Speaker 1: This is Master's in Business with Barry Ridholds on Bloomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest,
Speaker 1: Alana Weinstein, returns to tell us about all the competitive
Speaker 1: recruiting and superstar talent she's been working with over the
Speaker 1: past couple of years. Twenty twenty two was certainly a
Speaker 1: challenging year for a lot of the hedge fund industry,
Speaker 1: and it really separates the winners from the also ran.
Speaker 1: She is uniquely situated to see what goes on in
Speaker 1: the hedge fund industry in terms of not just performance,
Speaker 1: but what makes for a great PM versus an also ran.
Speaker 1: There are a few people in the industry as insightful
Speaker 1: and influential as she is. I could go on and on,
Speaker 1: but rather than do that, let me just say my
Speaker 1: conversation with IDW's Alana Weinstein.
Speaker 2: Thank you, Barry, and thank you for that lovely introduction.
Speaker 1: Well, well, it's good to have you back, and the
Speaker 1: timing is perfect because there are so many interesting things
Speaker 1: going on in the world of hedge funds. But before
Speaker 1: we get there, let's delve a little bit into your background,
Speaker 1: which I find kind of intriguing. You go from Goldman
Speaker 1: Sachs to Harvard Business School to the Boston Consulting Group.
Speaker 1: What were your early career plans? What did you want
Speaker 1: to do with your life?
Speaker 2: Well, when I was at Penn, I had this thought
Speaker 2: that I wanted to be Barbara Walters.
Speaker 1: Uh huh.
Speaker 2: That was kind of where my head was. So I
Speaker 2: loved how she was a trailblazer. She had fascinating interviews
Speaker 2: with people. She got people to the table that no
Speaker 2: one else could. She didn't take no for an answer,
Speaker 2: and I just thought that was like, that was a
Speaker 2: very cool, unique set of skills that she embodied and
Speaker 2: was able to capitalize upon. And I didn't know. I mean,
Speaker 2: I was studying nineteen century literature. My senior thesis was
Speaker 2: on Darwinism and Thomas Hardy. None of this sell and
Speaker 2: none of this lended itself to Goldman Sachs. I ended
Speaker 2: up at Goldman really because I didn't want to go
Speaker 2: to law school, because that's kind of what you do
Speaker 2: with an English and Psyche major.
Speaker 1: Sure, right, so.
Speaker 2: I was. I also parachuted into Goldman in the middle
Speaker 2: of my senior year because I made the mistake of
Speaker 2: telling the guys interviewing me that I could start right away.
Speaker 2: I'd done. I'd just gotten kind of blown through my
Speaker 2: classes quickly. I was a little bit of a nerd
Speaker 2: in college.
Speaker 1: Barry, did you go the full four years or were
Speaker 1: you doing double duty at Goldman?
Speaker 2: I was doing double duty my senior year. Well, I
Speaker 2: finished my classes really end of my junior year and
Speaker 2: I started at Goldman. I took some fun classes beginning
Speaker 2: of my senior year, and then I started at Goldman
Speaker 2: middle of my senior year. But what that enabled me
Speaker 2: to do, because I was on an off cycle, was
Speaker 2: go to HS early and I was really young. At
Speaker 2: business school, I was and this is the time period
Speaker 2: where they wanted you to have minimum five years of
Speaker 2: work experience. So I was very conscious of not coming
Speaker 2: with a lot of experience, and PCG was really a
Speaker 2: way to play catch up. It was like getting my
Speaker 2: post MBA MBA. Not so much that I wanted to
Speaker 2: be a consultant, but I wanted to learn about different
Speaker 2: industries and different types of problems.
Speaker 1: So what led you to the talent side of finance?
Speaker 2: Well, at Goldman, you know what I realized is I
Speaker 2: didn't really love finance. I could do the work. I
Speaker 2: did the work well enough to get into a good
Speaker 2: business school. But what really excited me was dealing with
Speaker 2: and this is Goldman back in the nineties when it
Speaker 2: was a private partnership and attracted the most exceptional some
Speaker 2: of the most exceptional and smartest people in the world,
Speaker 2: and dealing with them and working alongside them was super energizing.
Speaker 2: You know. At BCG and even back to high school
Speaker 2: at Stuyvesant was everyone was smart, you know, And I
Speaker 2: wanted to be in a milieure where I was really
Speaker 2: feeding off of and learning from just a super smart
Speaker 2: group of people. And I felt the way that I
Speaker 2: could best contribute was kind of a mix of my
Speaker 2: experience at BCG and Goldman. BCG being really delving into
Speaker 2: what makes industries and companies go the strategy and Goldman
Speaker 2: very transaction driven and helping people to get from one
Speaker 2: side to the next, not just giving them advice. And
Speaker 2: that was the way I felt I could contribute.
Speaker 1: I know, I have a natural ability to scout out
Speaker 1: some of the best and brightest alpha generators in finance.
Speaker 1: How does that happen?
Speaker 2: I was at BCG and this is when the dot
Speaker 2: com bubble was getting bigger and bigger. In my second
Speaker 2: year and my entire class had left to go start
Speaker 2: a tech company of some sort in California, and I
Speaker 2: didn't really that wasn't my think. I wasn't turned on
Speaker 2: by that. That's not I wasn't passionate about that, and
Speaker 2: so I was still trying to figure out what my
Speaker 2: next step was. Don't forget I was really young still,
Speaker 2: I was in my mid twenties, and so I ended
Speaker 2: up joining a large search firm because I just I
Speaker 2: felt i'd learn more about the different types of issues
Speaker 2: that were out there and how they get solved through
Speaker 2: human capital, and that might give me some insight functionally
Speaker 2: into what I wanted to do next. And I found
Speaker 2: once I joined them that I was actually just really
Speaker 2: good at what they were doing. And at the same time,
Speaker 2: the dot com bubble collapsed, their mainstay financial services practice,
Speaker 2: which was banking and equities, fell off a cliff, and
Speaker 2: what was per collating were all the prop groups. And
Speaker 2: I started doing work for some of these groups, and
Speaker 2: kind of like the hedge fund industry, there were only
Speaker 2: so many that were that good and really controlled, and
Speaker 2: we're the you know, and we're the best and really
Speaker 2: controlled that ecosystem, and they're very Clubby, and they ended
Speaker 2: up recommending My business just grew exponentially from there. They
Speaker 2: just they would recommend me one to the other and
Speaker 2: these were these were first of their kind types of
Speaker 2: products that these prop groups were focused on very complex
Speaker 2: financial instruments. So we were all learning as we went
Speaker 2: and just by virtue of doing really one search, it
Speaker 2: made me the expert because no one else was doing it,
Speaker 2: and so I built my business from there.
Speaker 1: So you launched your own firm IDW in two thousand
Speaker 1: and three, by the way, congratulations, that's twenty years ago.
Speaker 1: So you're celebrating a big anniversary this year. What led
Speaker 1: you to decide? I know, I'm going to go out
Speaker 1: on my own.
Speaker 2: It is a big anniversary, and it's not one I
Speaker 2: take lightly. Given the average hedge fund lives three years.
Speaker 2: I don't know if you're aware of that.
Speaker 1: Ban very short life span, huge turnover, and it's more
Speaker 1: than just the high water mark. There are a lot
Speaker 1: of factors that drive that constant churn.
Speaker 2: Exactly. I went out on my own because I really
Speaker 2: just wanted to focus on doing the kind of work
Speaker 2: that was interesting to me. I had built this business
Speaker 2: within this larger firm primarily working with these high octane
Speaker 2: prop groups, and I felt like I could just take
Speaker 2: that with me. You know, these were they didn't really care.
Speaker 2: They were entrepreneurs themselves. They didn't care about being part
Speaker 2: of a big firm with hundreds of people in many offices.
Speaker 2: They cared about domain expertise. And that's what I brought
Speaker 2: to the table.
Speaker 1: So you mentioned what a notoriously short lifespan so many
Speaker 1: hedge funds have. It's also a hyper comp headtive field.
Speaker 1: So staying power is something that really is of value.
Speaker 1: You've been in business running your own chop for two decades.
Speaker 1: What's the secret to longevity in a space that is
Speaker 1: known for not having longevity.
Speaker 2: Let me define what we do, because I feel like
Speaker 2: a fair misconception might be that is a recruiting firm.
Speaker 2: Our job is to help people find jobs. That's actually
Speaker 2: not what we do. We work with the most front
Speaker 2: footed hedge fund founders and talent in the industry to
Speaker 2: figure out what's next and keep them in the pole position.
Speaker 2: And when you think about the individuals that can meet
Speaker 2: that challenge for the highest impact hedge funds in the world,
Speaker 2: these are the best people out there. These are not
Speaker 2: people who are typically looking, and so in order to
Speaker 2: engage with them, it's not about helping them find a job.
Speaker 2: It's really giving them information and perspective they don't already have.
Speaker 2: So I expect my firm to be ahead on trends,
Speaker 2: themes and have a point of view that these guys
Speaker 2: wouldn't get if they didn't meet with us. And I
Speaker 2: don't care if they ever transact, you know, I think
Speaker 2: that in time, if we make a strong enough case,
Speaker 2: they're smart and they'll transact and do something different if
Speaker 2: it makes sense. But with every meeting we learn more
Speaker 2: and more more powerful for the next person. I'll give
Speaker 2: you an example. We met with someone recently who sits
Speaker 2: at a fund that is having a tough time. They
Speaker 2: lost four billion dollars last year, so big high watermark.
Speaker 2: They're down again this year, and he was he was
Speaker 2: quite happy with how he was treated by the founder.
Speaker 2: He said, Ilana, you know, I've been there a while.
Speaker 2: I actually think the founder was really fair with me.
Speaker 2: I didn't lose myne he guaranteed me a million bucks
Speaker 2: for this year and a million bucks for next year.
Speaker 2: It's really helpful to have had five other meetings with
Speaker 2: people who sit at analogous funds that had losses that
Speaker 2: were just as big, and in fact they may have
Speaker 2: contributed to those losses more and be able to tell him.
Speaker 2: First off, your fund, just by my math, has a
Speaker 2: two hundred and fifty million dollar management fee, so I'm
Speaker 2: not sure that that's so generous on behalf of the founder.
Speaker 2: And number two, it may interest you to know here
Speaker 2: are four or five different funds in the same situation,
Speaker 2: and what the founders did there was to guarantee their
Speaker 2: people who were more responsible for the losses than you
Speaker 2: four or five x you know what you've been given.
Speaker 2: So that's where things start to unsettle a bit in
Speaker 2: his head. And then we come up a level and
Speaker 2: talk about whether he's even learning the skills that will
Speaker 2: put him on his front feet to compete as things
Speaker 2: evolve in this industry. And I would say it's the
Speaker 2: amalgamation barrier of twenty years of intelligence of speaking to
Speaker 2: the best people out there that no one can compete with.
Speaker 1: So I want to focus on that because you you
Speaker 1: raise some really fascinating points there when you mentioned business intelligence,
Speaker 1: and really it's an astute use of the data that
Speaker 1: you become familiar with that isn't it's not on the
Speaker 1: Bloomberg terminal, it's not listed publicly. This is all very
Speaker 1: closely held information. You may be in a unique situation
Speaker 1: to see the landscape that very few people see. How
Speaker 1: big of an advantage is that.
Speaker 2: It's going it's everything real, So think about it. You're happy,
Speaker 2: You're doing phenomenally well, or you at least you think
Speaker 2: you're happy. You know, by the time we're done with you,
Speaker 2: you may not be that happy. You but you are
Speaker 2: doing well by anyone's metric. These are big numbers. There
Speaker 2: are people were talking to where compensation was closer to
Speaker 2: nine figures than eight figures. So it's really not about
Speaker 2: being disenfranchised or miserable or needing to find a job.
Speaker 2: They don't need to transact. Okay, this isn't like you
Speaker 2: know you're sitting on the cell side and yes, you know,
Speaker 2: you're on the equity sales desk and someone doesn't need
Speaker 2: to transact with Goldman on the other side of the phone,
Speaker 2: but they do need to transact with someone. These people
Speaker 2: do not need to transact. The only reason they're coming
Speaker 2: in to meet with us is because they're going to
Speaker 2: learn something and there's going to be some perspective that
Speaker 2: they're going to walk out with, like the example I
Speaker 2: just gave you, that they didn't have before. And that
Speaker 2: is a very different dynamic than what I think most
Speaker 2: recruiting firms do or even really able to do.
Speaker 1: So I kind of know of your work being hand
Speaker 1: in glove with a lot of the largest hedge fund founders.
Speaker 1: This isn't hey, I need to fill a seat. It's
Speaker 1: let's create a discussion about a strategy that we either
Speaker 1: want employee or are thinking about employing, and how do
Speaker 1: we go up about putting this into play staffing. It
Speaker 1: tell us a little bit about some of the work
Speaker 1: you do. That's more than just hey, I found the
Speaker 1: right fund manager for em distressed debt.
Speaker 2: It's much more sophisticated, much more it's we think of it, Barry,
Speaker 2: as we're moving a battleship forward. That's not that easy,
Speaker 2: you know. I think you sent me this article actually
Speaker 2: because I was on I was pulling up your name
Speaker 2: on my text messages and it came up. There are
Speaker 2: more hedge funds than Burger kings.
Speaker 1: Yes, that's right nationally, Yep.
Speaker 2: These aren't like the little Burger Kings sitting sitting out
Speaker 2: in the middle of you know nowhere these think of
Speaker 2: these guys that we work with as I don't know
Speaker 2: the biggest franchise owners of you know, those fast food
Speaker 2: chains in the space.
Speaker 1: Well, the Wall Street Journal column that I read about
Speaker 1: you from it was pre Pandemic twenty nineteen something like that.
Speaker 1: You're talking to Steve Cohen a point seventy two and
Speaker 1: Ken Griffin of Citadel and all of these other giant
Speaker 1: hedge funds. I know you don't disclose your clients, but
Speaker 1: the Wall Street Journal certainly mentioned those. I would imagine
Speaker 1: that the founders of those firms have a pretty solid
Speaker 1: grasp on where they want to go and what they
Speaker 1: want to do. How do you get involved with them
Speaker 1: in terms of strategy and how receptive are they to
Speaker 1: your insight?
Speaker 2: Sometimes, like I said, in terms of moving a battleship forward,
Speaker 2: it's just making sure that they have the best investment
Speaker 2: professionals for their existing strategies. Again, no mean feat, because
Speaker 2: the bar is exceptionally high, and there are so many
Speaker 2: things we look for and so few people that can
Speaker 2: meet that challenge, as I said, and sometimes they come
Speaker 2: to us with the thought of you know what, there's
Speaker 2: an adjacent strategy we think makes sense. Let's think about
Speaker 2: the best way to do that. Do we buy a fund,
Speaker 2: do we identify someone who we think we can raise
Speaker 2: capital around and we help them with that calculus. Sometimes
Speaker 2: I'm coming to them and saying, this is something I
Speaker 2: think you guys should look at. I just had this
Speaker 2: with a client who runs a very large, not multi manager,
Speaker 2: but multi strategy fund, and he and I have been
Speaker 2: talking about how to get his fund, which is already
Speaker 2: very big I mean very big, to the next level.
Speaker 2: And we've talked about things like and it's open ended.
Speaker 2: He told me his calculus he's going through, which is
Speaker 2: how do I get from where I am to as
Speaker 2: make sense you know, much bigger than that. And we've
Speaker 2: talked about whether we go deeper on existing strategies, we
Speaker 2: build new businesses, we find somebody who helps can help
Speaker 2: him more as almost a cocio with risk management, with
Speaker 2: the investment process. I've had a lot of conversations with
Speaker 2: him where I've said, we need to take a step
Speaker 2: back and think about what you really need because those
Speaker 2: are different skill sets and they reside in different people.
Speaker 2: But I've also come to him with ideas, what about activism,
Speaker 2: what about you know, fill in the blank things that
Speaker 2: he doesn't do today but may make sense and be
Speaker 2: a ja And he's exploring all of those things.
Speaker 1: So you're you're having these sorts of conversations with large
Speaker 1: hedge fund founders and other experienced people in the industry.
Speaker 1: I got to imagine that every now and then surprises
Speaker 1: come along. What sort of things do you interact with
Speaker 1: where you know you're rock back? Gee, I didn't see
Speaker 1: that coming. I bet you have a ton of great stories.
Speaker 2: I do, Barry, but I kind of feel like, you know,
Speaker 2: can you talk for the book I which there will
Speaker 2: be one day, maybe I'll have to be when I
Speaker 2: retire and you know, publish under anonymous.
Speaker 1: But people will figure out they probably will.
Speaker 2: But anyway, we'll cross that bridge when and if we
Speaker 2: come to it. Dealing with people, there's constantly surprises. That's
Speaker 2: what keeps me largely on my toes. There's so many
Speaker 2: twists and turns. You think you can prep someone within
Speaker 2: an inch of their life, and there's every reason they
Speaker 2: should resign and go to where we've been working toward
Speaker 2: for the last six months, them going and they end
Speaker 2: up staying, and then there are people who just get
Speaker 2: out like this where I think it's going to be
Speaker 2: a fight to the death to keep them so. But
Speaker 2: you know, one of the in building my business one
Speaker 2: of the most surprising things for me, and this has
Speaker 2: nothing to do with my clients. It's just kind of
Speaker 2: a funny thing to tell you. For a firm that
Speaker 2: is a really unique niche in the hedge fund industry, right,
Speaker 2: we recruit for the hedge fund industry, and we do
Speaker 2: it at a level that I think you know is unusual.
Speaker 2: It is so difficult to recruit for ourselves. It is
Speaker 2: just it's so hard because part of the sort of
Speaker 2: secret sauce that we were getting out earlier in terms
Speaker 2: of what makes us different. For us, we need someone
Speaker 2: who is strategic, transaction driven, really into the micro you mentioned,
Speaker 2: like all the details and information that we amalgamate, but
Speaker 2: then can come up a level and figure out how
Speaker 2: to commercialize that.
Speaker 1: Where do you find people like that?
Speaker 2: It's so hard. We typically hire people out of the
Speaker 2: banks with I love just a couple of years of
Speaker 2: experience so we can mold them into and teach them more.
Speaker 2: Experience doesn't necessarily help. There's so much that they are
Speaker 2: only going to learn just through the exposure and the
Speaker 2: information that they gather in being in the seat. But
Speaker 2: it's hard, It's really hard.
Speaker 1: So you mentioned a lot of the surprises, no shock,
Speaker 1: it comes from the human element of it. What are
Speaker 1: some of the things that really arched your eyebrows, what
Speaker 1: really gave you pause?
Speaker 2: There are so many good stories, Barry, but one that
Speaker 2: I'll tell, which hopefully no one will be to put
Speaker 2: off by if the protagonists self identify was early on.
Speaker 2: It was year one or so of IDW and we
Speaker 2: were working with a client who even back then was
Speaker 2: a well known guy in the industry, amazing hedge fund founder,
Speaker 2: very focused on growth excellence, and we did our first
Speaker 2: search for him, which was for Ahead of Credit. I
Speaker 2: really wanted to impress him, and we got a guy
Speaker 2: to the table after a lot of trial and error, who,
Speaker 2: as I said earlier, wasn't looking very and he was
Speaker 2: like one of the biggest credit prop traders on the street,
Speaker 2: phenomenal reputation. I can't remember if he sat at Bear
Speaker 2: or Lehman, but it was one of the banks that
Speaker 2: no longer exist and not his fault. But anyway, back then,
Speaker 2: huge deal, no interest in coming to the table, but
Speaker 2: I explained all the reasons why he should, and optionality
Speaker 2: is a great thing. This is a phenomenal guy. And
Speaker 2: then I'm thrilled get the meeting set up. Let's just
Speaker 2: say it was, you know it was. It was after
Speaker 2: the close. It was like four or five o'clock, and
Speaker 2: I'm kind of like glancing at my phone waiting for
Speaker 2: it to ring and to hear what a great meeting
Speaker 2: this was, because this I was like everything. It was
Speaker 2: everything I thought we wanted for this search. And the
Speaker 2: phone rings an hour in and it's my client and
Speaker 2: he says that can never happen again.
Speaker 1: Oh really, uh huh?
Speaker 2: And by and by that, you could never in a
Speaker 2: million years, I could never guess what the next string
Speaker 2: of sentences was going to be that came out of
Speaker 2: his mouth, which were apparently this guy had decided it
Speaker 2: was okay to put on a T shirt and shorts,
Speaker 2: a pair of roller blades and skate something like thirty
Speaker 2: blocks top speed. Arrives at the Four Seasons, skates right
Speaker 2: in through the entrance, right up the stairs, and slides
Speaker 2: right in for his meeting, completely dripping with sweat wheels
Speaker 2: still turning. Luckily that my client had a sense of humor,
Speaker 2: and we've gone on to do a lot of great
Speaker 2: stuff together. But it was a lesson for me, Barry
Speaker 2: that you cannot confuse intelligence with common sense.
Speaker 1: So now, how much of that is common sense? And
Speaker 1: how much of that is This guy really didn't want
Speaker 1: another job, he really wasn't looking to switch.
Speaker 2: I think it's common sense. I don't care if you
Speaker 2: are looking to move or not.
Speaker 1: Come on, I mean within the industry.
Speaker 2: Within this was one of a kind. I've got a
Speaker 2: lot of one of the kind stories. But you know,
Speaker 2: the important thing is to learn from it. And now
Speaker 2: now we prep people within an inch of their lives
Speaker 2: on everything.
Speaker 1: No rollerblading, No rollerblading. I really love the Wall Street
Speaker 1: Journal article about you that began quote in the overwhelmingly
Speaker 1: male world of hedge funds, a lot of Weinstein is
Speaker 1: one of the most powerful women. But Ms Weinstein doesn't
Speaker 1: manage money. Instead, she scouts the people who do. So.
Speaker 1: So let's talk about that first half of that sentence,
Speaker 1: overwhelmingly male world of hedge funds. What's it like competing
Speaker 1: in that space?
Speaker 2: Well, let me just say, we can't forget this is
Speaker 2: still a young industry. Okay. It though when you compare
Speaker 2: it to law to medicine, right, okay, so though you know, medicine, law, consulting,
Speaker 2: those industries have now over fifty percent women. Okay. Business
Speaker 2: school when I went, was twenty something percent. Now HBS,
Speaker 2: I think is fifty two or fifty three percent. Banking
Speaker 2: getting much better. See at the senior ranks, there's still
Speaker 2: some work to do.
Speaker 1: Finance in general getting.
Speaker 2: Much much better. Certainly at the more junior and mid
Speaker 2: and upper mid ranks it's roughly fifty percent women. So
Speaker 2: relatively speaking, this is still a young industry. I will
Speaker 2: tell you when I have these questions which I feel
Speaker 2: are like a little bit loaded, all male, what's that like?
Speaker 2: Blah blah blah, I have felt this is the most
Speaker 2: meritocratic industry that I have ever been a part of.
Speaker 2: And I've been working since I was fourteen. I've had
Speaker 2: a lot of jobs. When I was a pen I
Speaker 2: worked at a law from Ones, as you pointed out,
Speaker 2: I worked at Goldman, I worked in consulting. I work
Speaker 2: with CEOs from all sorts of different industries. The difference
Speaker 2: here is it is pay for performance, it's mark to
Speaker 2: market you know exactly where you stand with complete clarity
Speaker 2: every moment of the day, and teams are small, so
Speaker 2: the react. Even if it's a multi manager which has
Speaker 2: you know, one hundred pms when you pull back the curtain,
Speaker 2: the teams of those pms are small, right, and you
Speaker 2: certainly know how your pms are doing, which ones are
Speaker 2: the winners and which ones aren't performing that well. So
Speaker 2: founders are very clear on who the alpha generators are
Speaker 2: as opposed to for example, private equity where it can
Speaker 2: take seven to ten years to monetize your investment, or
Speaker 2: you know, an industry where there's just not that much
Speaker 2: that much clear attribution as to who's doing what on
Speaker 2: a very big deal team. So as a result of that,
Speaker 2: founders don't care if it's a man or woman or
Speaker 2: otherwise in terms of who occupies the seat. It's all
Speaker 2: about generating alpha and when it comes to me in
Speaker 2: my by the way, all female team, we'd love some diversity.
Speaker 1: Oh really, that's interesting, I have no idea we'd love
Speaker 1: some diversity.
Speaker 2: It is all about our ability to be a source
Speaker 2: of alpha generating talent for them.
Speaker 1: So there is there a female perspective in the hedge
Speaker 1: fund world, because in the academic research on investment returns,
Speaker 1: there's a lot of studies that say, hey, men are
Speaker 1: too risk embracing, they're too stubborn, they're over optimistic, and
Speaker 1: all other things being equal. When they looked at a
Speaker 1: series of female led funds versus male ed funds, the
Speaker 1: women outperform the men.
Speaker 2: So let me give you a little example. Back in
Speaker 2: two thousand and nine, or maybe it was ten, if
Speaker 2: you remember, hedge funds were largely short Lululemon. And I
Speaker 2: met with a guy who told me that his then
Speaker 2: girlfriend now wife, who to your point, is now very
Speaker 2: successful in her own right. Said to him, why are
Speaker 2: you short this stuff? And he said, well, because you
Speaker 2: know it's for yoga, and yoga's a fat And she said,
Speaker 2: what are you talking about. We wear this myself and
Speaker 2: my girlfriends wear this all the time for everything. And
Speaker 2: by the way, honey, yoga's not a fat. All right,
Speaker 2: So back to your question, The reality is what founders
Speaker 2: want is as much diversity of thought as possible because
Speaker 2: there will be fewer errors in reasoning if you have
Speaker 2: different perspectives and more thinking outside the box.
Speaker 1: Less group think. Yes, it can only be good totally
Speaker 1: and yet it doesn't seem that. Well.
Speaker 2: Again, I think it's going to take time. It just will.
Speaker 2: This is not an industry which doesn't want women. Quite
Speaker 2: the contrary. I mean, I have been asked almost since
Speaker 2: day one, and again I've been doing this. Love diversity,
Speaker 2: We love, but at the end of the day, they
Speaker 2: have a fiduciary duty to their LPs to hire the
Speaker 2: best person. And if few women are coming into the
Speaker 2: industry by the time we get involved, which is at
Speaker 2: a pretty impactful level, we don't really have anyone to
Speaker 2: pull from. So I hope over time and I think
Speaker 2: it's improving. There are signs that it is. More women
Speaker 2: enter the industry, they get trained to great places, and
Speaker 2: they end up being great candidates for us to put
Speaker 2: into to run, you know, the next big portfolio or start.
Speaker 1: A new strategy. So in the Wall Street Journal article,
Speaker 1: it tells of a story of you speaking at Wharton
Speaker 1: to a group of people, a group of students. Someone
Speaker 1: asked you why aren't there more women in hedge funds?
Speaker 1: And I don't want to steal the thunder, but tell
Speaker 1: the story what you asked the class and what happened.
Speaker 2: Well, a woman asked me at the end of the class.
Speaker 2: What are actually it was more aggressive than that barrier.
Speaker 2: We did this whole, a whole guest lecture, and she,
Speaker 2: of course was my last person that I called on,
Speaker 2: and she said, what are you doing to help women
Speaker 2: have a greater footprint in the hedge fund industry? And
Speaker 2: I was kind of like, oh god, you know, I immediately
Speaker 2: got a little bit defensive. But then I took a
Speaker 2: breath and I stepped back and I looked at the
Speaker 2: class and it was roughly fifty to fifty men women,
Speaker 2: And I said, let me start with the guys, how
Speaker 2: many of you are interested in working at a hedge fund?
Speaker 2: And I would say the majority of hands went up.
Speaker 1: I would bet more than fifty one percent eighty.
Speaker 2: It was almost all of them. I can't write it
Speaker 2: was the majority. It was a sea of hands. And
Speaker 2: then I asked the women the same question, and like
Speaker 2: two hands went up. Really And I turned to her
Speaker 2: and I said, that's your answer.
Speaker 1: Right, Go work on your peers. There's only so much
Speaker 1: I can.
Speaker 2: And there is also something too, you know, as much
Speaker 2: as there has to be a respectful number one, there
Speaker 2: has to be a respectful environment for everybody. Sure, men
Speaker 2: women or otherwise. I don't think we need to be
Speaker 2: treated like hothouse flowers. Right, So this business of like,
Speaker 2: I mean, this is a tough industry. It's really competitive.
Speaker 2: It's bottom line oriented. But it's about results, you know,
Speaker 2: and and people can be kurt, they can speak in bullets.
Speaker 1: It's just there's but we all know women on trading
Speaker 1: desks that they're still snap you in half if you
Speaker 1: get say the wrong thing to them. They're tough, they
Speaker 1: toughing up that experience. To assume that a woman fund
Speaker 1: manager or a trader is a delicate flower, I mean,
Speaker 1: that's a very nineteenth century perspective that I can't imagine
Speaker 1: that still exists anymore.
Speaker 2: I don't know when people say what managers are doing
Speaker 2: to make the environment more hospitable, what that what that means?
Speaker 2: I don't know what that means. It is completely hospitable.
Speaker 2: It is about people who do great analysis and can
Speaker 2: put up great results. Everything else, you know, it's it's
Speaker 2: the same metric and same bar for every for everyone.
Speaker 2: It's not it's not different.
Speaker 1: So what are the broader takeaways for any woman who
Speaker 1: interested in working in the hedge fund field?
Speaker 2: Well, let me take it out of hedge funds. I
Speaker 2: think it's just let's just make it more more general.
Speaker 2: I mean, well for hedge funds, it's the same thing
Speaker 2: for a man as for a woman. It's it's you know,
Speaker 2: it's getting good training, it's really being in it for
Speaker 2: the right reasons. It's all the things we talked about earlier,
Speaker 2: and honing your craft and improving and being front footed,
Speaker 2: and your approach to learning and growth and pushing yourself
Speaker 2: and reflecting on if you're not growing wide. This is
Speaker 2: not like a specially Again to my point, there's not
Speaker 2: a special set of things for women versus men. As
Speaker 2: a female entrepreneur, and I you know, there are things
Speaker 2: as a woman you do need to grapple with. And
Speaker 2: I would say it's probably true of anyone who has
Speaker 2: competing priorities in their life, whether it's a it's a
Speaker 2: male or a female primary you know, caregiver for a
Speaker 2: child or for an elderly parent, or whatever the case
Speaker 2: may be. But I can only speak from my own perspective.
Speaker 2: What I tell people is what I how women is,
Speaker 2: you can't you can do everything, just not all at
Speaker 2: the same time. Now that being said, I started my
Speaker 2: firm bought and renovated my first apartment and got pregnant
Speaker 2: all within the same year. But the difference was I
Speaker 2: had domain expertise and a reputation, and I figured it out.
Speaker 2: I think it's very difficult to break into a new
Speaker 2: industry where there's a steep learning curve and be dealing
Speaker 2: with other priorities at the same time, so you have
Speaker 2: to time things in a way that makes sense. I
Speaker 2: also think you should never apologize or feel guilty. Guilt
Speaker 2: is a waste of time. For being a working mom.
Speaker 2: I was not there for every drop off and pick up,
Speaker 2: far from but I was there for my son where
Speaker 2: it mattered, and I think it's important that as a
Speaker 2: parent you fold your kid into your successes and your failures.
Speaker 2: I talked to him throughout his growing up about the
Speaker 2: challenges that I was facing, you know, the winds as
Speaker 2: well as the misses.
Speaker 1: The challenges you face as a woman in a male
Speaker 1: dominated inst No again I fell or just a hyper
Speaker 1: competitive just the challenges of building a business, you know.
Speaker 1: You know.
Speaker 2: Coming back to that, I think that we have been
Speaker 2: able to provide a complementary perspective to a lot of
Speaker 2: our clients. It's an advantage being a woman. There are
Speaker 2: things we see that others don't and so, but just
Speaker 2: finishing on this point, I think that your kid, you know,
Speaker 2: your kids will really grow and learn as a result
Speaker 2: of being exposed to everything that you do.
Speaker 1: So, given twenty years at IDW and an all female team,
Speaker 1: what are some of the unique perspectives that you bring
Speaker 1: as a woman to a male dominated space.
Speaker 2: Well, I do think being a woman will mean that
Speaker 2: we might come at things differently and have a slightly
Speaker 2: different perspective, which can be complementary right to somebody who
Speaker 2: comes at things from their own lived experience, which looks different.
Speaker 2: I'll give you a story early on which I think
Speaker 2: speaks to that. This was maybe year one of IDW.
Speaker 2: We were still doing a lot of work for the
Speaker 2: prop desks, again the precursors to the hedge funds, and
Speaker 2: we were working with one of the most aggressive cell
Speaker 2: side firms on the street, certainly with respect to its
Speaker 2: prop businesses, and they wanted to build their structured credit business,
Speaker 2: and we went through a whole thing and we ended
Speaker 2: up making an offer to a guy who ran one
Speaker 2: of the biggest structured credit groups at a competing bank.
Speaker 2: It was a great offer. It was a three year deal,
Speaker 2: huge runway, great upside, and he could really build it
Speaker 2: and take it in whatever direction he wanted. And he
Speaker 2: was kind of fenced in where he was today, so
Speaker 2: much more open pathway. And we went through the whole
Speaker 2: resignation conversation. We prepped people within an inch of their
Speaker 2: lives before they walk in and they resign. And I
Speaker 2: told him to expect that this was going to be
Speaker 2: his fifteen minutes of fame. He was going to go
Speaker 2: in and they were going to put more and more
Speaker 2: senior people at the bank in front of him and
Speaker 2: make him feel like if he were to leave, the
Speaker 2: bank would Koreen off a cliff, which we both know
Speaker 2: you know is not the case. They were fine, with
Speaker 2: all due respect. I said to him, they were fine
Speaker 2: before you showed up, and they'll be fine after. You're great,
Speaker 2: but it's going to be fine, And he sounded good,
Speaker 2: he sounded solid. He knew to resign to his boss
Speaker 2: and basically get out of there and shut down other conversations.
Speaker 2: So I tell my client, and everyone at this bank
Speaker 2: was involved, from the CEO on down. This was a
Speaker 2: very important person to them, and they wanted to make
Speaker 2: sure it got done, and I tell them I feel
Speaker 2: really good. He sounds great, We're going to get this done.
Speaker 2: Goes in the next day, knows to call me an
Speaker 2: hour into resignation, which he does. He tells me Elana,
Speaker 2: it's going well, but you know, they want me to
Speaker 2: meet the head of Global Markets to explain my thinking.
Speaker 2: I said, we talked about you don't need to do
Speaker 2: this or we're not. No, no, no, I don't want
Speaker 2: to make my boss look bad. At least I need
Speaker 2: to explain it's not his fault. I owe them that much.
Speaker 2: I've been here for this long. Blah blah blah. There's
Speaker 2: nothing I can say. He's going to do it. I
Speaker 2: reinforce the reasons this has to end. After this conversation anyway,
Speaker 2: you can imagine where this ends up going. He's in
Speaker 2: a conference room. That additional conversation manifests into ten additional conversations.
Speaker 2: They're now trotting out the entire management committee of the
Speaker 2: bank in front of him. The head of the bank's
Speaker 2: getting involved. It's his phone is now off. My team
Speaker 2: is calling onto the desk. We're trying to get through
Speaker 2: to him any which way we can. It is impossible. Meanwhile,
Speaker 2: my client on the other side is going bonkers because
Speaker 2: we're now late into the afternoon. We can't reach him,
Speaker 2: and they're second guessing their decision. Do we have the
Speaker 2: right guy? Doesn't he know what he wants? Is this
Speaker 2: a leader? Blah blah blah. Doesn't he under stand you
Speaker 2: know this, This couldn't be clearer the reasons he should
Speaker 2: make this decision if he's not out of their sunni Ilana,
Speaker 2: we're pulling the offer.
Speaker 1: Which by the way, is really not fair for a
Speaker 1: guy who's just trying to extract himself totally gracefully.
Speaker 2: Right, And I explained that, but this this, like we
Speaker 2: started this process whatever it was seven am. We're now
Speaker 2: almost into the evening, so we're beyond gracefully. He's clearly
Speaker 2: getting bid back, and they're upset, they're embarrassed, they feel
Speaker 2: maybe they have egg on their face, and you know,
Speaker 2: there's a lot of positioning.
Speaker 1: And joby good.
Speaker 2: Also, Yeah, I think about it, and I really feel
Speaker 2: like that movie No Way Out with Kevin Costner. You know,
Speaker 2: I just don't even know what to do anymore, can't
Speaker 2: get through to him. And then I remember he always
Speaker 2: talked about his wife and she clearly as she should be,
Speaker 2: but it was lovely. The way he always brought her
Speaker 2: up was a big influence in his life and in
Speaker 2: his decision making. And I realize I have his home number.
Speaker 1: Get the wife on the phone.
Speaker 2: So I don't remember. I don't remember any of their
Speaker 2: names even, but I remember she was French and she
Speaker 2: picks up the phone. So let's call her Monique and
Speaker 2: I say hello, Hello. I don't know if you know
Speaker 2: who I am, Monique. I'm Ilana Weinstein. And before I
Speaker 2: can even finish, she says, I know exactly who you are.
Speaker 2: And I say, well, you know, we have a bit
Speaker 2: of a situation. And I explained to her that the
Speaker 2: place her husband is resigning to go to is very upset,
Speaker 2: and I recount all the reasons this is a phenomenal opportunity,
Speaker 2: and I think they're going to pull the offer, and
Speaker 2: I just you know, I can't get through to him,
Speaker 2: and I thought you should be aware of that, given
Speaker 2: you know, this is a decision I know you both
Speaker 2: came to and she says, Elana, I understand, leave this
Speaker 2: with me. Five minutes later, bury my phone rings and
Speaker 2: he's out. Wow, So you know, I.
Speaker 1: What did the firm he was going to have to
Speaker 1: say about.
Speaker 2: Oh they were thrilled, Are you kidding? But my point
Speaker 2: is sometimes it does take you know, it does take
Speaker 2: I guess injest it could it takes a strong woman
Speaker 2: to sort of, you know, in this case, move the needle,
Speaker 2: or maybe two strong women. And I'm not to say
Speaker 2: a man. It's not to say a man wouldn't have
Speaker 2: come up with this, but I do think there's something
Speaker 2: sometimes to coming at it from a female perspective, which
Speaker 2: is helpful.
Speaker 1: Huh, to say the very least. I bet you have
Speaker 1: tons of other stories to tell us one.
Speaker 2: This is a more personal story, but I think just
Speaker 2: speaks to some of the obvious challenges of being a woman.
Speaker 2: And this was simply early days of IDW. As I
Speaker 2: said earlier, I did a lot of things within that
Speaker 2: first year, including getting pregnant, and we were invited to
Speaker 2: pitch for the business of what was one of the
Speaker 2: most exciting hedge funds at the time. It was a
Speaker 2: spin out from so this would have been two thousand
Speaker 2: and four spin out from a well known prop group.
Speaker 2: To my point on doing work for a lot of
Speaker 2: the prop groups, they had a lot of capital, and
Speaker 2: they were on fire and they were building, and the
Speaker 2: founder invited me to come in. So here I am Barry.
Speaker 2: I'm eight months pregnant, and I'm looking at myself in
Speaker 2: the mirror thinking I wouldn't give myself this work. I mean,
Speaker 2: I look like I'm about to pop. And that's not
Speaker 2: a negative. It's just like again, competing priorities. Right, So
Speaker 2: this is he has a business to build and I
Speaker 2: have a small firm. So how is this going to work?
Speaker 2: So I do what any good entrepreneurial eight month pregnant
Speaker 2: person would do, which is swath myself in loose black clothing.
Speaker 2: I absolutely still look pregnant. I mean, just to contextualize this,
Speaker 2: you know, I'm a smaller person.
Speaker 1: I'min five foot something. Yeah, right, you look like you
Speaker 1: must have looked like.
Speaker 2: The like Well, it was better for me in that
Speaker 2: the weight was relatively evenly distributed. So I could I
Speaker 2: gained seventy pounds when I was pregnant.
Speaker 1: I could look like doubled double thank you.
Speaker 2: But yeah, I could look like a very heavy snake
Speaker 2: that swallowed a small goat. So that was the that
Speaker 2: was what I was going for in this meeting. And
Speaker 2: because I obviously he'd know I was pregnant. But if
Speaker 2: I was like looking three months pregnant or four months,
Speaker 2: that's a different story. Come in. We have a great meeting.
Speaker 2: By the way, thank god for big conference room tables,
Speaker 2: because I slid myself. I kind of leaned back in
Speaker 2: the chair and slid under, so he couldn't really focus on,
Speaker 2: you know, the fact that I really, you know, looked
Speaker 2: like I was about to pop.
Speaker 1: Then your water breaks.
Speaker 2: No, No, not that almost that good though, almost that good.
Speaker 2: Great meeting. He awards us everything, Ilana, like we're seeing
Speaker 2: eye to eye. You understand the business. There's all the
Speaker 2: stuff we need to build. Let's get to it. And
Speaker 2: I think to myself, Okay, we can do this. We
Speaker 2: have a month and IGW works smart and hard and fast.
Speaker 2: A month for us as like five months for other people,
Speaker 2: will be will be great. By the time I give birth,
Speaker 2: we signed the engagement letter, I'm in the hospital with
Speaker 2: an emergency C section. Within days, he is off to
Speaker 2: the races, like with the minute the letter signed. He
Speaker 2: wants to know who do we have ready for him
Speaker 2: to meet? And I'm not I'm not returning the call
Speaker 2: right because for obvious reasons. So two days later, I
Speaker 2: call him. He's very gruff on the phone and I said, listen,
Speaker 2: I'm sorry for not getting back to you sooner. I'm
Speaker 2: uber responsive, but I think I have a good excuse.
Speaker 2: I said, well, I'm calling you from the delivery room.
Speaker 2: Delivery for what? And I said, I just had a baby,
Speaker 2: and there is you could hear a pin drop on
Speaker 2: this call silence, I mean, and this isn't a guy
Speaker 2: who gets silenced easily. And I laughed and I said, listen,
Speaker 2: this should give you comfort the fact that I'm calling
Speaker 2: you from the delivery room. You know, we're going to
Speaker 2: get this done for you. Okay, come hell or high water.
Speaker 2: So he laughed, and on we went. But it's amazing, Yeah,
Speaker 2: I mean, you know, we have our own special, unique
Speaker 2: set of challenges, and that's an example of one.
Speaker 1: Huh, really really interesting. So before we get to our
Speaker 1: favorite questions, I just wanted to ask you a couple
Speaker 1: of things about just the state of the industry today
Speaker 1: and some of the changes we're going through. We're seeing
Speaker 1: the older generation begin to retire. You have Ray Dalio
Speaker 1: stepping down at Bridgewater. You have a lot of managers
Speaker 1: who are now in their late sixties, early seventies or beyond.
Speaker 1: Are we approaching a generational change over here?
Speaker 2: We are? It's early though, right, we haven't seen that much.
Speaker 2: Baton passing Bridgewater is one. Davidson Kemp would be another.
Speaker 2: On a smaller scale, Redwood sculptor. That one hasn't gone
Speaker 2: too well, right, There's been horrible, very a few.
Speaker 1: Of them that have kind of unraveled.
Speaker 2: So it's early yet. But the key thing is that
Speaker 2: the LPs do not see the secret sauce as residing
Speaker 2: in the head of one person. I think, for example,
Speaker 2: multi managers are set up well for this transition because
Speaker 2: by its very nature, you have multiple managers managing the capital,
Speaker 2: it's not the founder or you have to create a
Speaker 2: real partnership or investment committee in order to have the
Speaker 2: decision making be more a result of everyone versus one person.
Speaker 2: Elliott just created an investment committee in twenty twenty one,
Speaker 2: I think, precisely to get things ready for succession planning.
Speaker 1: So I don't want to suggest the top death style
Speaker 1: of firms are immune to this sort of success issues,
Speaker 1: or immune to a tough year in the market like
Speaker 1: twenty twenty two or twenty twenty three. But it certainly
Speaker 1: sounds like the firms that have become more professional, more institutionalized,
Speaker 1: are better positioned to withstand these sort of transitions. Is
Speaker 1: that fair? Fair?
Speaker 2: It is fair? But when we talk about top doest style,
Speaker 2: let's not forget a lot of the funds I mentioned
Speaker 2: in the beginning were top desctile funds and they are
Speaker 2: no longer. So things can unravel very quickly. You have
Speaker 2: to be front footed. You have to be constantly thinking
Speaker 2: about how you can improve your process even if things
Speaker 2: are going well, whether you're built for a different market
Speaker 2: environment and to be able to withstand the challenges that
Speaker 2: are going to be the result.
Speaker 1: Of that really intriguing. So let's talk about this competition
Speaker 1: out there for some of the best fund managers. How
Speaker 1: aggressive is the fight for talent?
Speaker 2: I would call it a feed frenzy.
Speaker 1: Really, that's quite a phrase in terms of what people
Speaker 1: are paying or just the hunger for that sort of talent.
Speaker 1: Why are feeding from? Well?
Speaker 2: I think I need to step back and explain where
Speaker 2: we are today is an industry, Okay, So bear with
Speaker 2: me as I set the stage, okay, and then we'll
Speaker 2: talk about the action going on on this stage, so
Speaker 2: more so today than ever before. We have the haves
Speaker 2: and the have nots. There has never been a clearer
Speaker 2: bifurcation between the two. In the have not category, we've
Speaker 2: got the long short equity funds that are directional and concentrated,
Speaker 2: which have had horrific performance. I'm not exaggerating. Tell us,
Speaker 2: I'm gonna go there.
Speaker 1: This is what I love about Alana. She does not
Speaker 1: hold back.
Speaker 2: I don't hold back. I am a truth teller.
Speaker 1: Like it or not so long short, not well, But let's.
Speaker 2: Talk about it because I'm not sure people really know.
Speaker 1: If you that's a lot of funds, right.
Speaker 2: And it's probably forty something percent of the almost fun industry.
Speaker 2: Let me give you another statistic since you're asking about numbers.
Speaker 2: The Financial Times did an article at the beginning of
Speaker 2: this year and it talked about aggregate losses for twenty
Speaker 2: twenty two in the industry. It was north of two
Speaker 2: hundred billion of losses.
Speaker 1: That's some real money the.
Speaker 2: Tiger cub community, which is a relatively small number of
Speaker 2: funds relative to all the burger kings of McDonald's out there.
Speaker 2: As we said earlier, there are tens of thousands of
Speaker 2: hedge funds. Do you know what percent just those funds
Speaker 2: those descended from Tiger management, small group of funds, do
Speaker 2: you know what percent they were of that total?
Speaker 1: I would guess half of that total.
Speaker 2: No, I mean that you can't say half. It was
Speaker 2: twenty five percent a quarter more than twenty five percent, But.
Speaker 1: That doesn't like a dozen funds that's well.
Speaker 2: You know, maybe a little more. But that doesn't even
Speaker 2: include funds like other notable funds that are huge and
Speaker 2: have had huge draw downs like al Keon which is
Speaker 2: a thirty billion dollar fund pre its losses, or Whale
Speaker 2: Rock which was thirteen billion, or Red Mile ten billion.
Speaker 2: I mean, when you think about all of the directional
Speaker 2: long short equity managers, it's an enormous list. Tiger community
Speaker 2: is only, as you know, small ish percent of that.
Speaker 2: What we did is look at I had my team
Speaker 2: pull any fund that was a billion or greater, which
Speaker 2: is again no small fee to get to that level
Speaker 2: of AUM. So these are the material players, most of
Speaker 2: whom are many multiples of that, and we looked at
Speaker 2: their performance over twenty one and twenty two on average bary,
Speaker 2: these funds are down thirty to forty percent. With funds
Speaker 2: like Tiger Global down as high as sixty percent. Tiger
Speaker 2: Global was one hundred billion pre the losses. There was
Speaker 2: an article that came out the other day. They're now
Speaker 2: fifty one billion.
Speaker 1: So fo half wow, cut in half.
Speaker 2: So that's how much value has come out of the industry.
Speaker 2: And what that means is you have a huge high
Speaker 2: watermark to get out of, you have no performance fee
Speaker 2: and no line of sight to getting to one anytime soon,
Speaker 2: and you have aum shrinking by virtue of the losses
Speaker 2: as well as the fact that LPs are now rightly redeeming.
Speaker 2: That's just long short equity. Then we've got Macro right
Speaker 2: which last year had a good year, but I feel
Speaker 2: like macro is very spiky. You have a good year,
Speaker 2: you have a bad year. So you've got lots of
Speaker 2: choppiness in the macro world. And then you've got the
Speaker 2: other side of the ledger, so lots of funds that
Speaker 2: are having a really tough time of it. Huge percent
Speaker 2: of the hedge fund world, and the other side of
Speaker 2: the ledger are the multi managers. We looked at their performance,
Speaker 2: the top multi managers over the last three years, and
Speaker 2: you know what that is. Barry the cumulative performance there
Speaker 2: is if your multi manager is at the low end
Speaker 2: thirty five percent, Wow. At the high end north of
Speaker 2: eighty eight percent, that's sit at al leading the pack.
Speaker 1: Wow.
Speaker 2: But any of them you're going to have done better
Speaker 2: with than the whole cabal of funds I just mentioned.
Speaker 2: And then you also have top multi strategy funds like
Speaker 2: Golden Tree. There's a reason Steve Tannebaum's fund was thirty
Speaker 2: four billion and twenty twenty it's now almost fifty billion.
Speaker 2: He's put up great consistent returns and he's been very
Speaker 2: commercial as to how he's grown the fund. So you
Speaker 2: would think to yourself, doesn't talent therefore in all the
Speaker 2: have nots want to go to the halves? And the
Speaker 2: short answer is yeah, although it's more nuanced than that,
Speaker 2: because people will get into it. I'm sure at some point.
Speaker 2: They're all sorts of things that factor into why someone
Speaker 2: may not be so quick to leave, even in an
Speaker 2: obviously broken situation. But at least more people are coming
Speaker 2: to the table voluntarily than ever before. But the difference is,
Speaker 2: and the reason I call it a feeding frenzy, it's
Speaker 2: not so much now we're getting somebody who is in
Speaker 2: what they feel to be a winning situation to think
Speaker 2: more broadly about their next opportunity, which is that's hard, right.
Speaker 2: They feel very happy, they feel they're treated well, and
Speaker 2: we have to architect something and a pathway that doesn't
Speaker 2: exist where they're at, and maybe they'll engage in a
Speaker 2: conversation to explore that further and eventually maybe they'll make
Speaker 2: a move. Now people are meeting with us, and there's
Speaker 2: a woman we met with recently who called herself and
Speaker 2: we've been dining out on this phrase ever since, multi
Speaker 2: manager curious.
Speaker 1: That's very funny.
Speaker 2: Yeah, I want so she's having. They want to have
Speaker 2: conversations with everyone, and that makes it much more intense.
Speaker 2: It's not just one conversation, it's like seven conversations, and
Speaker 2: they really are relying on us to help guide them
Speaker 2: through that and figure out what the best fit is.
Speaker 2: Another dynamic barrier that's important to keep in mind is
Speaker 2: because these are the has, they have grown, in some
Speaker 2: cases at a rate which is not sustainable. Some of
Speaker 2: these multi managers are two in three x what they
Speaker 2: were even a few years ago. LMAR in twenty twenty
Speaker 2: was four point six billion, Now it's eleven billion. Hudson
Speaker 2: Bay was five and a half billion, then now it's
Speaker 2: almost twenty billion.
Speaker 1: Wow, that's four x.
Speaker 2: Yes. So the reality is, and it's in a very
Speaker 2: short period of time. Talent doesn't proliferate at that level.
Speaker 2: So when we talk about feeding frenzy, there's also a
Speaker 2: question as to how these funds are going to perform
Speaker 2: if they're not being disciplined about the amount of the
Speaker 2: capital they are taking in to meet being able to
Speaker 2: hire good people to deploy it. You look at a
Speaker 2: firm like Citadel, which is closed to new investors, they
Speaker 2: could be multiples of what they are, and the best
Speaker 2: funds are super disciplined about how they've grown. Ballyasni lost
Speaker 2: a lot of capital in twenty eighteen, it got down
Speaker 2: to six billion. It took five years to get back
Speaker 2: up to peak aum, which is twenty billion now. But
Speaker 2: they were really disciplined about how they did it. They
Speaker 2: didn't just boom, you know, double and triple within a
Speaker 2: few years. They built their infrastructure, risk management and hired
Speaker 2: great pms to lead these businesses. And that it's so
Speaker 2: important because you can have you'll dilute returns without getting
Speaker 2: the talent piece right in keeping pace to AUM growth.
Speaker 1: Huh, that's really interesting. So we're going to talk more
Speaker 1: about talent and a bit, but I want to go
Speaker 1: back to some of the things you raised. That's really
Speaker 1: quite fascinating. So it's obvious if you're making a directional bet,
Speaker 1: or even worse, a leverage directional bet and you're wrong,
Speaker 1: your fund's going to suffer. But I'm kind of intrigued
Speaker 1: by what you said about Macro. I know there's a
Speaker 1: wide dispersion of performance in Macro, but if any year
Speaker 1: Macro should done well, it was twenty twenty two, where
Speaker 1: if you had the inflation side right, if you.
Speaker 2: Had that, they did They did well in twenty two.
Speaker 2: I think the point the point I was making is
Speaker 2: it's been choppy in that it's like twenty two was good,
Speaker 2: but then look at twenty one and look at twenty three.
Speaker 1: So as that's what you mean by spikey, is that's
Speaker 1: what I mean by spikey.
Speaker 2: I mean an AUM, by the way, has followed that.
Speaker 2: Revan Howard at peak was forty billion, then it drops
Speaker 2: down to six and change in twenty eighteen, and now
Speaker 2: it's back up again. But that's what I mean by spikey.
Speaker 2: As opposed to an entity, whether it's a top multi
Speaker 2: manager or a top multi strat that is able to
Speaker 2: navigate different markets, put up consistent return stream over time,
Speaker 2: and for the multi managers do it totally uncorrelated. That's
Speaker 2: all out.
Speaker 1: So that's where I was going to go. Multi multi
Speaker 1: strategy seems to be a very attractive atro manager.
Speaker 2: You mean multiman no.
Speaker 1: Multi strategy, because if you're a single strategy and it's
Speaker 1: an either a bad part of the cycle or you
Speaker 1: just make the bet wrong. So leverage directional.
Speaker 2: Or mar you have your hands in many different pots and.
Speaker 1: Something should be working, and even if it's not working,
Speaker 1: is non correlated exactly. So is it safe to say
Speaker 1: that the top performing funds, the ones that have the
Speaker 1: best track record of attracting talent, are going to be
Speaker 1: the multi strat multi managers or or what is the
Speaker 1: distinction there?
Speaker 2: There's there's transition risk no matter what you do.
Speaker 1: Meaning somebody just jumping from one fund to another may
Speaker 1: not carry their performance with them.
Speaker 2: Right and they have to learn new skills. And the
Speaker 2: reality is people typically don't leave something. They don't leave
Speaker 2: to go to do something similar. They leave to go
Speaker 2: do something which is a market step up from where they.
Speaker 1: Are in terms of size, or in terms of strategy,
Speaker 1: or many things.
Speaker 2: In terms of many things, in terms of autonomy, in
Speaker 2: terms of size, in terms of wingspan, also sorts of things.
Speaker 2: What I was referring to is the gap that exists
Speaker 2: at the single strategy funds, where at the end of
Speaker 2: the day, the ultimate arbiter of what happens at the
Speaker 2: fund is the founder. So it is attractive to go
Speaker 2: somewhere where you will where you will now be given
Speaker 2: the ability to manage a portfolio and make decisions, or
Speaker 2: at least be on a path to learn how to
Speaker 2: do that, And so there's greater receptivity to making that
Speaker 2: transition and taking on that transitional risk today because the
Speaker 2: paradigm these people sit in is no longer working. These
Speaker 2: funds are large, are underwater in a very extreme way.
Speaker 1: So let's extrapolate this and talk bigger picture. What I'm
Speaker 1: hearing from you is a specific single strategy founder led
Speaker 1: fund entails different risks for star performers. Then does a
Speaker 1: more institutionalized professional multi strategy fund that has the ability
Speaker 1: to ride out ups and downs. It's not whether or
Speaker 1: not their style is in favor of that moment, they're
Speaker 1: approaching investing from a much more I know, holistic is
Speaker 1: almost a dirty word, but a much more holistic approach
Speaker 1: by making sure that they're checking more boxes off.
Speaker 2: Let's say it like this, I think that a lot
Speaker 2: of individuals sitting at these I'll use long short equities
Speaker 2: as the example. Okay, single manager concentrated long short equity funds.
Speaker 2: Those funds might have done well up until twenty twenty one,
Speaker 2: not because their process was so good, but they were
Speaker 2: the beneficiary of an upmarket, and you could just belong
Speaker 2: and do fine, and you didn't have to develop a
Speaker 2: shorting skill set. You didn't have to develop the ability
Speaker 2: to balance factors. You could just be long growth stocks
Speaker 2: and you base could just sort of do fine with
Speaker 2: very lazy risk management. So in order to transition successfully
Speaker 2: to a multi manager, which is far more disciplined in
Speaker 2: its approach to risk, you need to now learn a
Speaker 2: whole other set of skills which will enable you and
Speaker 2: that should be attractive to generate consistent returns over time.
Speaker 2: But these are not skills that you would have. These
Speaker 2: are not muscles you would have developed up to this point.
Speaker 2: So there is risk both sides in somebody making that transition.
Speaker 1: So there's a risk for staying in a fund that
Speaker 1: is singularly focused and perhaps had the wind that they're
Speaker 1: back for the past decade and got lucky as well
Speaker 1: as the risk in transitioning.
Speaker 2: Is that a fair to say one hundred percent?
Speaker 1: Really quite interesting? So let's talk a little bit about
Speaker 1: the hunt for talent. You mentioned superstars before. How do
Speaker 1: you identify a rising star?
Speaker 2: Table stakes, good intellectual horsepower, work, ethic, training, and a
Speaker 2: history of results. But I would call those things necessary
Speaker 2: but not sufficient, because as we've just talked about, there
Speaker 2: are a whole bunch of funds that may have had
Speaker 2: good outcomes over a period of time, but didn't have
Speaker 2: great process. So the other things we're really looking for
Speaker 2: under the hood are insatiable curiosity, self awareness, a growth
Speaker 2: mindset coupled with an intense desire to improve and learn,
Speaker 2: and passion. And I'll give you a quick story that
Speaker 2: I think encapsulates all of that. Real time. We just
Speaker 2: took this guy out. He hasn't even yet started at
Speaker 2: his new gig. So there's a person that, like I
Speaker 2: said earlier, we are in dialogue with people for a
Speaker 2: long time. We've been talking to him for the better
Speaker 2: part of his ten years of investing. Well to put
Speaker 2: a fine point on his successes, his early success, he
Speaker 2: was made a PM. They call it something else where
Speaker 2: he was, but basically the same thing. He was made
Speaker 2: a PM after four years, four years of investing experience.
Speaker 2: He was made a pmy early super early never invested before.
Speaker 2: So after four years they gave him capital. He was
Speaker 2: running a couple billion of gmvow complete autonomy and a
Speaker 2: clear payout. So of course he didn't want to leave.
Speaker 2: Like again, the differences. There has to be something structurally
Speaker 2: inefficient in not working and broken to leave, so just
Speaker 2: to give that up to go someplace else, we're on
Speaker 2: the margin, some things would be better. Wasn't enough, and
Speaker 2: we can explain why those differences are not marginal. But
Speaker 2: at the end of the day, he had a pretty
Speaker 2: good gig and was staying put. At the end of
Speaker 2: twenty twenty two, he asked for a meeting. Oh and
Speaker 2: I'll give you another he asked for me. Well, we
Speaker 2: keep in touch, but it was now something like, now's
Speaker 2: the time first.
Speaker 1: You've gotten into his head enough that he's starting to
Speaker 1: see cracks.
Speaker 2: Well, something specific, specific happening. So four full years as
Speaker 2: an investment professional becomes a PM. In his second full
Speaker 2: year as a PM, he's paid seven million bucks. So
Speaker 2: this is not too shabby. Guy's doing great. At the
Speaker 2: end of twenty twenty two, he asks for a meeting.
Speaker 2: We sit down and he says, I had a really
Speaker 2: bad year, which a lot of people did in twenty two.
Speaker 2: This is not unusual. We just talked about it, and
Speaker 2: I said, are you under pressure? Is what's your relationship
Speaker 2: like now with the founder? He said, there's no issue
Speaker 2: whatsoever like we you know, no issue because a lot
Speaker 2: of those losses came precisely or the reason for those
Speaker 2: losses came because the founder likes us, which I knew
Speaker 2: to be concentrated and put a lot of capital where
Speaker 2: we where we have high conviction. So when I step
Speaker 2: back and look at my losses for the year, they
Speaker 2: were one hundred percent in one name. And then I
Speaker 2: went back and looked at my history of returns and
Speaker 2: what I found is my hit rate is exceptionally high.
Speaker 2: I have a really high batting average, which is you
Speaker 2: know about it, Barry, is very unusual in this industry.
Speaker 2: So I said to him, Aha, So if you're going
Speaker 2: to win more than lose. Why put all your eggs
Speaker 2: in just a few baskets, you know, because the reality
Speaker 2: is it's just not worth the risk.
Speaker 1: Right, But that's the structure of the founder.
Speaker 2: But that's the structure the founder wants. So what he realized,
Speaker 2: and especially in this new market paradigm that we're in
Speaker 2: where things are not just going in one direction and
Speaker 2: it's much more difficult to call things and there is
Speaker 2: a lot more market risk entering into the equation of
Speaker 2: why things perform in the way that they do, he
Speaker 2: realized he wants to run more diversified and he wants
Speaker 2: to be somewhere that will teach him how to do
Speaker 2: that better and give him the resources to be able
Speaker 2: to do it. Because if you're going to have a
Speaker 2: lot more names in your book, you also need a
Speaker 2: bigger team. And what I love about this story is
Speaker 2: it shows someone who refused to rest on his laurels.
Speaker 1: He very self aware exactly.
Speaker 2: He stepped back and figured out what he's best at
Speaker 2: where he's stagnating, and put himself on a path to grow.
Speaker 2: I kind of almost think that this is a metaphor
Speaker 2: for the hedge fund industry, writ large. They just there
Speaker 2: are so many funds that don't take that step back
Speaker 2: and think about what they need to do to improve themselves.
Speaker 2: They just kind of it's you know, like I said earlier,
Speaker 2: it's a it's an up market. What we're doing is working,
Speaker 2: So why rock the boat? Or I won't name the fund,
Speaker 2: but you may guess who it is. There was a
Speaker 2: founder who shut down who in large part think his
Speaker 2: approach to risk management wasn't that different at thirty billion
Speaker 2: of GMV from what it was at two billion. He
Speaker 2: just didn't didn't scale, didn't adjust to the scale, and
Speaker 2: didn't develop the tools necessary to see correlations in the
Speaker 2: book that might not have been obvious.
Speaker 1: So let me circle back to the manager you're just
Speaker 1: referring to, who had that high degree of self awareness.
Speaker 1: Generally speaking, how rare are stars like that or superstars
Speaker 1: like that? It seems this guy checked all the boxes
Speaker 1: and even in an off year, seemed to be trending
Speaker 1: in the right direction.
Speaker 2: Where he had no pressure from the founder. This wasn't
Speaker 2: like he felt that he was on shaky ground, far
Speaker 2: from very rare. I would say it's a handful of
Speaker 2: times a year that I would call someone a superstar.
Speaker 2: It's everything I just described, but it's also the muscle
Speaker 2: memory of having done this for twenty years where it
Speaker 2: just kicks in. You know, you know when you're sitting
Speaker 2: opposite someone that embodies all of that and some of
Speaker 2: the other things that you know, how do you know
Speaker 2: it when you see it? I talked about intense intellectual curiosity.
Speaker 2: One of the ways that manifests is these people are
Speaker 2: voracious consumer of information. You ask them what they do
Speaker 2: in their spare time, what they read, it's but it's all.
Speaker 2: It's what they read, and it's just it's coming out
Speaker 2: of their eyeballs. Like all of this the subject matter
Speaker 2: that they're interested in. It also goes to passion, and
Speaker 2: by passion I mean a real desire to just be
Speaker 2: engaged in what they do twenty four to seven. But
Speaker 2: I am not talking about being passionate about their investments,
Speaker 2: because you really need to be unemotional when you're making decisions,
Speaker 2: and that maybe goes to low ego too. It's not
Speaker 2: about being quote right, because being right and making money
Speaker 2: are two separate things. By the time you're right, you
Speaker 2: might have lost your shirt.
Speaker 1: So literally, the title of a nid Davis book being
Speaker 1: right or making money. You're kidding at one hundred percent.
Speaker 1: The grandfather probably the most respected technician.
Speaker 2: Ever, so honored to be that same breath.
Speaker 1: So tell us about some the current trends that you
Speaker 1: see in twenty twenty three that might be a little
Speaker 1: unique or surprising versus what we've seen over the past
Speaker 1: couple of years.
Speaker 2: So, in spite of everything I've said, people can still
Speaker 2: be quite sticky. And there is this inertia that I
Speaker 2: often see where people overweight what can go wrong in
Speaker 2: making a move, underweight what they have to gain, and
Speaker 2: turn a blind eye to stayin put. And given the
Speaker 2: clarity of the situation right now, it is just mind
Speaker 2: boggling to me that people who assess risk for a
Speaker 2: living can still be so obtuse for lack of a
Speaker 2: better word. And I think it goes to something that's
Speaker 2: really important, which is you have to be intentional about
Speaker 2: managing your career. Stayin put cannot be just the default position.
Speaker 1: Is it just inertia? People just get comfortable and don't
Speaker 1: want to move.
Speaker 2: I think people get comfortable and they feel like again,
Speaker 2: it's economic loss of version theory at work. They overweight
Speaker 2: everything that can go wrong, and they really don't pay
Speaker 2: attention to if they make a move, they underweight what
Speaker 2: can go right, and they're just not focused on the
Speaker 2: dire situation that they're in. And when you're being deliberate
Speaker 2: about managing your career, you're asking and I'm not suggesting
Speaker 2: people hop around for the sake of hopping around, but
Speaker 2: you do need to ask yourself the tough questions at
Speaker 2: various pivot points. And this isn't just true for hedge funds,
Speaker 2: it's true for any industry. How is my fund or
Speaker 2: firm performing? How am I evolving? Am I learning the
Speaker 2: skills I need in order to be effective going forward?
Speaker 2: Am I on a path to grow? Am I stagnating?
Speaker 2: Or am I increasing my value and optionality in the market?
Speaker 2: Am I being paid fairly? And you know to the
Speaker 2: extent that they're not, and they're just literally sticking their
Speaker 2: head under the covers and not thinking about these things.
Speaker 2: They really need to ask themselves why that's the case.
Speaker 2: It's the number one reason people flame out. They don't
Speaker 2: keep pressing forward, don't keep improving, don't keep learning.
Speaker 1: So that raises a really interesting question because you're suggesting
Speaker 1: that talent should be thinking about more than just salary
Speaker 1: and equity. There's a lot of other things they should
Speaker 1: be looking for. When you're counseling a superstar to switch funds,
Speaker 1: what are you telling them that they can get besides
Speaker 1: just hey, here's money and you get some equity in
Speaker 1: the GP. What's in it for them?
Speaker 2: So I can just still? I think there's four main things.
Speaker 2: One is to be made better, to learn things that
Speaker 2: they're not learning where they're at, which, more than ever
Speaker 2: today is important matter sure. Number two is autonomy and
Speaker 2: even if if it's not complete, jurisdiction over the portfolio.
Speaker 2: Increased ability to impact the results. Okay, so you people
Speaker 2: should really want that and that sense of agency. The
Speaker 2: second thing is clarity, not the number per se that's important,
Speaker 2: but clarity around how we get to that.
Speaker 1: Number, meaning it's not a crazy calculation. You have an
Speaker 1: idea each month, each quarter, how you're personally doing that.
Speaker 2: I'm not saying it has to be well. I mean,
Speaker 2: if you're on a payout then yes you do. But
Speaker 2: even in situations where you don't have a payout or
Speaker 2: points in the fund, you have to have clarity around
Speaker 2: why the founder makes the decisions he does. The most
Speaker 2: frustrating thing in this industry is for people who perform
Speaker 2: who get netted, meaning the founder takes from Peter to
Speaker 2: pay Paul and doesn't reach into his own pocket in
Speaker 2: order to do that. I was in the fourth thing
Speaker 2: just before I forget is stability. I'll come back to
Speaker 2: compensation stability or clarity around compensation stability in terms of
Speaker 2: that you're not going to get blown out at the
Speaker 2: slightest misstep. These are the fourth things right that are
Speaker 2: important to people, and stability that the fund is on
Speaker 2: solid footing, which increasingly is a more difficult thing given
Speaker 2: how many funds look today like melting ice cubes. But
Speaker 2: back to compensation, the founder has to be clear on
Speaker 2: what the P and L is of the fund and
Speaker 2: how he uses the management fee. To the extent that
Speaker 2: there isn't a clear formula in terms of how you're paid.
Speaker 2: People need to understand why they're getting paid what they're
Speaker 2: getting paid.
Speaker 1: So I'm a little confused. You're a rock star at
Speaker 1: one fund, you get an enticing offer in another funds,
Speaker 1: and you may not know what your comp is going
Speaker 1: to look like, even if you're putting up really good numbers.
Speaker 1: That's perplexing.
Speaker 2: If you're sitting at a fund where the.
Speaker 1: Guy across the hole is thinking the joint up, you're
Speaker 1: not going to get your bonus.
Speaker 2: I mean, let's just say you put up two hundred million,
Speaker 2: the guy across the hall lost two hundred million. There's
Speaker 2: no pass through model, so the founder is zero in
Speaker 2: terms of a performance fee if all he has is
Speaker 2: the two of you and he's allocated capital to you.
Speaker 2: So is he going to reach into his own pocket
Speaker 2: to make you whole or not? And if you don't
Speaker 2: have a payout that he has to abide by, and
Speaker 2: that can be really frustrating. If he doesn't actually make.
Speaker 1: You I think that would be good for your business,
Speaker 1: because that guy's going to be out the door. Hey,
Speaker 1: I don't care about who else you're hiring. If I'm
Speaker 1: putting up good numbers, I expect you to at least
Speaker 1: have a conversation with me about all right, we're only
Speaker 1: going to give you half of what you expected because
Speaker 1: Bob across the hole blew up. But I mean, what
Speaker 1: really happens to though.
Speaker 2: Well, I mean, I will tell you twenty twenty two
Speaker 2: is really interesting because I was pleasantly surprised by quite
Speaker 2: a few examples of founders who did reach into their
Speaker 2: own pocket to pay their best people, like the story
Speaker 2: I told early on, where some of these funds with
Speaker 2: very big holes still did substantial guarantees to retain their
Speaker 2: top people for this year and.
Speaker 1: For next years long term smart long term smart.
Speaker 2: Although the you know, the problem is to the extent
Speaker 2: those funds continue to lose aum because LPs are redeeming
Speaker 2: or don't get and or don't get out of those
Speaker 2: high water marks in some reasonable period of time, that's
Speaker 2: not really sustainable.
Speaker 1: Well, they could just dissolve and reform.
Speaker 2: And also those those guarantees are ceilings, and really talented
Speaker 2: people want to be able to have untapped ability to
Speaker 2: get paid.
Speaker 1: Clear skies above and if they do really well, they
Speaker 1: expect to get paid.
Speaker 2: But Barry, what you're picking up on, which is correct,
Speaker 2: is to the extent founders don't have a pass through model,
Speaker 2: meaning they have to. It's just everything is out of
Speaker 2: the management fee and performance.
Speaker 1: As opposed to segmenting four different funds, and the performance
Speaker 1: fee goes to each of those individual silos.
Speaker 2: Well, meaning they can pass through the expenses of the fund.
Speaker 2: So you can pass through the expense of paying that
Speaker 2: guy who made two hundred million. All that should matter
Speaker 2: to LPs is your net return. So you know, a
Speaker 2: pass through model is a higher bar because there's more
Speaker 2: expenses at the end of the day. But these guys
Speaker 2: who have that very coveted fee structure are able to
Speaker 2: have that because their net returns are worthy of it.
Speaker 2: They have a high enough net return in any event.
Speaker 2: I do think what talent wants is a pathway where
Speaker 2: they have more agency over what they do, and more
Speaker 2: control and clarity around how they get paid, they get paid,
Speaker 2: and just to be made better over times they continue
Speaker 2: to evolve.
Speaker 1: So let's flip the question what are the top hedge
Speaker 1: funds looking for? It's got to be more than just
Speaker 1: P and L. Tell us what the top funds want
Speaker 1: when they ask you to go find me a superstar
Speaker 1: in this space.
Speaker 2: Coming up a level, I will tell you. I do
Speaker 2: think funds trip themselves up sometimes in using terms like
Speaker 2: analyst and PM and partner, because those things mean very
Speaker 2: have very different definitions depending on who we're speaking to.
Speaker 1: Do they matter at some of the larger hedge funds
Speaker 1: or are people wearing multiple hats doing the same job.
Speaker 2: What I mean is we define different Founders define those
Speaker 2: things differently. So I'll give you an example. We did
Speaker 2: a search about eight years ago for a well known
Speaker 2: single manager, long short equity founder who'd been around at
Speaker 2: that point for twenty years and had just had one
Speaker 2: of his most senior people depart. And what he told
Speaker 2: me he wanted was a partner. The guy was a partner.
Speaker 2: He wanted someone who, he said, he's willing to give
Speaker 2: this guy some stancial points and would operate really as
Speaker 2: a PM alongside him. I want someone who's going to
Speaker 2: be able to make decisions with me, help deploy capital,
Speaker 2: help size, help construct the portfolio, more of a PM
Speaker 2: than an analyst. And what I said to him is,
Speaker 2: there's no one I can find you that has twenty
Speaker 2: years of working with you and the way that you
Speaker 2: evolved people, because everyone there was hired basically as a
Speaker 2: young analyst out of Goldman and then homegrown. He saw
Speaker 2: what people were capable of, they had wins with him
Speaker 2: over time, and then he gave them more and more responsibility.
Speaker 2: So to go into the market and basically find what
Speaker 2: for him would be a stranger and put that person
Speaker 2: in at a senior level. I knew wasn't going to work,
Speaker 2: and in fact, what we ended up doing was putting
Speaker 2: in It was a senior person, but it was someone
Speaker 2: who was less experienced was really a senior analyst, and
Speaker 2: that person was happy to have a seat at the
Speaker 2: table and be able to feed him ideas and over
Speaker 2: time morph into more of a PM or partner type role.
Speaker 2: But PM means different things, even among the multi managers
Speaker 2: who do have that, you know, where that title really
Speaker 2: does mean they're giving somebody an allocation of capital and
Speaker 2: that person does have autonomy. In some places a PM
Speaker 2: is really no, it's always managing capital, but it might
Speaker 2: be a small amount of capital. You might start with
Speaker 2: a paper book. It's like a mini PM, you know,
Speaker 2: or a PM with training wheels, and you might be
Speaker 2: overseeing a very small team to start. In other places,
Speaker 2: we want somebody who can build a scale business right
Speaker 2: out of the gate and can manage a lot of capital.
Speaker 2: And by the way, their definition of analysts may be
Speaker 2: different some there are places where being an analyst almost
Speaker 2: looks more like a PM. They are managing a significant
Speaker 2: amount of GMV. They do have a payout on that.
Speaker 2: Their definition of analysts may look again, it may look
Speaker 2: more like mini pms. So we really need to dig
Speaker 2: into these things and define what we're after. And I
Speaker 2: would say for an analyst, that's idea, generation, creativity, independent research,
Speaker 2: asking the right questions. For a PM, it's risk management,
Speaker 2: portfolio construction, hedging, sizing, the ability hopefully to build and
Speaker 2: manage a team. And where we're looking for someone to
Speaker 2: build a strategy, that's more like a founder. It's someone
Speaker 2: that we can raise capital around, potentially raise a fund around,
Speaker 2: and of course attract talent and also has a sense
Speaker 2: of what is needed with respect to technology and operations
Speaker 2: for their strategy. So different skill sets.
Speaker 1: I was going to say, it sounds far more complex
Speaker 1: than I think a lot of people might assume looking
Speaker 1: in from the outside. How important is fit? How do
Speaker 1: you figure out, hey, this square peg is going to
Speaker 1: fit or won't fit into that round funds? How do
Speaker 1: you evowvaluate personalities? On top of all these really challenging
Speaker 1: skill sets, it sounds like it's not an easy thing
Speaker 1: to do.
Speaker 2: There are things we do to see how closely the
Speaker 2: candidate maps to what we will want them to do.
Speaker 2: We do case studies, idea pitches, mock portfolios, business plans.
Speaker 2: You know, those are all sort of the hoops we
Speaker 2: have them jump through. But then in addition we do
Speaker 2: soft referencing as a firm. If you think of twenty
Speaker 2: years of meeting with the most talented people at every
Speaker 2: Hedge fund, odds are if you're a candidate, Barry, I've
Speaker 2: met with five other people from your fund that have
Speaker 2: a point of view on you. Right, So we very
Speaker 2: quickly get a three sixty on how people think, their
Speaker 2: velocity of ideas, their response time when they spot an opportunity,
Speaker 2: their ability to commit capital, and how they systematize their
Speaker 2: process so it's scalable and repeatable. These are all the
Speaker 2: things we're going to dig into in finding out about people.
Speaker 2: And I also love it when someone comes in with
Speaker 2: a clear sense of attribution. I don't think it's a
Speaker 2: great sign if someone has no idea what their p
Speaker 2: and L is. I get that often it's not tracked
Speaker 2: at many funds.
Speaker 1: Well really, I'm shocked to hear that. Because you not
Speaker 1: formally tracked and could still export your book to Excel
Speaker 1: spreadsheet and say here's where I am.
Speaker 2: We're saying the same thing I expect people to have
Speaker 2: done that. I expect people to have a clear sense
Speaker 2: of attribution. To the extent that they don't, it's not
Speaker 2: a good sign, that's what I'm saying. I would but
Speaker 2: the best people come in I mean, honestly, some of
Speaker 2: them come in with a huge spreadsheet. This is what
Speaker 2: I've contributed. And by the way, here are all the
Speaker 2: things I wanted to do that the founder didn't let
Speaker 2: me do, and how I would have performed if they've
Speaker 2: let me. Now I'm savvy enough after all these years
Speaker 2: to know and that if I add it all a
Speaker 2: little bit of a grain of salt, and if I
Speaker 2: added up all of the returns of everyone we meet
Speaker 2: from fund A, B or C, it would probably be
Speaker 2: north of three hundred percent. So you know, there's that,
Speaker 2: But I think there is still something to a sense
Speaker 2: of ownership and directional truth. And then the final thing
Speaker 2: I'd say to you is there's always a leap of faith.
Speaker 2: I don't care how much work both sides do, and
Speaker 2: we do a lot of work to have a strong
Speaker 2: sense that the person will be successful. There's always a
Speaker 2: leap of faith. Because we're talking about different founders, different
Speaker 2: definitions of success and failure, different investing style, different approaches
Speaker 2: to training and development. And I always tell the clients
Speaker 2: I'm working with that they have to lead with war stories.
Speaker 2: They have to lead with all the things that might
Speaker 2: have gone wrong early on when they recruit someone, and
Speaker 2: how they help that person to get out of a
Speaker 2: hole and to go on and be successful, because that's
Speaker 2: what's in the minds of people before they make a leap.
Speaker 2: What happens when things go south? How will I be treated?
Speaker 2: And founders really need to or whoever's doing the recruiting,
Speaker 2: And this is again any industry, you really need to
Speaker 2: lead with what constitutes failure losing money in and of itself, Yes,
Speaker 2: you failed to make money, but why how did you
Speaker 2: get yourself into that situation?
Speaker 1: You know?
Speaker 2: So there's sort of like good failure, which is a
Speaker 2: learning experience, and we think we can improve you. And
Speaker 2: let's define what is a situation where we think it
Speaker 2: actually isn't the right fit. You need to give people clarity.
Speaker 1: Makes sense. A good process will occasionally have a bad outcome,
Speaker 1: and you can't just assume every good outcome is the
Speaker 1: result of a good process. All right, so I only
Speaker 1: have you for a few more minutes. Let's jump to
Speaker 1: our favorite question that we ask all our guests starting
Speaker 1: with what has been keeping you entertained over the past
Speaker 1: couple of years. What have you been doing either when
Speaker 1: we were locked down or just re out? And about
Speaker 1: revenge traveling.
Speaker 2: Revenge traveling well. I took a fantastic trip with my
Speaker 2: son to Italy last summer.
Speaker 1: I do reco. We were talking about that and we
Speaker 1: didn't know what was going to happen. There was a
Speaker 1: couple of Varians we were both talking about traveling last summer.
Speaker 1: Where'd you go in Italy?
Speaker 2: It's almost where didn't we go? We went everywhere. The
Speaker 2: only places we didn't go were Pulia my pronouncing that correctly,
Speaker 2: soft ge Pulia, and we didn't go to northern.
Speaker 1: Italy Como and I want to check that out phenomenal.
Speaker 1: I haven't been to Milan. I haven't been to Modina, which.
Speaker 2: Was either, but those are that's worth hitting.
Speaker 1: I have a friend who did this private tour where
Speaker 1: instead of staying at hotels, you stay at people's houses
Speaker 1: and they cooked dinner for you and it's Grandma making
Speaker 1: the secret family recipe. And he said he came home
Speaker 1: twenty pounds heavier. I'm sure it was amazing. Let's talk
Speaker 1: about mentors who helped to shape your career.
Speaker 2: It's totally my parents. Really, I had amazing parents.
Speaker 1: What did your parents do?
Speaker 2: My father ran a small insurance brokerage, so he was
Speaker 2: an entrepreneur, but small, I mean he was. This is
Speaker 2: your classic first generation immigrant story. My dad did grow
Speaker 2: up in the States. He was born and raised in Brooklyn,
Speaker 2: part of what we often termed the Greatest Generation, right right.
Speaker 2: He volunteered to fight World War Two. He was an
Speaker 2: amazingly patriotic person. He was a tailgunner for B twenty nine's.
Speaker 2: They used to take us out. My parents used to
Speaker 2: take us out to airfields in the middle of nowhere
Speaker 2: to look at these old planes. Really hard working guy.
Speaker 2: And I listened to all the issues that he would
Speaker 2: bring home and discuss with my mom, who's an amazingly
Speaker 2: smart woman. She can run circles around most people. And
Speaker 2: she was kind of this CEO of our family. She
Speaker 2: really pushed us to be our best. She helped my dad.
Speaker 2: She came here. She was a hidden child during the Holocaust.
Speaker 2: Oh really, it's a whole story unto itself. She came
Speaker 2: to is then her family emigrated to Israel, and then
Speaker 2: she came to the United States, met my father, and
Speaker 2: they were we didn't have much growing up. They just
Speaker 2: they did the best they could in the way of
Speaker 2: giving us stuff. But there wasn't really a lot of
Speaker 2: material wealth that I grew up with far from but
Speaker 2: I had great parents who taught me the importance of
Speaker 2: by example through my father and my mom just in
Speaker 2: terms of her wisdom of constantly pressing forward. And you know,
Speaker 2: there wasn't a lot of room for whining in my house.
Speaker 2: She's you know, she was a in the Israeli Army.
Speaker 2: She's tough, she's strong. My dad again, great wonderful man
Speaker 2: who's a phenomenal salesperson, but worked super hard and I
Speaker 2: admired his resilience. And it was about pushing forward and
Speaker 2: not giving up. And that I think is that grit
Speaker 2: and perseverance. We didn't really talk too much about that.
Speaker 2: I actually think it's one of the most important determinants
Speaker 2: of someone's success in life and also professionally.
Speaker 1: Grit and perseverance good good qualities to have. Let's talk
Speaker 1: about books. What are some of your favorites. What are
Speaker 1: you reading right now?
Speaker 2: Well, I love books that are about real life. Could
Speaker 2: be a moment in time like Tom Wolf type books,
Speaker 2: maybe the story is quote fiction but loosely based on
Speaker 2: things that were happening then, or of course Michael Lewis,
Speaker 2: which is you know, those are real stories told in
Speaker 2: a highly entertaining way. The stuff I'm reading now is
Speaker 2: courtesy of my eighteen year old son who's gotten into
Speaker 2: the habit of buying his mom books she thinks that
Speaker 2: he thinks she might like, and he's hit it out
Speaker 2: of the jackpot every time. Yeah, so now thanks to Jordan,
Speaker 2: I'm reading I think it's called Ticking Clock. It's by
Speaker 2: Ira Rosen, who is a producer for sixty Minutes It
Speaker 2: and he bought me that because he knows I love
Speaker 2: the movie Wither with Russell Crowe, which was an expose,
Speaker 2: of course on the tobacco industry, but also on the
Speaker 2: world of journalism. And the book is fascinating. It's like
Speaker 2: being in the newsroom. It's all the intrigue that went
Speaker 2: on behind the scenes. It's it's just it's an amazing
Speaker 2: and it's so funny. He's just he's like this irreverent,
Speaker 2: nobs awesome, engaging storyteller, phenomenal. And then the other book
Speaker 2: I'm reading that my son got for me is called
Speaker 2: The Kings of New York, which is about really the
Speaker 2: New York skyline and the whole real estate industry and
Speaker 2: again told almost like a thriller in terms of how
Speaker 2: it unfolded, who, what all the inside baseball was and
Speaker 2: the rise and fall of a number of real estate dynasties.
Speaker 1: Huh, really quite fascinating. Our final two questions, what sort
Speaker 1: of advice would you give to a recent college grad
Speaker 1: who was interested in a career in either hedge funds
Speaker 1: or talent scaled and recruiting?
Speaker 2: For anyone, the question is why do you want to
Speaker 2: do that? What is it? And if the answer for
Speaker 2: anything is because they think it's lucrative, that's not a
Speaker 2: good answer.
Speaker 1: So, by the way, I've heard that time and again
Speaker 1: from people sitting in that seat. Hey, if you're in
Speaker 1: this game for the money alone, you're going to be disappointed.
Speaker 2: It's important to try. If you know what you want
Speaker 2: to do, that's great. I have a candidate right now
Speaker 2: who's been investing in biotech since he was thirteen. Really, yes,
Speaker 2: and so he knows what he wants to do. And
Speaker 2: I learned that because I said, what you studied in
Speaker 2: college was really interesting. You were pre meed, which is
Speaker 2: tough enough, and also studying business, Like, how did you
Speaker 2: know back then? He's like, I just knew. I knew
Speaker 2: I wasn't going to be a doctor. I was fascinated
Speaker 2: by biotech, but I wanted to come at it from
Speaker 2: the investing angle to the extent you don't really know.
Speaker 2: I think it's so important to try different things, you know,
Speaker 2: to your opening questions to me, I didn't know, and
Speaker 2: I learned through all of my experiences what I liked,
Speaker 2: what I was best at, and just as valuable, what
Speaker 2: I didn't like and what I felt. You know, I
Speaker 2: wasn't a natural app I think it's okay to go
Speaker 2: on a bit of a journey early on, but you
Speaker 2: have to be on that journey aggressively and meaning If
Speaker 2: what you're doing is not something that really is singing
Speaker 2: or speaking to you, you have to keep moving forward
Speaker 2: till you figure it out so purposefully, purposefully you can
Speaker 2: then lock in and really build something.
Speaker 1: Huh, really interesting And our final question, what do you
Speaker 1: know about the world of investing today? Hedge funds, talent
Speaker 1: recruitment that you wish you knew? Twenty years ago when
Speaker 1: you first launched IDW.
Speaker 2: I'll use your word purposefully. It's really important for founders
Speaker 2: to manage their team purposefully, meaning you have to give
Speaker 2: people room to fail, but you also have to cut
Speaker 2: when it makes sense. And I think a lot of
Speaker 2: founders are afraid to do that because will it look
Speaker 2: to LP's it's it's it's uncomfortable to have to do those,
Speaker 2: to have to, you know, to have to manage people out,
Speaker 2: what will it do to our culture? But a killer
Speaker 2: culturally is to be someplace where it becomes a hotbed
Speaker 2: for mediocrity. And so the best bed.
Speaker 1: For mediocrity, meaning you just start accumulating.
Speaker 2: Dead would and it becomes And I hear this time
Speaker 2: and again where people say, you know where they haven't
Speaker 2: really been paid that well, well, there's this kind of
Speaker 2: smoothing effect that goes on at our firm where maybe
Speaker 2: I'm not paid as well as I should be, but
Speaker 2: in down, you know, when things don't go with that
Speaker 2: well at the firm, I also am not hit as
Speaker 2: hard perhaps as other places. And I said, can we
Speaker 2: and I say, can we take a step back and
Speaker 2: look at your personal P and L history For the
Speaker 2: most part, you've been a rock star every year you've
Speaker 2: been earth. Are you giving yourself an artificial ceiling here?
Speaker 2: And why are you, you know, for someone who can
Speaker 2: never put up the goods? That's a great paradigm. Why
Speaker 2: is it for you? And so I think again, it
Speaker 2: all comes back to being front footed as talent, but
Speaker 2: also as an institution in managing, in managing for growth aggressively.
Speaker 1: Alana, thank you for being so generous with your time.
Speaker 1: We have been speaking with Alana Weinstein. She is the
Speaker 1: founder of the IDW Group and is known as one
Speaker 1: of the most powerful women in the world of hedge funds.
Speaker 1: If you enjoyed this conversation, well be sure and check
Speaker 1: out any of the previous five hundred or so we've
Speaker 1: done over the past nine years. You can find those
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Speaker 1: not thank the crack team of experts who helped put
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Speaker 1: Somanth Danzinger is my audio engineer. Attika Valbron is my
Speaker 1: project manager. Sean Russo is my researcher. I'm Barry Ritolts.
Speaker 1: You've been listening to Master's in Business on Bloomberg Radio