WEBVTT - IDW Group CEO Ilana Weinstein Talks Hedge Funds

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<v Speaker 1>We're going to talk about hedge funds. We're gonna bring

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<v Speaker 1>in Alana Weinstein IDW Group CEO and founder, because for

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<v Speaker 1>all the love the market makers are getting, the hedge

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<v Speaker 1>funds don't seem to be feeling as much love. What

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<v Speaker 1>are we seeing from the multistrats in terms of performance?

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<v Speaker 1>After we seemingly saw a little bit of a rebound

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<v Speaker 1>coming into May, are they still feeling it?

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<v Speaker 2>Okay? So what's beautiful about the multistrats is they're not

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<v Speaker 2>as tethered. They are not tethered, I should say, to

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<v Speaker 2>the market in terms of whether the market is up

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<v Speaker 2>or bound or rebounding. That's for another category, which we'll

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<v Speaker 2>get to. They are exceptional at managing volatility and putting

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<v Speaker 2>up consistent performance. And what I would chine a light

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<v Speaker 2>on right now, Shanali, is we have lived through one

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<v Speaker 2>of the most volatile periods in recent memory, as we know,

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<v Speaker 2>over the last several months. And the fact that the

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<v Speaker 2>multi managers have navigated this as effectively as they have,

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<v Speaker 2>They've stayed in largely positive territory during the duration of

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<v Speaker 2>this period, I think shines a light on the fact

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<v Speaker 2>that the best ones I'll say it like this have

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<v Speaker 2>money bowled.

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<v Speaker 1>The industry fascinating. So if you look at their ability

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<v Speaker 1>to draw in talent, how does it compare to the

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<v Speaker 1>rest Because you are seeing i mean, there's no other

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<v Speaker 1>way to put it, crazy pay packages. You've been seeing

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<v Speaker 1>seeing teams lifted out for one hundred million dollars. You're

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<v Speaker 1>looking at Ken Griffin trying to put a four year

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<v Speaker 1>non compete on in Florida. I mean, what does that

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<v Speaker 1>talent war look like for the multistrats?

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<v Speaker 2>Okay? So, and that is the Multistrats are the biggest

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<v Speaker 2>acquisitors of talent right by virtue of their name multi well,

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<v Speaker 2>multi managers is really the you know, euphemism that I'm

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<v Speaker 2>referring to. They need multiple managers to manage capital. First off,

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<v Speaker 2>let me provide some perspective on these pay packages. It's

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<v Speaker 2>not like someone who's getting an one hundred million dollar

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<v Speaker 2>check and walking across the street and able to cash that. Okay.

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<v Speaker 2>Part of it is a hefty guarantee for sure to

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<v Speaker 2>pay that person for the period they're sitting out.

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<v Speaker 1>Part of it is deferred.

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<v Speaker 2>Part of it is a wallet so that they can

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<v Speaker 2>hire a cracker jack team, and a lot of it

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<v Speaker 2>also is on the come where they're getting. If you

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<v Speaker 2>normally get a twenty percent PAYOUTTIONALI, I'm going to give

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<v Speaker 2>you a thirty percent payout up to two hundred million.

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<v Speaker 2>That's an extra twenty million, but you got to make

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<v Speaker 2>that two hundred million. The bottom line of all of

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<v Speaker 2>this is you don't want to be beholden too what

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<v Speaker 2>I'll call the auction. So if you're a multi manager

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<v Speaker 2>and you lose someone, which you inevitably will because this

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<v Speaker 2>is a merry go round, someone leaves Peter to go

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<v Speaker 2>to Paul, or you know what, there's a lot of

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<v Speaker 2>capacity for this strategy right now, let me take a

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<v Speaker 2>crack AT's starting my own fund. How are you going

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<v Speaker 2>to replace that person? Do you always want to be

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<v Speaker 2>in a bidding war? No, because then you're beholden to

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<v Speaker 2>paying I would actually say maybe overpaying for air quotes talent.

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<v Speaker 2>These people are not necessarily as talented or remains to

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<v Speaker 2>be seen as the headline numbers would suggest. That's a

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<v Speaker 2>lot of money for the multi manager to have to

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<v Speaker 2>recoup on their investment TVD on whether they will much

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<v Speaker 2>smarter to grow talent in house and the best ones

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<v Speaker 2>like point seventy two and Citadel are a factory for

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<v Speaker 2>what I like to call alpha makers.

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<v Speaker 3>That's what I was actually going to ask about. So

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<v Speaker 3>I don't obviously know as much about this industryationality, but

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<v Speaker 3>it would seem to me that a lot of these

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<v Speaker 3>people learn on the job. So can you foster a

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<v Speaker 3>sense of loyalty? Does Steve Cohen do that? Does Ken

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<v Speaker 3>Griffin do that? When you build them up from the

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<v Speaker 3>bottom up, it doesn't help obviously IDW. If they make

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<v Speaker 3>these well, it does.

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<v Speaker 2>Help IDW because the reality is if there is a culture,

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<v Speaker 2>and that's very hard, it's not. They don't all they're

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<v Speaker 2>not all created equal in terms of their ability to

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<v Speaker 2>train and develop and mentor and make you Matt the

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<v Speaker 2>best version of yourself that you can be at each

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<v Speaker 2>point along the experience curve and also give you a pathway.

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<v Speaker 2>It's not just about coming in as an analyst and

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<v Speaker 2>being a good AT or coming in as a PM

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<v Speaker 2>and being a good PM. At Citadel, you can you

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<v Speaker 2>can go very successfully as at point seventy two, from

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<v Speaker 2>analyst to PM to running a business. How exciting is

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<v Speaker 2>that you could be a business headed Citadel. Steve just

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<v Speaker 2>created a new fund around one of his PMS turion. Right,

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<v Speaker 2>So that's a pathway where now you have, in that example,

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<v Speaker 2>point seventy two with you to raise capital. They raised

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<v Speaker 2>a billion and a half out of the gate, and

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<v Speaker 2>the PM has all of the incredible resources available to

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<v Speaker 2>him at point seventy two. That's not all multi managers

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<v Speaker 2>created equal, and that's what creates stickiness and durability and.

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<v Speaker 1>Then the ability to build out a team under that.

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<v Speaker 1>Perhaps you know, one question I have is where we're

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<v Speaker 1>not seeing as much success. It looks like the long

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<v Speaker 1>short business this year, for all of the volatility in

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<v Speaker 1>the market, has not played out quite as well. And

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<v Speaker 1>that comes after some really tough years and resources. Yeah,

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<v Speaker 1>so well said, what's going on?

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<v Speaker 2>Okay, so you know, like you'll see the returns in

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<v Speaker 2>May breaking news, Really not. They're going they're gonna be

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<v Speaker 2>better than they were in April. So is the market.

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<v Speaker 2>The problem with this is one the swings of volatility. Okay,

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<v Speaker 2>I'm not gonna name names, but there are so many

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<v Speaker 2>examples of funds that were down and like the mid

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<v Speaker 2>teens in April and now we're up mid single digits.

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<v Speaker 2>Think about that as an LP and think of how

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<v Speaker 2>nervous that might make you about what's gonna happen next month.

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<v Speaker 2>And as an LP, what I'm thinking about is how

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<v Speaker 2>much alpha am I getting net of fees relative to

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<v Speaker 2>the underlying beta exposure. That's like very complicated. I don't

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<v Speaker 2>want to think about that. I want alpha and I

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<v Speaker 2>have the multi managers in order to access that, or

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<v Speaker 2>I want beta and I can pay nothing for that. Right,

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<v Speaker 2>buying an ETF for the SMP where the long short

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<v Speaker 2>funds will raise money is not in their hedge fund product.

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<v Speaker 2>You heard it here, fir s. They are not raising capital.

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<v Speaker 2>I don't care what they tell you. In their hedge

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<v Speaker 2>fund product. Where they are raising capital is long only

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<v Speaker 2>because there is appetite for the alpha component of a

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<v Speaker 2>beta product. Can I just ask.

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<v Speaker 3>Quickly, I have a curveball question for you, all right,

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<v Speaker 3>let's hear it. Traditionally, Harvard has been a feeder university

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<v Speaker 3>for these masters of the universe. Right, do you see

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<v Speaker 3>that continuing after this?

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<v Speaker 2>Well, my son goes to Harvard's I don't know how

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<v Speaker 2>I'm supposed to answer that question.

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<v Speaker 3>You as Harvard, But who else can provide the best

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<v Speaker 3>financial minds in the world.

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<v Speaker 2>Well, I mean, there's a lot of good schools out there.

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<v Speaker 2>I wouldn't say Harvard has a walk on that. What

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<v Speaker 2>I will tell you is it pertains to talent. And

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<v Speaker 2>I've seen this up close. Literally. I visited my son

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<v Speaker 2>a few weeks before the end of the year and

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<v Speaker 2>I was hanging out with him and his friends who

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<v Speaker 2>are finishing their sophomore year. Matt and the aggressiveness by

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<v Speaker 2>the top hedge funds, namely the multi managers in locking

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<v Speaker 2>up these kids now now for their junior summer, and

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<v Speaker 2>the pay packages talent the talent wear has gone way

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<v Speaker 2>downstream as we've seen or and you guys alluded to

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<v Speaker 2>it as well earlier, are huge even for kids so

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<v Speaker 2>that they have first steps.

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<v Speaker 1>We got to leave it there.

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<v Speaker 2>Whish we had more time.

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<v Speaker 1>That is a lot of winsteam of the IDW group place.

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<v Speaker 3>We need to continue that conversation right