YouSaid · the spoken record

Will England

lines on the record: 86
first: 2023-09-05
most recent: 2023-09-05
sittings or episodes: 1
sources: podcast

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“It really conveys, as I said, intellectual honesty. And so chapter three, basically the past six years, it's definitely not like everything has worked. Got a lot of scars over the years, but we've just incrementally grown and grown and grown. And so when people hear our story, you ask about being in Minnesota, we've obviously expanded to other geographies. At this point, New York is our largest presence. It's at about 300 people now. We still have our warehouse in Minnesota, but it will look from the outside, oh, okay, this is one of the real multi-managers. But the core DNA of having been through that experience of fighting for survival may be a little bit too strong, but there was, we got to figure this shit out or we got to find something else to do. It's really helpful. And there's a youth element to that as well because I personally was given a lot of responsibility at a young age. I'm only 38 now. So back then in my early 30s and my partner who's 30 years older me give a lot of responsibility. I was very much entrepreneur himself of saying, okay, go and figure this out.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“We think we can do that. It makes a lot of sense, and it's an intellectually honest proposition for us to do that, to grow a bit, it's better for our investors, better for our employees, better for the partners just to get a little bit more scale. But scale, I'm talking in that time of going from $100 million firm to a $200 million firm. And I remember in 2017, we were able to double the size of firm pretty quickly, largely through people that knew us. And even though we were a prop firm, we structured the capital and hedge fund format. So it could point to a true track record. And we thought that was big. And when I say track record, again, to give a sense of the numbers, at that time, we effectively hit a $100 billion firm with $30 million of expenses, another $20 to $40 million of variable expenses. So effectively, if we weren't making at least a 50% gross return on capital every single year, actually the investors, the partners, were losing money.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Quickly, and the only way to do that is have very high sharp ratio with a very consistent. So we spent all five years transforming ourselves from a single strategy firm into a multi-manager and in a scrappy way. I mean, we were a 60 million dollar prop firm a little over 10 years ago. And it worked. And it didn't work because there was this one thing where it was this lead bullet and we just threw it all in there. It worked because there was a lot of trial and error. There's a lot of throwing things against the wall. Even when we were starting to build our fundamental equities business, originally do that with managed account relationships with external firms because we were too small to even hire people. So that was a process. And we got to the start of 2017. We had retooled the business. Again, that was our chapter two. Chapter three starts at about that time. We said, okay, we're $100 million profirm. We have multiple different businesses now. We think we have some scale. We've seen what some of the larger multi-managers had done and there was another prop firm that had evolved from being a prop firm to starting taking external capital.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Challenging for various different reasons, some structural changes. And today, Citadel Securities, which is different than Citadel Hedge Fund, Citadel Securities in Susquehanna really are the only pure options market makers left. So we had an existential crisis really a little over 10 years ago of saying we've had really great profitability, but now the magic money machine is going away. We've got a lot of capabilities just like an industry, we need to transform ourselves or shit, we're going to die. And many firms that did look like walleye years ago just died. And the reason why I run the firm now is I was a driving force, certainly not the only force, but a driving force of saying we are going to transition effectively into a multi-manager model while being a prop firm. We didn't do this to raise capital. We didn't do this because it was faddish. We did it to fucking survive. And as a prop firm, again, prop meeting is all the partner's own money, conveys intellectual honesty, where if you're not making a really high gross return on capital, you're dead.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Having the douchiest East Coast background imaginable, I can straddle both worlds, it would be irrational to assume that a firm, we were starting in 2005 as proprietary options market making business, so a Chicago style trading firm effectively building an engineering technology machine, to quote single name options prices, very, very complex problem, but much more of an engineering problem than an investment problem. And especially around the financial crisis earlier on had some great success. doing that, but literally based in a warehouse in Minnesota, didn't even have a website. No one had even heard of us, it'd be totally logical to assume that we evolve in terms of where we are today. And even at the start of 2017, the history of reform, effectively, we started as mentioned the single strategy prop trading firm, breaking our history down to a couple chapters. That was about the first five or six years. Had very good success for a capital base up until around 2011, 2012, never losing money, but markets became much more.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is a very true story years ago when we first started raising capital because we were a prop firm. My partner and I were in New York. We had multiple meetings with people and say we're walleye. And they're like, the Disney movie? Like Wally? And I'm like, no, it's not a fucking robot. It's the state fish of Minnesota. How the hell do you not know that? But it just tells the story of, yeah, Minnesota is different. And I can say that as an East Coast person married to someone from Minnesota, as I mentioned.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Other elements that in a cliche way can sometimes be wrapped up into culture really does matter. And I think that increasingly as the multi-manager space evolves, it's not just about providing capital. It's not just providing great technology tools. It's not just providing flexibility in the same way that VC investing years ago because of supply demand and balance of capital was about providing capital nowadays. If you're a VC firm and you're not actually adding value to a company in some way that's authentic to who you are, you're not going to be as successful. And you're seeing that now in the multi-manager space is because the capital is there to go after a finite supply of people. You really need to be thinking about what is your value add. And not in a fake, we're all going to be super polyanalyst and claim that we're going to hug each other all day. But no, really, are you treating people with respect? Do they respect you? And if you have a track record of doing that for an extended period of time, so there's many data points where they can point to that.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“The PMs that we're talking about in many cases, they might need to work, they might not need to work, but they've done very well for themselves. So they're trying to think, what is my experience going to be after the assumption that all of what I need to do to just do my job is there? Do I actually want to work for this firm? Do I respect the people that are running it as humans? Do I respect where they're going? And there is this notion of these PMs, even though it is neat what you kill model. What we've found in growing our firm, and I can say this because we wouldn't have been able to grow and produce if this wasn't the case, there's a group of PMs out there for where for them, that's really important. They don't want to be motivated by fear or they've already been burned out, maybe doing that elsewhere. That doesn't mean that they want to sacrifice performance-based environment because you need to be hyper focused on performance in all aspects.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Right now. The other thing that I found really interesting because we did not start off as a multi manager, we ended up here really by accident. And when we concluded our first principles that the multi-manager model is a great business and makes a ton of sense and iterated there over a number of years once we really reached a certain scale in a very intellectually honest way where we could start hiring people, we had to think, what is it that someone is actually looking for? There's a very high quality person that you're dealing with. And frankly, this is where I think the big four maybe are a little bit vulnerable. These are humans and especially if they're humans where they're part of their career or it's not just about the incremental guaranteed dollar. They care about the firm that they work for. This actually does matter just like another businesses. And I'm not talking about in a fake way of, oh, let's give someone a fucking ping pong table and they're going to be great. Or some of these gimmicky things. Really, if you're a high caliber person and maybe you're at a point.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know the exact number. It's probably more hundreds than thousands at some level. And when I say that, that's less about the technical aspects of the job. You can learn how to model companies. You can learn how to be a quant wizard. You can do all those pieces. But the job of being a PM, whether you're quantitative or fundamental, is psychologically extremely taxing because you're going to be wrong basically just as much as you're going to be right. You're going to get kicked in the face a lot and you're going to be someone who's the smartest person that they've known their entire life and then they're just going to get beat up all the time. And that's what the job is. And that takes a certain psychological profile. And that requires training. And I just don't think many humans are wired that way. So I don't know the exact number, but it would be inaccurate to say that you can just take anyone with a resume and assume they're going to do well in the model. And if anything, probably the multi-manager space, in my opinion, is a bit too crowded at the moment, which is natural in finance because something works, you know, more people get drawn into it. And in some ways, we're seeing that.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“There's not an infinite supply. And actually, this is getting to an important point of just where we are because the multi stranger models generated this amazing alpha in the recent years. It's not as if you can just plan a flag and say the model generates so much alpha in and of itself that even if you've never done this, you're an analyst, you've never been a portfolio manager, or you're at a bank, you're at the sell side, and you've really never done this before. But voila, we can plug you in and magic, you can be there. I don't believe that is true. So there is a finite pool of talent. That pool of talent in terms of how big it is.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Before it goes to the fund, then obviously that's more efficient for the fund, but it can also create tension. So years ago, when we were starting our center book program, that is not the path that we chose, and not all firms do it that way. Some firms do, but it's not the path that we chose because we want it to be transparent to the PMs and have them participate in the economics, which I think is important. But that core concept of saying you have a critical mass of people doing all sorts of different things in a machine can take all the information simultaneously and do some interesting things with it and then do that at huge scale. Again, 30, 40, 50% of exposure in an equity long short firm multi-managed model can be these center books. It does make a ton of sense for its principles, but managing some of those human elements, the dynamics interaction with the PMs arp is very important.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Trades that they're making, and said, You know what? That's actually a pretty interesting signal when you put on that position or the fact that you have this position. I can do this across a large number of managers and I can take that information and I can either throw it into one giant machine to holistically say I'm going to call it the best picks, which is hard to do, but again, there's an approach to that, or a simplistic approach is just be like, you know what? I'm just going to copy what everyone else is doing. And the reason why PMs don't like the latter, which is quite prevalent, is because oftentimes they're copied and then the PMs are not actually compensated for that. So there's this notion of, well, you're stealing my IP. And it makes sense for the firm to do that. And this is where there can be tensions because it's just more efficient, particularly from that cost standpoint. Obviously, if you're running X, hundreds of millions of dollars in a given sector and a half of that is the PM and they're getting carry on that and half of that is run by the center team and there's no carry on that.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Boogeyman of what's co holdings risk, what a positioning dynamics. It's all basically saying the same thing of if everyone is positioned the same way and they all move their feet at the same time, it's like you run from one side of the boat to the other, well, everyone's screwed. The whole thing might capsize. And so thinking around that constantly monitoring that is just very amorphous. It's really important. So it's all of that is the risk management exercise. The other part of your question is, what is this boogeyman center book that gets talked about? And PMs really hate that at a lot of firms. And the reason for that is not because they disagree with it intellectually. The core concept of Centerbook, again, just using Equity Longshort Managers is to say, once you get to a critical mass, again, earlier, an economy of scale, another argument, you've got 30, 40 individual stock pickers. They're all sector focused. Well, a machine can essentially take an automated eye, look across what positions that PMs are having.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Going on at all these different firms and being like, okay, is there something underlying that could be sort of resonant frequency which could impact multiple different types of strategies and screw up this perfect analytical concept of having actually uncorrelated return streams? And it can appear in weird ways. You can have a biotech manager all of a sudden become correlated to someone trading European consumer stocks. Why is that? That could be something in the markets and it could be flows driven. What fundamental stock picking is, and again, multi-manager do a lot more in fundamental stock picking. That's a huge part of it. It's obviously fundamentals is a big element. The other part is game theory is what are all the super smart people that effectively all went to the same schools or trained the same banks and think the same way. What are they doing? You're all fighting with each other. And so this notion of positioning and crowding, and it is really game theory, is hugely important. And that's another thing that the risk teams are constantly trying to think about a lot is what is my crowding factor, which is this.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Flagged that and it might get mad at you. And there's all sorts of nuances of how is it going to get mad at you. But practically speaking, you're staying in your lane. And that's you put on a position that you shouldn't have or you lose more money than you're effectively allowed to lose. Yeah, absolutely. There's a lot of automation to that. But then there's another extens is this is where machines can do a lot of it, but human intuition, human thought, human's ability to essentially architect the risk management system is really important. That's a living breathing exercise of, okay, we have different strategies that we didn't think we're going to be correlated all of a sudden they're becoming correlated. Why is that? Is there something in our baseline risk model that we didn't see before when I talked about this concept of idiosyncratic? That's literally saying that just because something looks like an idiosyncratic return, it could be that there's a factor that's not actually in your factor model. So actually trying to think through that and dynamically adjust for that. And that is constant. And that is definitely going on our firm. I know it's.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is really going behind the curtain, which is fun. Definitely, there's a lot going behind the curtain. The basis for your question is saying, okay, let's think of a simple hypothetical problem in which you've got 100 uncorrelated time series. Well, the optimal solution to that would just be to give each one the same amount of risk. In practice, they're not uncorrelated and the correlations move around a lot, which is what makes this really hard. And so earlier statements around this being a giant risk management exercise, very true. And so there's a couple questions to act there. What is going on as far as the center book or the back book or the alpha caps portfolio, the magnifying portfolio, that's different than just the true risk management exercise of what is the risk team doing every day? What is my head of risk doing? What is a head of risk doing at City of Millennium? Again, technique is the same style might be different at different firms. So number one, of course, every individual strategies has their lane. And that's a machine is looking, are you staying in your lane pretty much in real time? And if you go outside of your lane, the machine is going to”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's just really hard to do that, and you want to take essentially as many small bets and add them up as many times as possible to squeeze out that alpha over time. And I view it as, and we'll probably get into quantitative versus fundamentalist stock picking. What is the place? It's very much a place for both. And it'll always be the case. Human's ability to synthesize information, even in a world of AI on a multi-month timescale, I think that is timeless. I'm definitely plagiarizing one of the leaders in our industry who said that recently, but I think it's a great statement. But it's really hard and you need to be very dedicated to doing that using tools available to you.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Markets are not efficient. They're closely efficient. They're nearly efficient, but they're definitely not efficient. The reason why private markets taking out all of the hype and the fads and the low interest rate environments that you could say. But people will say, I'm in private markets because there's an information asymmetry and I want to access something for various different reasons. So the core concept that there's a return to hard work and study very much exists. Empirically, you look at the track record. And this isn't just here's a needle in the haystack type arguments. The number of shots on goal that the firms have had with a hundred of distant investment strategies really refutes that. Absolutely, that's a counter to say that there isn't consistent alpha market. The point is it's really hard and that's why running in a very tight construct taking out all of these essentially low law of large numbers type bets. That's why that's really important. And just to say the obvious adage of you all need to be right 55% of the time, the difference between 55 and 57% of the time is huge.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Stock pickers obviously for quantitative strategy there is but canonical example is someone's going to have their universe 50 60 70 stocks some firms as low as 40 other places could be as high as 100 but here's your sandbox focus on those and we're going to give you tools and again this is why scale does really matter because you need to be able to provide analytics and technology to be able to help identify this problem to say okay now that i've got since with the companies that i want to belong the companies that i want to be short How do I do that in a ratio that really takes out all the variance in P&L that is a distraction? And you do need to do that in conjunction with the machine. That you're just giving those picks to a machine and it's just giving you back the answer. But it is definitely an interactive experience. And this has been an evolution over the past 10 or 15 years. Citadel is probably a pioneer in doing that.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Good at that. That's really a macro call. The law of large numbers is not in your favor. And so as a stock picker, let's just isolate it out. Focus on stocks. Focus on like for like relative value. And I can even make an argument for the market as a whole. This is a huge part, especially nowadays when so much talent has left long only's of what actually keeps market efficiency. This software company versus that subware company, which one is better or worse. And that's what we want people to be doing because that's where we believe they have edge. That is where the law of large numbers is in your favor, again, whether you're a quant investor or you're a fundamental investor in saying, yeah, take out all the noise, all that other crap, because it's so fucking confusing what actually is driving movements in any given day. And that's when you get this notion of idiosyncratic returns. What is your idio number that needs to be above a certain degree? And that's where firms can differentiate themselves effectively how locked down, how tidy you going to be. And that is not to say that the machine is doing all portfolio construction for fundamental.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Those are from the obvious core elements. And that final piece of that, which gets talked a lot more recently, we act this way, all the firms are going to act this way, is to say, okay, effectively, as a stock picker, and the same concept applies to a quantitative investment strategy that can increase debt orb strategy, really, is your jobs from earlier comments is to produce alpha. So let's think of all the things that are known, factor models are common factor models. And you can bifurcate that in two ways in terms of the style factors, momentum, value, growth, et cetera. which are effectively more statistical than anything. And then there's the other side is the industry factors. You're just betting on tech stocks. You're betting on healthcare. And let's actually take that out to a reasonable degree. And the reason for that, and there's tons and tons of statistical analysis that we've done that other firms have done, is humans' ability to consistently not only time the market, but to time when is the value factor going to switch, when is the growth factor going to switch. Humans just aren't very”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“A long short investor, like that is not just about market neutrality. We give someone a risk sheet when other firms will give someone a risk sheet and saying, okay, effectively, you're driving a car down the highway. Here's the guardrails. The guardrails are there just like in a car, so you don't drive off. So what would some of those be? Obvious things going one step down for that. Don't be too concentrated in a single position. So if something surprising happens, you're not punched in the face. So that's another element of saying, what's your universe to be in? Let's just assume if you're focused on picking tech stocks, don't all of a sudden go dealing with industrial companies or if you're a biotech manager, you should be hyper-focused on this particular set of what you're doing. So that's another element. Liquidity, a big part of the risk elements is the worst place to be in investing is something that you don't like and you can't get out of in private market investing. That's very clearly going on. Same applies to public market investing as well. So being cognizant of liquidity profile of your positions so you can stay nimble to a reasonable degree.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Technology costs is a central team cost. There's a whole fixed cost piece. And then individual PMs, depending on their tenure and their strategy, paying between 15 to 20% of the actual P&L. So when you add that up, the investor gets about half of the return. And that's how you go from that 30% gross return to 15%. So people talk about, yeah, there's a lot of fees in the multi-manager model, which absolutely there are on an A1 basis. And it's extremely important in our industry to remember that you are the steward of your investor's capital. They are giving you a blank check. Let's not abuse that. We actually look on the fees per unit of exposure. It is analogous to your standalone tiger style investor that's charging 2 and 20. It's just because of the leverage that gets magnified a bit. And that's justified because of the benefits of putting all these different”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the individual strategies and then collectively. So if you have 50 equity long, short managers and you say, okay, pick your number $10 billion balance sheet. You're looking to make a couple hundred million dollars of a P&L off of that as a whole. And so those are the individual return streams, but the expectation is the same no matter where you are. So let's just say it's 3%. Go back to where your numbers are. And then that set the GMV level. And so the way to back into the leverage is depending on the type of firm, you can have up to 10 turns of leverage. So let's just say it was 10 to make the math really easy, 10 and 3% to get to your 15. So I make 3% on GMV, but using 10 turns of leverage, that'd be a 30% gross return on the actual AUM. The way that the fees shake out and the fees per unit of exposure, again, are very fair, but you've got a lot of them. And that leverage comes in. Effectively, the investor gets half of the return. And because you're paying the individual PMs, there's a fixed cost element of it. You're paying the Sanyalist salary. There's the”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So I'm just going to speak in the context of assuming everything was trading equities. There's analogs for fixed income products, but just to make the numbers a little bit easier to follow. And again, effectively relative value investors. So let's assume when we're talking long short, that's true market neutral, long short. So if you have $100 in a fund, if you had one turn of leverage, that would just be 100 long, 100 short to 100 is 200 long, 200 short. So the way the numbers work out when you're just talking return on GMV on gross market value is collectively the individual strategies are really looking to make two to three percent return on GMV.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“That relates to this pass-through concept that we've been talking about earlier, it's different than in most hedge funds where it might be a 2 and 20 model where the firm gets paid two and twenty no matter what. You could have five individual teams that are doing great, but the other day they got to split that 2 and 20. No, when we go and when all these other places that we've been talking about go and strike a deal with a PM, that's formulaic, it's contractional. There is an element of which you kill there. And so as you get larger, yes, you can definitely incentivize people more with larger book sizes. So that's definitely important. On the other hand, the pace is really, really important. You can't go too fast. So that's what I tell people. It's inaccurate to just assume just to raise as much money as possible. And because you're a multi-manager, it's going to be great. No, you need to do the things that the precursors to success, just like in any business. You need to be able to build the platform properly. So when you absorb that capital, you can deploy in a ways which ultimately are respecting the trust that your investors are giving you, whether entrusting that capital.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, bits of data. The exercise that we're running is like a nuclear reaction. You've got to keep it controlled. And if you've got great systems, be able to contain it because you're using five, six, seven turns of leverage in this case. If something goes off the rails, you just blow up. And there are firms that have blown up historically. So the sophistication of the risk systems is very much tied to sophistication of the technology systems. So if you don't have that as part of your DNA and abilities, no, you absolutely can opt-over at skill. But as you get bigger, once you're able to develop those systems, again, to really say these are our core central functions that allow us to plug great investors onto the platform, you can get bigger. And then that's where the momentum can build in. As you get bigger, you can offer the best people, which again, we can define what best means, but high quality practitioners, larger book sizes, economics in our industry become very important if you're not operating a certain scale for too small, you can't offer that to someone. It's not going to be attractive.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Second, the notion of company scale, operating scale as you get bigger, you can get better. Think about what I was saying before is the model is not just about having good individual investment strategies and why is it that you might have hundreds of them. It's really to say for any particular type, you don't want that to get too big to have too much market impact. But then you've got to start putting these things together. So it goes into, okay, I'm only going to build world-class technology if I can build it for dozens and dozens of people because otherwise the fixed cost investments are going to be too high. I'm only going to build an accounting department with dozens of accountants that are going to implement, again, world-class systems, be able to track all the individual arrangements we'd have if you're doing that again at scale. So there's a true notion of the barrier to entry is that you need to be graded all of these non-investment functions in order to frankly justify what they're doing them. And I'd really just go back to underscore like technology is a huge, huge piece of what we're doing, just like in other businesses. And that's not a clear.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's separate scale into strategy scale versus company scale with strategy scale all things being equal as you get larger positions get bigger effectively become less nimble transaction costs go up so it's not like we're changing the laws of gravity in our particular type of world for any individual strategy and that can be a fundamentally driven strategy can be a quantitative driven strategy the market is still there you can't outrun those factors what is different going back to my earlier comments about building an operating company is that there definitely are economies of scale and even network effects as you get bigger. So just to talk from a size standpoint, you've got Citadel Millennium with approximately 60 billion of actual AUM. There's a lot of leverage involved in these models, so the balance sheet is multiple turns higher than that. These are very, very big investment businesses. And we're considered one of the smaller players in the industry, and we're still above $5 billion. So small is relatively more 300 people versus 3,000, 4,000 for some of the other places. But that second element, just returning to adverse.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Return standpoint have differentiating themselves, and a lot of that goes back to the investments that they've made in building just this machine of an operating company is very impressive.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Operations, legal compliance, accounting, and be really able to invest in that and be world class is very, very difficult. And so if you think about the elements of a traditional hedge fund or investment model, this was talked about in the previous podcast. If you're running an investment firm, you have to essentially pick your investments. So you've got your alpha, if your signals, if your quantity individual, you've got number two, portfolio construction. How do you put everything together in a balanced manner? And then number three is building the business. For most single manager hedge funds, that's things like raising capital, it's hiring. Do we have a cool fancy office, stuff like that? But for the multi-manager pieces, that third piece, that's just magnified dramatically because you're operating on such a scale across essentially everything that be done in hedge fund land and putting it all together. Complexity doesn't scale linearly. It scales exponentially. So that's a really key differentiator of do you have the ability to run a world-class operating company? And it is why in many cases Citadel is amazing. And in the past couple years just from”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Both from a fundamental standpoint, a quantitative standpoint, various different forms of macro strategies, various different forms of volatility trading. It would be inaccurate to say that everything has an arbitrage element to it, but relative value or arbitrage esque is certainly pretty common across most of the different styles. And multi-managers, the biggest ones, the best ones really putting that together, putting those strategies together in a single format. It's very easy to articulate why that makes sense. And again, you take essentially just from a pure time series to embrace multiple different uncorrelated time series, you put them together, voila, you've got a multistrat. What is very fascinating about the model and why there are realistically so few players that are doing this is to do that is incredibly difficult. Not only do you have to have excellent individual managers, and we're talking in some cases hundreds of excellent individual managers or pods as they're referred to, but Judge will have to run a world-class operating company. So that means world-class technology systems, even some of the less sexier functions.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“The technical term is a pass through multi manager. So hedge funds, a very special type of hedge fund that term pass through. It sounds like it's an operational nuance, but it's extremely important. What that is essentially saying is that investors are putting the trust in you as the investment manager to pass through essentially all the cost of the business in order to generate very high quality risk adjusted returns. The way to think about the landscape today is they're essentially four big firms in the industry that have all been around for decades. There's Citadel, there's millennium. There's 0.72, which used to be SAC, and now Bally Asney as well, growing into that, been around for a number of decades as well. Realistically, there's only four or five that have sufficient scale, sufficient track records competency to be able to, again, take advantage of the full benefits of reciprocation. Core concept of the multi-manager model is to say this should be a pure alpha vehicle. And the way to get that is by putting together multiple different types of essentially relative value strategies. And that could be long short stockpile.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“Cal motion is really inspiring and very applicable to today. World was different than in all sorts of ways, both positive and negative. But the core concept of someone who decides I'm literally going to go and have an impact still very applicable today.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source
“I love learning about that time of history. And many things are different, but many things were the same. And the scope of what some of these individuals accomplished was incredible. So I lived in Minnesota in a town called YZETA. And in YZeta, there's still a train station there built by James J. Hill, who's one of the lesser-known robber barons, but was still at the time one of the top five or ten I'm running a railroad. I'm building this entire network. And what they're able to accomplish in just the force of personality of saying, I'm literally going to change the landscape of the US. I'm literally going to bring people physically move them across. That is so inspiring. And so much of that was because of who they were as individuals. And yeah, obviously the Robert Barron term is because they're pushing the boundaries in certain areas. James J. Hill, relatively speaking, was one of the better Robert Barrons. But really inspiring. And so when we talk today about people building great companies, changing the world, it doesn't even fucking compare a comparison.”
2023-09-05 · Invest Like the Best · Will England - A Primer on Multi-Strategy Hedge Funds - [Invest Like the Best, EP.342] · IDENTIFIED FROM THE TRANSCRIPT · source