WEBVTT - How You Get and Actually Keep a Job at a Multi-Strat Hedge Fund 0:00:02.720 --> 0:00:14.040 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.520 --> 0:00:21.640 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.720 --> 0:00:25.200 I'm Jill Wisenthal and I'm Tracy Alloway. Tracy, there's a 0:00:25.239 --> 0:00:28.720 lot we've discussed about multi strategy hedge funds, but there's 0:00:28.720 --> 0:00:32.640 still a lot we don't know. And specifically, although I've 0:00:32.680 --> 0:00:35.640 come to learn things about comp and alignment and the 0:00:35.640 --> 0:00:39.280 importance of risk management and risk models and all that stuff, 0:00:39.600 --> 0:00:44.199 I actually don't know, like how how the pods make 0:00:44.280 --> 0:00:44.880 good trade. 0:00:45.360 --> 0:00:47.839 This is part two hundred and ninety eight of our 0:00:47.880 --> 0:00:50.240 attempt to understand multi strat hedge funds. 0:00:50.560 --> 0:00:51.239 That's what it is. 0:00:51.640 --> 0:00:54.160 But you're right, we haven't really looked at it from 0:00:54.440 --> 0:00:57.320 the I guess the perspective of a PM who is 0:00:57.360 --> 0:01:00.360 actually working there, and what it takes to get hot fired, 0:01:00.880 --> 0:01:04.280 what it takes to avoid getting fired, and things like that. 0:01:04.760 --> 0:01:07.440 I have a feeling that like avoiding getting fired is 0:01:07.440 --> 0:01:09.520 a really big part of the story, Like you want 0:01:09.520 --> 0:01:11.560 to do well right, you want to make money and 0:01:11.600 --> 0:01:13.880 all that, but I also get the impression that you 0:01:14.000 --> 0:01:16.039 just want to hang onto that seat for a really 0:01:16.120 --> 0:01:18.840 long time, and that a big part of I don't 0:01:18.840 --> 0:01:20.360 know if the game is the word. But a big 0:01:20.400 --> 0:01:23.640 part of the game is yeah, holding onto that seat, 0:01:23.720 --> 0:01:28.039 avoiding being part of any given call, Avoiding having your 0:01:28.120 --> 0:01:31.480 name show up on Bloomberg in a story that gets 0:01:31.560 --> 0:01:34.920 read spiked about so and so out after losing two 0:01:34.959 --> 0:01:36.880 hundred and sixty million or whatever in the trade. 0:01:36.880 --> 0:01:39.240 This is exactly what I was wondering, like, how do 0:01:39.319 --> 0:01:42.520 the drawdowns actually impact a bunch of pms. Is it 0:01:42.640 --> 0:01:45.600 like really embarrassing and does it have like an actual 0:01:45.640 --> 0:01:48.520 effect on their trading? I imagine it does, and it 0:01:48.640 --> 0:01:50.800 must have an effect on their confidence as well. But 0:01:50.880 --> 0:01:53.040 I am very interested in this subject, and we have 0:01:53.160 --> 0:01:55.600 joked a number of times about, you know, if we 0:01:55.600 --> 0:01:58.360 were at a multistrat hedge fund things like that. So 0:01:58.440 --> 0:01:59.960 maybe we'll get a better idea. 0:02:00.040 --> 0:02:01.840 We definitely have to learn more about the pod level, 0:02:02.000 --> 0:02:03.960 because I do get the pressure from talking to some people. 0:02:04.000 --> 0:02:06.440 We talked to Running Cosgrave recently. It's like, oh, you 0:02:06.520 --> 0:02:07.760 just put a bunch of people in a room and 0:02:07.760 --> 0:02:09.680 if you have the risk management right, it kind of 0:02:09.720 --> 0:02:13.280 works out. Anyway, We're going to continue our journey of 0:02:13.360 --> 0:02:14.959 learning more about these big out. 0:02:14.880 --> 0:02:18.000 There's a natural affinity between podcasts and pod shops. 0:02:18.000 --> 0:02:20.760 Oh, it's pretty sad. God, wouldn't you hate it if, 0:02:20.800 --> 0:02:22.440 like if we screwed up or like we had like 0:02:22.480 --> 0:02:24.520 an episode that didn't do very well and our traffic 0:02:24.680 --> 0:02:26.359 was down or something, and there was like a big 0:02:26.480 --> 0:02:29.560 article on It's like Joey Tracy out after you know, 0:02:29.639 --> 0:02:32.320 after one month of underperformance of the podcast. 0:02:32.440 --> 0:02:34.680 Oh yeah, Well, this is the other thing, Like what 0:02:34.840 --> 0:02:37.480 happens if you outperform for like half the year and 0:02:37.480 --> 0:02:40.520 then you underperform for the second half of the year, 0:02:40.560 --> 0:02:43.239 And how is that actually calculated in terms of your comp. 0:02:43.160 --> 0:02:45.440 Totally And this came up before, which is that people 0:02:45.440 --> 0:02:47.920 who have really good starts the fund at the fund level, 0:02:47.960 --> 0:02:50.160 you don't want them taking off risk just to lock 0:02:50.200 --> 0:02:53.959 in their annual bonuses. These are important questions. Anyway, let's 0:02:54.040 --> 0:02:56.360 dive right into it. We have the perfect guest, someone 0:02:56.480 --> 0:02:59.800 with a long track record and experience across many as 0:03:00.000 --> 0:03:01.800 spects of this space. We're going to be speaking with 0:03:02.040 --> 0:03:05.840 Brian Yelvington. He's currently a consultant for executive search firm 0:03:05.880 --> 0:03:08.760 Carrington Fox, but he's been a former analyst in PM 0:03:08.840 --> 0:03:12.840 at several large multi strat funds, Millennium or Capital et cetera, 0:03:13.000 --> 0:03:16.320 A few others in there, and so up. Brian, thank 0:03:16.360 --> 0:03:18.640 you so much for coming on odd lots. 0:03:18.480 --> 0:03:20.600 Thank you for having me. Great to be here. I 0:03:20.880 --> 0:03:24.120 always enjoy the podcast and enjoy hearing the very subject 0:03:24.200 --> 0:03:25.079 you guys come up with. 0:03:25.200 --> 0:03:27.160 Oh, thank you, we'd love to hear it. We're gonna 0:03:27.280 --> 0:03:30.120 clip that and put it in the mix before we 0:03:30.240 --> 0:03:32.040 go on, like why do you just give us the 0:03:32.040 --> 0:03:34.000 real brief version of like who are you? And why 0:03:34.000 --> 0:03:35.760 are we talking to you? Other than the fact that 0:03:35.760 --> 0:03:37.240 if I go to your LinkedIn page there are a 0:03:37.240 --> 0:03:39.240 bunch of famous companies listed on it. 0:03:39.360 --> 0:03:41.560 Yeah, probably a few too many for my taste, to 0:03:41.600 --> 0:03:44.280 be honest, I've kind of been one of the few 0:03:44.320 --> 0:03:47.800 people who've been both a pod PM as well as 0:03:47.920 --> 0:03:51.560 kind of helped bring those people into a large multi strat. 0:03:51.880 --> 0:03:55.040 I left the risk taking world and went to work 0:03:55.040 --> 0:03:57.880 in the business development area. Business development is just to 0:03:58.720 --> 0:04:02.040 badly disguise you from this for manager selection, although it 0:04:02.120 --> 0:04:05.400 means very different things at very different firms. So I've 0:04:05.440 --> 0:04:09.760 seen it both from junior analysts side to a senior 0:04:09.800 --> 0:04:14.440 PM to the person who's the necessary, if not sufficient 0:04:14.560 --> 0:04:16.200 gatekeeper at a hedge fund. 0:04:17.160 --> 0:04:19.200 I'm trying to think where to start because there's so 0:04:19.320 --> 0:04:21.880 much for us to talk about. But if I'm a 0:04:22.040 --> 0:04:26.479 PM and I am applying to a multi strat, what 0:04:26.520 --> 0:04:29.840 would my CV or resume actually look like? And then 0:04:29.880 --> 0:04:32.479 b would I even be applying to a multi strat? 0:04:32.560 --> 0:04:34.800 Or would I be headhunted and they would find me? 0:04:35.440 --> 0:04:39.760 The chances are generally better that if you're an established PM, 0:04:39.880 --> 0:04:44.440 you would probably come either through direct from the BD 0:04:44.640 --> 0:04:49.200 team who said, we need somebody who represents the same 0:04:49.320 --> 0:04:52.880 risk that Tracy represents. We hear she's great, We'd love 0:04:52.880 --> 0:04:56.200 to speak to her, or through an executive search firm 0:04:56.480 --> 0:04:59.760 who's there's a lot of turnover in this industry and 0:04:59.839 --> 0:05:01.840 they do a lot of business as a result. 0:05:02.120 --> 0:05:04.600 So how do you know if someone is actually good? 0:05:04.640 --> 0:05:06.400 Because this seems to be like one of the core 0:05:06.560 --> 0:05:10.600 challenges in really all investing, right, like past results are 0:05:10.640 --> 0:05:14.839 no guarantee of future returns. Everything always says that you 0:05:14.839 --> 0:05:17.120 don't know what's just a lucky streak, et cetera. So 0:05:17.480 --> 0:05:20.280 let's go through this process you want to establish if 0:05:20.279 --> 0:05:23.240 someone is actually a good investor or trader or portfolio 0:05:23.320 --> 0:05:26.200 manager or whatever. Walk us through the steps of like 0:05:26.279 --> 0:05:29.360 how you actually would identify if Tracy is good at 0:05:29.360 --> 0:05:31.159 her job exactly. 0:05:31.640 --> 0:05:34.800 Well, first to caveat, you're never going to know, Okay. 0:05:34.960 --> 0:05:38.159 The reason that past performance is not indicative of future 0:05:38.200 --> 0:05:40.359 returns is because it's the future and we never know 0:05:40.400 --> 0:05:43.960 how somebody's going to act. So what I'm going to 0:05:44.080 --> 0:05:47.880 do during our first conversation Tracy is I'm going to 0:05:47.960 --> 0:05:50.360 ask sort of like you guys did a little bit 0:05:50.360 --> 0:05:53.279 about your background. I'm going to be looking for things 0:05:53.320 --> 0:05:55.880 like where we might know people in common, where you 0:05:55.960 --> 0:05:58.279 might have worked through a really good group or something 0:05:58.360 --> 0:06:01.240 like that that had a great reputation. And then we're 0:06:01.279 --> 0:06:04.400 going to get into the nitty gritty of the conversation 0:06:05.160 --> 0:06:09.320 where I asked you in great detail, you know, what 0:06:09.480 --> 0:06:12.360 is your edge? That part's actually not too detailed. You 0:06:12.360 --> 0:06:14.840 should be able to elucidate that sort of standing on 0:06:14.839 --> 0:06:17.680 one foot. Then I'm going to go into wait. 0:06:17.560 --> 0:06:19.920 Yeah, can you pause, just give me if that's an 0:06:19.920 --> 0:06:22.200 easy part, what is it? Because this is actually something 0:06:22.240 --> 0:06:26.240 that I'm completely in the dark about. How does someone 0:06:26.320 --> 0:06:30.000 go about articulating an edge in plan English during an interview? 0:06:30.000 --> 0:06:31.920 Like what does that actually sound like? You say? Okay, 0:06:31.960 --> 0:06:34.839 Like Brian, what's your edge. You used to trade fixed 0:06:34.839 --> 0:06:37.080 income at where and where? Brian, what was your age? 0:06:37.600 --> 0:06:39.719 Well, I probably didn't have a very good one, but 0:06:40.800 --> 0:06:44.159 my edge was usually from the research side. What I 0:06:44.200 --> 0:06:46.960 will tell you is pms who are extremely good at 0:06:47.000 --> 0:06:50.560 their jobs, have boiled down what their edge is to 0:06:50.640 --> 0:06:55.120 a very well defined two or three sentence elevator pitch 0:06:55.160 --> 0:06:57.880 style answer. And the reason that they're able to do 0:06:57.960 --> 0:07:00.240 that is because this is something they've been doing a 0:07:00.240 --> 0:07:03.000 long time, and they've made a huge number of mistakes, 0:07:03.080 --> 0:07:06.120 and they know exactly the alpha that they want to identify, 0:07:06.400 --> 0:07:10.240 are good at identifying and what they go after. So 0:07:10.280 --> 0:07:13.680 it's going to sound different for everybody. For you know, 0:07:14.120 --> 0:07:16.720 a macro RV type of fund, it may be that 0:07:16.800 --> 0:07:21.760 they really anticipate the the shifts and monetary policy. For 0:07:21.880 --> 0:07:24.920 a credit fund, it's that maybe they understand, you know, 0:07:25.000 --> 0:07:28.040 corporate actions and they're really good at reading between the 0:07:28.080 --> 0:07:32.120 lines of maybe even a specific niche of companies. So 0:07:32.160 --> 0:07:35.000 it's going to differ, but you can usually tell by 0:07:35.040 --> 0:07:38.440 someone's answer there how much they thought of it. The 0:07:38.480 --> 0:07:41.880 bad answers tend to be something that relies on experience. 0:07:42.200 --> 0:07:46.440 I'll note that there are too many octagenarian PMS or 0:07:46.480 --> 0:07:49.560 something that relies on well, I'm just really good at this. 0:07:50.360 --> 0:07:52.520 You kind of have to be able to identify it 0:07:52.280 --> 0:07:53.360 to be good at it. 0:07:53.840 --> 0:07:57.760 So going back to performance metrics, like what figures or 0:07:57.840 --> 0:08:01.160 numbers are actually available? Well, here, you know, does a 0:08:01.200 --> 0:08:05.440 potential PM come bearing sharp ratios? And then how does 0:08:05.720 --> 0:08:10.360 the potential hiring firm actually do due diligence on some 0:08:10.440 --> 0:08:11.160 of those numbers. 0:08:11.560 --> 0:08:15.960 It's difficult. And the reality is that you know P 0:08:16.120 --> 0:08:19.560 and L even within a firm as a BD person, 0:08:19.680 --> 0:08:22.320 and again BD is very different from firm to firm. 0:08:22.840 --> 0:08:27.560 But if I were to hire Tracy as PM. 0:08:26.360 --> 0:08:29.680 I'm regretted using myself as an example, by the way. 0:08:30.240 --> 0:08:32.320 No, we're going to have you do well, okay, right, 0:08:33.200 --> 0:08:36.360 we'll flunk out somebody else. But if we were to 0:08:36.400 --> 0:08:39.120 hire Tracy in some places, I might not even be 0:08:39.200 --> 0:08:42.040 aware of how she's doing six months after we hired, 0:08:42.760 --> 0:08:45.800 and others I would have kind of perfect inside p 0:08:45.960 --> 0:08:50.440 and ls are extremely closely guarded secrets and usually they're 0:08:50.480 --> 0:08:54.480 not discussed within the firm except for a very few 0:08:54.559 --> 0:08:58.320 select group of people. And nobody's going to attest to 0:08:58.360 --> 0:09:02.319 that P and L. Right, you of your own accord, Tracy, 0:09:02.520 --> 0:09:06.920 might provide some assurance to somebody. Maybe it's because your 0:09:07.000 --> 0:09:09.840 past cap or something. They can't ask, but you can 0:09:09.920 --> 0:09:12.800 certainly say, hey, by the way, there's proof that I 0:09:12.840 --> 0:09:15.319 did what I did. That's your priority. 0:09:15.400 --> 0:09:16.440 Wait why can't they ask? 0:09:16.720 --> 0:09:20.800 I believe that's the employment law. Yeah, you're allowed to ask. 0:09:22.200 --> 0:09:25.960 It might not been designed to protect hedge fund pms, 0:09:26.000 --> 0:09:27.840 but I believe it does cover them somewhat. 0:09:28.160 --> 0:09:30.560 Tracy, I've brought up a bunch of chodes. I told you. 0:09:30.640 --> 0:09:33.079 I have talked about the time that I interviewed at 0:09:33.080 --> 0:09:35.880 a prop trading firm, right many many times. 0:09:35.960 --> 0:09:38.520 Joe, Yes, are you going to tell the story again? 0:09:38.600 --> 0:09:39.319 You can if you want. 0:09:39.440 --> 0:09:41.400 I'll just tell the brief one, which is that when 0:09:41.400 --> 0:09:44.120 I was living in Austin, which you are, Brian, you're 0:09:44.280 --> 0:09:46.920 there now, I interviewed at a prop trading firm when 0:09:46.920 --> 0:09:50.000 I was right out of college. There were two hundred interviews, 0:09:50.520 --> 0:09:52.760 and they asked me about my own trading when I 0:09:52.840 --> 0:09:55.240 used to date trade on each trade by myself, and 0:09:55.280 --> 0:09:57.439 I told them a little about my trades. They made 0:09:57.520 --> 0:10:00.160 me play a video game to test my hand and 0:10:00.160 --> 0:10:02.800 I coordination, and then they made me play ping pong 0:10:03.000 --> 0:10:05.599 against the CEO. I'm not really sure what that was 0:10:05.640 --> 0:10:08.120 all about, but then I was one of I was one. 0:10:08.280 --> 0:10:10.440 I was one of four people who got to offer 0:10:10.520 --> 0:10:12.840 the job, and then for some reason I didn't take it. 0:10:12.880 --> 0:10:14.280 Didn't you work at a sandwich shop? 0:10:14.320 --> 0:10:16.400 To the now, I'm making sandwiches at the Wheatsville food 0:10:16.440 --> 0:10:18.120 co Op at the time, and all my friends were 0:10:18.160 --> 0:10:19.640 working there. I was like, I don't really feel like 0:10:19.760 --> 0:10:22.640 working the corporate life just yet. And everything worked out 0:10:22.720 --> 0:10:24.840 and it was fine. That's still one of the stranger 0:10:24.960 --> 0:10:26.160 times in my life. But it was kind of like 0:10:26.160 --> 0:10:28.560 this where they asked me specifics. All right, here's a 0:10:28.600 --> 0:10:31.880 more important question. It's great to say, like, if you're 0:10:31.880 --> 0:10:33.960 a PM, then you show, but the first you got 0:10:33.960 --> 0:10:37.160 to become a PM. What does an analyst do? So 0:10:37.160 --> 0:10:39.600 so a PM has a pod and they have analysts 0:10:39.600 --> 0:10:42.080 in their pod, what does an analyst actually do? 0:10:43.040 --> 0:10:46.160 Just as with the street, you know how they're analysts 0:10:46.200 --> 0:10:50.240 and function and analysts and rank as you will, pods 0:10:50.280 --> 0:10:55.559 will generally have analysts covering, you know, specific areas. Basically 0:10:55.880 --> 0:10:58.720 at most firms, it's sort of a euphemism. If you 0:10:58.840 --> 0:11:02.199 have trading authority you're either a trader, a SUBPM, or 0:11:02.240 --> 0:11:05.040 a PM. If you do not have trading authority, but 0:11:05.080 --> 0:11:09.439 you're still committing or contributing to investment decisions, you're an analyst. 0:11:09.679 --> 0:11:13.240 It's just a generic catch all term. But you are 0:11:13.360 --> 0:11:17.280 generally in charge of building the you know, specific type 0:11:17.320 --> 0:11:21.040 of surveillance that the pod needs. You may have names 0:11:21.240 --> 0:11:25.000 or industries or specific areas of a specific market to cover, 0:11:25.640 --> 0:11:28.000 and you're being eyes and ears, and you will have 0:11:28.120 --> 0:11:32.280 specific projects. Yeah, in our current environment, there's no no 0:11:32.440 --> 0:11:35.640 shortage of things to test out and look into as 0:11:35.679 --> 0:11:38.600 to how policies may change. So if you're in a macropod, 0:11:38.640 --> 0:11:40.240 you're probably pretty busy right now. 0:11:40.640 --> 0:11:44.680 Presumably you don't have to make perfect PowerPoint presentations for 0:11:44.800 --> 0:11:47.600 potential deals and things like that. It's much more idea 0:11:47.679 --> 0:11:49.920 generation and I guess like back testing. 0:11:50.360 --> 0:11:52.480 There's you know there. Again, it kind of depends on 0:11:52.520 --> 0:11:54.480 the type of pod that you're in. If you're in 0:11:54.480 --> 0:11:57.680 a very directional macropod, you're probably looking for a lot 0:11:57.679 --> 0:12:00.960 of historical analogs, you know, house pods, he responded in 0:12:01.000 --> 0:12:06.199 the past. If you are in a more quantitatively oriented pod, 0:12:06.400 --> 0:12:09.040 maybe something that does some form of arbitrage. He has 0:12:09.120 --> 0:12:13.840 lots of back testing, lots of mathematical confetency. But it's 0:12:13.920 --> 0:12:18.120 interesting who I've seen make the jump. I've seen a salesperson. 0:12:18.240 --> 0:12:22.199 We basically just sent out a weekly commentary with a 0:12:22.280 --> 0:12:26.560 model portfolio in it, and people loved it, and PM said, Hey, 0:12:26.840 --> 0:12:28.880 we want to talk to this person. Who you go 0:12:29.160 --> 0:12:34.160 talk to him? For US analysts public machine analysts. Joey 0:12:34.280 --> 0:12:36.439 and I actually have a mutual friend that you've had 0:12:36.480 --> 0:12:39.080 on the show before who was kind of writing for 0:12:39.120 --> 0:12:41.280 a newsletter, and it was a newsletter. I can tell 0:12:41.280 --> 0:12:44.880 you that most every PM I knew in macro was 0:12:44.960 --> 0:12:49.760 reading and he built his audience on Twitter or X. Sorry, 0:12:49.840 --> 0:12:51.439 that doesn't make a very good verb. 0:13:06.840 --> 0:13:10.240 All right? And then if I am running a pod shop, 0:13:10.640 --> 0:13:14.840 what exactly am I looking for in terms of potential PM? 0:13:15.000 --> 0:13:19.480 So I get probably past performance, even though as we discussed, 0:13:19.520 --> 0:13:23.160 it's not a perfect indicator of future performance. But am 0:13:23.200 --> 0:13:26.960 I looking at personality like would I hire a complete 0:13:27.040 --> 0:13:29.440 jerk who happens to be a star trader because it 0:13:29.480 --> 0:13:32.040 doesn't really matter how he works with other people because 0:13:32.040 --> 0:13:35.720 he's going to be completely independent, Or would I be 0:13:36.000 --> 0:13:38.760 looking at it very holistically and taking a sort of 0:13:39.160 --> 0:13:42.760 moneyball approach where I'm trying to fill in or plug 0:13:42.880 --> 0:13:48.640 specific gaps in my overall business with maybe players or 0:13:48.679 --> 0:13:51.000 traders that are undervalued by the market. 0:13:51.480 --> 0:13:55.360 I think you're always trying to play the moneyball approach. However, 0:13:55.679 --> 0:13:59.360 most puge funds differ a lot in how internally they communicate. 0:14:00.160 --> 0:14:03.520 There are some hedge funds where you're really not allowed 0:14:03.520 --> 0:14:06.040 to talk to people from other pods, Like I might 0:14:06.160 --> 0:14:09.360 say something to you Tracy, like I like the market here, 0:14:09.640 --> 0:14:12.280 I don't like it here, But I would never say, 0:14:12.520 --> 0:14:15.520 you know, I'm shorting the two year versus the three year. 0:14:16.000 --> 0:14:20.040 DBO one weighted something specific, and that's to avoid kind 0:14:20.040 --> 0:14:23.920 of cross contamination of the pods. Whereas there are others 0:14:23.920 --> 0:14:27.120 who really value the esprie de corps and they like 0:14:27.480 --> 0:14:32.200 to have people collaborate and those places. Not only are 0:14:32.240 --> 0:14:34.960 you going to have the typical meetings with BD and 0:14:35.080 --> 0:14:37.320 risk and the CIO, but you're also going to meet 0:14:37.320 --> 0:14:39.920 a lot of other pms to make sure that you 0:14:39.920 --> 0:14:40.920 know you're not a jerk. 0:14:41.600 --> 0:14:44.720 Let's talk more about getting a job as an analyst. 0:14:44.840 --> 0:14:46.600 There are probably a lot of people, maybe they're in 0:14:46.640 --> 0:14:50.800 college listening to this episode right now. I think that 0:14:50.920 --> 0:14:53.280 if I were young and in college and didn't have 0:14:53.280 --> 0:14:56.040 any obligations, I would like, Oh, this sounds really fun 0:14:56.160 --> 0:14:58.720 working for a multi strategy hedge funds. I would love 0:14:58.760 --> 0:15:01.800 to get my door in one. What would be like? 0:15:02.080 --> 0:15:04.080 What should I do to get that first role. 0:15:04.680 --> 0:15:08.280 There are a few firms that hire direct from college, 0:15:08.280 --> 0:15:12.480 direct from university. Those are very very small programs. Normally, 0:15:12.560 --> 0:15:15.040 there's only a few of them at scale. I would 0:15:15.040 --> 0:15:18.440 say typically people who first move into a pod as 0:15:18.560 --> 0:15:22.160 an analyst or perhaps a sub PM generally come from 0:15:22.160 --> 0:15:26.080 the cell side or maybe prop but they generally have 0:15:26.160 --> 0:15:28.760 spent a couple of years on the cell side, have 0:15:28.960 --> 0:15:31.880 a lot of the great training that the street can provide, 0:15:32.520 --> 0:15:35.680 and have advanced themselves to where they are saying, you know, 0:15:35.760 --> 0:15:38.240 I no longer just want to make markets. I actually 0:15:38.280 --> 0:15:39.440 want to trade my own risk. 0:15:40.120 --> 0:15:41.840 So you get a job on the cell side, and 0:15:41.880 --> 0:15:46.120 you establish yourself as someone who knows something, who people 0:15:46.160 --> 0:15:48.480 like reading from, and who people like reading their You 0:15:48.520 --> 0:15:51.720 know their takes and their models and have interesting insights 0:15:51.760 --> 0:15:54.400 to say about whatever asset classes is being traded. 0:15:54.760 --> 0:15:57.680 Either that or you have a business that actually would 0:15:57.680 --> 0:16:01.120 work good on the buy side happens to be in 0:16:01.160 --> 0:16:04.320 the cell side. But in terms of how you get 0:16:04.320 --> 0:16:07.640 that first job, I would say, be useful. I think 0:16:07.680 --> 0:16:10.400 that everybody is kind of concentrated on the you know, 0:16:10.440 --> 0:16:12.560 I want to be coming up with the ideas that 0:16:12.680 --> 0:16:14.680 go into the book, and you sort of grow into 0:16:14.720 --> 0:16:18.240 that slowly. But if you're somebody who you know has 0:16:18.440 --> 0:16:21.080 read the history or done the work or researched, you 0:16:21.120 --> 0:16:24.040 know what happens when on the first bed cut, what 0:16:24.120 --> 0:16:27.320 happens on the last what happened in the dollar the 0:16:27.400 --> 0:16:29.920 last time we had tariffs. Those sorts of analogs in 0:16:29.920 --> 0:16:33.680 the macro world are very good. If you understand restructurings, 0:16:33.760 --> 0:16:36.960 you're probably going to be pretty valuable to high yield 0:16:37.040 --> 0:16:40.120 or distress pod. You're not going to get that. You know, 0:16:40.360 --> 0:16:43.680 I've got the con kind of job right away, So 0:16:43.760 --> 0:16:45.840 you need to be useful in the job you're applying for. 0:16:47.560 --> 0:16:48.640 And then you. 0:16:48.760 --> 0:16:51.160 Kind of touched on this before, but I would love 0:16:51.240 --> 0:16:55.080 to hear more what are the pools that multistraats are 0:16:55.080 --> 0:16:58.200 actually drawing from and have those changed over time, Like 0:16:58.520 --> 0:17:00.960 you know, when they first started popping up, were they 0:17:01.560 --> 0:17:04.520 hiring from fund of funds? And the cell side, and 0:17:04.560 --> 0:17:07.240 then as they progress, maybe get a little bit more 0:17:07.320 --> 0:17:13.360 experimental and start diversifying into other industries to draw pms from. 0:17:13.520 --> 0:17:15.800 Yeah, I mean, for instance, we've seen a lot of 0:17:15.840 --> 0:17:19.280 interesting commodities pms over the past few years, and a 0:17:19.320 --> 0:17:22.400 lot of those are at trade houses, or perhaps they worn't. 0:17:22.440 --> 0:17:25.280 For large boiling gas companies, a lot of which are 0:17:25.320 --> 0:17:29.600 really more engineering than trading, they'll look anywhere if there's 0:17:29.760 --> 0:17:33.840 sort of, you know, a definable edge. And we were 0:17:33.880 --> 0:17:37.480 talking a little bit about the process of interviewing. Part 0:17:37.480 --> 0:17:39.480 of what somebody is looking for is, you know, can 0:17:39.560 --> 0:17:41.760 we do what you do? I'll give you an example. 0:17:42.400 --> 0:17:45.000 Funds really want to expand their balance sheet and be 0:17:45.040 --> 0:17:47.160 as efficient with it as possible. If we look at 0:17:47.160 --> 0:17:51.320 gross notional exposure to net assets for multistrats, we hovered 0:17:51.359 --> 0:17:55.000 around ten ten x through about twenty twenty, and since 0:17:55.040 --> 0:17:59.360 then now we're between fourteen and sixteen and that's grossing 0:18:00.040 --> 0:18:04.040 sets up as a multiple of their investible assets. So 0:18:04.080 --> 0:18:06.280 that tells you they're looking for things that are a 0:18:06.320 --> 0:18:11.480 little bit more highly leverageable. But any edge they will 0:18:11.520 --> 0:18:14.720 look at. You know, fifteen years ago, no multistrap traded 0:18:14.840 --> 0:18:17.840 munis most all of them do. Now, you know, there 0:18:17.840 --> 0:18:22.480 were certain businesses like index rebounel, things of that nature 0:18:22.600 --> 0:18:25.760 basis type trades that once were the exclusive province of 0:18:25.800 --> 0:18:29.639 the street and now because in the ability of a 0:18:29.680 --> 0:18:32.399 lot of these multi strats to effectively lose use their 0:18:32.440 --> 0:18:36.960 balance sheet, they can engage in those businesses. Right. 0:18:37.000 --> 0:18:38.880 This is run of the themes that's come up as 0:18:38.920 --> 0:18:41.000 the sort of like post dog frank era or a 0:18:41.040 --> 0:18:44.199 lot of certain types of trades that used to exist 0:18:44.240 --> 0:18:46.399 in house at the major banks are now have now 0:18:46.440 --> 0:18:51.360 effectively been outsourced in some manner to buyside entities where 0:18:51.359 --> 0:18:54.480 it's more appropriate to take these risks. Let's talk about 0:18:54.480 --> 0:18:57.200 your time when you were a PM. We talked about 0:18:57.200 --> 0:18:59.600 the value of the seat and not getting fired. And 0:18:59.600 --> 0:19:01.760 I also get the impression that on a sort of 0:19:01.800 --> 0:19:03.480 day to day or week to week or trade to 0:19:03.560 --> 0:19:07.200 trade basis, there's a lot of constraints from the risk manager. 0:19:07.560 --> 0:19:11.439 Talk about the incentives of the PM to survive and 0:19:11.440 --> 0:19:12.840 make it to the next year and make it to 0:19:12.840 --> 0:19:13.800 the next bonus season. 0:19:14.080 --> 0:19:16.920 I mean, you can essentially think of working for a 0:19:17.040 --> 0:19:21.240 multistrat is you're running your own business. Okay, you're sort 0:19:21.240 --> 0:19:23.800 of running your own fund. But you only have one client, 0:19:23.840 --> 0:19:26.200 so you have to make very sure that that client's happy. 0:19:27.000 --> 0:19:31.399 Your constraints are usually put in, you know, two terms. 0:19:31.440 --> 0:19:34.439 You'll often hear the term capital thrown around. You know, 0:19:35.640 --> 0:19:39.920 Tracy manages seven hundred million in XYZ and Joe has 0:19:40.040 --> 0:19:44.480 fifty million in ABC, that sort of thing. The truth is, 0:19:44.640 --> 0:19:48.320 those aren't really easily comparable numbers, right. The hedge fund 0:19:48.320 --> 0:19:53.200 itself is inherently leveraged. They'll typically allocate somewhere between three 0:19:53.240 --> 0:19:57.280 and four times their notional value, maybe even more in 0:19:57.359 --> 0:20:01.760 terms of allocations to traders a billion dollars, you're allocating 0:20:01.760 --> 0:20:05.680 out theoretically three or four billion. But there are two 0:20:05.760 --> 0:20:08.160 numbers that are going to matter a lot to a PM. 0:20:08.280 --> 0:20:10.840 The first one is how much can I lose? That's 0:20:10.880 --> 0:20:14.000 your draw down, and there are two ways to measure that. 0:20:14.200 --> 0:20:16.399 Most hedge funds are going to measure it on a 0:20:16.440 --> 0:20:20.280 peak to trough basis, meaning even if you're up five, 0:20:21.119 --> 0:20:24.040 if you give back suppose you're stopped is seven. If 0:20:24.080 --> 0:20:26.719 you give back seven, then that's going to be your 0:20:26.800 --> 0:20:29.520 draw down, even though you really weren't down from zero 0:20:29.920 --> 0:20:32.719 much at all. The other way to measure that is 0:20:32.760 --> 0:20:36.399 from zero from flat. So you can actually be fired 0:20:36.440 --> 0:20:38.560 from one of these places and be up money on 0:20:38.600 --> 0:20:41.320 the year. When it happens, you just gave back too 0:20:41.359 --> 0:20:43.320 much of your sort of new money. 0:20:43.600 --> 0:20:47.280 So actually explain that further a why would you fire 0:20:47.560 --> 0:20:51.920 someone who's managed money profitably? But then here's another related 0:20:52.040 --> 0:20:54.320 question to that is, like you hear about, Okay, someone 0:20:54.320 --> 0:20:57.120 gets fired from place X, and then they go get 0:20:57.200 --> 0:21:01.359 a new job at place y. But if there objectively talented, 0:21:01.640 --> 0:21:03.960 and maybe they're not, but if by some measure that 0:21:04.000 --> 0:21:07.239 it can be established that they're talented, why are the 0:21:07.280 --> 0:21:10.640 pods so quick to fire them? I mean, I get, yeah, 0:21:10.760 --> 0:21:12.959 you lose money, that's not good. But if you know 0:21:13.200 --> 0:21:16.080