The transcript from this week’s, MiB: Dmitry Balyasny, Founder/CIO Balyasny Asset Management, is below.
You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
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This is Masters in business with Barry Ritholtz on Bloomberg Radio
Barry Ritholtz: On the latest Masters in Business Podcast. Strap yourself in another great one. Dmitri bni. He’s co-founder of the Hedge Fund, Balyasny Asset Management. They’re a $28 billion multi-Strat firm, 170 portfolio teams. 2300 people working in their offices around the world. He started as a trader at Schoenfeld, grew into both a manager and just a person looking at the world and identifying inefficiencies and coming up with ways to capitalize in it. Fascinating conversation.
Not only are they one of the most successful multi-strats, but they have a somewhat unusual business manager. They have lots of partners who are employees, traders, business people, fund managers. Really just, just a fascinating approach to corporate culture, to creating the right set of incentives and and creating a high functioning meritocracy. Very few people have seen the world of hedge funds develop from a trading perspective the way Dmitri has. I thought the conversation was absolutely spectacular and I think you will also. With no further ado, my discussion with Dmitri Balyasny:
Dmitry Balyasny: Thanks for having me, Barry.
Barry Ritholtz: And we got to say hello to Mike on the way in. We’ll, we’ll talk about that a little later. I’m fascinated by your background. You immigrated from the Ukraine at age seven. How did that affect your perspective in terms of taking risk and just looking at the world?
Dmitry Balyasny: I think it was probably very formative in building a thick skin, right? So back in Kiev we’re living in communist, Soviet Union. Parents would stand in line to buy jug of milk for a couple hours. I’d never been in a car until I was in the us. Never taken a flight until we immigrated. So very different life there. A lot of discrimination from a religious perspective, an ethnic perspective being Jewish and gave at the time, and then coming here and didn’t speak the language. Different type of discrimination from being Russian during the height of the Cold War, although never really thought of ourselves as Russian. So it builds, you know, I think it builds character and builds, you know, perseverance in the thick skin to be able to deal with the difficulties and figure stuff out.
Barry Ritholtz: You go to college at Loyola University in Chicago where you study business. What was the career plan?
Dmitry Balyasny: I wanted to invest, so I did a lot of sales type jobs in high school because I figured out that was the only way you could get paid because you got commissioned as opposed to salary as a kid. But I wanted to transition from selling stocks as a stockbroker, which I was doing in college to trading and taking risk and, and investing. I wasn’t sure how I was gonna do that and what format, but I was interested in trading and investing from a young age. Read, you know, market wizards, you know, followed the careers of the top traders at the time, applied to every hedge fund I could find. And I was lucky enough to answer a newspaper out of all things when Schoenfeld Securities ran a newspaper ad in Chicago when they opened up that office and it was the one and only time they actually ran a newspaper ad. So I was lucky that I was following the want ads every week…
Barry Ritholtz: I recall seeing, you know, traders wanted Schoenfeld Securities. That’s right. They were down on Wall Street back in the mid nineties. So you begin trading for Schoenfeld in the mid 1990s. What was the trading environment like? What were you doing for them on the desk?
Dmitry Balyasny: Well, at the time, they were looking for people who didn’t have a lot of preconceived notions and kind of systems and strategies that they really thought worked because they wanted to start them from scratch and kind of teach them their methodology, which was working well at the time. And that fit me very well because I was making a lot of money for at the time in commissions as a broker. But I was promptly losing at trading because I didn’t know what I was doing. From a trading standpoint,
Barry Ritholtz: You had to support your trading habit with commission sales.
Dmitry Balyasny: Yeah, exactly. Exactly, exactly. And so I would give people lots of great advice and then proceed to go do the opposite and, and my own trading. So I needed to go somewhere to learn a method that had more structure and discipline. And so they started you with a very small amount of capital, but, and very tight risk limits in terms of, you know, what you could trade when you could trade how, you know, what size you could trade. And from there, once you showed some proficiency, your risk box would expand,
Barry Ritholtz: Meaning more capital, little, little looser rains. That’s right. On what you could do when that’s right, how long you could hold things.
Dmitry Balyasny: That’s right. And so I started with, you know, very short time periods, very small risk, didn’t make any money for the first year, which was difficult because the salary was zero. But after that I started kind of getting the hang of it and making money pretty consistently.
Barry Ritholtz: How did you work your way through the various roles at Schoenfeld? ’cause eventually you end up allocating for their internal funds, right?
Dmitry Balyasny: Yeah, so it was a almost completely flat management structure. So at one point there were over a thousand people on the trading side. Wow. And there was a handful of people in senior management and, you know, virtually no people in middle management. It was very, very flat. And so you were basically a trader. You could run a group of traders or you were just managing and not really trading. And so I kind of worked my way up from a pure trading position where after I was successful for three or four years, I went to Steven and asked him if I could start hiring people to trade some of my risk. And he was kind enough to say, sure, if you’re willing to pay for them, you can hire them. And that was good enough for me. And so I did the same thing. I ran an ad in the paper and I started hiring the initial traders, some of whom are still with us today, 25 years later. Wow. So, and then I would allocate some of my risk to them. And then as that became more successful, I hired more traders, eventually analyst, eventually portfolio managers, and we spun off into a division. And while I was doing that, Steve gave me the opportunity to co-invest in a portfolio of hedge fund managers, external managers that we would allocate to. And that was a great experience. I got to meet a lot of the top hedge fund guys at the time.
Barry Ritholtz: So from building a whole division at schoenfeld, what led you to found Bally Os Asset management?
Dmitry Balyasny: I was always very entrepreneurial into, so again, it was like a very flat firm. So I always felt like I was building my own business. And our strategy started to divert from the rest of the firm. Like we became more fundamental. We were holding things longer, we needed to meet with company management, so we needed sell side coverage. And so that led to separate office space, separate strategies, different types of PMs and traders that we wanted to hire. And eventually it led to needing to take in external capital because it was a more higher capacity, you know, type of strategy that demanded external capital. And so we gradually moved from, you know, an internal group to a division, to a proprietary funded, you know, hedge fund to a traditional, you know, externally funded hedge fund over a few years.
Barry Ritholtz: So we’ll talk a little later about some of the technology that you guys have built internally, but mid nineties had to be an incredible environment for trading, and it seemed like every month it was a whole different set of technology that came down the pike. Tell us about your experiences in the nineties and are there any parallels to what’s going on today?
Dmitry Balyasny: Well, I think the world has moved, you know, tremendously in terms of the trading technologies that, that people are using today. When I think about, at the time that I first started as a broker, that’s really gonna date me. But we had, you know, one monitor that would be on a little carousel that you would spin around between four different brokers when you needed a quote, right? And when I started trading at Chfa, we had a person whose job it was to be the printer reader. And so you didn’t get your fills electronically, you would get your fills coming back on a printer, and some poor guy’s job was to read out your prints, you know, so you would know where you got filled. So, you know, you contrast that with all the AI and data, you know, technology today that, that we and others use for, for trading and investing.
And it’s just, you know, tremendously different world from the overall kind of technologies coming through the pike. The internet, I would say was, you know, a bigger change in terms of going from, you know, very little interaction, I would say with, with technology for most companies at the time. And, and really most individual people to, you know, tremendously kind of jumping in and trying to figure it out. Although I think AI will likely be a larger, you know, more substantive change over time. We’re coming from a place where everybody’s already, you know, enmeshed in technology in so many different ways, whether you’re an individual with your, your phone, your computers, your laptops, or you know, your, your meta glasses, et cetera. Or a company with, you know, zillions of engineers. So I think it’ll be more profound over the long term, but the change feels a little bit less than it did at the time.
Barry Ritholtz: I mean, there’s no doubt the internet was a sea change. Being able to plug into the hive mind was huge. Mobile was pretty big. But it sounds like you’re saying artificial intelligence has the potential to be even a bigger change agent than
Dmitry Balyasny: Yeah, I think so. I think over time, I think in terms of actual usefulness over time and ability to make you better and smarter in lots of different tasks at work, at home, et cetera. I use these apps, you know, every day and they’re still, you know, very new and rough. So you, but you could see at the rate of improvement, if you project it out and you think about like where these are gonna be in 5, 10, 15 years, like, I think it’ll be, you know, pretty transformative.
Barry Ritholtz: One of the things that really separates Bally, the asset management from many other large multi-strat hedge funds are the amount of technology that you develop internally, tools, apps, research databases. Tell a little bit, tell, discuss a little bit about what’s it like to constantly being on the bleeding edge of technology. Sure.
Dmitry Balyasny: So this was a big evolution for us. I would say over the last, you know, 6, 7, 8 years, first 15 plus years, we mostly used external technologies and we had a pretty small internal tech team. And the idea was basically give people all the support that they needed, all the supporting type of tools, but do as much off the shelf as you can. And over time, as we expanded different strategies and added, you know, macro and commodities and quant and these more technologically sophisticated strategies, we really found that we needed to build a lot more things internally. And so now today we have 500 plus people in technology, another a hundred plus people in, in data teams and AI teams. And we build a lot of really outstanding tools that not only support the investing teams, but really enable a lot of the investing functions, whether it’s trading, research, risk, even operational in some aspects. When we have folks come over from other, other firms, a lot of times they’re, we, because we don’t really advertise it that much. A lot of times people are kind of blown away by some of the things that we’ve developed.
Barry Ritholtz: So when I think of technology, I think of things, when you say trading, execution, the ability to get best execution, but risk is a big challenge. How do you identify how much risk is within a portfolio? And given that you’re multi-Strat, how much do the, does the risk cancel each other out? How do you do that analysis? That seems like, yeah, a moving target, it,
Dmitry Balyasny: It’s really important. So first, the overall philosophy, right? Like this is a slugging type of business, right? So if you, if you contrasted with like high frequency trading, which is a hit rate type of business, right? You’re gonna have 99% of your trades or whatever are gonna be profitable or a tiny loss, right? Right. But small profit, tiny, tiny, tiny, and repeat, repeat, repeat, right? Right. This is more of a slugging type of business. So if we have PMs and we have 170 investing teams at the moment, right? When you hire
And so when you hire an investing team, chances are depending on their track record, maybe 75% of ’em will wind up working out. If they have a lower track record, they’re coming as like a former analyst making a transition to the pm Maybe it’ll be 50 50. But if you can control the risk, you might lose, you know, 10 million, 20 million, 30 million on somebody who doesn’t work out kind of life to date in their performance. But the ones that do work out, you’re increasing their capital, you’re growing their team, and they’ll hopefully be with you for 10, 20 plus years. And you might make, you know, hundreds and hundreds of millions off of them, right? So how that plays into risk, right? In order to enable the slugging, you have to have very well defined risk boxes within which people will operate to enable them to bet on the things that they’re really good at betting on, and try to exclude as much of the other stuff as possible.
So for every strategy we’ll have, you know, stops, we’ll have vol targets, vol limits, we’ll have stress limits, liquidity limits, et cetera. And you create this box that’s completely transparent and in partnership with the portfolio manager that you’re hiring, and customize it and iterate it. And then as their strategy evolves and there’s new opportunities, you’re, you know, adding to it, subtracting from it all the time, et cetera. But the idea is to create this, this, you know, platform for them within which they can create like a very steady growing, you know, alpha stream that really plays to their individual strengths.
Barry Ritholtz: You know, you mentioned market wizards at the beginning, and I can’t remember, I read all of them over the years, the first one a couple of times. I don’t remember which traitor it was, but the thing that stayed with me was it your win-loss record isn’t what matters. It’s how much do you lose when you lose relative to how much you’re gaining when you win? Exactly. And, and you could lose three quarters of the time if you’re losing a little bit. But the winners are big winners. Yeah. Net net, that’s a big win. Yeah.
Dmitry Balyasny: We find our, it, it, it varies by strategies, but if you think about equities and equities, we find portfolio managers who have hit rates in the fifties with decent slugging could be very, very good, right? If somebody’s got a hit rate in the upper fifties with decent slugging, like that’s, you know, that’s an all star or somebody could be more like 50 50, but they have very good slugging, you know, that that works. It’s hard to find somebody with, you know, 25% hit rate and enough slugging to kind of overcome that. ’cause there’s just, there’s just too many reps,
Barry Ritholtz: Too much churn.
Dmitry Balyasny: But in some other strategies, if you have, you know, commodities for example, or a directional macro there, you can have like even a lower hit rate if they’re very good at sizing, right? Because they have a smaller number of bets at any given time and they’re trying to find like a few larger, bigger trades.
Barry Ritholtz: Pyramid the winners ride the trends all the way out. Really interesting. Yeah. So you start the firm in 2001, really the beginning of a lost decade. We didn’t get back over prior highs in every asset class pretty much till 2013. What was it like launching right into the teeth of that.com collapse?
Dmitry Balyasny: It was a great trading environment actually. So we, we did very well. At the time we were running a lot less capital. We started with $40 million. So, but the, the markets were less efficient. We were predominantly equity long short. There was a lot of dispersion, there was a lot of things that were unwinding from the bubble in both directions. We were able to take advantage of that and really grow the, grow the business.
00:16:53 [Speaker Changed] What was the biggest surprise to you in terms of the direction the business grew and evolved?
00:17:00 [Speaker Changed] I would say in those years, there wasn’t anything particularly surprising in, you know, 2008 we made people a little bit of money, but we had 50% redemption. So that was a bit surprising. Hmm. And not particularly pleasant.
00:17:17 [Speaker Changed] They people just, clients just panicked. Yeah. And said, I need liquidity.
00:17:20 [Speaker Changed] Well, because they need liquidity because, so we didn’t, we chose not to gate people, although we had the, the option in our docks, but we, we decided we were liquid and we actually went to cash in Q4 of, of oh eight.
00:17:30 [Speaker Changed] Did, did that cash come flying back in oh nine?
00:17:34 [Speaker Changed] Yeah, it took a few years actually, but eventually, yes, eventually we got some credit for that. But
00:17:38 [Speaker Changed] If, if you’re positive in oh eight, what was oh eight down 37%, something like that. Yeah,
00:17:42 [Speaker Changed] We’re like 50 bucks or something.
00:17:43 [Speaker Changed] Oh really? That’s a win. Anything in the green is a win. That was
00:17:46 [Speaker Changed] A win. So that was surprising, but outside of that, it wasn’t anything too crazy.
00:17:51 [Speaker Changed] Coming up, we continue our conversation with Dmitri bni discussing what it was like building BNI asset management into a powerhouse. I’m Barry Riol, you listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Dmitri bni. He is the founder of asset management running about $28 billion in various strategies. And currently your title is Chief Investment Officer. How do you balance that role while simultaneously running a firm of 2300 employees? Well,
00:18:42 [Speaker Changed] I think number one, I have great partners and, and great management team, so that helps a lot. We have 20 partners today and a lot of top senior managements across all the departments. Besides that, I don’t think there’s a tremendous amount of different difference in the hedge fund business between being a CIO and a CEO. It’s kind of really commingled type of function because what are you doing as a CEO? Like you’re trying to figure out where to make money in the hedge fund, right? So that’s basically how I spend my time is like trying to optimize our investment strategies. And that really includes pretty much everything you need to do from a business standpoint. You know, how do you get the best people? Where do you have edge? How do you build your competitive mode around a strategy? How do you break in and wedge into a new strategy? And then how do you grow it from there again, that it’s gonna go down to finding the best people and enabling them to execute in that area. How do you support them with the best infrastructure and technology? So you have to work with all the departments to figure out how to, how to do that. So
00:19:49 [Speaker Changed] The, the one thing that continues to surprise me doing these interviews is how many people have said talent acquisition is absolutely the single most important thing. Yeah, they do. It sounds like you’re in that camp as well.
00:20:02 [Speaker Changed] Definitely. It all start, it all starts with talent, right? And the talent starts with why are they gonna come to you, right? Like, how are you gonna differentiate? And that was always kind of the starting point from 25 years ago. Because even at that time we were competing with firms that were, you know, 25 times our size, right? And so how are you gonna compete? And you’re not gonna write the largest check for somebody to show up, right? So you really gotta compete on enabling them to be the most successful over time, right? So that’s, you know, the insights, the collaboration across strategies, the culture that, that you can foster, helping them build their teams, helping them build the resources and infrastructure around them. Coaching, learning from other people’s mistakes, you know, having a very transparent environment. All these things that each individually might not be that important, but when you add them all up, it really makes the difference over the arc of somebody’s career.
00:20:57 [Speaker Changed] And, and to put a little flesh on those bones, ballet asne asset management has won numerous awards in terms of best places to work in money management, including taking the top award from pensions and investments, best places to work. How much of this is comp and how much of this is corporate culture beyond just the dollars?
00:21:21 [Speaker Changed] I think comp is always part of it. Like you certainly have to be competitive and you want to run a meritocracy. So the top people that are really driving the performance of the fund on the business side and the investing side should be super well compensated and have partnership opportunities. But besides that, I think the culture can lead to the performance, right? The culture is not just, it’s a nice place and people are nice to you, like that’s great, but if you have like a culture that’s really, you know, driven, but at the same time collaborative, right? And where people are collegial but they also push each other and they’re also constantly trying to figure out like better ways of doing things right. And wanna succeed themselves and be the best, but also they want the person next to them to succeed and make the firm better, right? Like if you can create that type of culture, like that really is one that high performers are gonna wanna work in and thrive at.
00:22:18 [Speaker Changed] Hmm. Really, really interesting. So, so let’s talk a little bit about high performance. You operate a multi-strategy platform. When I hear multi-strat, I think fundamental equity, macro commodity slash futures trading arbitrage, systematic quant. Yep. You got it. Am I missing any that, that’s a nice list.
00:22:40 [Speaker Changed] No, those are, those are the major strategies. They all have lots of sub components. So you know, we have an arbitrage business for example, that will include, you know, converts and credit long, short and merger arbitrage and you know, a dozen different strategies, right? And commodities. We’ll have folks that are trading futures, directionally we’ll have folks that are doing a lot of RV type tradings. We’ll have physical commodities now that we’re building out. So all these strategies have lots of sub strategies associated with them, but generally that’s, you know, the right idea and you’re constantly trying to enable the next set of strategies, right? If you can execute well in the ones that you’re in this year, you have the option to figure out how to expand them, which might be more dollars in the stuff you’re doing well, but also what does that give you the right to compete? And that’s adjacent and we’re always trying to kind of figure out what is the next thing.
00:23:38 [Speaker Changed] Hmm. Really interesting. There was an article, I’m trying to remember which publication I saw it in that claimed you hired a trader with a $50 million pay package from a competitor. Is that remotely close to the sort of pay packages and how much does a trader have to generate in profits to qualify for a $50 million package? Sure.
00:24:01 [Speaker Changed] So you have to remember that the size of capital the folks are running these days has grown a lot. And so what publications like to do to get people to read the articles right, is put in large dollars as opposed to, you know, percentages,
00:24:15 [Speaker Changed] Denominator, blindness, they leave out Yeah. The context that it just looks like a big round number.
00:24:21 [Speaker Changed] Yeah. So you have like these headlines all the time. One on how much people get paid to how much somebody made or lost. And you know, if you have something that says, you know, trader X, YZ lost, you know, $50 million, right? And that’s like, wow, that sounds like a giant number. But you have to remember we’re managing 28 billion, right?
00:24:37 [Speaker Changed] That’s a normal draw down in a bad
00:24:39 [Speaker Changed] Week. Yeah. I mean a typical portfolio manager right? Might be managing a couple billion in, in gross market value, right? Right. So, you know, that’s two point a half percent, which is not good, but it’s not, you know,
00:24:50 [Speaker Changed] It’s not a disaster.
00:24:51 [Speaker Changed] No. Like that’s kind of the fluctuation that that, that you’re gonna get, right? And so from a hiring standpoint, it’s the same thing. If you’re hiring a, a trader with a $50 million pay package, for example, one that pay package is composed of lots of different things. It’s not all, it’s not just, you know, here’s 50 million
00:25:07 [Speaker Changed] Including his b and l for sure. Yeah.
00:25:09 [Speaker Changed] Like that includes, you know, it might include a guarantee for, for the time that the person is out of the market, it might include budget for hiring out their team, right? A lot of these teams are five 10 in some cases 15 people, so that’s expensive. Right? And it also might include extra upside incentives, which are only paid out if the person delivers a certain amount of p and l. So, you know, they kinda like print one number, but it, but it’s actually like lots of different components. Usually with that type of number, you’re budgeting that person to generate p and l of a hundred million plus a year.
00:25:46 [Speaker Changed] That’s a good investment vestment,
00:25:47 [Speaker Changed] We should have a track record of doing that. And if, and if you’re right on that, that leads to very healthy returns net to our investor, which, you know, we’ve delivered over time
00:25:56 [Speaker Changed] That that’s the game. Yeah. You have over 300 analysts and 170 PMs. How many different teams do you, are you guys running 170 PMs? Is that 170 specific strategies? So
00:26:10 [Speaker Changed] It’s 170 teams. So within the equities business for example, you’ll have like 70 teams, which sounds like a lot, but you have to remember that that’s split across, you know, three distinct equities businesses that all have like a different front end. And it’s also split across offices all over the world. And folks are, you know, based in London trading Europe based in Hong Kong or Singapore or Japan, you know, trading Asia. So it’s still fairly specialized. And each one of those teams will have a mandate where this is the group of stocks that they’re focused on in the case of equities, or this is the macro strategy in, you know, RV or emerging markets or rates or directional that they’re focused on in macro or you know, this person focused on, you know, trading gas or trading power and, and commodities. And they’ll build a team of subspecialists analysts around that.
00:27:03 [Speaker Changed] Hmm. Really interesting. So I mentioned earlier you’ve scaled up to $28 billion. Where does the general management strategy and style begin to get altered? Just by the size? At what point does that, we’ve seen a number of farms at a hundred, $200 billion and just the sheer heft becomes challenging. You can’t generate alpha at that scale, or at least not the same alpha. How large can this get comfortably?
00:27:37 [Speaker Changed] It’s, it’s hard to say. I think that’s a function of how markets develop over time. So if you have more companies, active capital markets, the world is growing, more places to trade in, you know, more credit instruments, more equity instruments, more macro instruments, then there’s, there’s kind of more to do. So if I think of the subset of strategies that we trade today, a lot of these things weren’t significant businesses, you know, 10 years ago or 20 years ago. So a strategy like merger arbitrage has been around a long time. A strategy like index rebalancing really got going the last 10, 15 years, right? You know, power trading in the commodities markets, right? Not a lot of people doing that 20 years ago. So a, a lot of these things go from very small strategies to much larger markets, you know, over time. And that enables you to run more vol there, you know, increasing your capacity.
00:28:33 The way that we go about it is every year and we update it throughout the year. We measure our capacity for, you know, this year and the following. And so we look at bottom up by each team, like how much can they grow at a steady pace? We don’t want people to grow too fast and we don’t want people to stay stagnant, right? Like you wanna find a healthy pace of growth as you’re expanding your coverage, as you’re getting used to running larger dollar amounts and dealing with those constraints. And we look at the recruiting. So where can we expand? Who is coming in? What does the pipeline kinda look like? You know, we discount that ’cause not everyone’s gonna work out, but you add those numbers together and that gives you a sense of what the growth path is likely to be. And over time that’s averaged about 20, 25% a year, you know, capacity growth.
00:29:23 [Speaker Changed] So you mentioned you’re looking both internally and externally at recruiting. When you’re looking internally, how do you identify and nurture talents? How can you tell when, hey, this person started out as a trader or a pm but they really seem to have skills and can manage a larger group? Yeah. That, that seems like a really challenging thing to
00:29:43 [Speaker Changed] Do. We, we spend a lot of time on that and I think that’s one of the keys to how we’re gonna grow from here on out. Like recruiting is super important, but being able to develop your talent, I think as you have scale and you have more people to learn from, right? That becomes a bigger and bigger slice of your senior talent pool over time. So when we started off and, and for a long time, the vast majority of RPMs were recruited, you know, externally today, like inequities business, which is the most mature of our strategies, 25% in the US are internally promoted. And I wouldn’t be surprised if that was 50% in a, in a few years, right? Because now you have more senior PMs from up and coming analysts to learn from more programs that they can participate in to work their way up if that’s the path that they wanna choose.
00:30:40 Which, you know, that wasn’t available. You didn’t have the mentorship and the tools. So how do you help people and select, it’s both quantitative and qualitative. So on the quantitative side, we try to measure as much as we can. So we have data on people’s recommendations, right? Not just on the ultimate trades, but the data on their recommendations. And you see what is the performance and we track that, right? So you try to disaggregate the performance of the analyst from the PM and see if who’s driving value and if it’s a particular analyst who’s doing great, like we wanna make sure that person is getting more authority, more autonomy, and more leeway over time, right? More growth opportunities. And the best growth opportunity for them might be with the team that they’re on. They might be become a more senior analyst, they might become a partner on that portfolio, or they might raise their hand at some point and say like, Hey, I want to be a pm.
00:31:38 And we wanna make sure that we facilitate a path to that if we agree that they are talented. And part of that is in partnership with the PM that they’re working for. You don’t want the person to just leave and go somewhere else to take that opportunity. You wanna make sure that they replace themselves, they work in partnership with the pm maybe they co-run something for a period of time and then they have the opportunity to do their own thing. So it’s, it’s definitely a combination of those. And it’s the same thing on the business side. Like you’re always on the lookout for emerging business leaders who can manage others. And we have a, a lot of leadership development that we do and also us utilizing external coaches as well to help with that.
00:32:17 [Speaker Changed] Hmm. That’s really interesting. External coaches, you mentioned mentorship. How important is mentorship for to the firm and how significant was it in your own professional journey? Well
00:32:29 [Speaker Changed] That’s where a partnership culture is really important, right? So I think it’s still fairly unusual in, in hedge funds, especially in our type of fund. And we’ve always wanted to build a true partnership where people own real equity in the business. You know, they buy in with their own money, they participate in all the economics of the business. And we have partners who are coming from the business side running a particular department. We have partners who are managers, heads of strategies on the investment side and we have portfolio managers. And so that dynamically creates like a culture where folks are incentivized to make the firm better, to make someone else better. And they’re obviously much more willing and excited to be mentors in those situations. And I think when you start with that, and I started with, you know, two of my co-founders, Scott and Taylor, you know, 20 plus years ago in a partnership type structure. And I think that then flows down through the organization. And so now today we have mentors for, you know, interns coming up, right? And you have mentors for, you know, younger associates in different areas of the firm. And then it goes, you know, all the way up and down the firm.
00:33:43 [Speaker Changed] Huh. Really, really
00:33:44 [Speaker Changed] Quite. And so for myself, sorry I didn’t answer that question.
00:33:46 [Speaker Changed] No, but you did. Yeah. Let’s hear about your own mentorship.
00:33:49 [Speaker Changed] I mean I certainly learned a lot from Steve Schofield working, working with him at the time, and got really good opportunities there. I think at a young age it was more, you know, certainly work ethic from, from my folks and then it was a lot from sports, right? I did a lot of, you know, basketball and you know, TaeKwonDo and things like that and seeing kinda what was possible. Like I remember as a kid, like watching TaeKwonDo demonstration where our instructor master shim, it was like a very slight Korean guy. It was probably, I don’t know, 140, 130 pounds. And he punched through a stack of seven cinder blocks punched through and you know, seeing that as a kid, you and I went to like examine the bricks after he did that and like tried to punch it and I was like, wow, that, you know, that hurt. And just seeing that just kind of shows you kind of what’s possible because every day after practice you would see the guy sit there punching a lead slab, you know? Yeah. For, you know, I don’t know, 30 minutes. Wow. Right. And it just adds up over time.
00:34:58 [Speaker Changed] Reminds me of the demonstration, this how old I am Bruce Lee did with the one inch punch. Yeah. Do you recall that?
00:35:04 [Speaker Changed] Yeah. I was just showing that to my kids the other day.
00:35:06 [Speaker Changed] Ju-just an inch and he’s also Yeah, 40 something fly, soaking wet, one 40 and Right. It’s amazing the focus and power that you can create in such a small
00:35:18 [Speaker Changed] That’s exactly the thing. It’s, it’s focus and perseverance. Right?
00:35:22 [Speaker Changed] Really quite, quite fascinating. So let’s talk a little bit about the current environment. I was kind of fascinated by something you told your team, you guys are trading too much and not investing enough. Explain.
00:35:39 [Speaker Changed] I think one of the keys to enduring success in the money management business is finding a balance between trading and investing, right? And you have to be true to your DNA and obviously the type of firm that that you’re at, right? But within each type of firm and each type of strategy, there’s always this, you know, tension, right? Because you can’t survive in a hedge fund type model, you know, just being a long term investor and you can’t really scale in a significant growing hedge fund being just a super active trader, right? So you need some combination of the two. And so what we try to do both at the individual level and at the strategy level is help folks find that balance. Part of it’s just seeing what’s working and part of it is a lot of statistical analysis that we do on each of the, each of the teams.
00:36:46 So when I made that comment, we were coming out of a period where I noticed that folks are really trading a little bit too much in the fundamental, you know, equities business and we’re like a little bit overly focused on each data point or we’re kind of missing the forest from the trees, right? And we were chopping ourselves up a little bit too much, missing some of the bigger winners and creating a lot of trading slippage costs. So we really worked hard with the teams to find more balance with that. Like find some positions that you can really be a longer term investor in. It doesn’t have to be, you know, years and years, but it could be, you know, months and quarters and supposed to days to weeks and find investments where there’s multiple ways to win where you’re not playing for one particular data point, you’re playing for a whole series of data points that’s gonna revalue you know, that security over time. And that’s been, you know, very, very effective I would say.
00:37:46 [Speaker Changed] So how much of this is a function of the environment that we all find ourselves in at any given moment? 22 was a double digit down year for stocks and bonds, but it was followed by 23 and 24 both years back to back plus 25%. Yeah. At least for US equities. Yeah. If, if you’re shortening up your investing timeline in a plus 25% year, is it just as simple as, hey, you’re leaving too much money on the table by trading? Well,
00:38:16 [Speaker Changed] For us it’s a little bit different because we’re running pretty much market neutral and in almost all the strategies. So if you’re running market neutral, whether the market’s up 25 or down 25, like you’re always gonna have half your portfolio that’s losing money on a, on an absolute basis. But you’re trying Yeah, but you’re trying to make the spread, right? Like you’re trying to make the the spread between your lungs and, and your shorts, right? So what influences are trading more than the absolute direction of the market is the volatility in the market. So if you’re in a period that’s very high vol, you’re naturally gonna be trading more to manage your risk and also because you’re getting stopped on things or they’re hitting your targets like fairly quickly. And high vol is associated with, with fundamental events like changing very quickly
00:39:01 [Speaker Changed] 20, 22, 500 base points
00:39:03 [Speaker Changed] Of fed hikes. Yeah. Or like the spring. So you, you, you, you’re gonna trade more during those April
00:39:06 [Speaker Changed] Of
00:39:06 [Speaker Changed] 2025 Exactly. Versus periods where things are sort of slowly, you know, trending and that’s okay, but over the course of the year, right, those periods are gonna balance out. Some will be vol, some will be lower vault. You want to find like the right amount of turnover to where you can capture your alpha, capture those relative mispricings and move on to the next thing that generate a strong sharp combined with like enough capacity, right? You can have a very high sharp and low capacity that doesn’t really help in a a scale, you know, hedge fund, right? You can’t eat your sharp, but you need enough sharp to be consistent putting up a p and l that kind of matters for the firm, that matters for the team that you’re running. And so for every strategy, like we try to come up with like what is a reasonable range, right? And that might be higher for, you know, a tech portfolio manager than, you know, utilities portfolio manager, right? But each of them should have a range that sort of is optimum for their style and we try to help them, you know, find that.
00:40:10 [Speaker Changed] So with the benefit of hindsight, I’m looking back at 2024, a fairly low vol year, Hey, maybe we should be trading a little less and holding a little longer and then 2025 volume spiked and at the end of Q1 and into Q2, all right, you guys can chop it up a little more. Is it just that simple or
00:40:29 [Speaker Changed] Yes. But again, I would say the more nuanced answer would be there’s lots of different types of trades that each person does. And you don’t want any pm doesn’t want their portfolio to just be one type of trade, right? So you might have short term trades, medium term trades, long term trades, right? Structural trades, tactical trades, risk mitigation, trades, et cetera. There’s lots of different types of trades and people run into problems when they get too focused on one kind of thing, right? And then when that thing is no longer working, it’s very hard to then reinvent yourself ’cause you don’t have any other, you know, irons in the fire, right? So again, we’re trying to run a lot of analysis and find like, what is the team really good at? Make sure that’s being expressed in the portfolio. Make sure there’s enough balance of different types of trades and that they’re not betting on things that they don’t really have views on that can take them out of the game before the things they do have views on payoff.
00:41:31 [Speaker Changed] Coming up, we continue our conversation with Dmitri bni, co-founder of BNI Asset Management, discussing the current market environment for trading. I’m Barry Ritholtz, you are listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in business on Bloomberg Radio, and some of you are watching this on YouTube. My extra special guest this week is Dmitri bni. He is the co-founder of BNI Asset Management, a multi-strategy hedge fund running over $28 billion. Do the different teams hedge their own positions or is that a function of firm-wide risk management and, and somebody else?
00:42:28 [Speaker Changed] We do both. So each team is responsible for running within their risk parameters. So they’ll have, you know, in the case of of the long short portfolio manager, they’ll have a idio risk, right? How much of your risk is outside of factor risk, right? And that should be, you know, 60, 70, 80% of your risk depending on the portfolio and the, and the style of the pm. But it’s basically the vast majority of somebody’s risk is their stock picking alpha, right? And depending on their skill and things like picking the right industry or trading the directionality of the market around, we might give them some more room or less room. You know, to do that, if you’re a directional macro trader, you’re gonna have, you’re not gonna have that constraint because you’re paid to directionally bet on the market, right? But you’re gonna have other limits like stress limits, right?
00:43:19 So if your directional bets don’t work out and there’s a gap tomorrow, you know, how much are you gonna lose in a stress scenario? So you have to, if that number is too high versus the agreed upon risk limits, you have to do something in your portfolio to hedge, you know, that that risk, right? So it’s a little bit different for each type of strategy, but the common philosophy is you wanna be able to run it to maximize your return while staying in the game, right? And delivering a relatively steady source of alpha over time.
00:43:53 [Speaker Changed] It, it’s interesting because they’re called hedge funds, but many hedge funds don’t hedge. And it sounds like BNY really makes an effort to make sure that as a risk management approach, anything that’s potentially downside, as you said, a gap has to be hedged. Yeah,
00:44:12 [Speaker Changed] I mean you’re looking for ab consistent absolute returns. So how do you get that right? You need specialists who have an edge in a particular strategy, right? And they need a portfolio construction or risk management approach that maximizes that edge, maximizes the capacity of dollars they can earn off of those advantages that they have, and minimizing the things that can create large drawdowns that they don’t really have, you know, edge and betting on. And so that’s the analysis that you’re constantly running and iterating on with the teams.
00:44:48 [Speaker Changed] So I heard a, a fund manager say, we have no competition because none of us in our space have market share. For the most part, we’re all less than 1% market share. How do you look at the competitive environment for other multi-strat firms? It seems like animal up and you get a decent number, but there are, what are there 11,000 hedge funds?
00:45:12 [Speaker Changed] Yeah. The way we think about it is we’re not really competing with 11,000 hedge funds. So I think what you’ve seen over the last, you know, 20 plus years is a consistent market share gain from the larger platform firms, right? And now I think there’s really like four or five that, right? And if you look at the private equity industry, it’s pretty similar. Like there’s probably more than 10,000 private equity funds, but the vast majority of dollars, vast majority of alpha, the vast majority of people are really at, you know, half a dozen
00:45:47 [Speaker Changed] Fathead long tail.
00:45:49 [Speaker Changed] Yeah. So the hedge fund industry’s really headed in that same, you know, direction. So we really compete with, you know, half a dozen firms. And now there’s also competition from some of the high frequency firms that are kind of going upstream to some of the longer duration discretionary strategies. And, you know, we’re doing more quantitative stuff going the other way, right? So maybe there’s a couple more, but you’re really competing with half a dozen to a dozen firms that are running, you know, specialist strategies at scale. And then everyone else in those strategies you kinda look at as like a generalist, you know, participant. And it’s great to have generalist participation. We want as much as possible from, you know, retail, from other funds, from, you know, prop, from banks. Like, like the more liquidity there is, the more generous participation there is. You know, I think the better for specialized firms.
00:46:39 [Speaker Changed] So the current environment kind of hard to compare to any other era. On the one hand we had a fairly robust economy coming into 2025 following a whole bunch of fed hikes. Now we’re expected to resume fed cutting by the time this airs. Were probably 25 paces points lower than where we are today. The whole tariff start stop. And now back to the litigation the Supreme Court agreed to take to that, it looks like inflation is starting to percolate a little bit as the labor market seems to soften. How does the firm look at all of these macro cross currents? Are they significant or are they just background noise or somewhere in between? Well,
00:47:23 [Speaker Changed] I would just say it’s a really interesting fluid environment, particularly for, for macro and, and long short equities because there’s just so much change. So if, if you think about like what is the worst environment to be in? It’s not when everything is clear. Because when everything is clear, there’s like no volatility, there’s no change, right? It’s hard to get any dispersion. So that environment might be good for passive strategies, but not, not good.
00:47:51 [Speaker Changed] Sideways markets don’t really help.
00:47:52 [Speaker Changed] Yeah. Yeah. So now there’s a ton of money sloshing around trying to figure things out. And that’s a, that’s a great environment, right? So if you think about this here on the macro perspective, right? You went from a very, you know, positive view in January of how everything was gonna play out to, you know, kind of the tariff mess and very pessimistic view of how, you know, the US was gonna play out and, and what was gonna happen with markets we’re down 20% in the s and p briefly, and now you’re, you know, right back up and still, like a lot of things kinda swirling around as to how it’s gonna play out. To your point on rates and inflation’s been a lot of change. It’s created a lot of relative value opportunities as you get different hiking cycles, different cutting cycles and in different markets, like that’s great for macro in equity land, you have all the changes, not just from the economy but from AI and how that’s impacting tech, but also impacting companies that are customers or gonna be run over because of ai. Like creates great long short opportunities. So I think it’s a really fascinating market. I don’t have any giant, you know, prediction of how things are gonna, you know, play out tomorrow. But if you have strong teams who are on top of the latest data points and you can figure it out a little bit ahead of the next person. Just tremendous opportunities. Like this last week, Oracle report a quarter, you know, giant company. Crazy
00:49:18 [Speaker Changed] 37%, right? For for a giant,
00:49:20 [Speaker Changed] Giant company,
00:49:21 [Speaker Changed] Right? Giant company. Amazing.
00:49:22 [Speaker Changed] I mean, when was the last time, you know, a company like
that moved 35, 37, 7
00:49:26 [Speaker Changed] Unbeliev quarter, unbelievable, right? the.com collapse and it was in the wrong direction.
00:49:29 [Speaker Changed] Yeah. I mean, amazing, right? So if you could figure that out or, you know, I think a, some of these, you know, FinTech companies circle went public, right? Usually public offerings are like pretty efficiently priced, you know, this one goes up 400% after it starts trading, right? And then it goes down 50%, you know, and a month after that. So in the first three months, like think of the travel and the stock. So amazing opportunities, right? If, if your teams can figure that out. So, you know, we’re out there working hard doing the research and you know, figuring out the market.
00:49:59 [Speaker Changed] So it doesn’t sound like you think the AI theme is overdone, but it certainly is creating a little more volatility and a little more opportunities.
00:50:08 [Speaker Changed] Yeah. I think the reality when we look back, you know, in 10 years or in 20 years in the actual outcomes that have happened, it’s probably under hyped really in terms of the stock re of the stock prices across the board. Like that’s harder to say. Like there’s some that are probably way over hype. There’s some that’re probably under a lot of companies have moved from one bucket to another where they were in a loser bucket and actually they turns out maybe they’re a winner or vice versa, where people got too optimistic and maybe they don’t really have anything that’s defensible and differentiated. So I think there’s a lot of alpha to be gained in figuring that out. And it’s hard to find things that are, you know, super bargain priced that have anything to do with ai. But in terms of like the longer term potential to really transform how people work and how companies work, I, I, I think it’s probably under hyped. I,
00:51:04 [Speaker Changed] I I, I’ve been fond of, of thinking of this in terms of, hey, the magnificent sevens certainly have been overhyped, but the magnificent 4 93 people haven’t really been paying attention to
00:51:17 [Speaker Changed] That. Well, yeah, I mean, it’s a good question. Like have they been overhyped, right? If you look at the dollars in earnings and cash flow that they’re generating pretty impressive in the market caps that they’re growing. Like I think they’re, you know, executing amazingly, amazingly well. I think it’s quite different from what we had in the, in the.com era where companies weren’t really making, making money. So that’s one difference. The other 4 93, I think there’s a lot of, you know, headwinds and tailwinds. So some companies are gonna figure it out, right? And they’re gonna kind of make the leap into the future and figure out how to be much more efficient. And you’re starting to see that in some of the commentary on the earnings calls where margins inflect positively for, you know, the way that they figured out how to leverage the tech and others are gonna disappear, right? So I think it’s gonna create a lot of opportunities.
00:52:10 [Speaker Changed] So the trader in me sees, we’re recording this on the 15th, another set of all time highs. I always learned on the desk, all time highs are bullish. What, what’s your perspective on all time highs?
00:52:23 [Speaker Changed] Yeah, I, I think like you have this two-tiered market that you mentioned where you have the kind of tech leaders and, and the AI leaders and, and everything else, everything else. Companies definitely got hurt more with all the tariff ups and downs or, and inflation ups and downs earlier this year. That seems to be certainly calming down. And the partially, you know, top down as calming down and partially bottom up, companies are figuring out, you know, how to navigate these things and maybe it’s not as, as troublesome as they thought. And so you’re seeing like better execution and probably a little bit more po positivity from companies than you were seeing, you know, certainly six months ago. And that’s starting to get reflected and the market’s broadening out a little bit. But, you know, the largest, you know, tech companies certainly have, you know, tremendous advantages that they’re continuing to press.
00:53:24 [Speaker Changed] So last of our regular questions, what are traders and investors not thinking about or talking about, but perhaps should be? What topics, assets, geography, policy, data points, what’s getting overlooked but shouldn’t,
00:53:39 [Speaker Changed] I think it’s, I don’t know if it’s getting overlooked, but I would say when you think about ai, where it’s going, what are the ramifications for every type of company, right? So at the moment, while AI is making us much more productive and efficient, we haven’t let go of one person because AI has automated their job, right? Like, we’re just hiring more AI people, right? But if you look out, you know, five years from now, is that still gonna be the case? You know, probably not, right? Like some jobs are gonna get automated, right? And, you know, we’re kind of on the, you know, high end I would say of, you know, skills that are necessary to, to work at a leading hedge fund. If you think of like a typical company where there’s a lot of folks doing like very bureaucratic type of things, like a lot of pretty mundane tasks, like all that stuff is gonna be automated. I don’t know if it’s in a year or in five years, like, but somewhere in that timeframe it’s gonna be automated. So when you think about
00:54:36 [Speaker Changed] Starting to SeeThrough, we started with the entry level jobs. Yeah. Under 30 unemployment is like 9.9%. Yeah. Double regular unemployment.
00:54:44 [Speaker Changed] Yeah, exactly. And so as, as you think about that, like what does that mean for every type of company, right? If you, if you’re a company that can really harness that and you could produce your products, your services at a much lower price point, and you figure that out ahead of the competition, like your margins might explode to the upside. On the other hand, if everybody in your space is doing that, like maybe your margins are actually gonna collapse, right? Because everybody’s gonna drive down pricing. And then how does it flow downstream? Like do you need as much office space if you’re gonna have less people in a particular area, right? So like all these kind of things, I think everyone is focused because there is a lot of volatility. Everyone is focused very much on like the next quarter. But if you think out, you know, 2, 3, 4 years, like how’s this space gonna look? Right? And that’s kind of the balance of trading and investing the work. You know, you gotta have one eye on each.
00:55:33 [Speaker Changed] Hmm. And, and before I get to my favorite questions that I ask all of my guests, I have to ask you about some of the philanthropy you participate in. Tell us a little bit about the Atlas Fellowship and some of the other things that you’ve been doing over the past couple years.
00:55:49 [Speaker Changed] Sure. So this was a, a, a program that my wife Rebecca and I started, I think this is five years ago now. We were looking to start an initiative to help kids go to college who were a bit under resourced, maybe first in their family to go to college, et cetera. And as we’re looking at these scholarship opportunities, particularly in finance, we couldn’t find any program that had a combination of internships with scholarships. There were some that had ones that were captive to a particular company, but then you were, you know, beholden to work just at that company forever. But there wasn’t anything that was diverse, right. Where someone could get real exposure across the industry. And so that’s what we started with, with Atlas Fellows, where we give kids who are super bright, driven, merit-based scholarships. Right? So these are like top students in the class a lot of times from diverse backgrounds, from with no connections to finance. Right. And they get scholarships of up to 20 grand a year for four years. And in addition to that, they get fully paid internships at finance firms for all four
00:56:59 [Speaker Changed] Years. Not just your firm, but a Exactly. A broad variety.
00:57:02 [Speaker Changed] Exactly. So we take ’em, their, their first internship when they’re coming outta high school, and that one is typically done at BAM. And they work either on our investing teams, our data teams, our tech teams, our business teams. And then the next year they go to work at a bank, or they go to work at another hedge fund, or they go to work at a prop firm or a VC firm. And every year they, they rotate. And we just had the first cohort graduate last year. They all got jobs in finance, some in Chicago, some in New York. And employers are really competing over the kids. Like they’re super smart, driven, passionate kids. And now they’ve had four years of finance internships at top firms. So I, I think it’s working really well and we’re working to, to scale it
00:57:43 [Speaker Changed] Up. They, they become a hot, hot commodity. Yeah,
00:57:46 [Speaker Changed] Exactly. And just like the fun, like now we got a hundred kids in the program and, and we’re trying to really scale it up to hundreds. Wow.
00:57:51 [Speaker Changed] That’s great. Alright, so let’s jump to our favorite questions that we ask all of our guests. Starting with, we talked about mentorship at bam. Let’s talk about who were your mentors, who shaped your career? You mentioned Steve Schoenfeld, he had to be significant. Tell us about him and anybody else that made a
00:58:10 [Speaker Changed] Difference. Sure. Yeah. I, I think what, what Steven did really well at the time in the firm was it was a super entrepreneurial type of environment. Everyone was kind of in, in business running your own little business, right? And most folks kind of stayed as one man shops, right? As a one man trading unit, right? But I had the oppor opportunity to kind of build that into a unit of, you know, five and then 10, and then 20, and then 30. And then, you know, then we spun off. So just the, the freedom and support, you know, to, to do that was really helpful. Right? And then a lot of business learnings from, you know, seeing how we allocated to different people, seeing how they manage risk. Like that was very, you know, very helpful. And then philosophically, I would say the biggest impact was reading Atla Shrugged in College, which I read in a English class in, in college. And that really kind of articulated a, a moral, you know, philosophical framework around which I think it makes it much easier to build a successful business. Right?
00:59:21 [Speaker Changed] He hence the name Atlas.
00:59:23 [Speaker Changed] Yeah, exactly. The name of our fund and the name of, you know, our, our scholarship program. I think a lot of times people have all sorts of conflicts with, you know, being successful and at the same time, you know, being a good person and, and helping the world. And I don’t actually think there’s any conflicts. And that objective is philosophy in her work. Like really does a good job of laying that scaffolding for people. And I think it makes it, you know, much more fulfilling and less conflicted to also be, be successful in all realms.
00:59:59 [Speaker Changed] So since you mentioned Atlas Shrugged, let’s talk about books. What are some of your favorites? What are you reading right now?
01:00:05 [Speaker Changed] Yeah, that, that’s definitely the number one. The current one that’s on my bookshelf is a fun one. It’s from this explorer. I didn’t know there were explorers anymore, but there are apparently, and we had this guy Mike Horn, at our VC conference. We do like a public private VC conference every year called Elevate. And we had him as a guest speaker. And we, we had two guest speakers this year. We had Steve Kerr, the coach of the Warriors, and we had Mike Horn and Steve went first and he was amazing and a great, you know, stories on teamwork and, and collaboration and work ethic and Michael Jordan’s stories and stuff, currency stories. So it was great. And then Mike had to follow him and I was like, oh my God, how is this guy gonna follow us? It’s a follow, it’s a follow, right? And my partner Scott brought him, brought him on and, and Scott’s created finding like talent that’s, you know, other folks haven’t discovered yet.
01:00:56 And this guy, you know, has circumvented the equator several times around the world. You know, self-powered walking, et cetera. He’s gone to North Pole, south Pole, swam to Amazon, like all these, you know, insane stories. One after another. And he’s, he’s got a book called, I think it’s called Nothing is Impossible, or something along those lines. And you started like, you shake hands with this guy, and he’s not like a particularly big guy, but he like crushed my hand and I go, Mike, how do you get? And he’s 60 years old, how do you get this handshake? Oh my God. He’s like, well I, you know, kite surfed across the Antarctica and that involves, you know, holding a kite across, you know, frozen Antarctica for 14 hours a day as this huge wind is pulling you along. And it’s like, okay, that’s, that’s how you get
01:01:43 [Speaker Changed] Builds up a little grip
01:01:44 [Speaker Changed] Strength. That’s how you get some grip strength. Yeah. But he had like these amazing survival stories and just mental fortitude stories that I think really relate to trading and investing. So he was an awesome speaker. And so I just got his book.
01:01:58 [Speaker Changed] Huh. Have you ever read Endurance the Shackleton story?
01:02:01 [Speaker Changed] Yes, yes. I read it, watched the movie. That one was hard to sit through.
01:02:05 [Speaker Changed] The book is just, yeah. Like it couldn’t be fiction ’cause nothing is believed. Yeah. It’s so amazing. It had to be real. Yeah.
01:02:12 [Speaker Changed] This is along those lines, but less abusive and much more fun.
01:02:16 [Speaker Changed] Let’s talk about streaming. Anything interesting that you’re watching or listening to these days?
01:02:22 [Speaker Changed] I mean, shows I like, I I really enjoyed the Three Body Problem, those on Netflix. That was a fun one. And then
01:02:27 [Speaker Changed] Books, the book is a tough slog.
01:02:28 [Speaker Changed] I read the book actually afterwards,
01:02:30 [Speaker Changed] So it’s a little challenging. It’s a, because it’s originally in Chinese Yeah. Chinese and Transit book. But the show is really, the
01:02:36 [Speaker Changed] Show is really good. And, and the, and the books, the books like the creativity in the books are really fun. Mm. So that was a good one. You know, Yellowstone is great. So the usual ones there on listening to, I think podcasts are like the greatest invention in the last, you know, five, 10 years of, of, not that they weren’t around before, but like popularized in terms of being able to just expand your, your knowledge set in a very efficient way. So I try to listen to as many as I can. I, I listen to, you know, a lot of yours, I listen to a lot of Tim Ferriss’. He’s got all sorts of super interesting people on there that invest like the best ones. There’s a ton on there. So there’s a lot of finance ones, there’s a lot of VC ones I enjoy. I was just listening to one. They had Vinod Kla and then another one with Mark Andreessen, and they’re just like, super thought provoking. And so I, I encourage like all our young people coming up that, that ask just, you know, you have this like amazing resource you could tap, you know, Spotify and, and you got, you know, a thousand different podcasts from World’s Best people in every field that you can listen to sharing their insights.
01:03:37 [Speaker Changed] There’s no excuse to be bored these
01:03:39 [Speaker Changed] Days. No, it’s amazing. I remember when I was coming up and I wanted to hear like, how do hedge funds make money? Right? Like, you couldn’t figure that out. Like if you had no connectivity to a hedge fund. Like how are you gonna figure that out? You read Market Wizards and now what? Right. But besides, besides that, reading all the books that are available now, like the podcast, like amazing resource.
01:03:58 [Speaker Changed] Absolutely. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either trading, investing, multi-Strat hedge funds?
01:04:09 [Speaker Changed] I mean, one is just follow your curiosity, which hopefully leads to a passion of something that you wanna really do, right? Don’t go into finance, hedge funds, whatever it is, because your, your friend is making a lot of money, right? Like, you gotta be interested in the work. Like you gotta be driven and curious and hopefully passionate about what it is that you’re doing because, you know, it’s like pro sports or anything else. Like, just because you know LeBron makes a lot of money doesn’t mean you’re gonna go make a lot of money playing basketball, right? You know, one, you know, he’s six 11, but besides that, like, he’s put in a lot of work over the years, right? And it’s because he loves the game of basketball, right? If you don’t love it, you’re not gonna put in the work and in trading for sure, if you’re, if you don’t love the process and you don’t love sitting there looking at the screen and trying to figure things out, you’re not gonna survive the emotional ups and downs.
01:05:06 ’cause there’s lots of downs in addition to the ups when things work out. So that’s the first thing. The second thing I would say is go to a firm that’s growing, right? And where there’s a culture that where you can learn from others, right? Where you can get good mentorship, there’s top people you can learn from, and you’ll have some amount of access to be able to, to do that. The particular thing that they’re trading or investing or how they’re doing it, the, like, that’s a lot less important. ’cause you, you might change, the company might change. And then the third thing is like, once you’re in a seat, that’s a decent seat, you know, ask for feedback. Like, here’s what I did, here’s what I think I could have done. You know, what do you think? Right? Don’t ask for feedback when the market opens or the person’s like in the middle of a, you know, disastrous day. But when things are quiet, right? Early, late, right lunch hour, like, you know, get, get feedback proactively, right? Don’t sit around waiting for your year end review to see how things are going and, you know, iterate it together with, you know, the people that you’re working with.
01:06:13 [Speaker Changed] And our final question, what do you know about the world of capital markets trading, investing today that would’ve been useful in 1994 when you were first starting out?
01:06:23 [Speaker Changed] I think the things that we’ve been doing the last, you know, five years, I wish I had figured those out earlier. So investing more aggressively across strategies, right? I think we were too equity heavy for too long. We weren’t serious enough about how do you build those strategies outside of equities and not serious enough about hiring top people to manage those areas. And then building like all the tech and the infrastructure that you needed to really be competitive and leading in those areas. So I wish I would’ve figured that out a little bit, a little bit earlier and pushed at it harder. But I think it’s on the, on the right trajectory now.
01:07:13 [Speaker Changed] Dmitri, thank you for being so generous with your time. This has been absolutely fascinating. We have been speaking with Dmitri Beni, co-founder of Beni Asset Management. If you enjoy this conversation, well check out any of the 550 we’ve done over the past 11 years. You can find those at iTunes, Spotify, Bloomberg, here on YouTube as well. Check ’em out. They’re really a great collection of resources. And be sure to check out my new book, how Not to Invest the ideas, numbers, and Behavior that Destroy Wealth and how to avoid them at your favorite bookstore. I would be remiss if I did not thank the crack team that helps us put these conversations together each week. Alexis Noriega and Anna Luke are my producers. Sage Bauman is the head of podcast here at Bloomberg. Sean Russo is my researcher. I’m Barry Riol. You’ve been listening to Masters in Business on Bloomberg Radio.
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