# 21st Century Investing Strategies From Dmitry Balyasny

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 26 Sep 2025, 1 h 09 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/9b409e4d-455f-4c03-b3dc-b3640001cab7/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

Barry speaks with Dmitry Balyasny, managing partner and chief investment officer at Balyasny Asset Management (BAM), a firm he co-founded in 2001. They discuss his career path, his thoughts on the current market environment for trading, hedge funds and more. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
[0:11] Speaker 1: Business with Barry Ritholtz on Bloomberg Radio on.
[0:16] Speaker 2: The latest Masters in Business podcasts. Strap Yourself in another
[0:20] Speaker 2: great one. Dmitri Ballyasni. He's co founder of the hedge
[0:24] Speaker 2: fund bally Asny Asset Management. They're a twenty eight billion
[0:29] Speaker 2: dollar multistrat firm, one hundred and seventy portfolio teams, twenty
[0:34] Speaker 2: three hundred people working in their offices around the world.
[0:39] Speaker 2: Started as a trader at Schoenfeld, grew into both a
[0:44] Speaker 2: manager and just a person looking at the world and
[0:48] Speaker 2: identifying inefficiencies and coming up with ways to capitalize in it.
[0:54] Speaker 2: Fascinating conversation. Not only are they one of the most
[0:57] Speaker 2: successful multistrats, but they have a one unusual business manager.
[1:02] Speaker 2: They have lots of partners who are employees, traders, business people,
[1:06] Speaker 2: fund managers. Really just a fascinating approach to corporate culture,
[1:12] Speaker 2: to creating the right set of incentives and creating a
[1:16] Speaker 2: high functioning meritocracy. Very few people have seen the world
[1:21] Speaker 2: of hedge funds develop from a trading perspective the way
[1:25] Speaker 2: Dmitri has I thought. The conversation was absolutely spectacular. And
[1:30] Speaker 2: I think you will also with no further ado my
[1:33] Speaker 2: discussion with Dimitri bally Asny. Thanks for having me very much,
[1:38] Speaker 2: and we got to say hello to Mike on the
[1:40] Speaker 2: way in. We'll talk about that a little later. I'm
[1:44] Speaker 2: fascinated by your background. You immigrated from the Ukraine at
[1:49] Speaker 2: age seven. How did that affect your perspective in terms
[1:53] Speaker 2: of taking risk and just looking at the world.
[1:57] Speaker 3: I think it was probably very formative in building a
[2:03] Speaker 3: thick skin. Right. So back in Kiev, we're living in
[2:11] Speaker 3: communist Soviet Union, parents would stand in line to buy
[2:16] Speaker 3: jog of milk for a couple hours. I'd never been
[2:21] Speaker 3: in a car until I was in the US, never
[2:24] Speaker 3: taken a flight until we immigrated, so a very different life.
[2:29] Speaker 3: There a lot of discrimination from a religious perspective and
[2:34] Speaker 3: ethnic perspective, being Jewish in Kiev at the time and
[2:38] Speaker 3: then coming here didn't speak the language. Different type of
[2:43] Speaker 3: discrimination for being Russian during the height of the Cold War,
[2:46] Speaker 3: although never really thought of ourselves as Russian. So it
[2:52] Speaker 3: builds a you know, I think it builds character and
[2:54] Speaker 3: builds a perseverance of a thick skin to be able
[2:57] Speaker 3: to deal with the difficulties and figure stuff up.
[3:00] Speaker 2: You go to college at Loyola University in Chicago, where
[3:05] Speaker 2: you study business, what was the career plan?
[3:09] Speaker 3: I wanted to invest, So I did a lot of
[3:12] Speaker 3: sales type jobs in high school because I figured out
[3:15] Speaker 3: that was the only way you could get paid because
[3:18] Speaker 3: you got commission as opposed to salary as a kid.
[3:21] Speaker 3: But I wanted to transition from selling stocks as a stockbroker,
[3:26] Speaker 3: which I was doing in college, to trading and taking
[3:30] Speaker 3: risk and investing. I wasn't sure how I was going
[3:32] Speaker 3: to do that in what format, but I was interested
[3:35] Speaker 3: in trading and investing from a young age. I read,
[3:38] Speaker 3: you know, market wizards, you know, followed the careers of
[3:41] Speaker 3: the top traders at the time, applied to every hedge
[3:44] Speaker 3: fund I could find, And I was lucky enough to
[3:46] Speaker 3: answer a newspaper out of all things when Showinfeld Securities
[3:50] Speaker 3: ran a newspaper aut in Chicago when they opened up
[3:52] Speaker 3: that office, and I was the one and only time
[3:54] Speaker 3: they actually ran a newspaper ad. So I was lucky
[3:56] Speaker 3: that I was following the one.
[3:58] Speaker 2: I recall seeing, you know, traders wanted shore Field Securities.
[4:02] Speaker 2: They were down on Wall Street back in the mid nineties,
[4:05] Speaker 2: so you begin trading for Showenfeld in the mid nineteen nineties,
[4:10] Speaker 2: What was the trading environment, like, what were you doing
[4:12] Speaker 2: for them on the desk?
[4:13] Speaker 3: Well, at the time, they were looking for people who
[4:15] Speaker 3: didn't have a lot of preconceived notions and kind of
[4:20] Speaker 3: systems and strategies that they really thought work, because they
[4:24] Speaker 3: wanted to start them from scratch and kind of teach
[4:26] Speaker 3: them their methodology, which was working well at the time.
[4:30] Speaker 3: And that fit me very well because I was making
[4:32] Speaker 3: a lot of money at the time in commissions as
[4:35] Speaker 3: a broker, but I was promptly losing a trading because
[4:38] Speaker 3: I didn't know what I was doing from a trading standpoint.
[4:41] Speaker 2: You had to support your trading habit with commissions.
[4:43] Speaker 3: Yeah, exactly, exactly, And so I would give people lots
[4:47] Speaker 3: of great advice and then proceed to go do the
[4:48] Speaker 3: opposite in my own trading. So I needed to go
[4:51] Speaker 3: somewhere to learn a method that had more structure and discipline.
[4:56] Speaker 3: And so they started you with a very small amount
[4:59] Speaker 3: of capital but and very tight risk limits in terms
[5:02] Speaker 3: of you know what you could trade, when you could trade,
[5:05] Speaker 3: you know what size you could trade, and from there,
[5:08] Speaker 3: once you showed some proficiency your risk box would expand.
[5:13] Speaker 2: Meaning more capital, little little looser reins on what you
[5:16] Speaker 2: could do when how long you could hold things.
[5:18] Speaker 3: That's right, And so I started with you know, very
[5:21] Speaker 3: short time periods, very small risk. Didn't make any money
[5:24] Speaker 3: for the first year, which was difficult because the salary
[5:27] Speaker 3: was zero, But after that I started kind of getting
[5:30] Speaker 3: the hang of it and making money pretty consistently.
[5:33] Speaker 2: How did you work your way through the various roles
[5:35] Speaker 2: that Schoenfeld because eventually you end up allocating for their
[5:39] Speaker 2: internal funds.
[5:40] Speaker 3: Right, Yeah, So it was almost completely flat management structure.
[5:46] Speaker 3: So at one point there were over one thousand people
[5:50] Speaker 3: on the trading side, and there was a handful of
[5:53] Speaker 3: people in senior management and you know, virtually no people
[5:57] Speaker 3: in middle management. It was very, very flat, and so
[6:00] Speaker 3: you were basically a trader. You could run a group
[6:04] Speaker 3: of traders, or you were just managing and not really trading.
[6:08] Speaker 3: And so I kind of worked my way up from
[6:12] Speaker 3: a pure trading position where after I was successful for
[6:15] Speaker 3: three or four years, I went to Steven and asked
[6:18] Speaker 3: him if I could start hiring people to trade some
[6:21] Speaker 3: of my risk, and he was kind enough to say, sure,
[6:24] Speaker 3: if you're willing to pay for them, you can hire them.
[6:27] Speaker 3: And that was good enough for me, and so I
[6:30] Speaker 3: did the same thing. I ran an ad in the
[6:31] Speaker 3: paper and I started hiring the initial traders, some of
[6:34] Speaker 3: whom are still with us today twenty five years later, wow.
[6:38] Speaker 3: And then I would allocate some of my risk to them,
[6:42] Speaker 3: and then as that became more successful, I hired more traders,
[6:45] Speaker 3: eventually analysts, eventually portfolio managers, and we spun off into
[6:49] Speaker 3: a division. And while I was doing that, Steve gave
[6:51] Speaker 3: me the opportunity to co invest in a portfolio of
[6:55] Speaker 3: hedge fund managers, external managers that we would allocate to,
[6:58] Speaker 3: and that was a great experience. I got to meet
[6:59] Speaker 3: a lot of the top headge fund guys at the time.
[7:02] Speaker 2: So from building a whole division at Schoenfeld, what led
[7:05] Speaker 2: you to found Ballyosny Asset Management.
[7:09] Speaker 3: It was always very entrepreneurial and so again it was
[7:13] Speaker 3: like a very flat firm, So I always felt like
[7:14] Speaker 3: I was building my own business. And our strategy started
[7:18] Speaker 3: to divert from the rest of the firm, like we
[7:20] Speaker 3: became more fundamental. We were holding things longer. We needed
[7:24] Speaker 3: to meet with company management, so we needed sell side
[7:26] Speaker 3: coverage and so that led to separate office space, separate strategies,
[7:31] Speaker 3: different types of pms and traders that we wanted to hire,
[7:34] Speaker 3: and eventually it led to needing to take an external
[7:37] Speaker 3: capital because it was a more higher capacity, you know,
[7:41] Speaker 3: type of strategy that demanded external capital. And so we
[7:44] Speaker 3: gradually moved from you know, an internal group to a division,
[7:47] Speaker 3: to a proprietary funded you know hedge fund, to a
[7:51] Speaker 3: traditional you know, externally funded hedge fund over a few years.
[7:54] Speaker 2: So we'll talk a little later about some of the
[7:57] Speaker 2: technology that you guys have built internally, but mid nineties
[8:01] Speaker 2: had to be an incredible environment for trading, and it
[8:04] Speaker 2: seemed like every month it was a whole different set
[8:07] Speaker 2: of technology that came down the pike. Tell us about
[8:10] Speaker 2: your experiences in the nineties and are there any parallels
[8:15] Speaker 2: to what's going on today.
[8:17] Speaker 3: Well, I think the world has moved, you know, tremendously
[8:20] Speaker 3: in terms of the trading technologies the people are using today.
[8:24] Speaker 3: When I think about at the time that I first
[8:27] Speaker 3: started as a broker, that's really going to date me.
[8:30] Speaker 3: But we had, you know, one monitor that would be
[8:34] Speaker 3: on a little carousel that you would spin around between
[8:37] Speaker 3: four different brokers, when you needed a quote, right, And
[8:40] Speaker 3: when I started trading at Choinfo, we had a person
[8:42] Speaker 3: whose job it was to be the printer reader, and
[8:45] Speaker 3: so you didn't get your fills electronically. You would get
[8:47] Speaker 3: your fills coming back on a printer and some poor
[8:49] Speaker 3: guys job was to read out your prints, you know,
[8:54] Speaker 3: so you would know where you got filled. So you know,
[8:56] Speaker 3: you contrast that with all the AI and data you
[8:59] Speaker 3: know technology today that we and others use for trading
[9:03] Speaker 3: and investing, and it's just, you know, tremendously different world
[9:07] Speaker 3: from the overall kind of technologies coming through the pike
[9:12] Speaker 3: the Internet, I would say, was you know, bigger change
[9:17] Speaker 3: in terms of going from you know, very little interaction
[9:21] Speaker 3: I would say with technology for most companies at the
[9:23] Speaker 3: time and really most individual people to you know, tremendously
[9:27] Speaker 3: kind of jumping in and trying to figure it out.
[9:31] Speaker 3: Although I think AI will likely be a larger, you know,
[9:34] Speaker 3: more substantive change over time. We're coming from a place
[9:37] Speaker 3: where everybody's already you know, immeshed in technology in so
[9:41] Speaker 3: many different ways, whether you're an individual with your your phone,
[9:44] Speaker 3: your computers, your laptops, or you know, your your metaglasses,
[9:48] Speaker 3: et cetera, or a company with you know, zillions of engineers.
[9:52] Speaker 3: So I think it'll be more profound over the long term.
[9:54] Speaker 3: But the change feels a little bit less than it
[9:56] Speaker 3: did at the time.
[9:58] Speaker 2: I mean, there's no doubt the Internet would a sea change.
[10:01] Speaker 2: Being able to plug into the hive mind was huge.
[10:05] Speaker 2: Mobile was pretty big. But it sounds like you're saying
[10:08] Speaker 2: artificial intelligence has potential to be even a bigger change agent.
[10:13] Speaker 3: Then yeah, I think so. I think over time. I
[10:15] Speaker 3: think in terms of actual usefulness over time and ability
[10:19] Speaker 3: to make you better and smarter and lots of different
[10:23] Speaker 3: tasks at work, at home, et cetera. Like I use
[10:27] Speaker 3: these apps you know, every day, and they're still very
[10:31] Speaker 3: new and rough, but you could see at the rate
[10:33] Speaker 3: of improvement if you projected out, then you think about
[10:36] Speaker 3: like where these are going to be in five, ten,
[10:38] Speaker 3: fifteen years. I think it'll be pretty transformative.
[10:42] Speaker 2: One of the things that really separates Ballyas and the
[10:45] Speaker 2: Asset Management from many other large multi strat hedge funds
[10:50] Speaker 2: are the amount of technology that you develop internally. Tools, apps,
[10:55] Speaker 2: research databases tell a little bit. To discuss a little
[10:59] Speaker 2: bit about what's it like to constantly being on the
[11:04] Speaker 2: bleeding edge of technology.
[11:05] Speaker 3: Sure, so this was a big evolution for us. I
[11:09] Speaker 3: would say over the last six seven eight years. First
[11:13] Speaker 3: fifteen plus years, we mostly used external technologies and we
[11:16] Speaker 3: had a pretty small internal tech team, and the idea
[11:21] Speaker 3: was basically, give people all the support that they needed,
[11:25] Speaker 3: all the supporting type of tools, but do as much
[11:28] Speaker 3: off the shelf as you can. And over time, as
[11:32] Speaker 3: we expanded different strategies and added you know, macro and
[11:36] Speaker 3: commodities and quant and these more technologically sophisticated strategies, we
[11:43] Speaker 3: really found that we needed to build a lot more
[11:45] Speaker 3: things internally. And so now today we have five hundred
[11:48] Speaker 3: plus people and technology and other one hundred plus people
[11:51] Speaker 3: and data teams and AI teams, and we build a
[11:55] Speaker 3: lot of really outstanding tools that not only support investing teams,
[12:00] Speaker 3: but really enable a lot of the investing functions, whether
[12:04] Speaker 3: it's trading, research, risk, even operational in some aspects. When
[12:11] Speaker 3: we have folks come over from other firms. A lot
[12:14] Speaker 3: of times there because we don't really advertise it that much,
[12:16] Speaker 3: a lot of times people are kind of blown away
[12:18] Speaker 3: by some of the things that we've developed.
[12:20] Speaker 2: So when I think of technology, I think of things.
[12:22] Speaker 2: When you say trading execution, the ability to get best execution,
[12:27] Speaker 2: but risk is a big challenge. How do you identify
[12:31] Speaker 2: how much risk is within a portfolio? And given that
[12:34] Speaker 2: your multi strat, how much do the does the risk
[12:38] Speaker 2: cancel each other out? How do you do that analysis
[12:41] Speaker 2: that seems like a moving target.
[12:43] Speaker 3: That's really important. So first the overall philosophy, right, like
[12:47] Speaker 3: this is a slugging type of business. Right, So if
[12:51] Speaker 3: you if you contrasted with like high frequency trading, which
[12:55] Speaker 3: is a hit great type of business, right, you're going
[12:57] Speaker 3: to have ninety nine percent of your trades or whatever
[12:59] Speaker 3: it going to be offitable or a tiny loss, right right, tiny, tiny,
[13:03] Speaker 3: tiny and repeat repeat.
[13:04] Speaker 2: Right.
[13:05] Speaker 3: This is more of a slugging type of business. So
[13:07] Speaker 3: if we have pms and we have one hundred and
[13:10] Speaker 3: seventy investing teams at the moment, right when you hire
[13:14] Speaker 3: and so when you hire an investing team, chances are,
[13:18] Speaker 3: depending on their track record, maybe seventy five percent of
[13:22] Speaker 3: them will lind up working out. If they have a
[13:24] Speaker 3: lower track record, they're coming as like a former analysts
[13:27] Speaker 3: making a transition to the PM, maybe it'll be fifty
[13:30] Speaker 3: to fifty. Right, But if you can control the risk
[13:34] Speaker 3: you might lose you know, ten million, twenty million, thirty
[13:37] Speaker 3: million on somebody who doesn't work out kind of life
[13:40] Speaker 3: to date in their performance. But the ones that do
[13:43] Speaker 3: work out, you're increasing their capital, you're growing their team,
[13:47] Speaker 3: and they'll hopefully be with you for ten twenty plus
[13:49] Speaker 3: years and you might make you know, hundreds and hundreds
[13:52] Speaker 3: of millions off of them. Right, So how that plays
[13:57] Speaker 3: into risk, Right, In order to enable the slugging, you
[14:00] Speaker 3: have to have very well defined risk boxes within which
[14:03] Speaker 3: people will operate to enable them to bet on the
[14:07] Speaker 3: things that they're really good at betting on, and try
[14:10] Speaker 3: to exclude as much of other stuff as possible. So
[14:13] Speaker 3: for every strategy, we'll have you know, stops, we'll have
[14:18] Speaker 3: voll targets, vall limits, we'll have stress limits, liquidity limits,
[14:23] Speaker 3: et cetera. And you create this box that's completely transparent
[14:28] Speaker 3: and in partnership with the portfolio manager that you're hiring,
[14:32] Speaker 3: and customize it and iterate it, and then it has
[14:35] Speaker 3: their strategy evolves and there's new opportunities you're you know,
[14:38] Speaker 3: adding to it, subtracting from it all the time, et cetera.
[14:40] Speaker 3: But the idea is to create this this platform for
[14:45] Speaker 3: them within which they can create like a very steady growing,
[14:49] Speaker 3: you know, alpha stream that really placed to their individual strengths.
[14:52] Speaker 2: You know, you mentioned market wizards at the beginning, and
[14:55] Speaker 2: I can't remember. I've read all of them over the years,
[14:59] Speaker 2: the first one a couple of times. I don't remember
[15:01] Speaker 2: which trader it was. But the thing that stayed with
[15:04] Speaker 2: me was it your win loss record is in what matters.
[15:09] Speaker 2: It's how much do you lose when you lose relative
[15:12] Speaker 2: to how much you're gaining when you win exactly, And
[15:14] Speaker 2: you could lose three quarters of the time if you're
[15:17] Speaker 2: losing a little bit. But the winners are big winners. Yeah,
[15:19] Speaker 2: net net that's a big win.
[15:21] Speaker 3: Yeah. We find are it varies by strategies, but if
[15:24] Speaker 3: you think about equities. In equities, we find portfolio managers
[15:28] Speaker 3: who have hit rates in the fifties with decent slugging
[15:31] Speaker 3: could be very very good. Right. If somebody's got a
[15:34] Speaker 3: hit rate and the upper fifties with decent slugging, like
[15:36] Speaker 3: that's you know, that's an all star, or somebody could
[15:39] Speaker 3: be more like fifty to fifty, but they have very
[15:41] Speaker 3: good slugging. You know that that works it's hard to
[15:45] Speaker 3: find somebody with you know, twenty five percent hit rate
[15:47] Speaker 3: and enough slugging to kind of overcome that, because there's
[15:49] Speaker 3: just there's just.
[15:50] Speaker 2: Too many reps, too much churn.
[15:51] Speaker 3: But in some other strategies, if you have you know,
[15:54] Speaker 3: commodities for example, or a directional macro there you can
[15:57] Speaker 3: have like even a lower hit rate if they're very
[16:00] Speaker 3: good at sizing right, because they have a smaller number
[16:04] Speaker 3: of bets at any given time and they're trying to
[16:06] Speaker 3: find like a few larger, bigger.
[16:08] Speaker 2: Trades pyramid, the winners ride the trends all the way out.
[16:11] Speaker 2: Really interesting. So you start the firm in two thousand
[16:15] Speaker 2: and one, really the beginning of a lost decade. We
[16:18] Speaker 2: didn't get back over prior highs in every asset class
[16:22] Speaker 2: pretty much till twenty thirteen. What was it like, launching
[16:27] Speaker 2: right into the teeth of that dot com collapse.
[16:30] Speaker 3: It was a great trading environment, actually, so we did
[16:33] Speaker 3: very well at the time. We were running a lot
[16:35] Speaker 3: less capital. We started with forty million dollars, so, but
[16:40] Speaker 3: the markets were less efficient. We were predominantly equity long short.
[16:44] Speaker 3: There's a lot of dispersion. There was a lot of
[16:46] Speaker 3: things that were unwinding from the bubble. In both directions,
[16:50] Speaker 3: we were able to take advantage of that and really
[16:51] Speaker 3: grow the business.
[16:53] Speaker 2: What was the biggest surprise to you in terms of
[16:56] Speaker 2: the direction the business grew and evolved.
[17:00] Speaker 3: I would say in those years there wasn't anything particularly surprising.
[17:05] Speaker 3: In you know, two thousand and eight, we made people
[17:10] Speaker 3: a little bit of money, but we had fifty percent redemption,
[17:13] Speaker 3: so that was a bit surprising and not particularly pleasant.
[17:17] Speaker 2: They people, just clients just panicked and said, I need look.
[17:20] Speaker 3: At any liquid. It did because so we didn't. We
[17:22] Speaker 3: chose not to get people. We had the adoption in
[17:25] Speaker 3: our docks, but we decided we were liquid and we
[17:27] Speaker 3: actually went to cash and Q four OFA.
[17:31] Speaker 2: Did that cash come flying back in nine?
[17:34] Speaker 3: Yeah, it took a few years actually, but eventually, yes,
[17:37] Speaker 3: eventually we got some credit for that.
[17:38] Speaker 2: But if you're positive in eight, what was eight down
[17:41] Speaker 2: thirty seven percent fifty or something? Oh, really, that's a win.
[17:45] Speaker 2: Anything in the green is a win.
[17:46] Speaker 3: It's that was surprising, but outside of that, it wasn't
[17:50] Speaker 3: anything too crazy.
[17:51] Speaker 2: Coming up, we continue our conversation with Dimitri Ballyosny discussing
[17:56] Speaker 2: what it was like building bally Osney Asset Management into
[18:00] Speaker 2: a powerhouse. I'm Barry Ridults. You're listening to Masters of
[18:04] Speaker 2: Business on Bloomberg Radio. I'm Barry Dults. You're listening to
[18:18] Speaker 2: Masters in Business on Bloomberg Radio. My extra special guest
[18:22] Speaker 2: this week is Dmitri Ballyasni. He is the founder of
[18:25] Speaker 2: Ballyasney Asset Management, running about twenty eight billion dollars in
[18:30] Speaker 2: various strategies, and currently your title is Chief Investment Officer.
[18:36] Speaker 2: How do you balance that role while simultaneously running a
[18:40] Speaker 2: firm of twenty three hundred employees.
[18:42] Speaker 3: Well, I think number one, I have great partners and
[18:45] Speaker 3: great management teams, so that helps a lot. We have
[18:47] Speaker 3: twenty partners today and a lot of top senior managements
[18:50] Speaker 3: across all the departments. Besides that, I don't think there's
[18:55] Speaker 3: a tremendous amount of different difference in the hedge fund
[18:58] Speaker 3: business between being a c I own a CEO. It's
[19:01] Speaker 3: kind of really commingle type of function because what are
[19:05] Speaker 3: you doing as a CEO, Like, you're trying to figure
[19:07] Speaker 3: out where to make money in the hedge fund, right,
[19:11] Speaker 3: So that's basically how I spend my time. It's like
[19:14] Speaker 3: trying to optimize our investment strategies, and that really includes
[19:19] Speaker 3: pretty much everything you need to do from a business standpoint.
[19:22] Speaker 3: How do you get the best people, where do you
[19:25] Speaker 3: have edge, how do you build your competitive mode around
[19:28] Speaker 3: a strategy, how do you break in and wedge into
[19:32] Speaker 3: a new strategy, and then how do you grow it
[19:34] Speaker 3: from there? Again, that it's going to go down to
[19:36] Speaker 3: finding the best people and enabling them to execute in
[19:40] Speaker 3: that area. How do you support them with the best
[19:43] Speaker 3: infrastructure and technology. So you have to work with all
[19:46] Speaker 3: the departments to figure out how to do that.
[19:49] Speaker 2: So the one thing that continues to surprise me doing
[19:53] Speaker 2: these interviews is how many people have said talent acquisition
[19:57] Speaker 2: is absolutely the single most important thing.
[20:00] Speaker 3: Yeah, they do it.
[20:01] Speaker 2: Sounds like you're in that campus.
[20:02] Speaker 3: Definitely. It all start. It all starts with talent, right,
[20:04] Speaker 3: and the talent starts with why are they going to
[20:08] Speaker 3: come to you? Right? Like, how are you going to differentiate?
[20:10] Speaker 3: And that was always kind of the starting point from
[20:14] Speaker 3: twenty five years ago because even at that time, we were
[20:17] Speaker 3: competing with firms that were, you know, twenty five times
[20:19] Speaker 3: our size, right, and so how are you going to compete?
[20:22] Speaker 3: And you're not going to write the largest check for
[20:24] Speaker 3: somebody to show up, so you really got to compete
[20:27] Speaker 3: on enabling them to be the most successful over time. Right.
[20:31] Speaker 3: So that's you know, the insights, the collaboration across strategies,
[20:35] Speaker 3: the culture that you can foster, helping them build their teams,
[20:40] Speaker 3: helping them build the resources and infrastructure around them, coaching,
[20:45] Speaker 3: learning from other people's mistakes, you know, having a very
[20:48] Speaker 3: transparent environment. All these things that each individually might not
[20:52] Speaker 3: be that important, but when you add them all up,
[20:54] Speaker 3: it really makes the difference over the arc of somebody's
[20:56] Speaker 3: career and to.
[20:58] Speaker 2: Put a little flesh on those bones. Ballyasny Asset Management
[21:03] Speaker 2: has won numerous awards in terms of best places to
[21:07] Speaker 2: work in money management, including taking the top award from
[21:11] Speaker 2: Pensions and Investments Best Places to Work. How much of
[21:15] Speaker 2: this is comp and how much of this is corporate
[21:19] Speaker 2: culture beyond just the dollars.
[21:21] Speaker 3: I think comp is always part of it. Like, you
[21:22] Speaker 3: certainly have to be competitive and you want to run
[21:25] Speaker 3: a meritocracy. So the top people that are really driving
[21:29] Speaker 3: the performance of the fund on the business side and
[21:32] Speaker 3: the investing side should be super well compensated and have
[21:35] Speaker 3: partnership opportunities. But besides that, I think the culture can
[21:40] Speaker 3: lead to the performance.
[21:42] Speaker 2: Right.
[21:42] Speaker 3: The culture is not just it's a nice place and
[21:45] Speaker 3: people are nice to you, Like that's great. But if
[21:48] Speaker 3: you have like a culture that's really driven but at
[21:52] Speaker 3: the same time collaborative, right, and where people are collegial,
[21:57] Speaker 3: but they also push each other and they're also constantly
[21:59] Speaker 3: trying to figure out like better ways of doing things
[22:02] Speaker 3: and want to succeed themselves and be the best, but
[22:06] Speaker 3: also they want the person next to them to succeed
[22:08] Speaker 3: and make the firm better. Right, Like, if you can
[22:10] Speaker 3: create that type of culture like that really is one
[22:14] Speaker 3: that high performers are going to want to work in
[22:17] Speaker 3: and thrive at.
[22:19] Speaker 2: Really really interesting. So so let's talk a little bit
[22:21] Speaker 2: about high performance. You operate a multi strategy platform. When
[22:26] Speaker 2: I hear multi strat I think fundamental equity, macro commodity, slash, futures, trading, arbitrage,
[22:36] Speaker 2: systematic quant.
[22:38] Speaker 3: You got it?
[22:38] Speaker 2: Am I missing any that.
[22:40] Speaker 3: Those those are the major strategies. They all have lots
[22:44] Speaker 3: of subcomponents. So you know, we have an arbitrage business
[22:48] Speaker 3: for example, that will include you know, converts and credit
[22:51] Speaker 3: long short and merger arbitrage, and you know, a dozen
[22:56] Speaker 3: different strategies, right, and commodities will have folks that are
[22:59] Speaker 3: trading futures directionally, we'll have folks that are doing a
[23:03] Speaker 3: lot of our V type tradings. We'll have physical commodities
[23:07] Speaker 3: now that we're building out. So all these strategies have
[23:11] Speaker 3: lots of sub strategies associated with them, but generally that's
[23:15] Speaker 3: the right idea, and you're constantly trying to enable the
[23:19] Speaker 3: next set of strategies. Right, if you can execute well
[23:23] Speaker 3: in the ones that you're in this year, you have
[23:25] Speaker 3: the option to figure out how to expand them, which
[23:27] Speaker 3: might be more dollars in the stuff you're doing well.
[23:30] Speaker 3: But also what does that give you the right to compete?
[23:33] Speaker 3: And that's adjacent and we're always trying to kind of
[23:36] Speaker 3: figure out what is the next thing.
[23:38] Speaker 2: Really interesting, there was an article I'm trying to remember
[23:42] Speaker 2: which publication I saw it in that claimed you hired
[23:46] Speaker 2: a trader with a fifty million dollar pay package from
[23:49] Speaker 2: a competitor. Is that remotely close to the sort of
[23:54] Speaker 2: pay packages and how much does a trader have to
[23:57] Speaker 2: generate in profits to qualify for a fifty million dollar package?
[24:01] Speaker 3: Sure, so you have to remember that the size of
[24:04] Speaker 3: capital the folks are running these days has grown a lot.
[24:07] Speaker 3: And so what publications like to do to get people
[24:11] Speaker 3: to read the articles rights put in large dollars as
[24:14] Speaker 3: opposed to you know.
[24:15] Speaker 2: Percentages, denominator blindness. They leave out, yeah, the context that
[24:19] Speaker 2: it just looks like a big round number.
[24:21] Speaker 3: Yeah. So you have like these headlines all the time,
[24:24] Speaker 3: one on how much people get paid to how much
[24:25] Speaker 3: somebody made or lost. And you know, if you have
[24:28] Speaker 3: something that says, you know, trader x y Z lost,
[24:30] Speaker 3: you know, fifty million dollars, right, and that's like, wow,
[24:33] Speaker 3: that sounds like a giant number, but you have to
[24:34] Speaker 3: remember we're managing twenty eight billion, right.
[24:38] Speaker 2: That's a normal draw down.
[24:39] Speaker 3: Yeah, I mean a typical portfolio manager, right, might be
[24:42] Speaker 3: managing a couple of billion in gross market value. Right,
[24:45] Speaker 3: So you know that's two and a half percent, which
[24:48] Speaker 3: is not good, but it's not you know, it's not
[24:50] Speaker 3: a disaster, no, Like, that's kind of the fluctuation that
[24:53] Speaker 3: that that you're going to get, right, And so from
[24:55] Speaker 3: a hiring standpoint, it's the same thing if you're hiring
[24:58] Speaker 3: a trader with a fifty million dollar pay package for
[25:01] Speaker 3: example one, that pay package is composed of lots of
[25:04] Speaker 3: different things. It's not all it's not just you know,
[25:06] Speaker 3: here's fifty.
[25:07] Speaker 2: Million for sure.
[25:09] Speaker 3: Yeah, Like that includes you know, it might include a
[25:12] Speaker 3: guarantee for the time that the person is out of
[25:14] Speaker 3: the market. It might include a budget for hiring out
[25:18] Speaker 3: their team, right, that's a lot of these teams are
[25:20] Speaker 3: five to ten, in some cases fifteen people, so that's expensive.
[25:24] Speaker 3: And it also might include extra upside incentives which are
[25:28] Speaker 3: only paid out if the person delivers a certain amount
[25:31] Speaker 3: of P and L. So you know, they kind of
[25:33] Speaker 3: like print one number, but it's actually like lots of
[25:35] Speaker 3: different components. Usually with that type of number, you're budgeting
[25:40] Speaker 3: that person to generate P and L of one hundred
[25:43] Speaker 3: million plus a year. That we should have a track
[25:48] Speaker 3: record of doing that, and if and if you're right
[25:50] Speaker 3: on that, that leads to very healthy returns net to
[25:54] Speaker 3: our investor, which you know we've delivered over time.
[25:56] Speaker 2: That's the game. You have over three hundred analysts and
[26:00] Speaker 2: one hundred and seventy pms. How many different teams do
[26:05] Speaker 2: you are you guys running one hundred and seventy pms?
[26:08] Speaker 2: Is that one hundred and seventy specific strategies, so.
[26:10] Speaker 3: It's one hundred and seventy teams. So within the equity's business,
[26:14] Speaker 3: for example, you'll have like seventy teams, which sounds like
[26:17] Speaker 3: a lot, but you have to remember that that's split
[26:19] Speaker 3: across you know, three distinct equities businesses that all have
[26:23] Speaker 3: like a different front end. And it's also split across
[26:28] Speaker 3: offices all over the world. And folks are you know,
[26:30] Speaker 3: based in London, trading Europe, based in Hong Kong or
[26:33] Speaker 3: Singapore or Japan, you know, trading Asia. So it's still
[26:37] Speaker 3: fairly specialized. And each one of those teams will have
[26:41] Speaker 3: a mandate where this is the group of stocks that
[26:44] Speaker 3: they're focused on in the case of equities, or this
[26:46] Speaker 3: is the macro strategy and you know RV or emerging
[26:49] Speaker 3: markets or rates or directional that they're focused on in macro,
[26:53] Speaker 3: or this person focused on you know, trading gas or
[26:56] Speaker 3: trading power and commodities, and they'll build a team of
[26:59] Speaker 3: sub specialists analysts around that.
[27:03] Speaker 2: Really interesting, so I mentioned earlier you've scaled up to
[27:07] Speaker 2: twenty eight billion dollars, Where does the general management strategy
[27:14] Speaker 2: and style begin to get altered just by the size
[27:19] Speaker 2: At what point does that. We've seen a number of
[27:22] Speaker 2: farms at one hundred and two hundred billion dollars and
[27:25] Speaker 2: just the sheer heft becomes challenging. You can't generate alpha
[27:30] Speaker 2: at that scale, or at least not the same alpha.
[27:34] Speaker 2: How large can this get comfortably?
[27:37] Speaker 3: It's hard to say. I think that's a function of
[27:41] Speaker 3: how markets develop over time. So if you have more companies,
[27:46] Speaker 3: active capital markets, the world is growing, more places to
[27:50] Speaker 3: trade in, you know, more credit instruments, more equity instruments,
[27:54] Speaker 3: more macro instruments, then there's there's kind of more to do.
[27:56] Speaker 3: So if I think of the subset of strategies that
[27:59] Speaker 3: we trade today, a lot of these things weren't significant businesses,
[28:02] Speaker 3: you know, ten years ago or twenty years ago. So
[28:05] Speaker 3: a strategy like merger arbitrage has been around a long time.
[28:09] Speaker 3: A strategy like index rebalancing really got going the last
[28:13] Speaker 3: ten to fifteen years, right, you know, power trading in
[28:16] Speaker 3: the commodities markets, right, not a lot of people doing
[28:19] Speaker 3: that twenty years ago. So a lot of these things
[28:23] Speaker 3: go from very small strategies to much larger markets, you know,
[28:28] Speaker 3: over time, and that enables you to run more volved
[28:31] Speaker 3: there you know, increasing your capacity. The way that we
[28:34] Speaker 3: go about it is every year and we updated throughout
[28:38] Speaker 3: the year. We measure our capacity for you know, this
[28:42] Speaker 3: year in the following, and so we look at bottom
[28:45] Speaker 3: up by each team, like how much can they grow
[28:47] Speaker 3: at a steady pace. We don't want people to grow
[28:49] Speaker 3: too fast, and we don't want people to stay stagnant,
[28:52] Speaker 3: right Like, you want to find the healthy pace of
[28:54] Speaker 3: growth as you're expanding your coverage, as you're getting used
[28:57] Speaker 3: to running larger, dour amounts and dealing with those constraints.
[29:01] Speaker 3: And we look at the recruiting, so where can we
[29:03] Speaker 3: expand who is coming in? What does the pipeline kind
[29:06] Speaker 3: of look like? You know, we discount that because not
[29:09] Speaker 3: everyone's going to work out, But you add those numbers
[29:12] Speaker 3: together and that gives you a sense of what the
[29:15] Speaker 3: growth path is likely to be. And over time that's
[29:18] Speaker 3: averaged about twenty twenty five percent a year, you know,
[29:22] Speaker 3: capacity growth.
[29:23] Speaker 2: So you mentioned you're looking both internally and externally at recruiting.
[29:28] Speaker 2: When you're looking internally, how do you identify and nurture talents?
[29:33] Speaker 2: How can you tell when, hey, this person started out
[29:36] Speaker 2: as a trader or a PM, but they really seem
[29:39] Speaker 2: to have skills and can manage a larger group. That
[29:42] Speaker 2: seems like a really challenging thing.
[29:43] Speaker 3: We spend a lot of time on that, and I
[29:45] Speaker 3: think that's one of the keys to how we're going
[29:48] Speaker 3: to grow from here on out. Like recruiting is super important,
[29:53] Speaker 3: but being able to develop your talent. I think as
[29:57] Speaker 3: you have scale and you have more people to learn
[30:00] Speaker 3: learn from, right, that becomes a bigger and bigger slice
[30:03] Speaker 3: of your senior talent pool over time. So when we
[30:08] Speaker 3: started off for a long time, the vast majority of
[30:12] Speaker 3: our pms were recruited, you know, externally. Today, like an
[30:16] Speaker 3: equities business, which is the most mature of our strategies,
[30:19] Speaker 3: twenty five percent in the US are internally promoted, and
[30:23] Speaker 3: I wouldn't be surprised if that was fifty percent in
[30:25] Speaker 3: a few years, right, because now you have more senior
[30:28] Speaker 3: pms from up and coming analysts to learn from, more
[30:32] Speaker 3: programs that they can participate in to work their way
[30:37] Speaker 3: up if that's the path that they want to choose,
[30:40] Speaker 3: which you know that wasn't available. You didn't have the
[30:42] Speaker 3: mentorship and the tools. So how do you help people
[30:46] Speaker 3: and select It's both quantitative and qualitative so on the
[30:52] Speaker 3: quantitative side, we try to measure as much as we can.
[30:55] Speaker 3: So we have data on people's recommendations, not just on
[31:00] Speaker 3: the ultimate trades, but the data on their recommendations, and
[31:03] Speaker 3: you see what is the performance and we track that.
[31:08] Speaker 3: So you try to disaggregate the performance of the analyst
[31:11] Speaker 3: from the PM and see if who's driving value and
[31:15] Speaker 3: if it's a particular analyst is doing great, Like, we
[31:17] Speaker 3: want to make sure that person is getting more authority,
[31:21] Speaker 3: more autonomy, and more leeway over time, right, more growth opportunities,
[31:25] Speaker 3: and the best growth opportunity for them might be with
[31:28] Speaker 3: the team that they're on. They might become a more
[31:30] Speaker 3: senior analyst, they might become a partner on that portfolio,
[31:34] Speaker 3: or they might raise their hand at some point say
[31:36] Speaker 3: like hey, I want to be a PM, and we
[31:38] Speaker 3: want to make sure that we facilitate a path to that.
[31:41] Speaker 3: If we agree that they are talented and part of
[31:44] Speaker 3: that is in partnership with the PM that they're working for.
[31:48] Speaker 3: You don't want the person to just leave and go
[31:49] Speaker 3: somewhere else to take that opportunity. You want to make
[31:52] Speaker 3: sure that they replace themselves they work in partnership with
[31:54] Speaker 3: the PM, maybe they co run something for a period
[31:57] Speaker 3: of time and then they have the opportunity to do
[32:00] Speaker 3: their own thing. So it's definitely a combination of those.
[32:03] Speaker 3: And it's the same thing on the business side, like
[32:05] Speaker 3: you're always on the lookout for emerging business leaders who
[32:08] Speaker 3: can manage others, and we have a lot of leadership
[32:11] Speaker 3: development that we do and also utilizing external coaches as
[32:16] Speaker 3: well to help with that.
[32:17] Speaker 2: That's really interesting external cultures. You mentioned mentorship. How important
[32:22] Speaker 2: is mentorship to the firm and how significant was it
[32:27] Speaker 2: in your own professional job.
[32:28] Speaker 3: Well, that's where a partnership culture is really important, right.
[32:31] Speaker 3: So I think it's still fairly unusual in hedge funds,
[32:36] Speaker 3: especially in our type of fund, and we've always wanted
[32:39] Speaker 3: to build a true partnership where people own real equity
[32:43] Speaker 3: in the business, you know, they buy in with their
[32:45] Speaker 3: own money, they participate in all the economics of the business.
[32:49] Speaker 3: And we have partners who are coming from the business
[32:52] Speaker 3: side running a particular department. We have partners who are managers,
[32:58] Speaker 3: heads of strategies, investment site, and we have portfolio managers,
[33:02] Speaker 3: and so that dynamically creates like a culture where folks
[33:05] Speaker 3: are incentivized to make the firm better to make someone
[33:09] Speaker 3: else better, and they're obviously much more willing and excited
[33:13] Speaker 3: to be mentors in those situations. And I think when
[33:17] Speaker 3: you start with that, and I started with you know,
[33:20] Speaker 3: two my co founders, Scott and Taylor, you know, twenty
[33:23] Speaker 3: plus years ago, in a partnership type structure, and I
[33:27] Speaker 3: think that then flows down through the organization. And so
[33:30] Speaker 3: now today we have mentors for you know, interns coming up, right,
[33:36] Speaker 3: and you have mentors for you know, younger associates in
[33:40] Speaker 3: different areas of the firm, and then it goes you know,
[33:42] Speaker 3: all the way up and down the firm really really
[33:44] Speaker 3: so far myself Sorry didn't answer that question.
[33:46] Speaker 2: No, but you did. Yeah, let's hear about your own mentorship.
[33:49] Speaker 3: I mean, I certainly learned a lot from Stifo work
[33:52] Speaker 3: working with him at the time, and got really good
[33:53] Speaker 3: opportunities there. I think at a young age it was
[33:57] Speaker 3: more you know, certainly work at from my folks, uh,
[34:02] Speaker 3: And then it was a lot from sports, right. I
[34:04] Speaker 3: did a lot of you know, basketball and you know,
[34:07] Speaker 3: taekwondo and things like that and seeing kind of what
[34:12] Speaker 3: was possible, Like I remember as a kid like watching
[34:17] Speaker 3: taekwondo demonstration where our instructor Master Shim. It was like
[34:21] Speaker 3: a very slight Korean guy. It's probably I don't one
[34:23] Speaker 3: hundred and forty hundred and thirty pounds, and he punched
[34:27] Speaker 3: through a stack of seven cinder blocks, punched through and uh,
[34:34] Speaker 3: you know seeing that as a kid, you know, And
[34:36] Speaker 3: I went to like examine the bricks after he did that,
[34:39] Speaker 3: and like tried to punch it, and I was like,
[34:41] Speaker 3: wow that, you know, that hurt. And just seeing that
[34:45] Speaker 3: just kind of shows you kind of what's possible. Because
[34:47] Speaker 3: every day after practice you would see the guy sit
[34:50] Speaker 3: there punching a lead slab, you know, for you know,
[34:54] Speaker 3: I don't know, thirty minutes. Wow, right, and it just
[34:57] Speaker 3: adds up over time.
[34:58] Speaker 2: Reminds me of the demonstration the so old I Am
[35:01] Speaker 2: Bruce Lee did with the one inch punch.
[35:04] Speaker 3: Do you recall that I was just showing that to
[35:06] Speaker 3: my kids.
[35:06] Speaker 2: Letter just an inch and he's also forty ways soaking wet,
[35:11] Speaker 2: one forty And it's amazing the focus and power that
[35:16] Speaker 2: you can create in such a small.
[35:18] Speaker 3: That's exactly the thing. It's it's focus and perseverance, right.
[35:22] Speaker 2: Really quite quite fascinating. So let's talk a little bit
[35:25] Speaker 2: about the current environment. I was kind of fascinated by
[35:29] Speaker 2: something you told your team, You guys are trading too
[35:33] Speaker 2: much and not investing enough unquote explain.
[35:39] Speaker 3: I think one of the keys to enduring success in
[35:43] Speaker 3: the money management business is finding a balance between trading
[35:48] Speaker 3: and investing. And you have to be true to your
[35:53] Speaker 3: DNA and obviously the type of firm that you're at, right,
[36:00] Speaker 3: But within each type of firm and each type of strategy, uh,
[36:06] Speaker 3: there's always this you know tension, right, because you can't
[36:12] Speaker 3: survive in a hedge fund type model, you know, just
[36:16] Speaker 3: being a long term investor, and you can't really scale
[36:21] Speaker 3: in a significant growing hedge fund being just a superactive trader, right,
[36:27] Speaker 3: So you need some combination of the two. And so
[36:30] Speaker 3: what we try to do, both at the individual level
[36:33] Speaker 3: and at the strategy level, is help folks find that balance.
[36:37] Speaker 3: Part of it is just seeing what's working, and part
[36:39] Speaker 3: of it is a lot of statistical analysis that we
[36:42] Speaker 3: do on each of the each of the teams. So
[36:46] Speaker 3: when I made that comment, we were coming out of
[36:49] Speaker 3: a period where I noticed that folks are really trading
[36:53] Speaker 3: a little bit too much in the fundamental know equities
[36:55] Speaker 3: business and we're like a little bit overly focused on
[36:58] Speaker 3: each data point or we're kind of sing the forest
[37:01] Speaker 3: from the trees, right, and we were chopping ourselves up
[37:04] Speaker 3: a little bit too much, missing some of the bigger
[37:06] Speaker 3: winners and creating a lot of trading slippitch costs. So
[37:13] Speaker 3: we really worked hard with the teams to find more
[37:16] Speaker 3: balance with that, Like find some positions that you can
[37:19] Speaker 3: really be a longer term investor. Doesn't have to be
[37:22] Speaker 3: you know, years and years, but it could be you know,
[37:24] Speaker 3: months and quarters and supposed to days to weeks. And
[37:29] Speaker 3: find investments where there's multiple ways to win, where you're
[37:34] Speaker 3: not playing for one particular data point, you're playing for
[37:38] Speaker 3: a whole series of data points that's going to revalue
[37:41] Speaker 3: you know, that security over time, and that's been you know,
[37:44] Speaker 3: very very effective outside.
[37:46] Speaker 2: So how much of this is a function of the
[37:49] Speaker 2: environment that we all find ourselves in in any given moment.
[37:53] Speaker 2: Twenty two was a double digit down year for stocks
[37:56] Speaker 2: and bonds, but it was followed by twenty three and
[37:59] Speaker 2: twenty four for both years back to back plus twenty
[38:03] Speaker 2: five percent at least for US equities. If you're shortening
[38:08] Speaker 2: up your investing timeline in a plus twenty five percent year.
[38:12] Speaker 2: Is it just as simple as hey, you're leaving too
[38:14] Speaker 2: much money on the table.
[38:15] Speaker 3: But well, for us, it's a little bit different because
[38:17] Speaker 3: we're running pretty much market neutral and almost all the strategies.
[38:20] Speaker 3: So if you're running market neutral, whether the market's up
[38:23] Speaker 3: twenty five or down twenty five, like, you're always going
[38:25] Speaker 3: to have half your portfolio that's losing money on an
[38:28] Speaker 3: absolute basis, Yeah, but you're trying to make the spread right,
[38:33] Speaker 3: like you're trying to make the spread between your lungs
[38:36] Speaker 3: and your shorts right. So what influences are trading more
[38:42] Speaker 3: than the absolute direction of the market is the volatility
[38:45] Speaker 3: in the market. So if you're in a period that's
[38:47] Speaker 3: very high VALL, you're naturally going to be trading more
[38:50] Speaker 3: to manage your risk and also because you're getting stopped
[38:54] Speaker 3: on things or they're hitting your targets like fairly quickly,
[38:56] Speaker 3: and high VALL is associated with fundamental events changing.
[39:00] Speaker 2: Very quickly twenty two or like the.
[39:03] Speaker 3: Spring, so you've got to trade more exactly versus periods
[39:09] Speaker 3: where things are sort of slowly you know, trending, and
[39:12] Speaker 3: that's okay, but over the course of the year, right,
[39:15] Speaker 3: those periods are going to balance out. Some will be higherball,
[39:17] Speaker 3: soon be lower ball. You want to find like the
[39:20] Speaker 3: right amount of turnover to where you can capture your alpha,
[39:23] Speaker 3: capture those relative miss pricings and move on to the
[39:27] Speaker 3: next thing that generate a strong sharp combined with like
[39:32] Speaker 3: enough capacity. Right, you can have a very high sharp
[39:35] Speaker 3: and low capacity. That doesn't really help in a scale
[39:38] Speaker 3: you know, hedge fund, Right, you can't eat your sharp,
[39:40] Speaker 3: but you need enough sharp to be consistent putting up
[39:44] Speaker 3: a P and L. That kind of matters for the firm,
[39:46] Speaker 3: and that matters for the team that you're running. And
[39:50] Speaker 3: so for every strategy, like we try to come up with,
[39:52] Speaker 3: like what is a reasonable range, right, And it might
[39:56] Speaker 3: be higher for you know, a tech portfolio manager than
[39:58] Speaker 3: you know utility sport f manager, right, but each of
[40:02] Speaker 3: them should have a range that sort of is optimum
[40:07] Speaker 3: for their style, and we try to help them, you know,
[40:09] Speaker 3: find that.
[40:10] Speaker 2: So with the benefit of hindsight, I'm looking back at
[40:13] Speaker 2: twenty twenty four, a fairly low vall year. Hey, maybe
[40:17] Speaker 2: we should be trading a little less and holding a
[40:19] Speaker 2: little longer. And then twenty twenty five fine spiked at
[40:23] Speaker 2: the end of Q one and into Q two. All Right,
[40:25] Speaker 2: you guys can chop it up a little more. Is
[40:27] Speaker 2: it just that simple or yes?
[40:30] Speaker 3: But again I would say the more nuanced answer would be,
[40:34] Speaker 3: there's lots of different types of trades that each person does,
[40:38] Speaker 3: and you don't want any PM doesn't want their portfolio
[40:43] Speaker 3: to just be one type of trade, right, So you
[40:46] Speaker 3: might have short term trades, medium term trades, long term trades, right,
[40:50] Speaker 3: structural trades, tactical trades, risk mitigation trades, et cetera. There's
[40:54] Speaker 3: lots of different types of trades, and people run into
[40:57] Speaker 3: problems when they get two focused on one kind of thing, right,
[41:04] Speaker 3: and then when that thing is no longer working, it's
[41:06] Speaker 3: very hard to then reinvent yourself because you don't have
[41:09] Speaker 3: any other irons in the fire. So again, we're trying
[41:13] Speaker 3: to run a lot of analysis and find like, what
[41:16] Speaker 3: is the team really good at, make sure that's being
[41:18] Speaker 3: expressed in the portfolio, make sure there's enough balance of
[41:21] Speaker 3: different types of trades, and that they're not betting on
[41:24] Speaker 3: things that they don't really have views on that can
[41:28] Speaker 3: take them out of the game before the things they
[41:30] Speaker 3: do have views on.
[41:31] Speaker 2: Payoffs coming up, we continue our conversation with Dimitri Ballyasny,
[41:35] Speaker 2: co founder of Ballyasney Asset Management, discussing the current market
[41:40] Speaker 2: environment for trading. I'm Barry Ridals. You're listening to Masters
[41:45] Speaker 2: in Business on Bloomberg Radio. I'm Barry Redults. You're listening
[42:03] Speaker 2: to Masters in Business on Bloomberg Radio, and some of
[42:06] Speaker 2: you are watching this on YouTube. My extra special guest
[42:11] Speaker 2: this week is Dmitri Ballyasni. He is the co founder
[42:14] Speaker 2: of bally Asny Asset Management, a multi strategy hedge fund
[42:18] Speaker 2: running over twenty eight billion dollars. Do the different teams
[42:23] Speaker 2: hedge their own positions or is that a function of
[42:26] Speaker 2: firmwide risk management and somebody else?
[42:28] Speaker 3: We do both. So each team is responsible for running
[42:31] Speaker 3: within their risk parameters. So they'll have, you know, in
[42:35] Speaker 3: the case of the long short portfolio manager, they'll have
[42:38] Speaker 3: an IDIO risk right. How much of your risk is
[42:41] Speaker 3: outside of factor risk? Right? And that should be you know,
[42:45] Speaker 3: sixty seventy eighty percent of your risk, depending on the
[42:48] Speaker 3: portfolio and the style of the PM. But it's basically
[42:52] Speaker 3: the vast majority of somebody's risk is their stock picking
[42:56] Speaker 3: alpha right. Depending on their skill and things like picking
[42:59] Speaker 3: the right, industy tree or trading the directionality of the
[43:02] Speaker 3: market around, we might give them some more room or
[43:05] Speaker 3: less room, you know, to do that. If you're a
[43:07] Speaker 3: directional macro trader, you're going to have you're not going
[43:11] Speaker 3: to have that constraint because you're paid to directionally bet
[43:14] Speaker 3: on the market, right, But you're going to have other
[43:17] Speaker 3: limits like stress limits. Right. So if your directional bets
[43:22] Speaker 3: don't work out and there's a gap tomorrow, you know
[43:24] Speaker 3: how much are you going to lose in a stress scenario?
[43:27] Speaker 3: So you have to if that number is too high
[43:29] Speaker 3: versus the agreed upon risk limits, you have to do
[43:32] Speaker 3: something in your portfolio to hedge you know that that risk, right.
[43:36] Speaker 3: So it's a little bit different for each type of strategy,
[43:40] Speaker 3: but the common philosophy is you want to be able
[43:43] Speaker 3: to run it to maximize your return while staying in
[43:46] Speaker 3: the game right and delivering a relatively steady source of
[43:52] Speaker 3: alpha over time.
[43:54] Speaker 2: It's interesting because they're called hedge funds, but many hedge
[43:59] Speaker 2: funds don't hedge, and it sounds like balle Asni really
[44:03] Speaker 2: makes an effort to make sure that as a risk
[44:05] Speaker 2: management approach, anything that's potentially downside as you said, a
[44:11] Speaker 2: gap has to be edged.
[44:12] Speaker 3: Yeah, I mean you're looking for consistent absolute returns. So
[44:16] Speaker 3: how do you get that?
[44:18] Speaker 2: Right?
[44:18] Speaker 3: You need specialists who have an edge and a particular strategy,
[44:24] Speaker 3: and they need a portfolio construction or risk management approach
[44:27] Speaker 3: that maximizes that edge, maximizes the capacity of dollars they
[44:32] Speaker 3: can earn off of those advantages that they have, and
[44:37] Speaker 3: minimizing the things that can create large draw downs that
[44:41] Speaker 3: they don't really have edge and betting on. And so
[44:44] Speaker 3: that's the analysis that you're constantly running and iterating on
[44:47] Speaker 3: with the teams.
[44:48] Speaker 2: So I heard a fund manager say, we have no
[44:53] Speaker 2: competition because none of us in our space have market share.
[44:57] Speaker 2: For the most part, we're all less than one percent
[44:59] Speaker 2: market chair, how do you look at the competitive environment
[45:03] Speaker 2: for other multistrat firms. It seems like animal up and
[45:08] Speaker 2: you get a decent number. But there are what are
[45:10] Speaker 2: there eleven thousand hedge funds?
[45:12] Speaker 3: Yeah. The way we think about it is we're not
[45:15] Speaker 3: really competing with eleven thousand hedge funds. So I think
[45:18] Speaker 3: what you've seen over the last you know, twenty plus
[45:21] Speaker 3: years is a consistent market share gain from the larger
[45:28] Speaker 3: platform firms, Right, and now I think there's really like
[45:32] Speaker 3: four or five, right, And if you look at the
[45:35] Speaker 3: private equity industry, it's pretty similar, Like there's probably more
[45:38] Speaker 3: than ten thousand private equity funds, but the vast majority
[45:41] Speaker 3: of dollars, best majority of alpha, vast majority of people
[45:46] Speaker 3: are really.
[45:46] Speaker 2: At half a dozen fat head, long tail.
[45:49] Speaker 3: Yeah, so hedge fund industry has really had it in
[45:51] Speaker 3: that same you know direction. So we really compete with
[45:55] Speaker 3: you know, half a dozen firms. And now there's also
[45:58] Speaker 3: competition from some of the high frequency firms that are
[46:00] Speaker 3: kind of going upstream to some of the longer duration
[46:05] Speaker 3: discretionary strategies, and you know, we're doing more quantitative stuff
[46:08] Speaker 3: going the other way. Right, So maybe there's a couple more,
[46:12] Speaker 3: but you're really competing with half a dozen to a
[46:14] Speaker 3: dozen firms that are running you know, specialist strategies at scale,
[46:20] Speaker 3: and then everyone else in those strategies you kind of
[46:22] Speaker 3: look at as like a generalist, you know, participant, and
[46:25] Speaker 3: it's great to have general's participation. We want as much
[46:27] Speaker 3: as possible from you know, retail, from other funds, from
[46:31] Speaker 3: you know, prop from banks. The more liquidity of there is,
[46:34] Speaker 3: the more generous participation there is. You know, I think
[46:37] Speaker 3: the better for specialized firms.
[46:39] Speaker 2: So the current environment kind of hard to compare to
[46:42] Speaker 2: any other era. On the one hand, we had a
[46:46] Speaker 2: fairly robust economy coming into twenty twenty five following a
[46:50] Speaker 2: whole bunch of FED hikes. Now we're expected to resume
[46:55] Speaker 2: FED cutting. By the time the sares, we're probably twenty
[46:58] Speaker 2: five paces points lower than today the whole tariff start stop.
[47:03] Speaker 2: And now back to the litigation the Supreme Court agreed
[47:08] Speaker 2: to take to that, it looks like inflation is starting
[47:11] Speaker 2: to percolate a little bit as the labor market seems
[47:15] Speaker 2: to soften. How does the firm look at all of
[47:18] Speaker 2: these macro crosscurrents. Are they significant or are they just
[47:21] Speaker 2: background noise or somewhere in between.
[47:23] Speaker 3: Well, I would just say it's a really interesting fluid environment,
[47:27] Speaker 3: particularly for macro and long short equities, because there's just
[47:33] Speaker 3: so much change. So if you think about, like, what
[47:36] Speaker 3: is the worst environment to be in, it's not when
[47:40] Speaker 3: everything is clear, because when everything is clear, there's like
[47:43] Speaker 3: no volatility, there's no change. It's hard to get any dispersion.
[47:47] Speaker 3: So that environment might be good for passive strategies.
[47:50] Speaker 2: But not good sideways markets.
[47:52] Speaker 3: Yeah. Yeah, So now there's a ton of money slashing
[47:57] Speaker 3: around trying to figure things out, and that's that's a
[48:00] Speaker 3: great environment.
[48:01] Speaker 2: Right.
[48:02] Speaker 3: So if you think about this year on the macro perspective, right,
[48:05] Speaker 3: you went from a very you know, positive view in
[48:09] Speaker 3: January of how everything was going to play out to
[48:12] Speaker 3: you know, kind of the tariff mess and very pessimistic
[48:15] Speaker 3: view of how you know the US was going to
[48:18] Speaker 3: play out and what was going to happen with markets.
[48:20] Speaker 3: We're down twenty percent in SMP briefly and now you're
[48:24] Speaker 3: you know, right back up and still like a lot
[48:26] Speaker 3: of things kind of swirling around as to how it's
[48:28] Speaker 3: going to play out. To your point on rates and inflation,
[48:31] Speaker 3: has been a lot of change. It's create a lot
[48:33] Speaker 3: of relative value opportunities as you get different hiking cycles,
[48:36] Speaker 3: different cutting cycles in different markets. Like that's great for macro.
[48:41] Speaker 3: In equity land, you have all the changes not just
[48:44] Speaker 3: from the economy but from AI and how that's impacting
[48:48] Speaker 3: tech but also impacting companies that are customers or going
[48:52] Speaker 3: to be run over because of AI. Like creates great
[48:55] Speaker 3: long short opportunities. So I think it's a really fascinating market.
[48:58] Speaker 3: I don't have any giant you know, prediction of how
[49:00] Speaker 3: things are going to you know, play out tomorrow. But
[49:03] Speaker 3: if you have strong teams who are on top of
[49:07] Speaker 3: the latest data points and you can figure it out
[49:11] Speaker 3: a little bit ahead of the next person, just tremendous
[49:13] Speaker 3: opportunities like this last week, Oracle report a quarter.
[49:17] Speaker 2: You know, crazy right for for a giant company company amazing.
[49:22] Speaker 3: I mean it was last time you know a company
[49:24] Speaker 3: like that moved thirty five thirty something?
[49:27] Speaker 2: Right? Dot Com collapse in direction.
[49:30] Speaker 3: Yeah, I mean I'm amazing, right, So if you can
[49:32] Speaker 3: figure that out, or you know, I think of some
[49:34] Speaker 3: of these, you know, fintech company Circle went public, right,
[49:37] Speaker 3: Usually public offerings are like pretty efficiently priced. You know,
[49:40] Speaker 3: this one goes up four hundred percent after it starts trading, right,
[49:44] Speaker 3: and then it goes down fifty percent, you know, and
[49:47] Speaker 3: a month after that, so in the first three months,
[49:49] Speaker 3: I think of the travel in the stock. So amazing opportunities,
[49:52] Speaker 3: right if if your teams can figure that out. So
[49:55] Speaker 3: you know, we're out there working hard doing the research
[49:57] Speaker 3: and you know, figuring out the market.
[49:59] Speaker 2: So it doesn't sound like you think the AI theme
[50:02] Speaker 2: is overdone, but it certainly is. Creating a little more
[50:06] Speaker 2: volatility and a little more opportunities.
[50:08] Speaker 3: Yeah, I think the reality when we look back, you know,
[50:13] Speaker 3: in ten years or in twenty years, in the actual
[50:19] Speaker 3: outcomes that have happened, it's probably under hyped. In terms
[50:23] Speaker 3: of the stock rate of the stock prices across the board,
[50:26] Speaker 3: Like that's harder to say, Like, there's some that are
[50:29] Speaker 3: probably way overhyped, there's some that are probably under A
[50:31] Speaker 3: lot of companies have moved from one bucket to another
[50:34] Speaker 3: where they were in a loser bucket and actually they
[50:36] Speaker 3: turns out maybe they're a winner or vice versa, where
[50:40] Speaker 3: people got too optimistic and maybe they don't really have
[50:43] Speaker 3: anything that's defensible and differentiated. So I think there's a
[50:46] Speaker 3: lot of alpha to be gained in figuring that out.
[50:50] Speaker 3: And it's hard to find things that are, you know,
[50:52] Speaker 3: super bargain priced that have anything to do with AI.
[50:55] Speaker 3: But in terms of like the longer term potential to
[50:58] Speaker 3: really transform how people work and how companies work, I
[51:02] Speaker 3: think it's probably under hyped.
[51:04] Speaker 2: I've been fond of thinking of this in terms of, Hey,
[51:09] Speaker 2: the Magnificent seven certainly have been overhyped, but the Magnificent
[51:14] Speaker 2: four ninety three people haven't really been paying attention.
[51:17] Speaker 3: Yeah, I mean it's a good question, like have they
[51:19] Speaker 3: been overhype? Right? If you look at the dollars in
[51:24] Speaker 3: earnings and cash flow that they're generating, impressive, the market
[51:27] Speaker 3: caps that they're growing, like, I think they're you know,
[51:30] Speaker 3: executing amazingly, amazingly well, I think it's quite different from
[51:34] Speaker 3: what we had in the in the dot com era,
[51:36] Speaker 3: where companies weren't really making making money. So that's one difference.
[51:40] Speaker 3: The other four in ninety three, I think there's a
[51:42] Speaker 3: lot of you know, headwinds and tailwinds. So some companies
[51:48] Speaker 3: are going to figure it out, right, and they're going
[51:51] Speaker 3: to kind of make the leap into the future and
[51:53] Speaker 3: figure out how to be much more efficient. And you're
[51:55] Speaker 3: starting to see that in some of the commentary on
[51:57] Speaker 3: the earnings calls where margins and positively for you know,
[52:02] Speaker 3: the way that they figured out how to leverage the
[52:04] Speaker 3: tech and others are going to disappear, right, So I
[52:07] Speaker 3: think it's going to create a lot of opportunities.
[52:10] Speaker 2: So the trader in May sees recording this on the fifteenth,
[52:15] Speaker 2: another set of all time highs. I always learned on
[52:19] Speaker 2: the desk all time highs or bullish. What's your perspective
[52:22] Speaker 2: on all time highs?
[52:23] Speaker 3: Yeah, I think like you have this two tiered market
[52:26] Speaker 3: that you mentioned, where you have the kind of tech
[52:30] Speaker 3: leaders and AI leaders and everything else, everything else. Companies
[52:35] Speaker 3: definitely got hurt more with all the tariff ups and
[52:39] Speaker 3: downs and inflation ups and downs earlier this year. That
[52:43] Speaker 3: seems to be certainly calming down and the partially you know,
[52:50] Speaker 3: top down is calming down and partially bottom up companies
[52:52] Speaker 3: are figuring out, you know, how to navigate these things
[52:55] Speaker 3: and maybe it's not as troublesome as they thought. And
[52:59] Speaker 3: so you're seeing like better execution and probably a little
[53:05] Speaker 3: bit more uh positivity from companies than you were seeing,
[53:10] Speaker 3: you know, certainly six months ago, and that's starting to
[53:12] Speaker 3: get reflected and the market's broadening out a little bit.
[53:17] Speaker 3: But you know, the largest you know, tech companies certainly
[53:19] Speaker 3: have you know, tremendous advantages that they're continuing to press.
[53:24] Speaker 2: So last of our regular questions, what are traders and
[53:28] Speaker 2: investors not thinking about? We're talking about, but perhaps should
[53:33] Speaker 2: be what topics, assets, geography, policy, data points, what's getting
[53:37] Speaker 2: overlooked but shouldn't.
[53:39] Speaker 3: I think it's I don't know if it's getting overlooked,
[53:41] Speaker 3: but I would say, when you think about AI, where
[53:46] Speaker 3: it's going, what are the ramifications for every type of company? Right? So,
[53:52] Speaker 3: at the moment, while AI is making us much more
[53:56] Speaker 3: productive and efficient, we haven't lego of one person because
[54:01] Speaker 3: AI has automated their job, right, Like we're just hiring
[54:03] Speaker 3: more AI people, right, But if you look out, you know,
[54:07] Speaker 3: five years from now, is that's still going to be
[54:08] Speaker 3: the case? You know, probably not right, Like some jobs
[54:10] Speaker 3: are going to get automated, right, and you know we're
[54:13] Speaker 3: kind of on the you know, high end. I would
[54:15] Speaker 3: say of you know, skills that are necessary to work
[54:19] Speaker 3: at a leading hedge fund. If you think of like
[54:21] Speaker 3: a typical company where there's a lot of folks doing
[54:23] Speaker 3: like very bureaucratic type of things, like a lot of
[54:26] Speaker 3: pretty mundane tasks, Like all that stuff is going to
[54:30] Speaker 3: be automated. I don't know if it's in a year
[54:31] Speaker 3: and five years like, but somewhere in that timeframe, it's
[54:35] Speaker 3: going to be automated.
[54:36] Speaker 2: When you think about that, with the entry level jobs, yeah,
[54:39] Speaker 2: under thirty unemployment is like nine point nine percent double
[54:43] Speaker 2: regular employment.
[54:44] Speaker 3: Yeah exactly. And so as you think about that, Like
[54:47] Speaker 3: what does that mean for every type of company? Right?
[54:49] Speaker 3: If if you're a company that can really harness that
[54:52] Speaker 3: and you could produce your products your services at a
[54:56] Speaker 3: much lower price point and you figure out how to
[54:59] Speaker 3: the competition, like your margins might explode to the upside.
[55:02] Speaker 3: On the other hand, if everybody in your space is
[55:04] Speaker 3: doing that, like maybe your margins are actually going to collapse,
[55:07] Speaker 3: right because everybody's going to drive down pricing. And how
[55:10] Speaker 3: does it flow downstream? Like do you need as much
[55:13] Speaker 3: office space if you're going to have less people in
[55:15] Speaker 3: a particular area? Right, So, like all these kind of things,
[55:18] Speaker 3: I think everyone is focused because there is a lot
[55:21] Speaker 3: of volatility. Everyone is focused very much on like the
[55:23] Speaker 3: next quarter. But if you think out, you know, two, three,
[55:26] Speaker 3: four years, like how's this space going to look?
[55:28] Speaker 2: Right?
[55:28] Speaker 3: And that's kind of the balance of trading and investing
[55:30] Speaker 3: the work. You know, you got to have one eye
[55:32] Speaker 3: on each.
[55:33] Speaker 2: And before I get to my favorite questions that I
[55:36] Speaker 2: ask all of my guests, I have to ask you
[55:39] Speaker 2: about some of the philanthropy you participate in. Tell us
[55:43] Speaker 2: a little bit about the Atlas Fellowship and some of
[55:47] Speaker 2: the other things that you've been doing. Over the past.
[55:49] Speaker 3: Sure. So this was a program that my wife, Rebcka
[55:51] Speaker 3: and I started I think this is five years ago now.
[55:55] Speaker 3: We were looking to start an initiative to help kids
[55:59] Speaker 3: go to college who were a bit under resource, maybe
[56:02] Speaker 3: first in their family to go to college, et cetera.
[56:06] Speaker 3: And as we're looking at these scholarship opportunities, particularly in finance,
[56:12] Speaker 3: we couldn't find any program that had a combination of
[56:16] Speaker 3: internships with scholarships. There were some that had ones that
[56:22] Speaker 3: were captive to a particular company, but then you were
[56:24] Speaker 3: beholden to work just at that company forever. But there
[56:28] Speaker 3: wasn't anything that was diverse right where someone could get
[56:30] Speaker 3: real exposure across the industry. And so that's what we
[56:33] Speaker 3: started with with Aplos Fellows, where we give kids who
[56:39] Speaker 3: were super bright driven merit based scholarships.
[56:42] Speaker 2: Right.
[56:42] Speaker 3: So these are the top students in the class, a
[56:46] Speaker 3: lot of times from diverse backgrounds, from with no connections
[56:49] Speaker 3: to finance, right, and they get scholarships of up to
[56:52] Speaker 3: twenty grand a year for four years. And in addition
[56:55] Speaker 3: to that, they get fully paid internships at finance firms
[56:59] Speaker 3: for all four years.
[57:00] Speaker 2: Not your sure firm, but exactly bad variety exactly.
[57:03] Speaker 3: So we take them their first internship when they're coming
[57:05] Speaker 3: out of high school, and that one is typically done
[57:08] Speaker 3: at BAM, and they work either on investing teams, our
[57:11] Speaker 3: data teams, our tech teams, our business teams. And then
[57:14] Speaker 3: the next year they go to work at a bank,
[57:16] Speaker 3: or they go to work at another hedge fund, or
[57:18] Speaker 3: they go to work at a PROP firm or a
[57:19] Speaker 3: VC firm, and every year they rotate. And we just
[57:23] Speaker 3: had the first cohort graduate last year. They all got
[57:26] Speaker 3: jobs in finance, some in Chicago, some of New York,
[57:30] Speaker 3: and employers are really competing over the kids. Like they're
[57:33] Speaker 3: super smart, driven, passionate kids, and now they've had four
[57:37] Speaker 3: years of finance internships at top firms. So I think
[57:41] Speaker 3: it's working really well and we're working to scale it up.
[57:44] Speaker 2: They become a hot commodity.
[57:46] Speaker 3: Yeah, exactly, And just like the fun like, now we
[57:48] Speaker 3: got one hundred kids in the program and we're trying
[57:50] Speaker 3: to really scale it up to hundreds.
[57:51] Speaker 2: Wow, that's great. All right, So let's jump to our
[57:54] Speaker 2: favorite questions that we ask all of our guests. Starting
[57:57] Speaker 2: with we talked about mentorship at a Let's talk about
[58:01] Speaker 2: who were your mentors who shaped your career. You mentioned
[58:05] Speaker 2: Steve Schoenfeld, he had to be significant. Tell us about
[58:08] Speaker 2: him and anybody else that made a difference.
[58:11] Speaker 1: Yeah.
[58:11] Speaker 3: I think what Steven did really well at the time
[58:13] Speaker 3: of the firm was it was a super entrepreneurial type
[58:17] Speaker 3: of environment. Everyone was kind of in business, running your
[58:20] Speaker 3: own little business, right, and most folks kind of stayed
[58:25] Speaker 3: as one man shops, right, as a one man trading unit, right.
[58:33] Speaker 3: But I had the opportunity to kind of build that
[58:37] Speaker 3: into a unit of you know, five and then ten
[58:40] Speaker 3: and then twenty and then thirty and then you know,
[58:42] Speaker 3: then we spun off. So just the freedom and support
[58:46] Speaker 3: you know to do that was really helpful, right. And
[58:50] Speaker 3: then a lot of business learnings from you know, seeing
[58:54] Speaker 3: how he allocated to different people, seeing how they managed
[58:56] Speaker 3: risk like that was very you know, very helpful. And
[58:59] Speaker 3: then philosophically, I would say the biggest impact was reading
[59:02] Speaker 3: Apples Shrugged in college, which I read in an English
[59:05] Speaker 3: class in college, and that really kind of articulated a moral,
[59:11] Speaker 3: you know, philosophical uh framework around which I think, uh,
[59:17] Speaker 3: it makes it much easier to build a successful.
[59:20] Speaker 2: Business, right, Hence the name Atlas.
[59:23] Speaker 3: Yeah, exactly the name of our fund and the name
[59:25] Speaker 3: of uh, you know, our our scholarship program. I think
[59:29] Speaker 3: a lot of times people have all sorts of conflicts
[59:31] Speaker 3: with you know, being successful, uh and at the same time,
[59:35] Speaker 3: you know, being a good person and helping the world.
[59:38] Speaker 3: And I don't actually think there's any conflicts. And that
[59:43] Speaker 3: objective is philosophy, and her work like really does a
[59:45] Speaker 3: good job of laying that scaffolding for people, uh, And
[59:51] Speaker 3: I think it makes it, you know, much more fulfilling
[59:54] Speaker 3: and less conflicted to also be uh, be successful in
[59:57] Speaker 3: all realms.
[59:59] Speaker 2: So, since you mentioned Atlas Shrug, let's talk about books.
[1:00:03] Speaker 2: What are some of your favorites? What are you reading
[1:00:05] Speaker 2: right now?
[1:00:05] Speaker 3: Yeah, that's definitely the number one. Uh. The current one
[1:00:09] Speaker 3: that's on my bookshelf is a fun one. It's from
[1:00:13] Speaker 3: this explorer. I didn't know there were explorers anymore, but
[1:00:16] Speaker 3: there are apparently. And we had this guy, Mike Horn
[1:00:19] Speaker 3: at our VC conference we do like a public private
[1:00:22] Speaker 3: VC conference every year called Elevate, and we had him
[1:00:25] Speaker 3: as a guest speaker, and we had two guest speakers
[1:00:28] Speaker 3: this year. We had Steve Kerr, the coach of the Warriors,
[1:00:30] Speaker 3: and we had Mike Horn Steve went first, and he
[1:00:33] Speaker 3: was amazing and a great you know stories on teamwork
[1:00:35] Speaker 3: and and uh collaboration and work ethic and Michael Jordan's
[1:00:40] Speaker 3: stories and stuff, Curry story, so it's great. And then
[1:00:42] Speaker 3: Mike had to follow him, and I was like, oh
[1:00:43] Speaker 3: my god, how is this guy gonna follow us? And uh,
[1:00:47] Speaker 3: my partner, Scott brought him, brought him on. And Scott's
[1:00:51] Speaker 3: great at finding like talent that's you know, other folks
[1:00:54] Speaker 3: haven't discovered yet. And this guy, uh, you know, has
[1:00:58] Speaker 3: circumvented the equator, so several times around the world, you know,
[1:01:02] Speaker 3: self powered walking, et cetera. He's gone to North Pole,
[1:01:06] Speaker 3: South Pole, swam the Amazon, like all these you know,
[1:01:09] Speaker 3: insane stories, one after another. And he's he's got a
[1:01:14] Speaker 3: book called I think it's called Nothing Is Impossible or
[1:01:17] Speaker 3: something along those lines. And you started, like, you shake
[1:01:20] Speaker 3: hands with this guy and he's not like a particularly
[1:01:22] Speaker 3: big guy, but you like crushed my hand. I go, Mike,
[1:01:26] Speaker 3: how do you get any sixty years old the way?
[1:01:27] Speaker 3: How do you get this handshake? And he's like, well, I,
[1:01:30] Speaker 3: you know, kite surfed across the Antarctica and that involves
[1:01:33] Speaker 3: you know, holding a kite across you know, frozen Antarctica
[1:01:38] Speaker 3: for fourteen hours a day. Is this huge wind is
[1:01:40] Speaker 3: pulling you along, and it's like, okay, that's that's how
[1:01:43] Speaker 3: you get that's how you get some grip string. But
[1:01:47] Speaker 3: he had like these amazing survival stories and just mental
[1:01:50] Speaker 3: fortitude stories that I think really relate to trading and investing.
[1:01:56] Speaker 3: So he was an awesome speaker, and so I just
[1:01:57] Speaker 3: got his book.
[1:01:59] Speaker 2: Have you ever read Endurance the Shackleton?
[1:02:01] Speaker 3: Yes, yes, I read it, watched the movie. That one
[1:02:03] Speaker 3: was hard to sit through.
[1:02:05] Speaker 2: The book is just like it couldn't be fiction because
[1:02:08] Speaker 2: nothing is believed. It's so amazing it how to be real.
[1:02:12] Speaker 3: Yeah, this is along those lines, but less abusive and
[1:02:14] Speaker 3: more fun.
[1:02:16] Speaker 2: Let's talk about streaming anything interesting that you're watching or
[1:02:19] Speaker 2: listening to these days.
[1:02:22] Speaker 3: I mean shows I like, I really enjoyed The Three
[1:02:24] Speaker 3: Body Problem those on Netflix. That was a fun one
[1:02:26] Speaker 3: of them.
[1:02:27] Speaker 2: The book slog.
[1:02:28] Speaker 3: I read the book actually afterwards, so.
[1:02:31] Speaker 2: It's a little challenging. It's originally Chinese and transit, but
[1:02:35] Speaker 2: the show is it was really good.
[1:02:37] Speaker 3: And in the books, the books like the Creativity and
[1:02:39] Speaker 3: the books are really fun, so that was a good one,
[1:02:42] Speaker 3: you know, Yellowstone. It's great usual ones there I'm listening to.
[1:02:47] Speaker 3: I think podcasts are like the greatest invention in the
[1:02:50] Speaker 3: last you know, five ten years of of not that
[1:02:54] Speaker 3: they weren't around before, but like popularized in terms of
[1:02:56] Speaker 3: being able to just expand your your knowledge set in
[1:02:59] Speaker 3: a very efficient way. So I try to listen to
[1:03:01] Speaker 3: as many as I can. I listened to, you know,
[1:03:04] Speaker 3: a lot of yours. I listened to a lot of
[1:03:06] Speaker 3: Tim Ferriss's. He's got all sorts of super interesting people
[1:03:08] Speaker 3: on there that invest like the best ones. There's a
[1:03:11] Speaker 3: ton on there. So there's a lot of finance ones.
[1:03:14] Speaker 3: There's a lot of VC ones I enjoy. I was
[1:03:16] Speaker 3: just listening to one they had vinode Cosla and then
[1:03:19] Speaker 3: another one with Mark and Dreesen. They're just like super
[1:03:22] Speaker 3: thought provoking. And so I encourage like all our young
[1:03:25] Speaker 3: people coming up that ask just you know, you have
[1:03:28] Speaker 3: this like amazing resource you could tap you know, Spotify
[1:03:30] Speaker 3: and and you got, you know, a thousand different podcasts
[1:03:33] Speaker 3: from world's best people in every field that you can
[1:03:36] Speaker 3: listen to sharing their insights.
[1:03:37] Speaker 2: Well, there's no excuse to be bored these days.
[1:03:39] Speaker 3: No it's amazing. I remember when I was coming up
[1:03:41] Speaker 3: and I wanted to hear like how do hedge funds
[1:03:42] Speaker 3: make money? Right? Like you couldn't figure that out? Like
[1:03:45] Speaker 3: if you had no connectivity to edge fund Like, how
[1:03:47] Speaker 3: are you going to figure that out? You read Market
[1:03:49] Speaker 3: Wizards and Malway, right, But besides besides that, reading all
[1:03:55] Speaker 3: the books they're available now, like the podcast, like amazing resource.
[1:03:58] Speaker 2: Absolutely Our final two questions, what sort of advice would
[1:04:02] Speaker 2: you give to a recent college grad interest in the
[1:04:05] Speaker 2: career and either trading, investing multi strat hedge funds.
[1:04:09] Speaker 3: I mean one is just follow your curiosity, which hopefully
[1:04:13] Speaker 3: leads to a passion of something that you want to
[1:04:16] Speaker 3: really do. Right, don't go into finance, hedge funds, whatever
[1:04:21] Speaker 3: it is, because your your friend is making a lot
[1:04:23] Speaker 3: of money, right, Like, you got to be interested in
[1:04:27] Speaker 3: the work, Like you got to be driven and curious
[1:04:31] Speaker 3: and hopefully passionate about what it is that you're doing,
[1:04:34] Speaker 3: because you know it's like pro sports or anything else. Like,
[1:04:40] Speaker 3: just because you know Lebron makes a lot of money,
[1:04:42] Speaker 3: doesn't mean you're going to go make a lot of
[1:04:43] Speaker 3: money play basketball, right, you know one, you know he's
[1:04:47] Speaker 3: six eleven. But besides that, like he's put in a
[1:04:49] Speaker 3: lot of work over the years, right, and it's because
[1:04:52] Speaker 3: he loves the game of basketball.
[1:04:54] Speaker 2: Right.
[1:04:54] Speaker 3: If you don't love it, you're not going to put
[1:04:55] Speaker 3: in the work and and trading for sure, if you're
[1:04:58] Speaker 3: if you don't love the process, and you don't love
[1:05:01] Speaker 3: sitting there looking at the screen and trying to figure
[1:05:03] Speaker 3: things out, you're not going to survive the emotional ups
[1:05:06] Speaker 3: and downs, because there's lots of downs in addition to
[1:05:08] Speaker 3: the ups when things work out. So that's the first thing.
[1:05:12] Speaker 3: The second thing I would say is go to a
[1:05:14] Speaker 3: firm that's growing right, and where there's a culture where
[1:05:19] Speaker 3: you can learn from others, right, where you can get
[1:05:22] Speaker 3: good mentorship. There's top people you can learn from, and
[1:05:26] Speaker 3: you'll have some amount of access to be able to
[1:05:30] Speaker 3: do that. The particular thing that they're trading or investing
[1:05:33] Speaker 3: or how they're doing it, like that's a lot less
[1:05:36] Speaker 3: important because you might change, the company might change. And
[1:05:39] Speaker 3: then the third thing is like, once you're in a
[1:05:41] Speaker 3: seat that's a decent seat, you know, ask for feedback,
[1:05:45] Speaker 3: like here's what I did, Here's what I think I
[1:05:48] Speaker 3: could have done. You know, what do you think right,
[1:05:51] Speaker 3: don't ask for feedback when the market opens or the
[1:05:53] Speaker 3: person's like in the middle of a you know, disaster's day.
[1:05:56] Speaker 3: But when things are quiet right early, late, right lunch hour,
[1:06:01] Speaker 3: like you know, get get feedback proactively, right, don't sit
[1:06:05] Speaker 3: around waiting for your year end review to see how
[1:06:08] Speaker 3: things are going. And you know, iterated together with you
[1:06:11] Speaker 3: know the people that you're working with.
[1:06:13] Speaker 2: And our final question, what do you know about the
[1:06:15] Speaker 2: world of capital markets? Training investing today would have been
[1:06:19] Speaker 2: useful in nineteen ninety four when you were first starting out.
[1:06:23] Speaker 3: I think the things that we've been doing the last
[1:06:26] Speaker 3: you know, five years, I wish I had figured those
[1:06:30] Speaker 3: out earlier. So investing more aggressively across strategies, right, I
[1:06:39] Speaker 3: think we were too equity heavy for too long. We
[1:06:43] Speaker 3: weren't serious enough about how do you build those strategies
[1:06:47] Speaker 3: outside of equities, and not serious enough about hiring top
[1:06:52] Speaker 3: people to manage those areas and then building like all
[1:06:57] Speaker 3: the tech and the infrastructure that you needed to really
[1:07:00] Speaker 3: be competitive and leading in those areas. So I wish
[1:07:04] Speaker 3: I would have figured that out a little bit a
[1:07:05] Speaker 3: little bit earlier and pushed at it harder. But I
[1:07:10] Speaker 3: think it's on the right trajectory.
[1:07:12] Speaker 2: Now, Dimitri, thank you for being so generous with your time.
[1:07:15] Speaker 2: This has been absolutely fascinating. We have been speaking with
[1:07:20] Speaker 2: Dimitri Ballyasny, co founder of bally Asney Asset Management. If
[1:07:25] Speaker 2: you enjoy this conversation, well check out any of the
[1:07:28] Speaker 2: five hundred and fifty we've done over the past eleven years.
[1:07:32] Speaker 2: You can find those at iTunes, Spotify, Bloomberg here on
[1:07:38] Speaker 2: YouTube as well. Check them out. They're really a great
[1:07:42] Speaker 2: collection of resources. And be sure to check out my
[1:07:45] Speaker 2: new book How Not to Invest The ideas, numbers and
[1:07:48] Speaker 2: behavior that destroy Wealth and How to Avoid Them at
[1:07:52] Speaker 2: your favorite bookstore. I would be remiss if I know.
[1:07:56] Speaker 2: I think the crack team that helps us put these
[1:07:59] Speaker 2: conversations together each week. Alexis Noriega and Anna Luke are
[1:08:03] Speaker 2: my producers. Sage Bauman is the head of podcasts here
[1:08:07] Speaker 2: at Bloomberg. Sean Russo is my researcher. I'm Barry Ritolts.
[1:08:13] Speaker 2: You've been listening to Masters in Business on Bloomberg Radio.

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