YouSaid · the spoken record

Peter Troob

lines on the record: 69
first: 2018-07-02
most recent: 2018-07-02
sittings or episodes: 1
sources: podcast

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“I mean, I think the biggest one, and again, these things you learn from your parents as well. But this isn't a saying. I think actually, I think maybe I made it up. It was in my book too, is time is a non-renewable commodity. So you can't waste it. And that's what drives me, by the way, nuts watching kids and stuff, just sometimes play on these video games all day. I mean, you don't want to waste the time. You want to enjoy your time, do it right. I didn't think I wasted a lot of time, but of course I did too. I worried about things that I had no control over. You can't do that. I worried about, I love my children. I love that they work hard, but they're not who I want them to be. They are who they are. I think you've got to accept people, you've got to accept life and you've got to take the time to enjoy it literally all the time.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“The thing that I've read, I just read it actually, it was a book by Annie Duke called Thinking in Bets. For me, it just struck a chord. It happened to be a fun read. But the reality is, and it goes back to the short, fun discussion we've had and about everything else I've done. You wonder if when you got it right were you right for the right reasons or you're going to then get it right, get it wrong next time? Or when you got it wrong, it's okay because you did it with the odds in your favor. And if you had to do it again, you should do it again. And it goes through all the machinations of how sometimes your past experiences totally skew your future decisions incorrectly. You've got to take each decision and really play odds on each decision.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“A couple things. I mean, my father, it was to take risks and realize that whenever you do doors open, even though you think it's a big risk, do open.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you saw me, my stature is about 5'8", but I was a good basketball player. I was a long time ago, and I was a very good shooter. And my 16-year-old son and I play horse and I do not lose to make him feel good. I beat him up pretty much every time. And the last time we played, he beat me and he beat me again and he beat me again. And he was making the shots when the pressure was on. And I was pleasantly surprised that he had it in him to, you know. I now know he's better than I am. That was made me pleasantly surprised.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Professionally, it was starting my own business at 33, actually, and being very naive. It was dangerous as I look back. It was the greatest thing I ever did, the being that naive. And personally, I went with my family and we went whitewater rafting and inner tubes, you know, no big deal in Costa Rica. And it was like, what the hell am I doing? Like I'm looking, I'm like, I'm worried about my son. Of course, I'm worried about myself. And then my wife and my daughter. And I was like, I'm not that big of an adventurist.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm a fundamental guy, which puts me in an unfortunate minority at this stage in the investment cycle. I can't stand adjusted EBITDA. It drives me out of my mind to try to look, and I don't mind some of it is real. You know, one time costs are one time cost. But recurring one time costs are not one time, and pro forma for synergies and costs with all the rules that are going around. How in the hell do they allow some of this adjusted EBITDA to hit the pages of these documents that I look at? And it drives me nuts because it's so misleading and it bothers me. I wish they would at least put it somewhere deeper in the document where people had to actually want to see it versus making it up front as if it's real. It's not real. It's make-believe totally. And I think it fools a lot of investors. As I said in my book, if you want to read a prospectus properly, read it like a Chinese.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh God, I mean, one of them sitting on my wall that I'm looking at, you know, Reggie Jackson hitting three home runs off of three different pitchers in, I think it was the 77 World Series. And by the way, if people don't know this, it was his four film run in a row. He had hit one the night before. But what they really don't know is he hit it off of three different pictures all on the first pitch. So he basically said, because, you know, now everybody waits and sees the first pitch. He basically said, I think after the game, someone asked, you know, you hit him off the first pitch. He goes, if you see a good pitch, you got to hit it. Was my favorite password”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Grandfather was a lawyer to musicians. And it's just nice they all had their own business and we ended up buying, he had, he couldn't get paid on some of his rights. And he got paid in music. And one of the things that our family owns, a very small part of, but it's very lucrative is a little piece of standby me. And so I've learned that, you know, owning is hard, being the boss and making decisions is hard, but I wouldn't like have it any other way. I mean, I'd rather, you know, it's good.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“For internet, it was call up and get a book, believe it or not. But we watched that business struggle and then she wanted inventory that meant something. So she went into the jewelry business. So we watched that. Her father was an accountant and had his own accounting firm to very wealthy people. So he always reminded us about you watch it, you know, the whole three generations ruin the money and how you set up the funds and the trust funds and how you want to instill your younger generation to do the work because a lot of times the first generation does it, the second grows it and the third one just blows it. So we watched him and he was an accountant to the Lehman's and the Lomes and the Braunfins and it was nice to see. My father had a business as we discussed selling small businesses. So he bought a company that sold small businesses and nobody ever wanted it because it was a pain to do. And when he was up to selling over a hundred small businesses a year, Citigroup bought his business.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it was. My mother owned the second biggest jewelry designer manufacturer next to Yerman about 20 years ago. She would sell it into Saxon Neeman. So we watched her build a jewelry business. Actually, just for the record, she used to have a book business. It was called Dialobook. It was the precursor to Amazon. And she reminds me.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's great. My brother and I started this business. We said this 15 years ago to people. We say it today. If our relationship were to be soured, we close the business. The relationship's more important. And there are times it gets heated. We get angry. And then we got to remind each other that life is short and he's my brother. And it's nice to have a partner I know is not going to ever do anything to me that's unethical. So that's good. I only have one brother. I only have one sibling. You know, maybe it's because I came from a very family that didn't have a lot of tentacles. My mother side and my father's side. We both had no cousins. So we felt the sense of togetherness and we've kept it that way. And it's nice that our families are growing now, but a lot of people tell me they could never work with their brother. You know, they kill each other. We're very different, as you know. We are very different people. But we work well together.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Give real growth capital. They just want to have assets and very standard cash flow. Mez and those guys are all bigger. They'd rather do a bigger loan. Equity doesn't care. So there's a void. And that void is you can make a lot of money in that void. You just have to do it over and over and over. It's like a rinse and repeat, but you got to do it and you have to have the patience to work with all these small companies. But once you have a pattern, we've been very successful in doing it.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“The risk on that, for instance, is business. You just think the business has to full tent. So effectively, if the company has money and it continues to trying to get more revenue, there's a lot of times a sustained base, subscriber base. They have a base of revenue. So it's not as if you're lending them $10 million on a $3 million revenue business. You might be lending them $2 million on a $6 million revenue business and you'll be getting a piece of their revenue for the next two years. So you have to make sure the business stays alive, basically. And then, of course, what I found is because of regulation and because of the way the regional banks and the community banks have to deal with regulation, there is a real void of when companies, entities need money, again, in the sub 15 million dollar space and nobody really cares. A company needs four or five or six million dollars to grow. The bank isn't there to give it to them.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, for me, that's almost a 30% IRR. It's a two to three over two years. And monthly. To them it's cheap financing because they look at it and say, you're going to basically come in at one and a half times your money. That's nothing. If this company grows its revenue, the next financing round will go from $11 million to $50. So they don't want to give away the equity. That is not being banked right now very well. Some guys are doing it here and there, but in general, the venture capital guys would love my type of money for some of their companies, and I can get it off revenue, which is actually a real revenue stream. And you can get it monthly. The payback could be within 12 months.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Markets constantly change, and there always are inefficient parts, always not opaque. That doesn't mean opaque and you can marked. I'm talking about inefficient where you can make money. And I like those. I like finding them. They're not easy to find. And a lot of big players have gone into a lot of little veins and sopped them all up. But there's still more. There are always more. I mean, I'll give you an example. Venture capital. Okay. Venture capital is interesting. Venture guys have lots of money and they've put in series A or friends and family at 2 million, you know, a series A at 5 million valuation, another Series B at 11. And then they still need more money, but they're not growing. And what we're finding now out in the venture capital world is they will take a million dollars, let's call it $2 million, $2 million, and give you one and a half times your money, $3 million, back in two years, paying you monthly off of revenue.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of your peers who started in the business with you, depending on the degrees of success, we're seeing, let's just call it a demographic shift. Hedge fund business is harder. Some of it's probably in private equity, but hedge fund business is harder. People have made their money. What is it that's kept you going all the way through with the same energy you had fifteen years ago?”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I spent my time doing much more work getting in, and then I spent much more time monitoring the controller because that's who made the decision. It's not anyone else. Everyone else can talk and yap all they want. The controller controls. So get to know them. And again, this goes back to the discussion of the larger funds. It used to be in the old days I could call the controllers because we all were working together and no one could bump anyone else out. We weren't big in 96, 97, 98. Now they'll entertain me because they know me from the past as a person, but they don't need to speak to me or give me what they're thinking in their head. And so it makes it harder for a small investor to want to go talk to the large ones because they don't have time to talk to. They get no value for it. So I understand why they don't want to do it. And so it changes the dynamics of the game.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, in a typical portfolio, I would imagine there's a mix of control situations and non-control situations in the sense that the control situations take a lot of time. Everyone has a little bit capacity constrained. After you learn that, did you start spending your time differently on the non control situations?”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're either going to go in and ride the coattails of the decision makers, absolutely fine, which is what you do when you buy any stock, if you think about it, or you should have control. You should have an ability to control. That can be control through owning something that has a five-year life so you know the contract gives you control or control where you own a majority of the business. But non-control, like third, being third in an investment is like coming in fourth in the Olympics. It just feels like crap, you know, and you waste a lot of time. You spend a lot of time getting there and you lose.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, as my dad would say, you know, if you don't know where you're going, any path will get you there, right? So you got to know where you're going. I was invested in a deal. And again, this one did not work out. I invested in a deal where I was the third largest holder. And we came to another deal with a company. And this was a deteriorating business that we needed to jettison into another company that would run it off for cash flow. And when we finally got to the table and we had done all the work and we got the deal sold, one of the other big guys got greedy and said we could sell it for more. Now, I could only kick, I could scream, I could push, I could do whatever, but I couldn't do it. So we didn't sell. The company deteriorated. The buyer went away. Another buyer never emerged. It turned into a total disaster. And I have to blame myself because I knew I was the third biggest going in. I think you have to make in your head a decision.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think my biggest mistake that I made in my own firm, the other mistakes I had made actually earlier in my career is you have to align your interests with whoever you're investing with early and you have to think about exits when you enter. Buying is fun and easy. Exiting is hard. And so if you don't align your interests, then you don't have a roadmap.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I have hired millennials, and to be totally honest, I've hired three. And the only thing a big problem I have is you got to get off that phone. I mean, when I see, I know it's a way to communicate and I know I'm old school, but you can't sit in an office yapping back and forth with your friends all day long. The problem is if you don't concentrate, you break your concentration every five minutes. It doesn't work. That one kills me. But on the other side, it's unfair to say millennials, you know, some of them don't want to work. That's not true. They work very hard. I think they see the world differently and I like the way they see it. And I'll keep hiring them.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Big mistake. Because in that one, I knew. Sometimes that you think you know and you don't, but sometimes you do know and everyone should listen. So if I'm in a negotiation internally about an investment and the junior guy goes, I've done more of the work. I've spent the time. I think you're wrong. I have to say, I better look into it again, not, no, you're not wrong because you're young. That's a bad idea.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, you got to give everybody, you got to empower everyone. You have to allow people to believe in it, want to invest in it, prove it to everybody else, and you have to allow, including of myself, people to say, I don't think you're right and have to listen. You can't cram everything down people's throats. I think a lot of people in hedge funds and in funds in general, they're two decision makers and everyone else just tries to please them. That might work because those two people may make all the right decisions. So it doesn't seem to say that doesn't work, but you have to empower people to say to the boss, I don't agree with you. And these are the reasons. And you know what? It could be the most junior person who says that reverting all the way back to investment banking, that's why I didn't like it. I felt like I knew stuff. And maybe I was wrong. But, you know, it had to do with a deal, actually, in retail. My parents are in retail, and I knew it very well. And I wanted to explain that. And they didn't want to hear from me because I was young.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“What I've always found is taking that incremental person. That one person can change your investment group's cocktail to taste like shit, you know? So you've got to be very careful bringing them in. People feel threatened. There's an issue. I mean, it goes on and on. So I have not built a huge organization probably because of that.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I was just talking to someone else about this. First of all, and I know it sounds a little bit weird, everyone has greatness in them, like everyone. We really do. I believe that. You just have to tap into it and find it, and they have to find it. People actually are, they work hard. I mean, I've had a team together for 16 years, most of us together for the whole time. People are honest people are hardworking. And I know it's my business and I love it the most. But for guys who don't own the business, they love it a lot. And you have to, I know, again, this is a little bit Zen. You have to engender love, not fear. Fear will cause people to leave. For instance, in my organization, we have no lockups. I pay people the end of the year. The door is unlocked. They can go whenever they want. And they've all stayed. Because when you get handcuffed, all you want to do is break out of the handcuffs. So I think you also have to deal with people's personalities. And the hardest part.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“I like, you know, I'm invested in a real estate guy who has Mez loans into very specific types of real estate. I can't find that as much as I'd like. And by the way, I do find it. And then I call them in and they help me. So I think if you have to, you should invest in things that you can't do and you have to be careful on how much of liquidity you take because you'll have a problem that's unforeseen to you too. So everyone has that problem. So I probably make less, but I keep a healthy amount of in treasuries instead of cash, but I'll spend six, nine month, a year treasuries to try to just keep myself liquid.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“I want probably 30% liquid because I always believe there is something around the corner and I want to be the guy who buys and doesn't have to sell because I could get myself into the same problem as anyone else. And I know this is not the greatest thing to say, but being in the hedge fund business for all these years, it's interesting how few hedge funds I give money to. And it's not because I don't want to. It's that the market's gotten more efficient. There's a lot of other ways to invest to make money without having to give your money to someone else. And I'm not begrudge anyone to buy Apple or Google or Facebook. I find that not valuable for the fees. Then there are valuable things, things that I say, I can't do that. I'm invested in a firm, for instance, a guy who buys secondary interests of venture capital companies like a treasurer wants to get rid of some of his shares. I can't do that. So I invest in them and they do a great job in that.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Best way to find these. But when you come and make a decision to do something, you got to do it. You can't just be a lookie loo and just look and look and then not do anything. You have got to get in there and be honest that you will put that money to work and they have to feel that and then you have to know they're going to do the deal with you. Once we smell it being shopped, we're out.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think what you have to do, it's a simple issue, which I think everybody knows, it's the power of no. You have to be able to say, if someone's trying to hustle you, then you just say, I don't have time for that no. Or if it's send me your best term sheet, I don't need to send you a term sheet so you can shop it. You have to very quickly understand if there's a need, if there's a time frame on it, and how you can help. If you're just looking to rip them off, that's not good either because your relationship sours. And even if you give them money, you're at odds. You want to work with them. You want them to be successful. You just have to have them upfront understand. Hey, you don't have assets I don't lend to no assets. You have revenue. So I'll lend to you, but I want a piece of your revenue. Merchant cash advance is an example. We want a piece of your revenue monthly. And I want it first. And they might say, that's too expensive for me. And I say, that's fine. Then find someone else. And the...”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, a combination of things. I mean, we've been out there in the marketplace for a decade looking. And so we call on our investor base and we always ask them. We are constantly out there. And when people are giving us money for our hedge funds, we ask them, do they have anything that they'd like to get rid of? They'd like us to take a look at, to have us take a look and help them with the solution. is a continuous process with accountants, with lawyers, with administrators. Over time, you get a nice flow of investment.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's direct source to the company. Companies almost always need some sort of what people call bridging. It's called bridge finance, but really, if you think about what it means, it's a bridge to something else they're trying to do. And in the meantime, they're short a little bit of money. Then there's always Mez loans, again, not dissimilar. That is almost a bridge between they have some money on both ends, equity and maybe bank, but they don't have enough to do the whole project or whatever they're doing. So they need another little piece in between. So they come at higher rates.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, we filled everything from a receivable finance, meaning a company just needs money for the receivables that take too long for them to collect, but they need the money to build new inventory, let's say, for another order. So they're willing to give you.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Need equity. What we found is as long as we're structuring it and we're coming up with a solution, we can help control our outcome. It's the best you can do. I'm still going to make mistakes, but we get good returns because we feel confident in going in. Once you get into a brokered situation, it's not that it's bad, but if you don't get the last look, effectively in my world, I think if you get no look, it's like the Ricky Bobby quote, right? If you're not your first, your last. Right. And the problem is there's a high probability you're not the guy getting the last look. Only one guy gets it. And it's usually a bigger guy.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. I mean, what we've been fortunate enough to have a family office for about 10 years, and what we always found, again, is what I mentioned before, is if we could buy from sellers in need, they're small enough where it's a non-brokered market under fifteen million and under ten million dollar need, they have a problem somewhere else. They sell something good to fund something that they have the issue with, or they have a problem somewhere and they want to get rid of that itself. They have family offices that have investor turnover. CIO turnover. Now, they want to jettison a lot of the things that they were once invested in. What we've been fortunate enough to know a lot of our clients, and we've said, if you have a need, we can fill that need. Small companies, they get involved in that need money. They might need a receivable financing. They might need just to borrow money. They might need a convertible bond.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Owner of that, thinking that it's a bond portfolio and you see it down eleven percent in three weeks. And you're like, I didn't think that could happen. And that might be three years worth of income to you. By the way, income that you pay tax on and you lose just real money in principle. I'm more worried about things like the bank loan indexes. They are even, I mean, the fastest bank loan you could sell under LSTA docs is seven days. So why can I buy and sell that stuff in seven seconds? Now, if that starts to get shaky, high yield is all of the bonds below bank debt. So then you would think everyone will run and start selling that too. The combination could get sort of ugly when I don't know, but it'll happen and then everyone will look back and go, oh, we should have had stopped.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, yeah. I mean, they are the proverbial tail that wags the dog. They are the marginal price setter. Every day, every quarter, every month, you see it. Flows are in, flows are out, they don't think, they just do. They want to stay in balance. If there is a liquidity push out of the marketplace, you will see those, in my view, maybe not gap down because they're, remember, they could just sell it to another buyer. It's when people need to sell there aren't buyers, so then conversions occur, you know, redemptions of the units. When you start having that problem, you'll just see gapping. It will eventually happen. It'll work itself through. The ETF will then get smarter and better the next time around. But you'll have to live through that. And it's not going to be fun if you're an”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the flip side of that is you hear a lot that high yield DTFs in particular have this massive liquidity mismatch, the underlying assets from the daily intraday liquidity. Do you get concerned of what could happen to the market in a sell off because of those vehicles?”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, yes, for a guy who's going to invest, just making up a number, one to five million into one of these funds. If you can do it through a nice ETF that's liquid, it may just be the better alternative.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, they certainly have a portion that are going to be similar because there's only so many large companies that they can put the money to work, feel like they have some sense of liquidity. And then, of course, there are only so many companies that fall at any one time. And so they all race in to work on them, which is exactly what they're paid to do. So the answer is they're going to be similar. And the question is, and I know I don't have the facts on this, but I know like Goldman and other guys are trying to figure out how to create ETFs that sort of match those. I wonder, you know, I don't have an answer. I wonder if they're going to be pretty good alternatives.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Smaller deals. These big firms, they'll say they'll do a smaller deal, but they'll only do it on an add-on to a larger deal. It's not worth their while, not because they don't want to, to deal with a deal that's $8 million, $14 million. It just doesn't move their needle when they're $15 billion. So they do on average, my guess is they've got to put anywhere from $100 to $500 million to work on every investment they're working on. The idea they put 50 is a placeholder to the decision if they're going to grow. Because remember, they may be working with leverage. So a $20 billion fund, it might have purchasing power of forty billion. And just because you have $30 or $40 billion invested, you're not going to invest in hundreds and hundreds of things. You're still going to have a core investment, maybe AD names. So you can just do the division.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, first of all, that world is falling on top of each other. I mean, is Apollo and KKR and Oak Tree, what's the difference? And the answer is there's not a lot of a difference. They're all very bright. They all are very good at what they do, and they will get into situations where they're at odds or they're working together. So what do I really think it's an institutional market? It is actually, it's become a normal market. The problem is if everybody has money and they're looking for distressed in that part of the market, it'll never show up. Because when something goes to 11, 12, 15% yield, if that becomes the thing that everyone buys, then it'll never get there. So you either have to have a monster shock to the system, which I'm not sure anyone foresees, or you're going to find that distressed returns are muted because of the amount of money until money starts coming out. Again, I think where the money will be made is if you got to go downstream to.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“A little easier on this one. I've smelled it in a couple things I've been in. I get out of the game. I will get run over. I can't play that game. I'm not nearly big enough to deal with it. And so what I do is I just allow the big guys to beat each other up, which they're doing. And sometimes in the darks and sometimes in the paper.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, we'll first CDS, as I think you know, it's on many less companies now because it's a derivative game and you can play games in that derivative world to make it so that the company really didn't. Hey, you know, that's too bad”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“And they know exactly what. I mean, you can see it in what they did with J. Crew, where they can, and now they're, I think they might be doing it in PetSmart as well, where they're able to have a restricted payment basket, move parts of companies out and the bond guys get sitting there holding less assets in a worse company. And by the way, it's better off for the private equity guys. The private equity guys are in control of the future with their war chests, not the high yield guys.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“The answer is yes, but you're making the assumption, which is wrong, which I think a lot of people do, that that capital held in the private equity sponsors will come in as equity. Why? They're very smart. If you've looked lately, or not lately, it's amazing what they will come in. They will see an unsecured bond and say, I'll lend it a second lien position, a one and a half times lien position, whatever that is. One and three quarters lean position. They can slice that paper thin, you know, they get between the wall and the wallpaper and they know how to do it. So they will be economic animals. They will look for the best return, for the reward of what for the risk they're taking. And there is no reason why they come in and just subordinate themselves to bonds and save the bond market. Why? They know the covenants that they've cut in these bonds better than the bondholders do.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you look at that through a cycle with the lens of sort of what happened in 08 and 09 with private equity, they now have huge war chests of cash. In a lot of situations, it was in their vested interest to keep that option value of the equity going. So they have money they could put in. They could refinance the bonds. Do you think differently about those types of bonds because of that extra private layer of capital?”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have to check that. I mean, I don't have an answer. It's at least half private equity is huge. Private equity uses the high yield bond market. So if you're invested in private equity, you're invested in the high-yield bond market. Don't think that you don't have exposure. And they should borrow as much as they can for the IRRs of their equity. It makes total sense for them. And so the high yield bond market is just something that's been used ever since milk and created it in the late 80s for the LBO firms. So a lot.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, timing is the key. You really can't think about timing. If that's the key, if you have to get it right, then you can't do it. You have to say this is part of your portfolio. You have to say, yes, while the music's playing, you got to keep dancing. And so you showed with 95% of your portfolio. But how do you live without a hedge? How do you live with, you don't think your house is going to burn down, but you buy insurance? If your house is on fire, you can't buy it. The idea that you are going to miss out on a little bit to buy that insurance and that you can't afford to do that is agreed, I think, that could be a mistake for a lot of investors. And this idea that you invest in non-liquid structured product bonds and say, but look at those, they never go down. They don't go down because they never get marked. It's not that they don't go down because they don't go down. That's a fool's game that will get exposed at the right.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's like picking up pennies in front of a steamroller. Is it worth it? That's the question. And my answer to that is no. You can get yield in other ways, REITs, and some bonds and some other and even treasuries these days, and you can short vulnerable high yield bonds. And I think do pretty well.”
2018-07-02 · Capital Allocators · Peter Troob – Monkey Business in High Yield (Capital Allocators, EP.59) · IDENTIFIED FROM THE TRANSCRIPT · source