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Robert Koenigsberger

lines on the record: 94
first: 2022-12-16
most recent: 2022-12-16
sittings or episodes: 1
sources: podcast

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“What I really like is on top of these four return streams that we have, we kind of have a multi asset dynamic asset allocation process. And that's where you're able to create alpha and that's where you're able to have really low correlation to the markets. And one day markets are at all-time highs. So not that interesting to want to buy QCIPs or public debt at that point.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and I think you can create lack of correlation dependent about how you construct the portfolio. I mean, I think if you pick one return stream in emerging markets and stick with that return stream, you're going to find a lot more correlation to markets.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, if you can pick good credits that pay their coupons. The mathematics work, right? That's why after these big dislocations, if you can pick a subset of credit that has coupon will keep paying and roll down the curve towards par, then you're going to get these types of extraordinary returns. And I think we're in that type of environment today. Now, of course, there's a lot of volatility, and I think one needs to be respectful of that volatility today. But I continue to think that the expected returns in the destination warrant what may be a bumpy journey.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And I would even call them systemic Like we've seen today, and they all have kind of looked the same, which is peak to trough, it's taken about five months. They drop about 2022 percent. Eight months later, it's up like 27% and 12 to 24 months later, it's up 30 to 50 percent. So, with that kind of top down historical framework, it's easy to see that there's cheap valuations in emerging markets. But we also have to think about where we came from, like really low interest rates, a lot of liquidity, what have you. So we also have to prove out with the portfolios that we build that those same type of expected returns are there. And one of the beautiful things about fixed income versus equity is we have contractual coupons.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Something similar, and I think what we have observed, and again, we're all credit, not equity, but is over the 25 years that we've been together for a team, there's been 11 major dislocations in emerging markets.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It mattered because none of us knew what would happen if Yeltsin passed. And so I'll take that to today. It's like, if Putin weren't here tomorrow, I can't tell you what the politics look like there. And also, how is Russia going to be treated on the other side of this, right? Is it going to be treated like Germany after World War I or Germany after World War II Will it be embraced in that Putin was a bad guy who led good people astray and let's have some sort of reconstruction of Ukraine and Russia? Or is it going to be More like Germany after World War I, where that's still a prior state.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you need to look back at the past at the last time there was regime change in Russia to be able to triage that. And what I mean is, pardon me, Putin's been around for so long, that you got to go back to the Yeltsin era. And I've read and heard so many times that if Putin just leaves, everything will be fine. But I have no idea what's behind Putin and Russia. And I remember being in Russia in the late 90s. And I would get a call in the middle of the night saying, Yeltsin's in the hospital. And you'd have to triage which hospital. One was for a cardiac, for a heart attack, and the other one was he was just drunk and a sanatorium. And it made a big difference.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“So, even though you can't short it, when you don't own it in the index, you actually, it's not riskless, right? In our alternatives, more traditional hedge funds, to your point, we can do alpha shorts. We can say, and look, we were long protection against Russia in February 2024. That was an alphabet for us. It was like, you know what? We think Russia has asymmetric downside, and we can express that in that vehicle.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And so one of the riskiest things we had to do is sit there and watch Russian debt trade up and down while we have zero exposure.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And look, there's two different ways to do it in long only, and it's risky to do it in long only, right? So it seems like Long Only is the less risky. You know, you're going up against an index. And oftentimes these indices have very risky proxies in them. I mean, let's talk about Russia and Ukraine this year, right? Sure. So we had the good fortune to have no Russia or no Ukraine in February of 2022. Our analysts walked in in January and said, I think there's a 50% chance that there'll be some sort of invasion. And the assets will drop a little. Like, well, Petar, you got the first part right, but if there's an invasion with a capital I or small I. Ukraine's going from 80 to 20, and Russia's going from part of 50. That's great. We missed it February 24th. We're out. But it stayed in an index for two months.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And in litigation finance, the most difficult thing to predict is the outcome of the litigation. Well, we can actually hedge that. We can actually buy insurance. There's insurance companies that will offer you insurance for maybe if it's an $800 million claim and you can buy insurance for $10 million to ensure the $10 million of litigation and it costs you $3 million. That's pretty good asymmetry in terms of if you lose, you lose the three. But if you win, you're in for $800. So we use hedging”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“But when we start thinking about our alternative group, we can think about relative value, we can think about long short, we can think about doing things with derivatives that give you kind of a call on the left tail, so to speak.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And let me clarify we have four major strategy groups within the firm. One of them is long only. And we do four subsets there. The other is alternatives where we can do long, short alpha shorts, what have you. The third one is what we call capital solutions or private credit or asset-backed lending. And the last one is special situations. So I agree with you. Sometimes in long only, the only way you can express a negative view is to not have any exposure.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, what we're trying to do with these platforms is get depth and breadth in the different regions. So if I go to Mexico, for example, where we're lending to the suppliers to PEMEX, people who lay pipes, people who build the platforms. If you do it on a one-off basis, you can't really scale it. But if you have a platform of dedicated people to that and the controls, it gives you the ability to depth and breadth in Mexico to look at other industries. Now, maybe we can look at real estate, but also think about the same industry in a place like Colombia or whatever it may be.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“So we're based in Greenwich, Connecticut. We have offices in Latin America, in Mexico, Peru, Argentina. We have a lending platform or an office in Turkey, Brazil. done some stuff in Africa as well through a lending platform. And getting back to the local presence, you know, the... Having a platform, having your own team in the market has all the obvious benefits, but also it gives you the ability to get depth and breadth. And our business, particularly our private credit business, where we're doing asset-backed lending in a country. And I remember a friend who does domestic private credit told me once, you know, Robert, it's just as easy to do a $400 million loan as a $40 million loan.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I wouldn't make that blanket statement throughout emerging markets, but quite frankly, when I see some kid in their 20s or 30s start a business and there are three or four people around their Bloomberg screens and they don't have the internal analysts and they don't have the external network, I don't know how they think they can do it.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And the gentleman starts the negotiations. He goes, let's have a toast. Here's to my wealth and to your health. You just have to have people on the ground to pick. That's just bad”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Great, so it was a patriarch former military guy, had the discussions at his house, not a law firm. You were escorted into the conference room through three levels of security.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I mean, boots on the ground are essential. And I would say both internal boots and external boots, right? So we have our own people, we have our own platforms, we have offices in Argentina and Turkey and Mexico and what have you. And those people are really important for sourcing deals, doing due diligence on deals, doing due diligence on people. Quite frankly, one of our biggest strengths isn't on our website. It's all the relationships we've had for 35 years with people in different countries that can give you good information on people. I remember a story in Thailand a few years ago. We were getting ready to buy the debt of a country, of a company that had come out of debt restructuring. And our research guys did their work. The traders did the work. We liked the value. We like the entry point. We went out to our network, external lawyer, who had sat in the debt restructuring conversations. And the lawyer says to me, Robert, before you invest, let me tell you what the debt restructuring look like.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. First of all, I mean, a lot of places we go English isn't necessarily spoken well, even at the most senior levels of government. So to be able to speak, seek information, persuade others in their language is very helpful. And I'm not going to say I do it as well in Spanish as I do in English, but that's very helpful to emerging markets is all about assessing people. So we have to think about credit risk like everybody else. But at the end of the day, emerging markets risk is about credit culture people, how do they behave in times of duress in the past to predict how they're going to behave in the future. Helpful to be able to assess that prediction in that language.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Bilingual, but they did. But they don't know that. I speak a little Turkish too now that my wife's Turkish as well. So I go upstairs to meet with the big boss and they start chatting in Spanish and they go, you know, you told me that there were no other jobs out there, that we didn't have to pay these guys. So then he turns to me and goes, Robert, what can I tell you? And I answered him back in Spanish. I said, I just heard everything. Thank you very much.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you another story. I remember when I left Merrill Lynch, so Fad started raising rates in 94. We've got the tequila crisis in Mexico. And I resign. And my boss is Venezuelan, and the big boss is Cuban. And the Venezuelans say, well, you got to go talk to the Cuban. And so they start talking in Spanish in front of me.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“That might be disposal. And don't take a lot of risk and make a lot of money, supposedly, right? So I go into 97. My book, the restructuring book, has a $5 million, what do you call it, budget? Then they raised it to 10, then they raised it to 30, and then they raised it to 40. So I walk into my bonus discussion in January or February of 1998, and it starts with, well, we almost made it, right? So they were trying to basically say, since you didn't get to the 40, you shouldn't expect to get paid very well. So I said, well, wait a minute, just stop right here. This conversation's over. I'll come back tomorrow. You put a different number on the piece of paper. And that was the moment that I decided I wanted to start the firm. And, you know, we're purely there for our clients. And if our clients do well, we do well. And that's all that matters.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“We were basically, I went to work there right after that. They had no aspirations for PL in 1996, very little aspirations. It's like, just don't lose money, right? That was emerging market debt for Lehman. So”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“The next trade in Russia, or whatever it may be. So, one is I really wanted to have a conflict-free mission driven firm. And our mission's really simple. All we do is focus on investment management. We want to focus on the well-being of our clients, our portfolio investments in their communities, and our team members. That's it. And that's hard to do at a big, big shop on Wall Street. Obviously, eat what you kill. I wanted a meritocracy. And Wall Street is quite frankly anything but a meritocracy because of all the politics and what have you. I remember the day I made up my mind to start grammarcy was at the end of the 97 bonus year, early 98. Now go back to Lehman. They almost blew up in Mexico in 1995.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Going through a sovereign debt restructuring, that's just a negotiation. I'm sitting there representing the bank and I'm sitting across from the senior debt negotiator from the Russian Federation or wherever it may be. And I remember at the banks, you know, on my sides would be someone from investment banking, someone from corporate relations. And so I'm just pushing to get the bank and our clients paid. And these guys are thinking about the next.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“A few things. I mean, I started in a boutique environment and I never really thought that I was going to stay on Wall Street for a long period of time. I always wanted to do something entrepreneurial. Obviously, I wanted to stay invested and have a career in emerging market debt. But so the factors behind starting grammarcy were a few. One, you know, I mentioned conflict of interest on Wall Street. And when you are”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, you know, that's oftentimes what I talk with clients about because, you know, if you go back to the 1980s, I wouldn't call it an asset class. It was a bunch of bank loans in default. It was submerging at the time, right? And it was, I guess, unpolitely called the third world debt crisis, lesser developed country debt crisis. But no one was thinking about putting an index around a bunch of defaulted bonds. So I was fortunate enough to be there as we transformed defaulted loans to performing bonds. And then when JP Morgan made the index in 1980, pardon me, 1992, I think that was really the beginning of emerging markets debt as an asset class.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And another one, real quickly Russia's been so much in the news these days. And I remember the wild, wild west in Russia was the Yeltsin era in the 90s, the era of default. And I remember going there with a group of investors in, I think it was June of 1999, their default debt was trading at six cents. And we go into this conference room at Vanesha Khan Bank, which was the Oblagor, the export-import bank of Russia. And this trader walks in and he's completely disheveled. And he goes, I want to know who's buying back my debt. You guys are getting in my way. I'm trying to buy back my debt. Greatest buy signal that any of us have ever seen. The problem is we don't have cell phones, right? So it's like race back to the hotel to see who can call their trading desk fast enough to buy Russian if you look on your Bloomberg screen today. On that day, the asset went from six cents to 12 cents just on this meeting.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“We didn't have cell phones or what have you, so I got to run back to the hotel. And I said, you know, Carlos, is the building included? He said, yes. I said, it's got to be worth a million bucks. So we paid a million dollars for that 1990, made $3 million trading FX before we sold it, and it was sold for $50 million three years later And that became the beginning of one of the largest groups in Peru today. And so fast forward after graduate school, I'm having lunch with a friend from school. And Eric says he's working for Bank of America. I said, Eric, what are you guys doing? He goes, oh, we're thinking of opening a branch in Lima, Peru.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“That's right. So, one example that was a lot of fun, I think, was 89 or 90, Bank of America decided they wanted to sell their branch in Lima, Peru. And the price tag was a million dollars. I'm like 25 years old. My boss, this gentleman I mentioned, had been the finance minister Peru. He's like, I need you to go down to Peru and take a look at the bank, do due diligence, right? 25 years old. So I don't know if you've ever been to Lima, but in the center of Lima in San Cedaro, there was a Retorno like a roundabout and one big tower. On the top of the tower, it says Bank of America”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, if I go back to the late 80s, early 90s, and you're asking about distress then versus distress today, and I think one of the most interesting things in distress is when people are throwing away the keys. Want to be there to catch them. And I remember one time in, I think it was 89 or 90, we're right at the end of the lost decade in emerging markets and all the banks are basically, not all the banks, but a few of the banks are just getting out of Latin America. And one of them.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so it's a crude interest. So maybe it's got four points of interest on an eight cent bond that typically when something trades at eight, people don't think it's going to keep pain. And then once the program came out, this Chinese tarp, if you will, all of a sudden eight-cent bonds were trading at 32 this morning. They're at like 60. Just on this bailout notion.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think the Chinese government wanted to kind of isolate evergrand and then insulate the rest of the sector. And now what we've seen is that it contaminated the Evergrand just poured over to even the best names like a country garden or what have you. And so right after the party congress, we've just seen massive amounts of aid. I would argue that what we're witnessing today is the TARP program in China for the property sector. And you can see assets have gone. We were buying performing bonds at eight cents on the dollar. Wow. That you had to pay for accrued, right? Which is a weird concept to”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“First of all, let's unpack that. I mean, emerging markets is not this homogeneous asset class, so almost anything you and I could talk about, it would be different. There'd be dispersion of factors. But when you think about bailouts of Corporate sovereign adjacent or what have you. We've certainly seen it in emerging markets. And I would say the most example right now is in China property. If you've seen what's going on there. Sure. So it started as a crisis forever.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Every bank made markets. Every bank had balance sheet. Today you have less banks, less balance sheet, less market making, and a really big buy side. So you have inelastic supply when people want to buy. Like if you have a dollar, there'll be someone in emerging markets that wants to issue a bond and take that dollar from you. But when there's outflows, you don't have an elastic demand, and that's where you tend to get this volatility and dislocations that we've seen.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And then sovereign adjacent are interesting as well because they're not explicitly owned by the state, but they're so important that there's some sort of nexus between the sovereign and that corporate. But today the markets, you know, think about now there is a buy side, ETFs, FortiAx, the buy side is so much larger than the street. It used to be just the street. Street had a lot of balance sheet. Today, if you take emerging market corporates as an example,”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so usually, and I usually talk about quasi sovereign and sovereign adjacent. Sovereign is just the debt obligation of the country. Right. Quasi sovereign is typically an entity owned by the state that issues G.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. And so, you know, tended to create a lot of volatility. You know, if everyone wanted to buy or sell the same thing at the same thing, same time. Today, the market's massively larger. It was predominantly a sovereign market back then. Now it's sovereign quasi-sovereign, US dollar, local, corporates, high yield, et cetera. What's quasi-”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“When I got to Merrill in 1995 and you looked at the trade blotter of who you were trading with, it was basically banks trading with each other. And every so often a client would come by. So it was a tremendous amount of proprietary trading, you know, hedge funds in the back book, a little bit of a front book. I would characterize it as a bit of a bizarre and less of a market because I was at Merrill and I would call JP Morgan and I would sell something to them and they would call Chase and they would call Naaman. It was just his roundabout and then the market would drop five points or what have you.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, first of all, they were great experiences because I started in a very small boutique environment. And again, I'm political science and history major prior to graduate school. So to actually get experience in finance, to lead the bank's efforts in investing in sovereign debt restructurings and to bring our clients along was a great experience. I got to learn a lot about how markets function or not. And I got to get us feel for Wall Street politics, which I found out really weren't for me and all the conflicts of interest that one finds in Wall Street.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And I didn't know what FX was. I didn't know what letters of credit were, and I had to go get a letter of credit. I had to go to Guatemala. I had to present it. And then we did a buyback, but we got paid in Casellis, which was the local currency. And so my job for basically two weeks was to get up, go sell as much FX or buy as many dollars as I could, and then go back to the hotel and sit by the pool.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Emerging markets in the late 80s was very different than the emerging markets of 2022. I think it's fair to say it was a bit of the Wild West. Go back the entire, you know, it was the lost decade, right? The 1980s was the lost decade in Latin America. Mexico defaults in 82. virtually the entire regions in default by the end of the decade. So what it was like was putting Humpty Dumpty back together again and dealing with countries that had defaulted debt and taking them through what's now known as the Brady Debt Restructuring and having these bonds that nobody really understood come out of it. And that, quite frankly, was the beginning of the asset class. And I remember even like we were doing, you'd have countries that were shared borders that couldn't talk to each other that one o' the other and you can get in the middle and do some sort of debt swap or a buyback or what have you. And so one of my fond memories was like Guatemala, I think it was in the 1980s.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Built and lucky, quite frankly. I actually go back to undergrad where I did political science and history of Latin America and I was asked to do a similar thesis on or to do a thesis. And my parents told me I had to find a job at the same time. And so I tried to put the thesis and the job search together. And the only issue in Latin America, which was my major back in 86, 87, was the Latin American debt crisis. Sure. So I did my study on that, and I got fortunate enough to meet a gentleman who had been... The finance minister of Peru, he'd been the head of Wells Fargo International. He lent it. He borrowed it. He defaulted on it. And he had this great boutique out in California. So I feel really fortunate to have spent 35 years doing the same thing in emerging markets. And the gentleman I worked with was just a great professional.”
2022-12-16 · Masters in Business · Robert Koenigsberger on Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source