YouSaid · the spoken record

Frank Brosens

lines on the record: 63
first: 2022-11-21
most recent: 2022-11-21
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

“When your wife says she's had a bad day, just listen, don't try and fix it. And it's taken me 38 years to figure that out. Honestly, I'm one of those people who do try and fix every problem. And with four boys, I learned relatively early on that I was much better off letting them work things out. It's led to the relationships amongst the four boys being incredibly strong. Still to today, they're in their mid-thirties. But it took me a lot longer in business. There were a number of times where I would identify a problem and rush to fix it. And it was really someone else's job. And by rushing to try and fix it myself, I would come up with a suboptimal solution. The people whose job it was would typically resent it. They'd follow it because I had figured out the solution. And maybe worst of all, the next time there was a problem, they would sit in their hands and wait for me to find a solution. I've come to realize that letting people”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think I've been permanently scarred by the crash of 87. As I mentioned, I'd only been running the area eight months at the time. And it's left me constantly fearful of tail risks that are at times visible risks and at times not visible risks. It has probably left me or us more deliberate in putting risk on subsequent to a dislocation.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“It would have to be investments where I know it's a very limited downside, but there's substantial asymmetry to the upside.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bob Rubin and Kenbrodi, without Ken, I wouldn't have started to conic. He and I did that together, and it was really his idea.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Arnone tennis? I'm a pretty decent player, for my age group probably one of the better players in the area, and yet a function of Ken's love for the game, we ended up hiring some very good tennis players in our firm, including the number one doubles player in the world. So I'd found myself number four or five at our firm and with four boys number five in my family.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a business that I love that more than anything else. I don't know necessarily what motivated each and every one of those other individuals. They clearly all got to a point where they didn't need an extra dollar of income. Obviously, Tom went into politics, has always had an interest in politics. Others, it was more sitting on a beach or whatever it was that they chose to do. But for me, again, it goes back to my decision when I left Goleman. I really left it with a view that I would take my retirement years at a time where the kids were young with a view that I would be in a business that I really enjoyed and stay in it ideally forever.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Further unwind were high enough that we never deployed the capital. And it's probably the committed capital fund that I'm most proud of because we were only going to get paid if we drew the capital down. We had all the expenses of putting the fund in place, but never drew it down. And I think in the environment that we're going into, you have to have that mindset.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rates we hedge pretty religiously. We try and take as little DVO1 risk as we possibly can. The other risks are clearly factors that we're thinking about constantly. I mean, that goes into both the timing of deployment of capital and even whether to deploy capital. I think of our very first committed capital vehicle that we launched in the fall of 2007 with an investment period that ended in March of 2008. So it was a very limited investment period and the idea was effectively to take advantage of the sales by the banks of levered loans, which we felt they definitively should sell for capital purposes. We were right that they should. We weren't right that they would. So we saw some dislocation, obviously Bear Stearns failed or close to failed in March of 2008, and that led to a dislocated market at that time. But we felt that the risks of”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is really important, but in the US as well, liquidity of markets is getting more and more challenged, and to be able to optimally take advantage of the opportunities that I think we're going to see over the next couple of quarters, you really want to have committed capital ready and able to deploy.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're clearly heading in an area where, as I said before, excess liquidity is going to be much less prevalent. Financial conditions are going to be tight for quite some time. And that lends itself to a credit cycle that's going to be more normal. I think as financial conditions tighten, especially right now over the next quarter or two, we're heading into a time where the likelihood is you're going to see corporate default rates substantially higher. That's particularly true in Europe, but Europe is more of a bank credit market, not a security credit market. But I think both in North American credit and in European credit, there's going to be a tremendous opportunity to own illiquid, distressed assets, illiquid distressed credit for quite some time, especially in Europe since it's a bank credit market, having committed capital.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“The way that we've made the decision with respect to any of these commitment funds is a little bit different than it most firms I frankly think has a lot to do with the success that we've had in these entities when we've actually launched them. And that is largely to have them be driven by a partner close to the area that feels there is not only a big opportunity for the firm, but a big opportunity personally to put a lot of capital in that specific area. What I want to hear in deciding whether to start a committed capital fund is this is a great opportunity. I want to have a lot of my capital there and that's effectively what drives the launch. We've had a number of times where clients come to us and said we'd love for you to do a fund that looks at XYZ if we don't believe in it. We're not going to do it just because the capital is available to do it.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Deciding whether something was a buyer or a sale, he always felt like we as the people that were closest to the deal that had done all the work on the deal were the ones most able to make an investment decision, he might have a view as to how much risk we wanted to take within that area. But in terms of the decision making itself lead that to the person closest to the facts.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“A couple things one is there's a constraint around individual position loss. We also will look at sector risk or factor risk. We don't want to have an enormous amount of risk that is all quite correlated and will go down together given a certain scenario. But within those constraints, they're largely the drivers of how big they want to be in individual positions. We do have an investment committee that will meet and talk through what the opportunity set looks like, how big a risk of loss we should be willing to take given different scenarios. Obviously, some tail risks are bigger than others, but largely within the risk constraints that we set, it's the PMs themselves that are closest to the situation that make the decision. That's a lesson that I learned from Ruben way back when he would never try and impose his judgment in”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“So here's a lot more capital because frequently it's actually the opposite that happens. When an area is done very well, other competitors have also done well. Excess capital is typically being allocated to that area and the expected returns tend to not be very good. It's usually the other way around. When someone's actually lost a fair bit of money, it's because an area has been quite dislocated, the expected returns end up being bigger, and so you're looking to allocate more. We think of capital effectively being pulled from us rather than pushed by us. The people running the areas will raise their hands when they see a big opportunity.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“He started with more of a generalist model, which was more the model we had at Goldman Sachs, frankly. The issue was more valuation of an enterprise, and that applied to credit just as easily as it did to Merger Arb. As time has gone on and we've gotten into more specialized businesses, we've gone to much more of a specialist model. CMBS is run by James Jordan, who has been in that business effectively his entire career. He now runs the CMBS and real estate operations. RMBS, same thing. We've got a specialist who's focused on that. So each area effectively is run by people that are constantly focused on their areas. What we do to end up getting the capital allocated to the best opportunities is effectively have them raise their hands when they see a big opportunity there. We're not effectively saying you did well last year.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“or two where something happens where suddenly people had been fully invested and are suddenly finding themselves more at risk than they expected. And there's a big opportunity in one or two specific deals. That's lent itself more. I think it's a much better way to allocate capital to risk arbitrage within a multi-strategy book because you can be right now, it's 15% of our book and 5% is in one deal. You couldn't conceivably have that kind of exposure if you had a merger or a book on its own.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“His ear pockets of opportunities in different businesses so there'll be a sudden deleveraging event within Merger Arb and capital isn't going to rush there. There'll be a sudden deleveraging event in some levered area of structured credit and that opportunity will be there for a longer period of time than we've seen historically. I think we need to be prepared for that and manage accordingly. As it's happened so far, the merger our business you mentioned the merger our business and how do you manage the tail risk, the merger our business used to be a business where you could be invested on a permanent basis and do just fine. It's become a business that's much more cyclical. There are times where there's a deal that breaks and it leads capital to temporarily flee the area and there's a very temporary big opportunity.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Different than that. I think it's one where, to a large extent, people are going to repatriate their capital to their own area of expertise. There's going to be a lack of liquidity or less liquidity than there has been for sure. Fed has clearly heading in a direction of trying to tighten financial conditions. I personally don't think that we're going to be heading into a period of excess liquidity for quite some time. I think the expectations that once inflation is under control, we're going to go back to the Fed as it was before, I think is less likely to be the case. I think as capital effectively gets repatriated to their individual areas, to people's areas of expertise, you're going to have less capital that flows across the borders of investment areas. I think what that leads to”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Asking a question which actually has quite interesting applications to the environment that I think we're going into right now. So if I think of the last really 13 years, and it was true before then, but less so, you've had incredible liquidity, excess liquidity that has been ubiquitous almost the entire time. You can think of pockets of times where it wasn't the case, certainly the end of 2018, maybe the first quarter of 2016, but for the most part over the last 13 years, excess liquidity has effectively found its way, I think of it, a little bit like a waterfall effect. It tends to fall into all of the cracks of the opportunity sets in our business. And so if there was an opportunity in risk garb, it tended to get arbitraged away relatively quickly. If there was an opportunity in CMBS credit, capital would find its way there. I think the environment we're going into”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“How did it do? How close to half the loss is it should be in fact less than half because a stress test will lead to more than linear losses on the downside. You can look across the book and see how different portfolio managers actually did in terms of predicting their losses. And so that's how we effectively manage the risk of the book on a monthly basis. How we take risks after a stress test event is a different situation. more frequently than not it's a function of encouraging people to take risk in spite of everyone including my own natural inclination to hunker down when an event like that's just taking place people frequently say if the price were to ever to get to this i'd load up the truck what happens when the price gets to that is they have no interest in loading up the truck and so”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Funds that broke down in 2007 or long term capital or date back to a number of situations, people will frequently talk about eight or ten standard deviation events, which clearly could never happen. And it's a function of those models breaking down. So while we do look at the statistical analysis of the portfolio to try and understand what our effectively DVO1 risks are, what our directional risks are in the portfolio to analyze our stress test loss, we assume that correlations will go to one and we'll have each of the managers go through their entire book and come up with their analysis of what they would lose in a stress test, again positioned by position. And you can test whether those predictions are accurate even in less than stress test situations. So if a market's down 10 and you're assuming a stress test of down 20,”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“The way we calculate the stress test loss is on a discrete basis. We've got statistics that model the portfolio that look at what standard deviations of loss are, et cetera. But in a big dislocation, the loss that you're going to suffer has nothing to do with the standard deviation of risk that the entire portfolio has. Your statistical analysis breaks down when you start to look at TALs. I like Emanuel Derman's quote. He used to work with me at Goldman in the equity derotive business who said that all models are wrong, but some are useful. Models are very good at predicting what will happen within one or two standard deviations of the current situation. The nature of the risk that you're taking. And you've seen that time and time again, whether it's the Bear Stearns mortgage hedge.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“The philosophy of the firm from the inception has been to, in a big dislocation, keep losses to single digits. And we literally have a stress test that goes through the equivalent of an 87 crash and assure ourselves every month by going name by name, portfolio by portfolio, how much would we lose in a huge dislocation and making sure that we've got enough hedges in place where that's the case. That's been the philosophy, not just with respect to the merger Arab distressed area, but every business we've gone into. We want to make sure that we don't lose too much money in any individual situation, but also in aggregate that even in a big dislocation across the board when correlations tend to go to one, that we're not going to be in a position where we've lost more than 10% in that situation and can be on our front foot taking.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've had a view from, it really dates back to 87, that if you are able to preserve capital really well through a big dislocation and you're on your front foot coming out of it, not only do you have the benefit of not losing a lot of money going in,”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“A big opportunity there effectively a basis trade between senior CMBS pieces of paper and the CMBX indices, it evolved from there into real estate in CMBS-related real estate in 2013-14 when we identified an opportunity that was actually really unusual where you could, by buying securities that had virtually no value in and of themselves, we paid virtually nothing for them, but they came with them rights to buy defaulting assets out of CMBS trusts. You would be the exclusive buyer of those assets. And so we ended up aggressively buying literally twenty-five percent of the entire market in those securities and built a real estate business around that opportunity set. That's been quite successful.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“The hurdle for us was always it had to be accretive to the returns. We ended up growing gradually into new businesses, some of which worked, some of which didn't work. The business that we clearly were going to evolve into was credit. We did that in 2001, 2002. There was no question that that was going to be an ongoing business for us forever. The businesses that became a little more questionable, we went into the emerging market credit business with not great success, stayed in that business for a couple of years and decided to exit it. The businesses that worked better were the credit businesses under John Jackman. He runs our North American credit business. He developed an R&BS business for us in 2007, first from the short side, and then post the great financial crisis from the long side. The CMBS business for us in 2011.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“strategy if you hedged share for share you were frequently vulnerable to the dollar spreads widening because both companies would double. So both companies double the percentage spread stays the same, the dollar spread doubles. So you needed to be more closely dollar hedged rather than share hedged, but it was a time where the spreads were very big because nobody was interested in making fifteen, twenty percent returns annually when you could make fifteen twenty percent returns in a week picking the right stock.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Started solely wrist garb. The idea was even in starting the firm that it would morph into credit. Those are the two big drivers in the risk our period. They were frequently countercyclical in that in good times you had booming M&A business in bad times you had a booming credit business. It's tended to not be quite as countercyclical with the amount of QE that we've seen over the last 13 years, but they were countercyclical businesses at the time. Riskarb at the time in mid-99 was a very big business. A lot of the drivers for the firm had been Ken's, in my view, that we were in the midst of a mania, so we wanted something that did not correlate to equity markets. Not surprisingly, most of the M&A that existed at the time were M&A between high-flying internet companies. Where it was actually fairly complicated in terms of trying to figure out the hedging.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“based on changes in contributions to the LPs and based on role. And a couple of those have led to people effectively saying thank you. In one case specifically, they literally said thank you for doing this. I've come in every day feeling like I was being overcompensated. It didn't feel good. I didn't feel like I had a future here. You found a way for me to continue to contribute at a level where I think it makes sense.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's been both, as you say, voluntary and involuntary. We had two partners, the only people that left to go to another business that just wanted their name on the door. We knew that was going to happen at some point. We've also had partners that in a couple of cases didn't work out. And we were pretty straight with them in terms of things not heading in a direction that was really going to work either for us or for them, probably leading to an area where at least for some period of time they would have significantly less capital to work with until they effectively rebuilt their ability to demonstrate that their commercial instincts were still there and they could still deliver for the firm. In most of those cases, the partners decided to just move on and find something else. It's been relatively smooth, even when we've had those difficult conversations. We've also had conversations where we took someone's percentage down.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Another firm goes out and tries to hire someone, they can offer them economics but not partnership or if it is partnership it's a small sliver of the economics that's left. In our case we can talk to people about partnership and a significant partnership percentage if they end up driving a significant percentage of the economics. And so it's enabled us to go out and hire top talent as well.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“We haven't had trouble on the retention side paying people equitably. Equitably doesn't mean that you pay everybody the same. You clearly have stars within the organization that have become partners and become significant partners because neither Ken nor I, really right from the start, took as much as 20% of the economics. There was a large percentage of economics available for the people that really drove the profitability. In addition, they knew that when Ken and I eventually retired, our economic stakes would go to zero and they would effectively inherit the firm. And so the significant drivers of the economics have stayed. We have 14 partners today. The average tenure of the partners over 15 years at Taconic, the average experience over twenty years, we've been able to keep the stars that we had. We've also been able to attract stars with the same logic.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Curious what you found over the years with talent attraction and retention when some of your competitors at least will take the star and pay them as if they're a soul star, that way you kill type model. How is that played through in that original concept of who you can have around Ken and U originally as partners over the last 20-something years?”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you were sitting next to someone and you were getting paid purely as an eat what you kill system, you not only have no interest in whether or not the guy is sitting next to you makes money, you actually want them to do poorly because if they do poorly, you get more of the capital and you will be able to profit more from the results. And so one of the aspects of it that we talked through was to the extent that people helped each other out with the investment side, that would be one of the factors in their compensation and vice versa if they were perceived as being purely working for themselves and not helping out. That was going to be detrimental to their content.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“A lot of it was a function of just trying to think through how to align the decision making for not just the investment professionals, but anyone in the organization with how a limited partner would want that decision to get made. So one of the early ones was not to have an eat what you kill system. We didn't want people to be compensated based on the upside with obviously no direct consequences on the downside. And so to the extent that people took a lot of risk, that was factored into the ultimate P&L. The quality of the P&L really mattered. The quality of the decision making mattered. There were times where someone was going to make very good decisions that happened not to work out and vice versa. We were very clear about the subjective compensation structure that we had in place. It was also much better from a teamwork standpoint.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's developed over time the most important concern we had at the time because right as we were starting the firm Goldman Sachs was preparing to go public, it occurred to us that much as we would want the firm to be in its private form like a Goldman Sachs forever, that the next generation may have a different view, we wanted to try and set up the firm in a way that it would remain a private partnership and remain effectively aligned with the limited partners the same way Goldman Sachs Riskarb area was aligned with the Goldman Sachs partners. So we put in a clause which has been referred to by one of our investors as the anti-Goldman clause where if the firm ends up either going public or selling at some point down the road, 30% of the economics effectively gets carved out and goes to Ken's and my foundation. So the intent wasn't for us”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Change our lifestyles one iota. And on the other hand, if we create a firm where we distribute the economics pretty broadly amongst all the partners, we'll be able to attract and retain a level of talent that we won't be able to do in a firm where we take most of the economics. We'll also walk in every day, not just with a quality of individual that's higher, but with a real feeling of a partnership because it will be. It'll really be a true partnership in the sense of distributing the economics fairly. That'll change our lifestyles dramatically every day. And he bought in, and that's the direction we went.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we had an interesting conversation in late 98 in deciding to start the firm where he said, you know, if we do this right and we create an entity that has some permanence to it, I think we could either sell or take the firm public and make ourselves a pot of gold in five or ten years. And I came back to him the next day. I said, completely think that you're right and want to go in a totally different direction. And he looked at me bizarrely and said, why and what do you want to do? And I said, well, neither one of us has a huge lifestyle. We both have enough money that we could get by from here easily. We're not going to be suffering. If we end up with a pot of gold in 10 years, what are we going to do with it? We're not necessarily going to live any differently. We could give it to our kids, probably ruin them. We could give the money away, so could our partners. It's not really going to change.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was Ken Brody, my partner in business who I started with in'99, who convinced me, and effectively he drew me in slowly. Initially, it was as an advisor, and then it was a day a week, and it turned into three days a week, and pretty soon it was full time. I was chair of a hospital at the time in the first couple of years that Taconic started, and that was pretty close to a full-time job. And so effectively, those first couple of years, it was juggling the two. is the role of chair of the hospital took less time to conick became a more full-time thing.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Strangely, I thought of it effectively as a career in reverse, retiring and spending time with your family when they wanted to spend time with you with a view that I'd eventually go back into work and potentially try and find something that I would do forever. The number of people that said, geez, that's a great decision. I wish I could do that, but you'd see the decisions that they made and they had the ability to do it, just not the inclination. It was unusual to say the least.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“I used to see memos go across my desk of people that were in their late 50s, 60s who had decided to retire from Goldman to go spend time with their family, only to learn that they were divorced. Their family didn't really want to spend time with them. Their kids were grown up. They'd gone away. The idea of leaving to spend time with your family when you've got boys ages eight to one had far more appeal to me. And so I did that for four and a half years.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Run the National Economic Council. Bob took it. And that role became a much less interesting role over the course of the next year or so. I ended up moving from there to run oil trading in 1994. I worked for Mark Winkelman. And Mark was spectacular. I would have enjoyed working with Mark the same way that I enjoyed working with Bob. Unfortunately, at the end of 94, he ended up effectively losing a political battle to run the firm and left at the end of that year. And when he left, I decided to leave with him. I had four boys at the time. They were a range of ages eight to one. They were at ages where they all wanted to spend time with me. I knew with 100% certainty that that would not always be the case. And so if there were ever a time where I'd spend a couple of years with them, this was it.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“So he asked me to actually be part of the strategic center of the firm in 92. It was at the time that Clinton was getting elected and there were rumors about him potentially being part of the administration. So when he did that, I asked him, a lot of it depends on you, really. And he said, well, we have to make the decision with respect to the role now. So you have to decide one way or the other. So let me just let you know where it stands. They've picked Lloyd Benson to be the Treasury Secretary. And the only other job that I'd really want is the head of the National Economic Council. And they've picked Bob Reich to do that. So the odds of my joining the administration at this point are close to zero, which reminds me of the 99% odds that I put on me going to business school because I took that job and within a month, someone had decided that Robert Reich was really not the person.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Me, and I thought he was going to give me a pat in the back. And instead what he said was, why did you do that? And I thought, do what? I thought that went pretty well. And he said it did go well. But you've been to the management committee a dozen times talking about risk in the risk-arb area. This was Zach's first opportunity to do that. He knew it just as well as you, if not better. You took that opportunity away from him. And I thought, what a great lesson from a management perspective. He was really quite spectacular about thinking not just about the risks involved, not just about the commercial aspects of our business, but also the people development aspects of our business.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we had to approach it totally differently and brought in someone who'd actually worked with Fisher, Zachabrenick, brilliant mathematical mind, who devised a way to effectively map the warrant universe from a cheapness standpoint in ways that you could constantly have a basket of warrants and then hedged it very differently than Black Schoals valuation would, but hedged it based on the way that they traded. We went to the management committee to propose that to them and we laid out what the expected P&L would be and also what the volatility of that P&L would be. And it was actually quite volatile. It was like $65 million P&L plus or minus 50. So the risk of losing a substantial amount of money was clearly there. I gave the presentation. It went extremely well. The management committee approved it. Bob Rubin walked out with both Zach.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Anecdote with respect to Bob, which was a couple of years later in 1989, we started a business called Japanese Warrants. And that was a business that I got very interested in because we were looking at the implied volatility of the warrants as they were trading in Japan. It was actually Fisher Black who brought it to my attention and he and I talked about that opportunity. It looked like you could create a basket of warrants that could effectively replicate the NICA, but much, much cheaper, sell the Nikkei against and have an enormous volatility arbitrage by doing that. Eric Minich and I actually put together a little basket of warrants and hedged it with futures. It was a P&L where we didn't think the volatility would lead to P&Ls of much more than plus or minus half million over the course of a month. It ended up being much more.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of my mouth, and he said, Well, I just want you to know we just met as a management committee. We've got 100% confidence in you guys. And if you guys want to go double your positions, go ahead and do that and walked away. At that point, as long as Bob was there, I was never going to leave because to show that kind of confidence in us at that moment in time and effectively back us at a time where we really needed it was a difference maker. And it made a very large difference as well in terms of our approach to decision making from there. We felt like as long as we made decisions with the firm's interest at heart, the firm was going to have our back and as a result we ended up having a record year in 88 by a lot and were off to the races and we were able to take advantage of the opportunities that others really weren't. I should give you one other answer.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was forty million and $40 million to the partners was a very large loss. We were hearing stories of other areas getting shut down, risk getting cut in half in a number of cases, people that had been running the areas for 10, 15 years were effectively de-risked dramatically. So we were nervous the day after the crash talking amongst ourselves in terms of what do we do from here? What do you think the firm's going to do to us? How is this going to all play out? And as we were going through our positions, Bob Rubin came down to the floor and came up behind me and I saw the ashen looks on the people in the meeting in front of me and turned around and Bob looked at me and said, I hear you guys lost a little money yesterday, half jokingly, but not really. I said, yeah, we did. That was about all I got out of.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“The one that stands out above all others was the crash of eighty seven. I'd started running the area in early 87. Bob had moved on, co-running fixed income, but on his way to co-running the firm. And so by the time the crash hit in October, we had only been under my leadership for eight months. I was barely 30, not yet a partner there. And we managed to lose the largest amount of money Goldman's Risk Arb area had ever lost on that day. It was in percentage terms not terrible. We were quite defensive, quite concerned actually, going into the crash, whereas I think a lot of firms were down 35, 40 percent that day. A number of firms closed shop literally that day. We came into about 70% cash. We were down four. We had a number of hedges in place, so not unreasonable, but four percent of a billion.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's a combination of two things. Bob's philosophy was one of uncertainty. He wrote a book on it where you couldn't know things for sure. You had to know what could go wrong. You had to estimate the probability of that thing going wrong. And effectively, being humble about your confidence level in ultimate outcomes. It wasn't other people's money. And that drove a very different philosophy with respect to the risk-taking mentality of that group than if we had been only paid on the upside.”
2022-11-21 · Capital Allocators · Frank Brosens – Culture and Partnership at Taconic Capital (Capital Allocators, EP.282) · IDENTIFIED FROM THE TRANSCRIPT · source