YouSaid · the spoken record

Khe Hy

lines on the record: 106
first: 2017-04-04
most recent: 2017-04-04
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

“Just coming out of me. And like five people would read it, seven my parents, a few friends. I didn't even have the confidence to link from my newsletter to some of the things that I was writing. So it was almost like I was writing it to not have it be discovered. But it felt good. And then little by little, you know, mostly like in my finance circle, people would find it. And they would consistently come up to me and say, I don't know what you're doing, but you are writing about things that I have thought about my entire life or career that no one has ever put on paper. And it was really around three things. It was around fear. It was around ego. And kind of the mutant child of the two of them, mortality.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“And this is confusing, and I feel like I'm disappointing a lot of people. I'm scared of the responsibilities. I've got quote unquote two years to figure this out. I'm scared of the responsibilities of a family, my identity. I remember this moment when I went to a conference and they asked the woman to ask me, what's your company name? And I didn't have one. And my heart sunk. But I just made one up. Like K-Holdings, which are my initials. But it really, you don't appreciate how, you know, when you equate achievement with happiness and in that achievement comes identity, you pull identity out of it. You pull happiness out of it potentially. And so it's just like grappling with all that stuff. And I just started writing about it. I mean, it was like.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“And, you know, like the internet's a very public place, say, two guys recording a podcast, but especially in finance where you're just told to be like closed off, don't show emotion, like wear the mask and all that stuff. And so I was hiding behind that, but I could tell that people were really gravitating towards like even my little commentary. And I just kind of hit this point where I said, fuck it. I'm going to stop hiding and I'm just going to write what I'm feeling about. And I just started to like write and it just came out of me about. Basically, My LinkedIn might look great, but I don't know what the fuck I'm doing.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because I basically gave myself permission to try whatever I wanted, but I needed to have had that conversation with myself. And that's the big turning point. I haven't actually verbalized that before. So that would be one major turning point. But again, nothing happened off of that. But I think it opened these kind of like creative and emotional, positively emotional floodgates. So January 16th starts. I've given myself permission. And I just started to write. And what was happening was in my email newsletter, I was hiding behind curation to share my ideas. And I didn't have the courage to share my ideas. So instead, what I would do is X says that manage your ego. And then I say, I really agree with X.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it was a really difficult conversation. I mean, think about loss aversion there. Think about you built your entire life around getting that thing and you got it or you were on the path and then you just say, I don't want to use those skills anymore. And I guess throw them out. And I just say right now because I just don't know how to predict the future. It was so liberating.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“As you know, with your podcast consistency and probably many things in your life. So I'm doing this newsletter. I have a WeWork space. This is January of 2016. There were a few little things I dabbled in. Actually, there was one very important thing that happened at the end of 2015. And this will really resonate with your readers. And it's an insignificant event to most people, but I think you'll get it. Some point in late 2015, I had loosely explored the concept of doing a venture fund because that's what I should be doing. You like finance, you like tech, like go do fintech. But I had this conversation with myself where I said, you know what? I don't want to do finance.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so we were talking about I left, come back from the trip. I have this email newsletter really simple, just link blogging, five links with a little bit of perspective that I added. And people thought it was cool, a couple hundred people subscribed to it. And that was the one common narrative of this entire journey was the consistency. And you talk to a lot of entrepreneurs and investor. The one recurring thing is consistency is just, I don't want to call it a superpower because it's pretty simple, but it's an underappreciated virtue.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Often, but it's that comparison. If you measure the minutes of joy that are brought in a surfer's lifetime, it's probably 1% of their lifetime, but it defines their happiness for an entire. And so skateboarding had that kind of combination of culture, culture slash counterculture, the Gladwellian notion of 10,000 hours and creativity within constraints.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“So skate culture is creative within constraints, which was, that works well for me because I'm not, my wife's an artist. She's the creative. I need constraints and I could create. That's why I'm really good at Snapchat. It's like creativity within very high constraints. There is an element of thumbing your nose at the establishment to it. There's a real element of fashion in it. It's like fashion trendsetting even back in the 80s. But you'll like this part. It's the ultimate 10,000 hours sport because you do the same trick over and over and over and over with no reward. And then one year later, you can all over trash can. And two years later you can land a kick flip. I do surf to it.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“You're a father. There was a newsletter. There once was a newsletter. And it's a crazy thing to say that an email newsletter could really throw off all of these out of, not even left field, out of Mars occurrences for me. But then I'll return to that. The only work with air quotes that I did while I was gone, I had started this email newsletter called Rad Reads. And the reason why it's called Rad Reads is I had said to myself, if I ever start a company as an homage to skate culture, I want to use the word Rad. And I want to say it as often as I can in business settings because that will really make me happy. Because I just be reminded of this culture that I grew up in and I really admire. And so this is a little. Can we pause for one second?”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Thinking that I had created this elaborate machine of achievement. And once that achievement had hit, happiness would just start raining, you know, like from the heavens. And that was the biggest shift, the combination of like giving myself that space.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, I was an afraid child. And that was the biggest revelation from it, it wasn't necessarily the trip, but the coaching work planted the seed and the trip gave the space for it to really kind of flush out in my head. But the afraid child that I was when I was nine, 10, 11 years old, like I grew up in New York City, I had been mugged three times. There was no girl would ever date me. I was 130 pounds when I got to college. That stuff had really started to build up. But in my 20s, I learned all these defense mechanisms. It's like, okay, I'm 130 pounds. If I take creatine and do tons of burpees, I'll weigh 165. It's like, okay, that works. And it's like, oh, if I read white papers when everyone else is going to a bar, I'll make more money. Oh, that works. And so I had kind of tricked myself in.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's like you're a piece of shit and you don't deserve this. You have to work harder. You're always on the cusp of losing it all. And I thought that that was the way to motivate myself. And so I think when I talk about emotional burnout, you do that for 35 years and you don't share it with anyone. And on the outside, like people are like, oh, things are great for you. You stud, yeah. Yeah. Like you should be like the happiest person on the planet, a 31-year-old MD. But I didn't realize the tax that that was putting on me. And to be even more, more direct is like, I was just scared. I was just afraid.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the biggest realization that I had was that I was always living for tomorrow. My whole life. And I had set up such an efficient machine of learning, of investing, of relationship building. And it all came from a good place. I wasn't building relationships to transact on them. But it was so focused on achievement. And I had equated happiness with achievement. And I had tried to push that out as far as possible to have bigger achievement, hence bigger happiness. But deep inside I was tremendously unsettled. You know, nothing bad, but I was anxious. I was envious. I was judging. I was entitled. I think the thing that really hits home with people is that my inner monologue, my self-talk, was very, very vindictive. And so the way I Would talk to myself in my head was basically like you're like, can you curse?”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I was like, oh, high performers can have coaches? Cool. I'll get one. And so I had started to see a life coach. And she just, I mean, she cracked me open.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say my health, but almost like my emotional health, and meaning that I wasn't physically burnt out. I didn't think I was, but I was a little bit emotionally burnt out. And what I was starting to realize was that I had never, my entire life was a sprint. And I just cranked and worked and exercised. I did everything so intensely without really questioning why I was doing it. And I started to just see little strands that there might be more to my behavior than just being a high achieving person. And I really started to explore that. And the big change was almost, and I approached it from a performance perspective. A lot of my entrepreneur friends had executive coaches and life coaches.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's pretty daunting. But it was just a magical time. And I would add one thing, though, before we left. It was a month before we left on that trip between quitting and leaving, going on the trip, I decided to really start to invest in.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Three and a half months. Although the last month was in LA because we thought about maybe moving there. And so we did that and it was one of the most, it was difficult. I mean, traveling with a one-year-old on, I think she'd been on 22 flights on that trip is pretty.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“We left. This was May of 2015. My daughter was one, and I had set up my life knowing I had made the decision to leave a year prior. So I had set up my life in the sense that we had no dad. And we had savings. I had kind of earmarked. I did the whole take a chunk of money, put it in a different account, pay yourself a salary monthly to give yourself that peace of mind. So we didn't have any assets, any debt. And we bought a one-way ticket and we went to Bali. We did a family eat pray love with my wife and my one-year-old. And we kind of got off the grid, did a lot of exercise surfing, just chilled out and kind of very spontaneously decided where we would go next. And we'd kind of like open the map and see where there were cheap flights and went. We ended up going to seven different countries for.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's vacation. And so it was actually very hard for me because I'm extremely hardworking and for people to keep pointing their finger at me and say you're on vacation. You're on vacation. I'm not on vacation. Do you know that Twitter started as a podcasting company and became, and Slack started as a gaming company? That's not a sexy media story. And no one really wants to believe that. And I really was insecure about that for a while being in that in-between phase, but we're jumping for it a little. But that was the process of me leaving. And just a lot of head scratching. I think people, especially when we talk about what I did after, but people just were just really confused.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the biggest thing was why would you not try to start something while you have the job? And that was kind of the prevailing narrative or reaction. And I had an answer to that question. My answer was, I tried. I tried for probably two years waking up at 4 a.m. writing business plans and trying to start companies and try different ideas. The reality is, and this is something that I talk a lot with with my finance friends still because they don't understand, it's a very linear way of thinking in a lot of ways and they don't understand that the creativity. In their mind, this is a lot of peers, not everyone, but there's two states of the world. You're working on something or you're on vacation. And this kind of in-between area of creativity, of learning, of self-discovery, of experimentation.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's why he's been obsessing about China when it has nothing to do with, you know, so people who really knew me, they didn't agree, but they kind of saw how it could fit. And then there's just a lot of just general like.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. Yeah, yeah, good question. No, I was terrified to call the founder of the firm, not of BlackRock, but of my group and the CIO. But again, he's a special individual. And at first he was a little skeptical because I also, what you didn't mention is I had nothing lined up. And so I told people, I'm quitting and I have nothing lined up. I don't even have a kernel of an idea. And 90% of the people thought that that was my way of saying that I was going to a competitor and that I would just disappear and then pop up, you know. Park Avenue. But my CIO is just a kind and cerebral guy who knew me. If you knew me, it would all start to make sense. Like, that's why he was always talking about Bitcoin and investing committee meetings, you know, or, you know, that's why there are things that start.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“This zero sum game was everywhere. And it just, I kind of hit a point in my life. I think it's just a personal maturity that I just didn't want to live in a zero-sum game environment. And I actually believed, I didn't know, I couldn't verbalize it as well as I can now, but I believe that there was a way that you could create businesses, create cultures around the concept of rising tide lifts all boats.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“So inhumane, and I actually think it's bad business because it just shows corporate insecurity that you're so tied to this one person that you need to humiliate them and show And then what happens in tech? When that happens in tech, the CEO writes this florally blog post that's like, we're so happy that so-and-so dedicated so much time. These were all the innovations that were attributed to them. While we're really sad that they're going to go, we're going to throw a party for them. And we hope that we encourage you all to stay friends. And then, so then what happens? Two years later, the person who leaves is at a different company. No one cares anymore. Then they become a potential client. Then they mentor someone and they're like, oh, don't work for that company. They humiliated me the day I walked out of the door. And it's just, I think it's just the wrong way to do business. And you kept seeing that everywhere. This is premise. Like if I buy a stock and you sell a stock, one of us makes money, one of us loses money. It actually doesn't work that way.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“My personal interests. Or can I add one thing though? Yes. Before we accelerate. The other thing, and this is kind of captured in the story of, I guess, my life at this point, was that finance is a very zero-sum game. I win you lose. And that was the prevailing mindset in the industry. So the example that I always use to exemplify the scarcity thinking is someone leaves, star analyst leaves to go to a competitor. What happens? And a lot of your non-finance listeners will really be surprised to hear this. So you announce you're leaving and then HR calls, I guess, security. And the black guard was like this big bald guy. And they come in and they open your desk. And within two hours, you're out of the building. And you're locked out of your email. And it's just, it's so humiliating. It's so...”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“I was kind of forcing myself to switch from an I to a T through hobbies, but I hit this point where I said, I want to do that for work. Why should I just do that with the evenings and the mornings and the weekends? Like, why can't that be my whole life? Does that answer the question?”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Versus T means. So I means you are a specialist. And by knowing more than everyone else in your field of specialization, you become an expert and you're able to collect excess rents personally or from your company. A T is more like a CEO. The CEO he might have a vision about the product or the future. Like there are going to be driverless cars. But to execute on that vision, he or she needs to A, understand the self-driving car technology, like product, B, be a really good recruiter. So just empathy and compassion. C needs to understand marketing and branding and digital. D needs to understand operations. E needs to be a charismatic salesperson. And I could go on and on and on.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“FinTech data sets, but it was still one basis point. And so, you know, there's this kind of concept of being an I-shaped individual or a T-shaped individual. I spent my whole life becoming an I-shaped individual, deeply, deeply specialized, and I collected excess rents from doing that. But it was very empty. And so it was intellectually empty. So that was the second thing was I started to just feel like this intellectual emptiness and every year I would try to disrupt myself with air quotes just to stay fresh. And so I just learn, I immerse myself in a new field just to learn about it. It was like startups was one year and Bitcoin was in another year and high frequency trading was another year and energy markets was another year. And I was just having so much fun doing them. But as I started to get further off the reservation from my eye specialization, I really realized.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“But it was more just a comment on the middlemen and the disintermediation of middlemen. And so I guess I always had that in the back of my head that economics just didn't make sense. And this is when things were returning well, where the returns were good for everyone. But what really started to happen was a few things. One, I was really, really specialized. So the world of invest, the world is a huge place. The world of investing is a huge place. And here you have K who's reasonably smart guy that is really, really good at one basis points worth of the entire investing landscape. And I kind of hit me. It's like, yes. And I did a lot with that one basis point. I went from high frequency trading to...”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“For those of you, I mean, everyone's listening, Patrick has quite a smirk as he asks that entire question. Okay, where to begin? I was one of the youngest MDs at BlackRock at 31. And I think it was a combination of luck and hard work. Mostly, I got a lot of battlefield promotes around that 2008 period, which might be why I felt so alive to your earlier question. You feel alive when you get promoted. I had been doing this, or here's a, I'm going to cheat a little on the answer. When I joined the fund to fund industry in 2003, I told one of my friends, I don't think this industry is going to exist in 10 years. I knew nothing.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“By definition, you can have skin in the game in all the things that you're adding. And so I think that is always going to be the kind of principal agent challenge with growth. And so I think for budding entrepreneurs, I think that there's an opportunity in specialization. There's an opportunity in staying small in many regards, like capacity incentives, and things like that. And again, it goes back to the Do you want a jet or do you find this fun? And for those who want jets, you need to raise a lot of money. And that's fine. I mean, that's capitalism and incentives drive innovation. I'm not knocking that. But I think as someone that's choosing to get into these products, I think that's a legitimate diligence question. Do you want a jet?”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Fixed income rates, it's just pushing capital into these fringier or alternative asset classes. So size, and I think the measurement periods where, again, as fund of funds were a derivative of hedge funds, obviously, but the monthly reporting cycle is just so bizarre and just, I don't know, I think it's wrong, even for liquid equities. And I think that that has such a trickle-down effect all the way down to the capital that you're optimizing for the wrong thing. But not only that, you're actually injecting by claiming to try to manage volatility, you're actually injecting more volatility into the strategy. And so that would be the second thing is the actual window of measurement. And the third is... Incentives. I think that”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“What was right about it is that highly specialized understanding of specific markets combined with depth of relationship, technology is never going to replace that. It might even become a tool for some of that. And so I think that that is a skill that no amount of technology and transparency can take away access and relationships, like meaningful relationships and specializations. So I think that that worked well. I think that what didn't work was just too much capital. And I don't think that that's a fun to fun thing specifically. There's just so much capital chasing, not a lot of return with low”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Every single day you were teaching yourself about short selling, and it was just, I think that's what I loved about the fund of funds industry was that there was infinite breadth potential, especially because things were changing so fast, but just the vast number of strategies that existed. And so 2008, which was terrifying in terms of the stability of the global system. I don't know. I guess, and that can segue later to some of the things I'm doing now, but it was kind of cool to be living through that. And yes, I was nervous, but I was also very aware of things that I couldn't control and things that I could control. And being able to separate those two made for a little bit clearer thinking on what was happening. And it was a bonanza of learning experiences for two straight years.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say around the actual credit crisis, I think that I was fortunate to be kind of young enough in my career that it was, you know, I didn't have a lot of deferred stock and I was less at risk of layoffs and things like that. I love teachable moments and every single day for two years because, I mean, really it started in Feb of 07 if you were in credit was a teachable moment and you're just like learning about leveraged loan unwinds in August of 2007, how that impacts equities. And then in 2008, you're learning about all the outs that prime brokers have to delever books. And then you're looking at how netting agreements work with credit default swaps, these billion trillion dollar portfolios. And it was just like every...”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“You'd be surprised, though. There, I mean, we were in a, I don't think anyone's officially called it a hedge fund bubble, but we were in a regime where it was so easy to start a hedge fund, the combination of capital being awash and returns having been so good that, you know, I mean, I take it back to Bernie Madoff, right? It wasn't that, if you ask a few right questions, you'd pretty quickly see that that was not a replicable strategy yet some of the top investors were caught in that.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“And this probably goes to my lust for technology. But there were a few firms that were fundamental trading firms that had such a deep commitment to investing in technology systems and data and the robustness of understanding decision making in type 1 and type 2 errors and all that for fundamental investors and risk management on top of that. And those were the incredible fundamental investors because they were truly skilled stock pickers. But on top of that, they just came to a knife fight with a gun and they were all about repeatability of process. So they brought that quantitative mindset to a fundamental game, which really separated them from the kind of finger in the wind fundamental guys where it's actually hard to know if it was skill versus luck.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“You could tell very quickly who was doing this for the intellectual pursuit and sport of investing and who wanted to buy the jet. And a heuristic that I personally use, I'm never funding the guy that wants to buy the jet because at some point he'll realize, and I use pronouns because they were all he's, especially in quant, but at some point they'll realize that the jet is not worth it or the jet is unfulfilling or the jet is a proxy for a lot of other kind of personal manifestations in one's life. So I really, you know, there is something about the guy who has half a billion dollars personally that still has his psycho watch because then you realize that it's the true art that brings them joy and not the end result. And I think I spent a lot, I spent a lot of time trying to suss that out.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Most joy was that it brought me down this personal rabbit hole of trying to understand high frequency trading. High frequency trading for your listeners who may not know is pretty much uninvestable as a trading strategy because it doesn't really require much trading capital. It just requires a huge infrastructure built. But as you started to understand the high frequency trading world and the nuances between dark pools and all these different trading venues and order types and all that, there were times where I was actually more versed in trading infrastructure questions than the person that I was interviewing. And right away, that was a red flag. So a lot of things I'm telling you are more red flags to pass than like a stamp of approval for a go.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“managers, but then you also go ask them to your smart friends who work at other hedge funds. And then you go ask them to, like Andrew Lowe to get his take on it. And you start to, it's no different than the mosaic theory of investing in fundamental stocks is you start to piece together these different platforms. And so you could talk about data sets. You could try. And again, with time, you build that rapport that they wouldn't necessarily tell you what the data set was, but they might intimate something like, oh, we know of a site that gets crowdsourced earnings estimates. And you might happen to know that there exists a site that has crowdsourced earnings estimates. And then you realize that nine other managers never talk about that. So you kind of start to see like, okay, these people are in on the cutting edge. The last thing I'd say on that point, and this is probably one that brought me.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so there's two questions in there. What did we look at to distinguish on funds? So this is where kind of this really intense kind of curiosity was a sort of advantage. And what I mean by that is that I would spend months, years reading different approaches to building risk management systems like mean variants and different types of approaches PCA and things like that. And there's no way that I could replicate them on my own or that I even understood all of the nuances of it. But it gave me a toolkit to have a meaningful conversation. And again, we were talking about this earlier, asking the right question. And so like, why would you use a principle components-based analysis versus a mean reversion risk model? And then you ask that question enough times.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“But that whole thing, like there, believe it or not, in the Fund to Funds industry, there are people who invest in options funds who have never heard of Susquehanna. And so that doesn't mean that knowing about them makes you a better, a good investor, but it just shows the breadth of how deep do you want to dig.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“A fundamental equity guy, but if you look at the tiger lineage, it might be kind of a garpy approach. their style of investing or trading, and then you can start to kind of tease out different patterns between different strategies. So I think one example that we used was Susquehanna, for example, are just notoriously It's a proprietary trading firm outside of Pennsylvania, outside of Philly, notoriously great options traders, poker players. And when it was very rare for Susquehanna guy to leave Susquehanna, but when they did leave, they actually had this really unique set of skills that were in finite supply because you could only learn them there that if you had the relationship with the individual that was leaving, then you had privilege with air quotes access.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“You can move up one level further is how do you pick the engineer who designs the computer that picks the stock? It's a really, really tough question. But I would start with a few things. One would be to start with the history of the manager. And here I want to be a little careful and draw nuance around because history and pedigree are very different because yes, so there was a pedigree angle and I'm always a little bit skeptical of that angle because that's like saying I would only invest in startups that are founded by someone from Harvard where it might actually be inversely correlated to where they went to undergrad. But I think the history is something a little bit different because that informs the type of thinking that they espouse. So if you, and I'm not.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, at the time, it felt like, well, I could just use, if you use the kind of higher profile seed deals, where those were the Blackstones and the reservoirs, you know, you're talking checks of 50 to 150. So that kind of felt like the big size of the seed market. But funds with sub 20 million, it was very hard to justify the amount of resources. And oftentimes those funds were very hesitant because we were so such an institutional platform, just there was a very high bar on compliance on operations and all that, that it just required a certain AUM to make that even feasible.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“year. But if you were a long short equity fundamental analyst, you could in theory meet one new hedge fund per day. So it really depended on the space that you were at. We at BlackRock, we were also very big. The two guys and the Bloomberg, it just really didn't make sense for us. So that kind of chopped off a portion of the long tail.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Smaller size hedge funds in general tend to perform better than larger hedge funds. So the question is, how do you get there early? And there was no playbook for that. And I think that this will this conversation will happen. We'll talk about this many times today, but there is this mix of hustling, real genuine relationships, establishing yourself as a credible thinker, long-term compounding small wins over a long term. And so a lot of kind of, in summary, without giving away the juicy part of the answer, it was around being really good at building relationships, building long-term relationships. With your second question, how frequently it depends, so in quantitative equity, there just weren't that many funds, probably one per week you would look at and maybe invest in two per week.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think a lot of it is about access. And there were a lot of, let's see, incentivized players to help kind of deliver some of that access. So prime brokerage being a very obvious one where for the unfamiliar, the prime brokers were effectively the hedge funds broker. So they were incentivized to do these kind of road shows of their hedge funds. Then there was the conference circuit. There was the paid conference circuit, all the different providers. The thinking that we had espoused was that by the time the hedge fund has gotten to that level of stature, popularity, and just AUM size, you really wanted to be there much earlier. And there's a lot of research that shows that hedge funds in the first couple of years outperformed significantly, as well as the fact that”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source
“So many more people came in to chase out these excess rents. So it just became more competitive. And so there's just a gigantic end because the industry matured, the end investors matured. So they were also able to do the work better that they used to pay the fund to fund to do. So it was kind of a perfect storm in so many different angles. And one that the industry, now, I mean, the fund to fund industry is fundamentally changed since 2008. And in fact, a lot of the smaller ones are already consolidating away. And the bigger ones have changed their business models from what I gather. But even the hedge fund industry is really challenging now because it's been a long time since 2008 and the returns have not really been there as an industry. And then it's getting hard to justify fees of 2 and 20.”
2017-04-04 · Invest Like the Best · Khe Hy – Quant Hedge Funds and the Fear of Death - [Invest Like the Best, EP.31] · IDENTIFIED FROM THE TRANSCRIPT · source