resources to innovate, the ability to build new businesses, new strategies, the ability to try things and adapt. And that allows you to grow over time.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“But if you look at it over 5, 10, 15, 20 year periods, I think the secular trend is going to be sustained. So if you look at the market share in terms of investor dollars or the market share even more so in terms of the alpha pie in the markets or the talent in the markets and how much of that was owned by deleting diversified multistrat firms 20 years ago, 10 years ago today, that chart is up and to the right. And I think that's going to continue in that same direction, similar to what you've seen in other areas, whether you're looking at banking and what's the market share of the top five banks, or you look at private equity, what's the market share of the top five private equity firms. Once you build a durable franchise with a particular culture, a particular way of doing things that people are attracted to, that stood the test of time, you can bolt on.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's a function of how much capital is going to be in the markets, which is a function of what happens to the world. If the world continues to grow and the world is flourishing and GDP is growing and economies are expanding and money is going to come into the markets, then I think you can continue to grow. That ebbs and flows. But history, I think, has shown us that over time it tends to grow. Then you have the types of firms question. Last year the multistrap, multi-PM space hugely outperformed the single manager space. This year, I think you've seen a little bit of a flip. And part of that is the beta inherent in a lot of single manager strategies, where markets are up this year. If you're running a 50% beta or you're long growth and short value type stuff, like you're going to do well. So there's certainly periods where I think those strategies will outperform. And that's usually exacerbated when there's a lot of money that comes into the multistrat.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Improve the training infrastructure for example where we think we can lower our slippage significantly multiplied by the billions and billions of dollars we trade every day that's going to have a huge impact for our investors but we can't make those investments that are multi-year investments where you have to fund large teams to develop these things if you don't have the visibility on your capital. As we've been able to push that out, I think it really improves our ability to make those investments both in people and systems to then drive the better returns. And I think you've seen that consistently across some of the larger peers.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“The success in building out additional strategies. And you could kind of see a chart of our duration of our capital expanding to where today it's all two and three year capital up from monthly and quarterly capital five years ago. Our success in building out things like macro and commodities and other strategies that I think is directly tied to that because you can consistently invest and you can show potential incoming PMs. If you hire a quant PM today, a lot of them have two year sit-outs. And then they take another year to build. So they have to believe that they're joining a place that's going to have plenty of capital and resources for them to deploy three years from now. So if your capital duration is three months, you could talk all day about how great you are and how great your investors are. They're just not going to buy that. So it's a real impediment in hiring. And then also in investing for the infrastructure that you need for these areas, a lot of the technology investments that we're making to...”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“As well as the transparency that we try to provide them and the value add that we try to give them beyond our returns. We always try to help them with market color or any strategies that they're considering internally. So that was first building out an institutional marketing team, client relationship team, which again has taken decade to do successfully. It's a big part of that. And then the second part is the term. So has the strategy been successful and we've delivered, we've been able to get longer duration commitments. And that's really helpful. And I wish we would have had that 10 years ago because every time your capital goes up and down a lot, it just stifles your business development. Sometimes even your retention, like although we did a pretty good job with that, but your ability to expand and take advantage of those dislocations, if your capital is shrinking at that time, like you just can't do it. I think it's very tied to.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“The last five years, we really emphasized a more institutional approach, both first in the types of investors and then in the terms. I mean, I think you need both. And now our success and consistency over time, we've had knock on wood 20 out of 21 positive years, very consistent volatility and drawdown management and zero correlation over that time that's enabled us to attract and grow really top tier investor relationships. So the investors we have today, a lot of them are like the who's who if you took just a blank sheet of paper approach and you said you were starting the best fund in the world who would you want to invested like a lot of our investors would be on that list but that's taken a long time to develop those relationships both from getting to know each other and working together through the ups and downs that you inevitably go through”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this is something I wish we would have done a better job of early on. Unfortunately, when we started off, we were coming from a prop background. Thankfully, there was enough interest and we got initial capital, but it wound up being very volatile capital because we didn't really have an institutional approach and institutional investors. And so it wound up with too much momentum. And sometimes the momentum was based on us where I remember first we went from 300 to 600 and then we had a drawdown and we went back to 300 in the meantime. We'd hired a lot of people and I was like, oh my gosh, how are we going to deal with this? We made the money back and it was fine. But it happened again in 08 where it didn't have anything to do with us. But we went from $2.5 billion to one and a quarter billion and we made money in 08. People needed their capital and we decided not to gate them and we were liquid. And so people took their capital. So post that in a particular”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of convexity in the portfolio, even though those strategies were down a lot. And firms that didn't have that diversification or didn't do a good job of seeing it in other places, they had massive drawdowns intramon. And so we never want to be in a position of relying on a government intervention to save us. You want to build a diversified and durable enough business across all these things that you always have some areas that are hopefully doing well when others aren't. If there's a crowding unwind in a particular space, you'll probably get hurt there. But hopefully you'll have other strategies that are doing well enough that you can sustain and trade around it and maintain a decent enough level of exposure to where when it snaps back, you're there. And that's one of the benefits of running a diverse business.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“In there, and you say you're diversified, but you've really taken a long time to build really solid businesses across different strategies sectors. That going to have a ramification across all these firms? Absolutely. But another side of that, if you can navigate it, you obviously have phenomenal opportunities because you'll have more alpha and less people to pick up that alpha and you'll have big dislocations. So you have to manage through those periods. So one of the things I take Briden is in 2020, we had a period in the first quarter trading around the COVID mess where we did a good job trading around it inequities. We had really good information flow across our teams between the healthcare teams and others and then across the macro universe. But then there were other strategies, various relative value macro strategies, merger arbitrage strategies, all the RV type stuff that wasn't directly related to it where the spreads really blew out. And we could have done a better job of seeing that early. We didn't than I think most people didn't see that connection quickly. But even at the depths of third week in March, we were positive on the month.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think it's unique to this space. I think for some reason it gets singled out to this space, but much larger risk in dollars is the more long biased strategies that are common across other areas. So if you look at last year and you think about the meltdown in growth investing and whether that was your mutual funds, your ETFs, your long biased tech funds, they were all pretty correlated and the dollars of those dwarf the dollars when you're thinking about a market neutral equity stock picker market. I think it happens across every strategy. It's just one of the things you have to deal with. I think the way you can help mitigate it is through diversification. So the more diversification you have as a firm with good risk controls and good PMs, not just diversification because you hire the first available guy and you threw him.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd love to ask you a couple questions about the multi-strategy, multi-PM business as it relates to markets and competition. And there's always this concern that there's a lot of leverage in the equity markets in these strategies, and they all have variations of a theme of similar trading strategies. How do you think about the potential for some systemic risk or contagion effect across these different strategies and firms?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Equity is tends to average around four pretty typical. It changes obviously depending on the volvironment that you're in. That tends to be an average.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“We run to a vault profile like the rest of the PM, so we run the firm the same way. We've averaged about a four to four and a half percent vol as a fun for the last, I'd say probably five years. It's been pretty consistent. Now that we've gotten more diversified and built out, more large strategies that are uncorrelated.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I look at the main bets that we have, I look at equities markets overall in the larger macro markets. And then I look at all the PM P&Ls. So you have every team as a P&L, and then you roll it up by sub-strategies. Keep an eye on what's working and what's not working, where you might be able to take more risk, less risk.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's more helpful to compare and customize structurings. Whereas a lot of the value in the positions, a lot of times it's how you structure them and the optionality you're able to build in. Whereas inequities, there's thousands of line items and there isn't really much structuring. And so that's much easier done quantitatively.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“To hire somebody who'll probably take three days to fire somebody, so we want to invest the time up front to figure out is it a good fit? Are we really bought into the team and the strategy? Inevitably, they're going to have a hard time at some point. And you want people that have actually taken the time to understand what the heck they're doing and to have some conviction in the team. So when they are having a hard time, you could go back to your notes and say like, oh, we all spent a lot of time with these guys. We thought they were great six months ago. They're probably still great. They're having a hard time for some reason. Let's see if we could figure out why. And then in things like macro, it's a little bit more discretionary. So like Steve Goldberg, head of our macro business trades. So him and the macro management team work with the PMs on some of the trades and occasionally they'll do trades that are split three or four different ways and they'll all train it independently and compare their views. And we found that's very creative on the macro side because there's less line items to trade.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“For that strategy. For an analyst with a PM, if you don't think it's working, you give them clear feedback on why it's now working and what they need to do to change. Or maybe they're great and it's just not fit style-wise. And in those cases, we'll try to find them to fit with another team. But generally, we want people focused on their top performers and how to scale them as opposed to constantly trying to fix the underperformer at some point. It's just better to make a change. We tend to do a lot of work figuring out ahead of time how committed are we to this strategy. A lot of times we'll get a call and this team just be on the kind of picks their head up. They previously haven't wanted to engage, but whenever there's some issue with the firm and now they want to look around, they're like, I talk to competitor viewers last week and I got a term three days later. Like, well, that's not going to happen here. So you should just take that if that's what you want. You want to be aggressive and move quickly, but if you're going to take three days.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have enough time because you could have somebody with a great track record that starts when their particular strategy is really out of favor. And the best person to strategy, you could have had the best directional macro guy five, six, seven years ago, and there was zero volatility and rates were at zero. They're just not going to do that well. Then you let them all go. And then, you know, the year after that, rates start going and they all make a fortune. So you have to sort of distinguish between giving somebody enough time on an absolute basis, but also what's the opportunity set in that strategy. So if the opportunity set in the strategy has been great and they're not doing well and you've given them a good amount of time, we tend to make a change. If the opportunity said in the strategy has also been really tough, but they're really doing a good job building their team, constantly iterating their process, getting feedback, coming up with innovative ways of improving, and just working their butts off will tend to give them more time. And hopefully there will be a change in the environment.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Feels really, really important. And also, how much effort you're putting into the process. Maybe the first person you interview is going to be great. But usually it might take 30, 40, 50, 60, seventy interviews of looking at lots of people, being very clear on what your criteria is. And through the process, you're also defining in your own mind what you like, what you don't like, what's the ideal background for you, and defining that better. And then taking the time with that person, like have them do case studies, have them do some sort of part-time analysis for you. Talk to them for a bit on lots of potential ideas and compare them to other people and really make a thoughtful decision. Interview them on Saturday, see if they show up for a couple hours. Just make sure they're really bought in and it's a really good fit. It lessens all those problems. Having said all that, you're still going to have to make changes. And we'll do everything possible to help them over that period of time to get going. But it's important to.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“What are your expectations from them? And you want to really figure out how to avoid the expectation mismatches and just doing things that are unrealistic. So we see a lot of times you'll have a younger PM and by definition it'll then wind up almost always hiring really young analysts. And expectation is this person's going to come in and help me make a lot of money. It's just not realistic at the stage of development that they're in. They're going to take a couple years just to figure out how to be additive. So if you want somebody to come in and help you make money and you're a first time PM, you better find a partner on your portfolio. It could be a 50-50 partner. They could be a 60-40 partner. They could be a 70-30 partner, but somebody who's really going to be a partner or a strong number too for you where they're going to be sufficiently attracted enough to the growth prospects of that, to where you're going to be able to get an experience person. So those expectations, avoiding those mismatches.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“We basically guide people number one to be very thoughtful on the IRA. The more thoughtful and the more work you put into the hiring process, the better your odds are that you won't have to deal with making a change, or at least not quickly. And we see this all the time. The biggest gating factor to someone's success growing from a first time PM to an experienced PM or a small PM to a large PM is their ability to build a team and to manage a team. And so defining that to start, like what are the people you're looking for? What is your ideal number two look like? What is your ideal parker in your portfolio look like? What coverage model do you want and what are the people look like that are covering those?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“And again, you're never going from all in or all out, but you're certainly changing it relatively aggressively, depending on that period. Your risk in a particular substrate could be up or down 50% very easily if you're in a good period versus poor period. So our weeide PMs when we have meetings and talk about kind of what's working in the market and what the environment is for a strategy, how much room you're willing to give things, how much positioning becomes a factor, and how much you're looking to ride new winners is very dependent on which of those environments you're in.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so you always think about the positioning and the crowdiness in different areas. In general, the best environment is when there's a lot of generalist participation in a strategy and there's a lot of money coming into a strategy. Because then that your specialist participants, whether they're trading bonds, currencies, commodities, equities, like they should be able to do a better job of forecasting where the capital is going to go. Another side, the worst environment is when there is no generalist capital and money's flowing out of the strategy and the specialists in this strategy are all underwater. And so in that environment, you're trading against other specialists and nobody has much risk tolerance. And so you have this cascading drawdown type of periods. So you want to know which type of period you're in and adjust the capital allocation accordingly.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source