YouSaid · the spoken record

Jeffrey Solomon

lines on the record: 75
first: 2017-05-30
most recent: 2017-05-30
sittings or episodes: 1
sources: podcast

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“Yeah, in fact, Michael Mobison just did a piece where he showed that they measured effectively the difference between time weighted and dollar-weighted returns. So they measured, I think he called it the behavioral cost or something like that. And it was higher than the fee difference between active manager by a factor of two questions. It was something like 120 or 140 basis points a year that investors caused themselves friction in the same index. Just by going in and out the wrong times.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Indices If you actually look at funds flows into ETFs, people are still doing the same thing they were always doing, which is crowding into peaks and selling at valleys. And so when you look at it, if you just do an adjustment for the performance in passive product, just take the S&P and look at when people entered and exited as a proxy, look at volumes as a proxy for when people entered and exited, they actually haven't gotten the returns. They've underperformed Active Managers tremendously.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there'll be a lot of money that gets made by patient capital, people who are sitting on cash will have their day and they will get an opportunity to pick and choose the time when they want to enter the market. And there you're going to get a significant amount of market outperformance. I'll also say this. Someone had showed me a stat, which I'll see if I can find for you, but I think you'll find this interesting because it would have been relevant to you in your bet with Mr. Buffett. It's all well and good to say I'm picking a starting point and an ending point on an investment, a decade. Nobody does that because life gets in the way, or emotions get in the way. I don't think I have anything in my portfolio today that I had in my portfolio 10 years ago. Really? If I do, it's, I don't know, I've forgotten about it, right? And very few investors really do, it turns out. So even though we've had this great move in...”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you need to carry more cash as an active manager. I just, you're going to definitely underperform in upward bull markets. But if investors are smart about this, what they'll do is they'll recognize that over a cycle, there's going to be an opportunity for you to buy things at distressed prices or at stressed prices. I do believe active management is not going away. It's going to be smaller as a percentage of the overall market, though active management today, there's more assets in active management today than there ever has been. Sure. It's not that active management has gotten smaller. It's just gotten smaller as a percentage of the overall market.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that will likely happen when all of the individuals make a decision to take risk off the table. And they can do it, I mean, really easily today. It's a click of a button or touch your iPad and you liquidate your ETF in the middle of the day. And we will see index vault a spike at some point in my life. I'm 100% sure. And when it does, we don't quite yet know how far that will go because we just don't know how deep people are going to de-risk. And when they do, they're going to sell everything.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think it's changed investing. So, you know, if you were an investor in the 90s or the 2000s or the 80s, the strategies that you pursued in order to achieve alpha may not be working the way that they were working before we had a significant portion of the market and passive product. So we're getting to the point now where passive product is so dominant that you have to begin to try to figure out how to model in the presence of significant passive players. Up until now, it's been a relatively low ball environment, you know, because money has been coming in and coming in pretty consistently and people are buying index product. That means everything in the index goes up. If I know anything about math, I know if you can have 10 vol, you could have thirty vault or forty vol. It's just sort of every day you spend a ten, you should be really thinking in your own head and in normal distribution curve, you could really have a tail at the other end.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like the active, passive debate today. You have an SP 500 that's had a big run, hedge funds for sure haven't really delivered what investors may have expected, but there is this dynamic that they're not supposed to keep up with the roaring bull market, certainly since 09. I know you guys have done some work on it. How do you think about where we stand and active and passive and what's your view?”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so we didn't really raise a lot of money until things broke. We actually took some money in from Bank Austria as a strategic investor and sold 25% of the firm to them. And they gave us a bunch of money to manage in that conservative style. And then by the middle to the end of 2000, people are like, okay, okay, okay, I need to actually focus on long-term wealth creation through consistent returns. Boom. Let's talk to Ramius.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like tremendously, so I think from 98 after that until 2000, we actually had a tough time raising money, not because of our performance, but because if you remember, 98 to 2000, everybody was getting along internet stocks and the tech bubble. So people thought it was their God-given right to achieve sort of 25 or 30 percent returns on their equity investments. We're like trying to tell them 500 over the risk-free rate over the long haul is better than the long-term return on equities with a volatility that's a fraction of equities, right? If the S&P vault was 14, we were like, hey, we're two, a two vol. Monthly. Standard deviation. Pretty high bar, actually. And at the time, we actually had interest rates or short-term rates close, you know, not near zero. And so, you know, you're talking about high single digit returns to actually low double digit returns in around 10%, which seems pretty good. It just was hard to convince people that they should not invest in portfolios of internet stocks.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we actually had some insight around long term capital because of Tom Strauss and his relationship with John Merriweather. So all of those guys worked for Tom. So we had a pretty good idea of what was going on there. I don't think we fully appreciated the knock-on effect. This is really the precursor to Too Big to Fail. I mean, all the firms had to get around the table and figure out how to work out a very large, highly levered quant-oriented fund. Sound familiar? I mean, it's, you know, the older I get, the more I see things through a similar lens. It's just sometimes bigger.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today, everyone talks about behavioral finance, and it's well understood. In 98, you experienced it, but you probably didn't have the term to say, oh, I must be suffering from risk aversion or whatever it was. How did it feel going through it where things are just wacky? You'd never seen it before. Merger deals are breaking because the Thai bots doing whatever. You probably didn't know in the moment that long-term capital. Well, so we actually had some insight around long-term”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“I say up until 98. 98 was a tough time. It was the first time I really got to see how correlation worked in real life. We talked about it mathematically in times of stress things correlate, but I'd never seen parts of our portfolio that had nothing to do with the Thai bot, you know, almost converge in terms of their performance. And fortunately for us, we've never really been a big user of leverage. So we've definitely lived through periods of stress and pricing, but we've recognized that as long as you're not leveraged and forced out of the trade at an inopportune time, you can last a long time. So a lot of our strategies are still very much alive and well. They may be smaller, they may be larger, but they're still here. And in large part, because we're just conservative with the way we think about that.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was in'95, almost right afterwards. So Ramius, now Callan Investment Management, is or was at that point was simply on its way to being a multi-strategy and a multi-manager shop that then would seed strategies and grow them. And the difference between us and a number of other firms is we actually raised money for the GP from friends and family and strategic investigators so that we could further incubate strategies with our own capital base, which is something we still do today at Cowen.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, although I think it's much harder for people to launch funds today than it was in the salad days. But yeah, no, $100 million we thought was a lot. We could cover all of our overhead with management fee. We were almost always a one in 20 shop for the most part. And then we added a fund to funds capability when Tom Strauss joined and Morgan Stark joined. We added a fund to funds capability. What was that?”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Back then. $100 million? Yeah. We thought if we could get to the $100 million, that would be great. It was. I mean, we got to our first hundred probably within a few years.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“And do them for investors. And if you think about the way the hedge fund business evolved, it evolved from people who were on the prop desks, you know, Goldman Sachs, Lehman Brothers, all these different places in the 80s, and they spun out and started their own firms largely managing money for the partners of those firms. And we sort of took a bit of a different tack and we said, listen, we know how we made all this money at Sheerson and all these strategies. Can we import those people to come and build those businesses for investors that Peter had relationships with? And that was really the genesis for starting Ramius in 1994, was to build out a business that was basically enabling investors, high net worth investors, to access strategies that heretofore had been only the purview of investment banks.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was interesting. I got to do something at Sheerson that was pretty unique in retrospect. I didn't know at the time. We were going to do a public offering at Sheerson. We were already public, but we were going to raise more capital in 1990. And so I got to actually draft the S1 for the follow-on offering and raise additional capital. And in the course of doing that, I got to see all these different businesses that Shearson was in because I drafted the S1. I would literally walk around from department to department and write down what is private placements being, what are convertible bonds, what is inequities trader do, and what do volumes mean. And what I learned is that there were all these little businesses that we had inside Sheerson that made a lot of money. They were unique, like merger, arbitrage, and event business, like securities lending business, like all these things that are really interesting businesses that were really the purview of Wall Street at that time. And what we've been able to do at Ramius when we started that in 94 is essentially take a number of those businesses that were really profitable inside investment banks in the 80s.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess, can I go on auditions whenever I want? He's like, Yeah. And so out of that actually became the foundation of an amazing partnership. You know, Peter Cohen and I have been working together for 28 years through ups and downs and sideways, as I've told people. He's enabled me to never change firms. I've changed the firm. That's a really interesting thing. And I look back on the last 30 years of my career. I'm like, wow, I actually never quit anywhere. I got to the end of my program at Sheerson and I went to work for Peter. The acting thing I decided just wasn't to my, I didn't want to be a professional actor. It turned out that I just didn't like it that much. And what I was doing with Peter was really exciting, building businesses. And so that became really my career. And the partnership has been fantastic.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“After I was done, I quit to work to go to work acting. I was pitching Peter Cohen an investment idea. And Peter Cohen at the time had just left Sheerson and was trying to figure out the next chapter of his life. And in the middle of the pitch, he asked me, what are you doing with yourself? And I'm like, well, I'm leaving and I'm going to be an actor. And he's like, what? And I'm like, yeah. I mean, that's my life plan at the age of 24. And he said, well, why don't you like can you do the acting thing and come work for me and help me look at deals and opportunities and ideas? And I'm like.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“I came here to be an actor, actually. I did. Really? I did. Yeah, I was at the University of Pennsylvania, did a lot of theater as an undergrad, and I really wanted to come to New York with a lot of my friends who were going to be working on Broadway. I decided, though, that the acting thing was sort of risky, wasn't sure that I would exactly be able to make it. And I thought I needed a critical skill in case it didn't all work out. So I got a job on Wall Street just for two years, make a little bit of money, put it away, so that if the acting thing didn't really work out for me, I'd A, have money, and B, I'd have skill. I did it. I actually worked on Wall Street for two years as an investment banking analyst at Sheerson Lehman.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“And news dealers like Ryan Shazir and Antonio Brown and Cam Hayward, and their fans of each other, and they root for each other that penguins actually had a game scheduled. During a Steeler playoff game earlier this year, regular season game, and they moved the game back three hours and opened up the stadium for all penguins season ticket holders to come watch the Steelers play at PPG Arena and they moved the game because they knew that the rest of the city is like really preoccupied with the Steelers in the playoffs and why do that to them and it's That is like amazing interaction from professional sports athletes who feel an affinity for the community in which they live. And so I've always, I don't want to make more of it than it is, but I believe that, you know, sports teams can represent.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“But actually, no, my parents went to the same high school that my wife and I did, and the same one that your mom did, Aldridge High School. Listen, Pittsburgh is an amazing town that is filled with so much energy. And Pittsburgh's have been down and out more times than we can mention. We always seem to come back. And we do it because we work super hard at whatever it is that we do. And we feel like our sports teams are a huge representative of who we are as people. So, you know, talk to me or talk to anybody who grew up in Pittsburgh, especially in the 70s when the Steelers were in their heyday the first time. And it is a resilient bunch of folks who totally identify their personas with the sports teams. And by the way, I love how the sports teams in Pittsburgh root for each other. So, you know, I was at a Penguins game last year during the Stanley Cup final, and I ran into like three or four steelers there. You know, and old Steelers like Franco Harris.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just to be clear, your mom went to high school with my parents, for those listening, like I didn't go to high school with your mother.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“And empathy. Our conversation starts with a passionate description of Pittsburgh sports and flows to how active managers succeeded in the nineteen nineties and need to evolve to succeed today. We discussed the importance of empathy in the investment business and touch on how Jeff's summer camp experience as a kid informs how he manages people today. His answers to my closing questions are just amazing. If you're short on time, fast forward to the 45th minute of the show. You'll miss plenty along the way, but you won't want to miss these. Please enjoy my conversation with Jeff Solomon. Jeff, thanks for joining me. Good to be here, Ted. When I walked into your office for the first time, all I saw around the walls was paraphernalia from Pittsburgh sports teams.”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Jeffrey Solomon, the president of Cowen Group, ticker COWN, a publicly listed financial services company that supports and provides active management to the marketplace. After graduating from the University of Pennsylvania in 1988, Jeff deferred an acting career with a brief respite on Wall Street, but he hasn't looked back since. In 1994, he joined Peter Cohen, then the former head of investment bankerson-Lehman Brothers, to form money management firm Ramius Advisors. Following the merger, Jeff switched over to the investment banking side of the business and today serves as its CEO, where he embodies the firm's core values of vision, tenacity,”
2017-05-30 · Capital Allocators · Jeffrey Solomon – Vision, Tenacity, and Empathy (Capital Allocators, EP.09) · IDENTIFIED FROM THE TRANSCRIPT · source