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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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“As you look at the overall portfolio, let's just focus this on equity long short. The notion of volatility scaling as it relates to both what you're doing and then of course the other types of capital, the vast amounts of capital in some of your peers, how do you think about navigating not just your own portfolio, but the broader equity market environment that your PMs are participating in?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Things come back. But if you don't have the room there and they don't come back for a while and they get worse, now you have a giant hole in the front. You have to navigate the balance of those risks. But if the teams have done a reasonable job and that business is doing fine overall, then you definitely want to play offense when you're in a position to do so and capture that. Other strategies that are, I would say, a little bit more momentum to me like the growthy sectors and equity investing or directional macro trading, those tend to be a little bit more momentum to me where a good environment feeds a good environment for periods of time. And usually people will want more capital as they're making money in those areas.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's usually a combination and it depends a bit on the strategy. So in strategies that are more RV oriented. So you could think about that as fixed income relative value, for example, or merger arbitrage, things that are very spread oriented. There's a cost of capital and there's a typical spread that you can earn if you're doing a good job in that strategy. And then once in a while, there's a dislocation, some deals blow up. some firm has a hard time something surprising happened there's a bunch of stopouts and all of a sudden the spreads are much fatter and so those are more on a mean reversion basis where those guys will pick up their hands and go this is the time we need to step up and the trick is you want to hopefully have navigated the drawdown period well enough to where you have the ammunition to step up because it's always easy to say yeah of course we should step up most of the time”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“So at each of those levels, whether it's bottom up the PM, the opportunistic, the management looking at it, or the infrastructure required, when you see that pivot from 40% allocation to 60%, is there a bias in the firm that is momentum driven or mean reverting driven of what defines an opportunity set?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Top down and bottom up pieces, you could be fairly dynamic. But what you don't want is uncontrolled changes. So we might take macro, for example, from 15% to 25% if we feel like the macro opportunities such as got a lot better, which we did the last couple years. But we're not going to take it from 15, 20% to 60% because you need the PMs to get used to running more capital. You need the depth of the teams to increase. There's always more challenges running more money. So you're always trying to find like that right balance of taking advantage of the opportunity, but not getting so big that all of a sudden it swings the whole firm around before that business was ready for it.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I'd like some flex capital, even though it's going to be above what's in my business plan for this year. But I think I can go from this 50 to 75 for the next three months because we just had this major dislocation. My team did a good job of navigating it. And now we want to pick up all the pieces. And the spreads are really wide. And we want to have the extra capital to do that. And that could be inequities, that could be macro, that could be anywhere. And then you have the top-down changes from the firm management investment committee level where we could say the prospects for this particular strategy look better. The firm is growing. We have access additional capital we can deploy rather than deploy it exactly the same way we were deploying it before. We want to disproportionately add a little bit more here because the PMs are really doing well. There's a lot of opportunity. There might be less competition for some period and you want to take advantage of that. So between those.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Might have a range, so we give them a volocation of 50, for example, but we could say you have room to go up or down 20% from that. In effect, you could go 40 to 60, depending on your assessment of opportunity set at any given time. And so that's quite chunky. And if you have a number of people in a particular space all of a sudden go from 40 to 60, your allocation to that space just went up quite a lot. And so that at the ground level, your day-to-day flows go to where the PMs feel that the opportunities are greatest at any given time. Then you have more discretionary changes where somebody raises their hand and says, I'm already at 120% of my allocation, but I really feel the opportunity set is outstanding and there's a special.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“We like to have a blend between top down and bottom up. I remember reading a long time ago how Home Depot got a lot more productivity out of their associates at the store, out of the clerks in the aisles, and how they managed to ramp earnings is they basically gave a lot more autonomy and decision-making ability to the guys in the stores. So they could figure out how much of this product to order. They could make pricing adjustments on the fly because what might be selling in Omaha might not be selling in Nashville. And all of a sudden their earnings went way up. And so I think you want to balance between guys who are in the line of fire, who are trading the book every day, having a lot of decision-making autonomy, but you also want top-down strategic ranges that you think make sense for the firm and for where the stage of development for that particular business is. So to put some numbers behind it, an individual PM.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Commodities guys, equity guys, macro guys, etc. So, all those kind of things. And I think the horizontal stuff is just as valuable as the management development things because you just learn from practitioners, you get a lot of buy-in because somebody's talking about something that's working for them. It's very hard to sort of dismiss that. But you can really pick up a lot of things that otherwise you wouldn't have access to”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“A monthly PM meetings by strategies, what's working in equities, what's working in macro. People talk about their specialties and what's going on in the markets. There's a weekly PM call that's just PMs, no management where they're talking about across strategies again across sectors. And you're just getting a lot of tidbits of information that you would never have as a siloed PM. We're doing a global PM get together in New York where we have one day of content is things that are common across all PMs where we have panels and things that are common processes. How do you build a team? How do you hire well? How do you grow your capital and expand? How do you utilize technology and data? And then you have another day that's strategy specific.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“if they choose to work on their weaknesses. So you might have somebody who's great at cutting their losses but is not so good at writing their winners. And so how do the other guys that are good at that do that? For somebody that does great on generating ADO alpha, but they lose too much on factors and they have too much volatility in their book and they wind up getting out of their winners too early because of that. Can you help them with portfolio construction and factor management to avoid that? somebody who's over trading, how do you lower their trading costs, how much alpha do they have immediately after putting on trades? Maybe they could trade more patiently. So all these kind of things. And then there's a lot of horizontal learning, which is really important. So we have a lot of forums for that. We have a top PM gathering every year with top performers across strategies get together for a few days where we spend a lot of time together talking about best practices on things that are common across them.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bisector. So that's a good one that we're growing. Then it goes to PM development program where you take a former number two from a top performing team who's ready to make the jump to number one and you put them through a two-year PM development program where they're running money during that time and scaling their team, scaling their capital, but they're learning all the pieces they don't know. So typically they'll know stock picking, but they won't know portfolio construction. They might have not had a lot of experience to trading. They probably wouldn't have managed a lot of people before. So we coached them on all those aspects. Then at the PM level, we have a couple different things. We have a PM development group that gives them lots of data that's fairly quantitative. And so we look at all their stats and we give them a lot of feedback on what's working for them versus others. How do they rank versus others across all different dimensions of portfolio management? And so then they can iterate and optimize within their own.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think that's really important at all levels. So starting at the junior levels starts all the way from an internship program where we had 120 interns this summer from a lot of the world's top schools. It's a big undertaking and it's across all strategies, all departments. And we wind up converting somewhere between a third to a half of those into employees where the teams have had time to battle test them before they hire. So at the end of the day, it really lowers your hiring cost and you're getting great talent. So it starts from that. Then you have different functions like analyst development programs. So we have a program where we take pretty young analysts either straight out of investment banking or a couple years out of sell side and we put them through a development program for six months typically where we teach them all the hedge fund equity investing skills of how you transfer that knowledge from sell site to buy side and then make them available to our long short investing teams and match them up.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Equity portfolios, you'll have IDO versus factor risk limits. And you might say, okay, your idio limit is we want you to run at least an 80% idio, 20% factor portfolio. Or you might say it could be lower than that, but we want the factor portion to be more based on your industry factor risk as you have demonstrated skill in that versus your style risks or beta risks. You have liquidity limits. You'll have guidelines on things like number of positions and concentration. So lots of things like that that create a box within which that person can operate.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“different by strategy so the common things across all strategies is we have volatility budgets we allocate capital in the form of volatility dollars and then somebody has an expected sharp and they multiply that sharp times the vol doll dollars to arrive at their expected P&L for the year and so you have like a drawdown framework that's very objective and clear that everybody signs off on on day one and that's multi-step so you're not forced to reduce the portfolio by a large chunk at any one time so that's common across all the strategies and then there's lots of specific limits based on the strategies so macro for example and commodities you'll have a lot of stress testing and stress limits based on historicals of when everything goes wrong you get very extreme scenarios how much can you lose and you want to make sure people don't lose a lot more than they're a model to hedging the tail risks and”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“The frequent complaint you get from analysts when they're going through their winners and losers is I got the numbers right, but the stock got killed because the multiple contracted by 50%. It's like, well, that's part of your job is to understand what's going to make the multiple go up and down. The best investments are ones where you...”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going to be a huge tailwind or a huge headwind to what that company is doing. And you're putting those things together to arrive in really variant earnings estimates. And that changes all the time. And as people catch on and you're proven right or wrong, the stock prices will move and you spread variance will close. And you have to rotate to something else. So that's one. And then second is multiples. So what's going on with the story? Is this something that's likely between the story of the company and the story of the macro that's going to be a case of expanding the multiple or contracting the multiple? And this is where really understanding sentiment, positioning, and macro and having lots of folks to talk to about that is really helpful. A big difference between a more junior analyst and a more senior analyst and then a PM is really an understanding the drivers, the story, the sentiment, which will lead to the multiple change.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it starts with good old fashioned stock picking and long short. So you're trying to pick lawns that go up more than your shorts or in the Dow Market shorts that go down more than your longs. And you're just trying to make the spread and trading around your positions actively to capture those spreads. And so you're typically in equities focused on earnings and multiples. Those are kind of the two main things that drive stock prices. So earnings, can you get ahead of the street? Can you get ahead of other hedge funds in estimating earnings inflections where you're not one, two or three percent differentiated, but you're 30% differentiated for the quarter and you might be 60% differentiated for next year because you figured out something that's going on with this business, which might be a combination of micro factors where that company is coming out with new products, new processes, changes to their business model. And macro where something is going on in the macro environment that's really...”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“more durable model because you can refresh. We've had periods where a team has had to completely revamp their coverage, their approach. A lot of the members of a team. If you're running a standalone fun, that's very hard to do that. It's almost like why private equity exists. If you're running a publicly traded company and you're trying to do a wholesale revamp, you know, the market doesn't have patience for that. Whereas in private equity has a ton of success doing that. And so it's the same thing like your ability to adapt and change is just much better because you don't have to deal with all those other things and you have the resources of the firm to help you navigate that.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“patient our investors during those periods whereas if you're on a platform and there's fifty other teams in different sectors and the money can flow up and down depending where there's opportunity to help pay for the various resources and to not distract you with explaining to investors why it's a tougher period all the time rather than trying to innovate your process and develop your team and go to an extra meeting and try to figure out a new idea It's just like a lot of headwinds. If you guys do it, but if you look back, we used to invest in a portfolio hedge funds when I was a Schoenfeld as one of the best things I had an opportunity to do early on just personally investing in a portfolio hedge funds and doing the diligence on that. If you look today and see how many of those funds are still around, very, very few of the single manager funds are still around. But the multistrats we invested in at the time, most of them are. So just a much more”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, first of all, specialization. I think in long shared equity, it's very hard to run a standalone sector fund. I mean, it's hard to run any sort of fund. You have all the challenges from running an equity fund. But then on top of that, you have all the challenges from running a specialist equity fund. Sectors come in and out of favor. Think about energy. How many times has it gone through these multi-year cycles where it's fantastic and then it's really difficult to trade, where generalist money is just flowing out and you just have the specialist hedge funds fighting each other? That's a very tough environment to trade in. So if you're on a platform and you're running that type of strategy, it could be anything, could be tech, it could be healthcare, it could be financials. Is there a great appetite to invest in a standalone financial fund? Probably not. But even in areas like tech or healthcare, it's very hard because for periods in time, there's just less to do. And what do you do during those periods?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“And as you look at one of these people when they join you, compared to someone who's running an independent fund on the outside, what is it that you think creates an edge for the individual PM underneath your umbrella?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's relatively efficient. I think it depends on the transparency of the strategy. So equity long short, I would say, is pretty efficient. There's a lot of teams. They all go to the same conferences. A lot of them know each other. People move around. Analysts move around. And so you can map things out pretty well. Other areas, if you get into lower latency quantitative trading, that's less official.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“You might be able to reposition your portfolio to weather those storms before they become evident to other specialists. And I think that's a critical advantage, especially at inflection points in these markets.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Constant, iterative diagnosis of what's going on top down in economy is super helpful. So that transparent and collaborative culture horizontally is super differentiated. That's reinforced by our partnership structure. So myself, my co-founders, we've been together for over 20 years. And then now we have 21 partners in the firm across strategies, across business departments, across geographies. that really reinforces the culture. And I think in order to be a really effective specialist PM, they typically don't get hurt when there's something in their area of specialty that they're surprised by. Like they're usually all over that. But they usually get hurt when there's something that's rolling through the markets that might have started somewhere else that all of a sudden becomes an issue for their coverage. And so if you can get an insight into that earlier,”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“To develop a culture that's very collaborative and where insights at the macro level and insights at the process level are shared across the firm. And so you develop this learning organization where you're not just top down telling people like here's what's worked for others, but also horizontally they hear from each other, what are the nuggets that they're picking up from speaking to thousands of companies every month on the equity side that might be useful on the macro side. How often are companies talking about inflation picking up or easing? Very useful on the macro side. Vice versa on the macro side when the Fed is active, your typical equity guide doesn't really have a sense of what that might mean. And so when they come in and they're making changes to the language, what does that mean? And so having that interpretation and”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Through it with hundreds of other PMs over time, you don't have to reinvent the wheel on everything. They want some guidance on how other successful folks dealt with this problem. How have they built out their teams? What's worked? What hasn't? How have they developed their analysts? What's been the best practices in data monetization? How do they utilize tech? What's the best practices in portfolio construction? And so you want the benefits of that experience and that business building from a partner as opposed to just saying like, here's your capital, good luck, you lose money, we'll fire you, make money, we'll give you more. So we really try to be that partner, like really find that sweet spot where we're really helping people build their businesses, helping them navigate their problems, showing them the best practices that have worked for others. That's kind of number one. And then number two is we've tried.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“It starts with that philosophy that we tried to be a really good partner for people in the best sense of the term. So if you think of the venture capital business, which is we're building a growth stage venture capital business is another vertical, the best investors in that space, how do they get the best company founders to partner with them? Why does Mark Zuckerberg partner with one versus another when he's coming up the ranks? The best founders, and I think the best PMs both look for a really value added partner. You don't want somebody who's all over every decision that you're making where everything you're doing is micromanaged and it's very vague whether the subjective decisions are going to go your way or not. But by the same token, I don't think the best PMs want someone that's completely hands off because a lot of the experience that a firm has having gone”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's grown with the firm and with the strategies. So everything started with a few people. My partner, Jen Blake, has been running it for almost 15 years now. And now underneath her between the recruiting areas that focus on the business side where we hire a lot of technology folks and data folks and all the people focused on the investing side, it's over 50 people.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so we have this gap, and part of that we can fill by growing the teams, but part of it we need to fill by recruiting. Or you might have a coverage gap where you have, for example, power trading in commodities in Europe, but you don't have power trading in the US. And so we need to fill that. Or we have consumer in Asia, but you don't have this tech area covered in Asia. There's a lot of market cap and alpha that can be had by filling that seat. So those are targeted searches. And so every quarter we update, the priorities per strategy with the recruiting teams of what are we focused on if we could fill the next quarter, we'd be super excited to get a talented person in that seat. The process can be anywhere from a few months if you're lucky, if you know the person already and have a relationship. Sometimes it's a number of years and building that relationship before it's the right time for the person to make a move.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Tension is diverted to managing the business. They have negative hiring and retention selection because they can't compensate their teams as well. They have negative technology and data selection because you can't invest as much in that. And just the time slock of managing all that versus trading and investing. We like those situations where we could take off all of that and help them with all of those elements. And a lot of times they're freed up and thrive. So those are kind of the opportunistic ones that become available when they become available. Our business development team tries to form relationships with all folks that are talented in all the various spaces. You're forming those relationships. So when opportunistically there's a chance for those folks to move, you're the first call. And then there's the targeted piece, which says, okay, we have this sector in the market where our model spits out. We'd love to have a 15% allocation just based on the market cap and alpha pi of that sector. And the teams we have are at 8%.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's again a combination of targeted and opportunistic. You could start with a sheet of paper with a bunch of boxes on every box that you'd like to have filled, but they take a really long time because the best people in a particular space aren't available all the time. So that's kind of the opportunistic piece. Somebody might get frustrated with their current firm for whatever reason. Maybe they're vastly outperforming to other people there. That's a scenario we really like where the firm is not doing that great, but the person is doing great. Maybe their deal, it's an equitable split with other partners and management there, where somebody's an up-and-comer and they've done great, but there's more established people who maybe put the firm on the map and now aren't contributing as much. We like those scenarios. You have the fun roll-in piece. We've done a few of these recently. We have a couple more in process where guys have done reasonably well as an independent shop, but they haven't been able to scale the business to where they've liked because a lot of their”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd love to turn this concept of how you build in a new business to that individual PM level in any of the strategies. As you're thinking about adding another PM, how do you go about finding, doing the diligence and deciding if that's someone that fits into BAM?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“phase one for the first year what does that look like in terms of the sub PMs underneath the person or the senior analyst underneath that person what's the coverage what's the capital and then you have an expected sharpened P&L based off of that and assuming that goes according to plan then it's like okay what's phase two well phase two we want to run twice as much money and so in order to do that we need to expand to this area and this I've done before I can hire analysts to do this this I haven't done before but here's why I think we could be successful in that area but I need a sub PM so that's contingent on hiring that person we need additional technology to do it you don't get too far ahead I think five and ten year plans I think markets change too much and it's not usually that helpful but I think one two three years is pretty helpful and then you're obviously iterating those every year”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, on the other hand, if you go all the way to the other side of it, if you're taking someone who has been very successful running a lot of capital, at a similar firm where do you think the risk limits and the resources they had, we could certainly replicate or do better. So their skill should be pretty transferable. And they've had really good track record managing both teams and capital. Their business plan and capital allocation are going to be much more ambitious to start. But even there, you'll have a multi-year plan. And so we try to have deliverables for what is phase one. So you want to make sure even if somebody's managed a 25 person team and billions of dollars, they're probably not going to start with that because there's non-solicit. So they have to build a team from scratch. You have to get used to a new firm. There's usually a sit out period where they have to get back and step with the market.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Two concepts that we think about with that are the capital allocation and the business plan has to be commensurate with the experience of the person. So if you're hiring somebody who hasn't run money previously, but you think they're a talented analyst who might be able to convert to a portfolio manager, we'll put them through a PM development program and it's much more structured in terms of here's the mandate. It's very well defined. It's relatively narrow. The team is small to start and you're building it over a few years. You're not running a lot of capital to start. And with the success, you're getting more resources for all of those. And then the guys that work out, we've had a couple guys who've become partners now who started in the PM development program. But five years later, they're running very large teams and large allocations.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you take the corollary to when you first joined Schoenfeld for your firm when you're entering a new space, you want to set those guardrails. You want to have the smaller box so you could expand the box over time. But as you're also defining the opportunity, you're talking about trying to bring in really talented BMs in each of those spaces you'd like exposure to. How do you balance that desire to have initial risk control to make sure that you're not making a big mistake with trying to bring in really talented people that probably want to put their pedal to the metal on day one?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really navigating in liquid trading markets and you're positioning risk management portfolio construction or big parts of it that you've tackled in equities or you tackled in macro trading. And you basically start to blueprint that business. And then what are the larger profit pools? Do you want to focus on larger markets, smaller markets? Which of those are more approachable to start? And then you try to plug in the talent. Obviously not everybody is great and available immediately. So you're trying to plug in folks that are a good fit for where you are in the business where they can partner with you to build liquid large coverage.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“You start with research, so you look at what are the good commodities businesses on the street, how are they organized, and you look at different types. And commodities, for example, there's proprietary firms, there's commodity trading merchants, there's CTAs, there's hedge funds that have been successful in the space. And so you're looking at all of those and you're like, okay, what's worked? What's transferable and what's likely not transferable for a long period of time. For example, you know, physical trading takes a long time to build out. We didn't want to start with that. Or some things have sharp ratios that we're not excited about. So traditional long-term CTA type trading, we're not really that excited about. So you sort of figure out what you like and what you don't like and what's applicable. So where can you take similar types of strategies where you are doing fundamental work? You're also”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Take this commodity example. You're going into a market you didn't have exposure to before. You said there's step one, step two, step three. What did they look like as you mapped out building out the commodities?”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“With the teams, and they constantly evolve as you see what's working of how to build optimal investing strategies where you're really building a business. When we started out building commodities, for example, like we didn't really have any commodities. And so what's the best way to do that? And you try to outline what's a mature commodity business look like and what stage one of that, stage two of that, stage three of that, what do the teams look like? What's the infrastructure that you need? What kind of team leaders do you need? What kind of research and technology stacks do you need? So it's much more than just hiring people and giving up capital, although that's obviously a significant and important part of it. But a lot of it is you're really trying to partner with business builders in these different areas that bring a lot of that thought to the firm and also the firm is contributing a lot of our”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“The term pod shops makes somebody visualize lots of very independent teams where the firm is a capital allocator and a back office provider but doesn't do much else and teams do their own thing within their risk limits. We've always tried to strike a balance between creating the benefits of that, which is lots of independent thought and creativity and entrepreneurial drive from the heads of the teams. But we really try to help the teams build businesses on the platform and we really try to create strategies and build businesses and then fill them with teams as well. So it's both bottom up and top down business building. And so to answer your question in the last five years, that's really accelerated even more. Where we have ideas and their iterators.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“A multi strategy, multi-PM trading and investing firm. So we have almost 2,000 people globally across over 15 offices now. We engage in lots of different strategies. So fundamental long short, equity trading is still the largest strategy. But that's down from being 100% of the risk in the early days even five years ago is probably 85% of the risk. Now it's about 45 to 50% of the risk. And we've built out large businesses in macro where we have lots of different verticals within macro. Same with commodities, equity arbitrage strategies, credit, and we're in the process of building on lots of different quantitative type strategies.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“Group to a separate division, to a separate division with our own real estate that was still funded by the firm to a division where I put up money and then we became a hedge fund but with proprietary capital where myself and Steve Schoenfeld were the only investors and then we fully spun it out and started taking external capital and also piece by piece weaned ourselves off of the middle and back office and started building out of our own stack which took a number of years to kind of fully do.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“People were so around 2000, 2001. And our strategies started to divert a little bit from the rest of the firm because we were trying to hold positions longer. We were trying to add the fundamental analysis piece. And so we needed things like sell side coverage. I opened up the yellow pages in Chicago, looked up Goldman Sachs under G, called them up, and said, we need institutional sales coverage. And they're like, who are you? We showed up at their office and they didn't know what to make of us. And they put us with their middle markets guy. And after a couple days of calling in hundreds of trades to them for day, they quickly realized that they should switch our sales coverage. That was kind of the beginning of our relationship with Goldman and the sell side in general. We needed to start meeting with corporate management. And so we couldn't have guys walking around and shorts and t-shirts around the office. So we needed to get our own space. We went from an individual and a small group to a large group.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was iterative, so within Schoenfeld, when I started, there were like 100 people there. And when I spun out our group, there were over 1,000 people there. So the firm had grown quite a lot. I was very successful.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was focused on the change in fundamentals and news flow, so I wasn't focused on fundamentals of trying to figure out what a company was going to earn next year. But we were focused on what is driving the stock for the next few days and few weeks. We weren't building models or running valuations, but we were very focused on what our investors anticipating going into this earnings print or what are they anticipating going into this conference presentation? What are the one or two key things to be on the lookout for in training and anticipation of that, but also a lot of times in reaction to how is the market reacting to the news flow if you're getting positive news that was sort of as expected, but the stock is not acting well like we were very focused on either trading the other side of that and capturing the sentiment swings. So they're more like multi-day type swing trading where fundamentals weren't input, but not fundamentals in terms of long-term valuations or models.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to have a view on companies longer term. We hired our first analyst and that was the beginning of our research department. And then we went from there as that scaled to hiring more experienced sector type portfolio managers more in today's mold where you would hire a head of healthcare, head of technology, and then they would hire more junior analysts underneath them. And I would allocate capital for them to manage.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was like, well, I'm willing to pay for him out of my end. I'm making money pretty consistently. And they said, great, if you want to pay for him, you know, go for it. I had the support of the firm to go out and hire people, but the risk was all on me to pay them and manage them. And I hired the first class of four, it was 1997. I hired the next four in 1998. A few of those guys are still with us today. I signed people sectors, groups of stocks to kind of manage and allocated risk to them. I ran the majority of the risk and would upsize trades. And then we went from that to hiring the first analyst in 1999. Same thing. I said, I want to hire fundamental analyst and the general feedback was, why in the world do you want to do that? Those guys just lose money. You're doing great. Don't screw up your head. But I thought we wanted to manage more capital and hold positions longer. The only way you can do those things is.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was always very entrepreneurial. I always wanted to build something from a young age. I always read a lot of business biographies, business publications and was always very interested in how companies were built before I was in college. I had several ventures. I ran a small music related sales company where we would hire a bunch of salespeople. And then in finance when I was a broker for a few years, I had four, five, six people at different periods working for me, even though I was just starting out college. So that was always kind of my mindset is once you figure out some basic success, how do you leverage yourself and really build something sustainable and scalable after it had had some success trading for a few years? I went to my boss and said, I'd like to build out a group and a team. And at the time, the firm was really strong traders. And so they said, well, we don't really have anybody that does that.”
2023-10-02 · Capital Allocators · Dmitry Balyasny – Multi-Strategy Platform at BAM (EP.341) · IDENTIFIED FROM THE TRANSCRIPT · source