July 7, 2025 • 45 mins
Multi-strategy hedge funds, composed of lots of individual portfolio managers, have seen assets under management boom in recent years, thanks to astonishingly consistent returns throughout the cycle. If you're one of the PMs, the money can be incredibly lucrative. But job security is fickle, and it's easy to lose your place on the team. So how do you actually get your seat and keep it? On this episode, we speak with Brian Yelvington, a consultant at the recruitment firm Carrington Fox. He's also a longtime veteran of the industry, having been a trader at many large firms. He discusses how people get their foot in the door, the skills needed to succeed, and how to think about optimizing returns while avoiding ruin.
Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
I'm Jill Wisenthal and I'm Tracy Alloway. Tracy, there's a
lot we've discussed about multi strategy hedge funds, but there's
still a lot we don't know. And specifically, although I've
come to learn things about comp and alignment and the
importance of risk management and risk models and all that stuff,
(00:39):
I actually don't know, like how how the pods make
good trade.
Speaker 3 (00:45):
This is part two hundred and ninety eight of our
attempt to understand multi strat hedge funds.
Speaker 2 (00:50):
That's what it is.
Speaker 3 (00:51):
But you're right, we haven't really looked at it from
the I guess the perspective of a PM who is
actually working there, and what it takes to get hot fired,
what it takes to avoid getting fired, and things like that.
Speaker 2 (01:04):
I have a feeling that like avoiding getting fired is
a really big part of the story, Like you want
to do well right, you want to make money and
all that, but I also get the impression that you
just want to hang onto that seat for a really
long time, and that a big part of I don't
know if the game is the word. But a big
part of the game is yeah, holding onto that seat,
avoiding being part of any given call, Avoiding having your
(01:28):
name show up on Bloomberg in a story that gets
read spiked about so and so out after losing two
hundred and sixty million or whatever in the trade.
Speaker 3 (01:36):
This is exactly what I was wondering, like, how do
the drawdowns actually impact a bunch of pms. Is it
like really embarrassing and does it have like an actual
effect on their trading? I imagine it does, and it
must have an effect on their confidence as well. But
I am very interested in this subject, and we have
joked a number of times about, you know, if we
were at a multistrat hedge fund things like that. So
(01:58):
maybe we'll get a better idea.
Speaker 2 (02:00):
We definitely have to learn more about the pod level,
because I do get the pressure from talking to some people.
We talked to Running Cosgrave recently. It's like, oh, you
just put a bunch of people in a room and
if you have the risk management right, it kind of
works out. Anyway, We're going to continue our journey of
learning more about these big out.
Speaker 3 (02:14):
There's a natural affinity between podcasts and pod shops.
Speaker 2 (02:18):
Oh, it's pretty sad. God, wouldn't you hate it if,
like if we screwed up or like we had like
an episode that didn't do very well and our traffic
was down or something, and there was like a big
article on It's like Joey Tracy out after you know,
after one month of underperformance of the podcast.
Speaker 3 (02:32):
Oh yeah, Well, this is the other thing, Like what
happens if you outperform for like half the year and
then you underperform for the second half of the year,
And how is that actually calculated in terms of your comp.
Speaker 2 (02:43):
Totally And this came up before, which is that people
who have really good starts the fund at the fund level,
you don't want them taking off risk just to lock
in their annual bonuses. These are important questions. Anyway, let's
dive right into it. We have the perfect guest, someone
with a long track record and experience across many as
spects of this space. We're going to be speaking with
Brian Yelvington. He's currently a consultant for executive search firm
(03:05):
Carrington Fox, but he's been a former analyst in PM
at several large multi strat funds, Millennium or Capital et cetera,
A few others in there, and so up. Brian, thank
you so much for coming on odd lots.
Speaker 4 (03:18):
Thank you for having me. Great to be here. I
always enjoy the podcast and enjoy hearing the very subject
you guys come up with.
Speaker 2 (03:25):
Oh, thank you, we'd love to hear it. We're gonna
clip that and put it in the mix before we
go on, like why do you just give us the
real brief version of like who are you? And why
are we talking to you? Other than the fact that
if I go to your LinkedIn page there are a
bunch of famous companies listed on it.
Speaker 4 (03:39):
Yeah, probably a few too many for my taste, to
be honest, I've kind of been one of the few
people who've been both a pod PM as well as
kind of helped bring those people into a large multi strat.
I left the risk taking world and went to work
in the business development area. Business development is just to
badly disguise you from this for manager selection, although it
(04:02):
means very different things at very different firms. So I've
seen it both from junior analysts side to a senior
PM to the person who's the necessary, if not sufficient
gatekeeper at a hedge fund.
Speaker 3 (04:17):
I'm trying to think where to start because there's so
much for us to talk about. But if I'm a
PM and I am applying to a multi strat, what
would my CV or resume actually look like? And then
b would I even be applying to a multi strat?
Or would I be headhunted and they would find me?
Speaker 4 (04:35):
The chances are generally better that if you're an established PM,
you would probably come either through direct from the BD
team who said, we need somebody who represents the same
risk that Tracy represents. We hear she's great, We'd love
to speak to her, or through an executive search firm
(04:56):
who's there's a lot of turnover in this industry and
they do a lot of business as a result.
Speaker 2 (05:02):
So how do you know if someone is actually good?
Because this seems to be like one of the core
challenges in really all investing, right, like past results are
no guarantee of future returns. Everything always says that you
don't know what's just a lucky streak, et cetera. So
let's go through this process you want to establish if
someone is actually a good investor or trader or portfolio
(05:23):
manager or whatever. Walk us through the steps of like
how you actually would identify if Tracy is good at
her job exactly.
Speaker 4 (05:31):
Well, first to caveat, you're never going to know, Okay.
The reason that past performance is not indicative of future
returns is because it's the future and we never know
how somebody's going to act. So what I'm going to
do during our first conversation Tracy is I'm going to
ask sort of like you guys did a little bit
about your background. I'm going to be looking for things
(05:53):
like where we might know people in common, where you
might have worked through a really good group or something
like that that had a great reputation. And then we're
going to get into the nitty gritty of the conversation
where I asked you in great detail, you know, what
is your edge? That part's actually not too detailed. You
should be able to elucidate that sort of standing on
(06:14):
one foot. Then I'm going to go into wait.
Speaker 2 (06:17):
Yeah, can you pause, just give me if that's an
easy part, what is it? Because this is actually something
that I'm completely in the dark about. How does someone
go about articulating an edge in plan English during an interview?
Like what does that actually sound like? You say? Okay,
Like Brian, what's your edge. You used to trade fixed
income at where and where? Brian, what was your age?
Speaker 4 (06:37):
Well, I probably didn't have a very good one, but
my edge was usually from the research side. What I
will tell you is pms who are extremely good at
their jobs, have boiled down what their edge is to
a very well defined two or three sentence elevator pitch
style answer. And the reason that they're able to do
(06:57):
that is because this is something they've been doing a
long time, and they've made a huge number of mistakes,
and they know exactly the alpha that they want to identify,
are good at identifying and what they go after. So
it's going to sound different for everybody. For you know,
a macro RV type of fund, it may be that
they really anticipate the the shifts and monetary policy. For
(07:21):
a credit fund, it's that maybe they understand, you know,
corporate actions and they're really good at reading between the
lines of maybe even a specific niche of companies. So
it's going to differ, but you can usually tell by
someone's answer there how much they thought of it. The
bad answers tend to be something that relies on experience.
(07:42):
I'll note that there are too many octagenarian PMS or
something that relies on well, I'm just really good at this.
You kind of have to be able to identify it
to be good at it.
Speaker 3 (07:53):
So going back to performance metrics, like what figures or
numbers are actually available? Well, here, you know, does a
potential PM come bearing sharp ratios? And then how does
the potential hiring firm actually do due diligence on some
of those numbers.
Speaker 4 (08:11):
It's difficult. And the reality is that you know P
and L even within a firm as a BD person,
and again BD is very different from firm to firm.
But if I were to hire Tracy as PM.
Speaker 3 (08:26):
I'm regretted using myself as an example, by the way.
Speaker 4 (08:30):
No, we're going to have you do well, okay, right,
we'll flunk out somebody else. But if we were to
hire Tracy in some places, I might not even be
aware of how she's doing six months after we hired,
and others I would have kind of perfect inside p
and ls are extremely closely guarded secrets and usually they're
(08:50):
not discussed within the firm except for a very few
select group of people. And nobody's going to attest to
that P and L. Right, you of your own accord, Tracy,
might provide some assurance to somebody. Maybe it's because your
past cap or something. They can't ask, but you can
certainly say, hey, by the way, there's proof that I
(09:12):
did what I did. That's your priority.
Speaker 2 (09:15):
Wait why can't they ask?
Speaker 4 (09:16):
I believe that's the employment law. Yeah, you're allowed to ask.
It might not been designed to protect hedge fund pms,
but I believe it does cover them somewhat.
Speaker 2 (09:28):
Tracy, I've brought up a bunch of chodes. I told you.
I have talked about the time that I interviewed at
a prop trading firm, right many many times.
Speaker 3 (09:35):
Joe, Yes, are you going to tell the story again?
You can if you want.
Speaker 2 (09:39):
I'll just tell the brief one, which is that when
I was living in Austin, which you are, Brian, you're
there now, I interviewed at a prop trading firm when
I was right out of college. There were two hundred interviews,
and they asked me about my own trading when I
used to date trade on each trade by myself, and
I told them a little about my trades. They made
me play a video game to test my hand and
(10:00):
I coordination, and then they made me play ping pong
against the CEO. I'm not really sure what that was
all about, but then I was one of I was one.
I was one of four people who got to offer
the job, and then for some reason I didn't take it.
Speaker 3 (10:12):
Didn't you work at a sandwich shop?
Speaker 2 (10:14):
To the now, I'm making sandwiches at the Wheatsville food
co Op at the time, and all my friends were
working there. I was like, I don't really feel like
working the corporate life just yet. And everything worked out
and it was fine. That's still one of the stranger
times in my life. But it was kind of like
this where they asked me specifics. All right, here's a
more important question. It's great to say, like, if you're
a PM, then you show, but the first you got
to become a PM. What does an analyst do? So
(10:37):
so a PM has a pod and they have analysts
in their pod, what does an analyst actually do?
Speaker 4 (10:43):
Just as with the street, you know how they're analysts
and function and analysts and rank as you will, pods
will generally have analysts covering, you know, specific areas. Basically
at most firms, it's sort of a euphemism. If you
have trading authority you're either a trader, a SUBPM, or
a PM. If you do not have trading authority, but
(11:05):
you're still committing or contributing to investment decisions, you're an analyst.
It's just a generic catch all term. But you are
generally in charge of building the you know, specific type
of surveillance that the pod needs. You may have names
or industries or specific areas of a specific market to cover,
(11:25):
and you're being eyes and ears, and you will have
specific projects. Yeah, in our current environment, there's no no
shortage of things to test out and look into as
to how policies may change. So if you're in a macropod,
you're probably pretty busy right now.
Speaker 3 (11:40):
Presumably you don't have to make perfect PowerPoint presentations for
potential deals and things like that. It's much more idea
generation and I guess like back testing.
Speaker 4 (11:50):
There's you know there. Again, it kind of depends on
the type of pod that you're in. If you're in
a very directional macropod, you're probably looking for a lot
of historical analogs, you know, house pods, he responded in
the past. If you are in a more quantitatively oriented pod,
maybe something that does some form of arbitrage. He has
lots of back testing, lots of mathematical confetency. But it's
(12:13):
interesting who I've seen make the jump. I've seen a salesperson.
We basically just sent out a weekly commentary with a
model portfolio in it, and people loved it, and PM said, Hey,
we want to talk to this person. Who you go
talk to him? For US analysts public machine analysts. Joey
(12:34):
and I actually have a mutual friend that you've had
on the show before who was kind of writing for
a newsletter, and it was a newsletter. I can tell
you that most every PM I knew in macro was
reading and he built his audience on Twitter or X. Sorry,
that doesn't make a very good verb.
Speaker 3 (13:06):
All right? And then if I am running a pod shop,
what exactly am I looking for in terms of potential PM?
So I get probably past performance, even though as we discussed,
it's not a perfect indicator of future performance. But am
I looking at personality like would I hire a complete
(13:27):
jerk who happens to be a star trader because it
doesn't really matter how he works with other people because
he's going to be completely independent, Or would I be
looking at it very holistically and taking a sort of
moneyball approach where I'm trying to fill in or plug
specific gaps in my overall business with maybe players or
(13:48):
traders that are undervalued by the market.
Speaker 4 (13:51):
I think you're always trying to play the moneyball approach. However,
most puge funds differ a lot in how internally they communicate.
There are some hedge funds where you're really not allowed
to talk to people from other pods, Like I might
say something to you Tracy, like I like the market here,
I don't like it here, But I would never say,
(14:12):
you know, I'm shorting the two year versus the three year.
DBO one weighted something specific, and that's to avoid kind
of cross contamination of the pods. Whereas there are others
who really value the esprie de corps and they like
to have people collaborate and those places. Not only are
you going to have the typical meetings with BD and
(14:35):
risk and the CIO, but you're also going to meet
a lot of other pms to make sure that you
know you're not a jerk.
Speaker 2 (14:41):
Let's talk more about getting a job as an analyst.
There are probably a lot of people, maybe they're in
college listening to this episode right now. I think that
if I were young and in college and didn't have
any obligations, I would like, Oh, this sounds really fun
working for a multi strategy hedge funds. I would love
to get my door in one. What would be like?
(15:02):
What should I do to get that first role.
Speaker 4 (15:04):
There are a few firms that hire direct from college,
direct from university. Those are very very small programs. Normally,
there's only a few of them at scale. I would
say typically people who first move into a pod as
an analyst or perhaps a sub PM generally come from
the cell side or maybe prop but they generally have
(15:26):
spent a couple of years on the cell side, have
a lot of the great training that the street can provide,
and have advanced themselves to where they are saying, you know,
I no longer just want to make markets. I actually
want to trade my own risk.
Speaker 2 (15:40):
So you get a job on the cell side, and
you establish yourself as someone who knows something, who people
like reading from, and who people like reading their You
know their takes and their models and have interesting insights
to say about whatever asset classes is being traded.
Speaker 4 (15:54):
Either that or you have a business that actually would
work good on the buy side happens to be in
the cell side. But in terms of how you get
that first job, I would say, be useful. I think
that everybody is kind of concentrated on the you know,
I want to be coming up with the ideas that
go into the book, and you sort of grow into
that slowly. But if you're somebody who you know has
(16:18):
read the history or done the work or researched, you
know what happens when on the first bed cut, what
happens on the last what happened in the dollar the
last time we had tariffs. Those sorts of analogs in
the macro world are very good. If you understand restructurings,
you're probably going to be pretty valuable to high yield
or distress pod. You're not going to get that. You know,
(16:40):
I've got the con kind of job right away, So
you need to be useful in the job you're applying for.
Speaker 1 (16:47):
And then you.
Speaker 3 (16:48):
Kind of touched on this before, but I would love
to hear more what are the pools that multistraats are
actually drawing from and have those changed over time, Like
you know, when they first started popping up, were they
hiring from fund of funds? And the cell side, and
then as they progress, maybe get a little bit more
experimental and start diversifying into other industries to draw pms from.
Speaker 4 (17:13):
Yeah, I mean, for instance, we've seen a lot of
interesting commodities pms over the past few years, and a
lot of those are at trade houses, or perhaps they worn't.
For large boiling gas companies, a lot of which are
really more engineering than trading, they'll look anywhere if there's
sort of, you know, a definable edge. And we were
(17:33):
talking a little bit about the process of interviewing. Part
of what somebody is looking for is, you know, can
we do what you do? I'll give you an example.
Funds really want to expand their balance sheet and be
as efficient with it as possible. If we look at
gross notional exposure to net assets for multistrats, we hovered
around ten ten x through about twenty twenty, and since
(17:55):
then now we're between fourteen and sixteen and that's grossing
sets up as a multiple of their investible assets. So
that tells you they're looking for things that are a
little bit more highly leverageable. But any edge they will
look at. You know, fifteen years ago, no multistrap traded
munis most all of them do. Now, you know, there
(18:17):
were certain businesses like index rebounel, things of that nature
basis type trades that once were the exclusive province of
the street and now because in the ability of a
lot of these multi strats to effectively lose use their
balance sheet, they can engage in those businesses. Right.
Speaker 2 (18:37):
This is run of the themes that's come up as
the sort of like post dog frank era or a
lot of certain types of trades that used to exist
in house at the major banks are now have now
effectively been outsourced in some manner to buyside entities where
it's more appropriate to take these risks. Let's talk about
your time when you were a PM. We talked about
(18:57):
the value of the seat and not getting fired. And
I also get the impression that on a sort of
day to day or week to week or trade to
trade basis, there's a lot of constraints from the risk manager.
Talk about the incentives of the PM to survive and
make it to the next year and make it to
the next bonus season.
Speaker 4 (19:14):
I mean, you can essentially think of working for a
multistrat is you're running your own business. Okay, you're sort
of running your own fund. But you only have one client,
so you have to make very sure that that client's happy.
Your constraints are usually put in, you know, two terms.
You'll often hear the term capital thrown around. You know,
(19:35):
Tracy manages seven hundred million in XYZ and Joe has
fifty million in ABC, that sort of thing. The truth is,
those aren't really easily comparable numbers, right. The hedge fund
itself is inherently leveraged. They'll typically allocate somewhere between three
and four times their notional value, maybe even more in
(19:57):
terms of allocations to traders a billion dollars, you're allocating
out theoretically three or four billion. But there are two
numbers that are going to matter a lot to a PM.
The first one is how much can I lose? That's
your draw down, and there are two ways to measure that.
Most hedge funds are going to measure it on a
peak to trough basis, meaning even if you're up five,
(20:21):
if you give back suppose you're stopped is seven. If
you give back seven, then that's going to be your
draw down, even though you really weren't down from zero
much at all. The other way to measure that is
from zero from flat. So you can actually be fired
from one of these places and be up money on
the year. When it happens, you just gave back too
(20:41):
much of your sort of new money.
Speaker 2 (20:43):
So actually explain that further a why would you fire
someone who's managed money profitably? But then here's another related
question to that is, like you hear about, Okay, someone
gets fired from place X, and then they go get
a new job at place y. But if there objectively talented,
and maybe they're not, but if by some measure that
(21:04):
it can be established that they're talented, why are the
pods so quick to fire them? I mean, I get, yeah,
you lose money, that's not good. But if you know
losing money happens if the person has talent, why the
quick fires.
Speaker 4 (21:17):
It helps if you think of the multistraat itself as
managing a portfolio themselves, but it's a portfolio of risk takers.
Not to be reductive, but generally most of those types
of decisions are made on a fund by fund basis.
In other words, you know, maybe this person is not
as uncorrelated to what we have as we already thought.
(21:38):
They are not really making a lot of money. They
just exceeded their draw down, because it's not like they
don't know that it's a picatrough number. They're perfectly aware
of it. Or perhaps there's another opportunity in the market
to replace them with someone better. They're always looking to
optimize their portfolio of risk takers as far as the
other firm. They could be thinking, this person does fit
(22:01):
what we need and we really like their risk profile.
Even a really great PM is going to have a
significant draw down every two to five years, and there
aren't too many who've gone ten plus years with no
losing gears. You know, you just don't want to be
that person who experiences that five percent of the time
broad down in your first few months. And a new thought.
Speaker 3 (22:23):
I used to know a credit guy who always said, like,
you're not a proper credit trader until you've had at
least one major blow up. Maybe maybe that's true. But
on this note, Okay, if I get a big draw down,
I understand maybe it depends on where I am with
my career, and if I get it in the first
six months of working at a shop, that would be
(22:44):
very bad. But if it's in you know, year six
or something, maybe it doesn't matter so much, But how
embarrassed am I when that happens? And am I like
publicly shamed within the organization for this happening? Or how
does it work exactly?
Speaker 4 (23:01):
You know, it's sort of funny because obviously we had
a period just a few months back where there were
a lot of headlines about large losses. Is the marketplace
views it, it's going to feel awful to the PM, right,
you never want to be on the screen for a loss.
But whenever you see somebody up there with one hundred
million dollar loss, that means they had one hundred million
(23:22):
to lose, which means that they were managing a large
book and they were taking a lot of risk. And
if you'll notice, some of those pms from a few
months ago are still exactly where they were. You are
really generally better off getting bounced for a large loss
than you are a small one.
Speaker 2 (23:41):
This goes fits with something one of my beliefs that
a billionaire is someone who either has positive one billion
dollars in net worth or negative one billion in one
billion in debt, because you have to be like really
rich to have lost that much money. And anytime you
hear about like a former billionaire and they lost everything.
They're almost all as still somehow living large. So being
(24:02):
deeply deeply in debt is almost as good as having
tons of money. So I'm glad to hear this. How
does that constrain your actual trading? Okay, you know that
draw down number, you know at the point we're going
to get stopped out of the seat, How does that
actually translate into thinking about the trades that you put on?
Speaker 4 (24:20):
I hate to do And it depends, But it sort
of depends on where you're at. Because even though common
draw down for limits are usually somewhere between seven and
ten percent for what's called a stop out, you might
end up getting your capital reduced well before that at
three and a half or five, and that makes it
really really hard to come back. The key is, you know,
(24:42):
do you have a process, do you have risk management
and portfolio construction where you are still applying your risk management.
I'm only going to risk as much my risk capital.
What is between me and a capital reduction or draw down?
I'm going to be pick here. I'm going to trade smaller.
There are a lot of funds that have you know,
internal coaches, psychologists like it's windy Rhodes is based on
(25:07):
real people who do real things. And you know, certain
firms will sit you down and talk to you, or
they'll make you take a time out. Other firms will
just say that's it, you're out. But psychologically it makes
you you want to get it back, which is not
a great feeling because even when you get there, you're
just at flat and it really impacts your risk taking tolerance.
(25:31):
I think one of the best things that you know,
I ever heard was if you're kind of in a
losing street, just get flat and go away. Don't keep
any marginal things. You can always buy it back later.
You can always sell it later. But get your mind right.
But it does negatively affect you and you kind of
stew your thinking either to I'm going to take more
(25:51):
bets to get it back faster, or I'm not going
to do anything because I'm going to be so picky.
Overtrading is really common. I'll give you a for example. Well,
people coming from the cell side almost always overtrade when
they first get to the buyside. The reason is trading
has a positive expected value for them. They are in
the bid ask. Not only that, but facilitation desk on
(26:13):
the cell side. They lose money if VALL explodes, but
they generally make a lot of more money after it subsides.
The bid ask widens out and they could collect a
lot of clients flow in the back end of that.
One of the questions that I always ask people is,
you know, tell me about your biggest draw down. What
did happen, When was it, what was going on? What happened?
(26:34):
Would you do? And the sell side traders will always
have very quick times to recovery, and they expected to
get it back, but that's not the positive expected value
you have on the buy side. It costs your money
to trade.
Speaker 3 (27:02):
Brian, tell me about your biggest draw down and what
it was and what you did well.
Speaker 4 (27:07):
My biggest drug I was losing my job. I can't
name numbers, but essentially I violated my own risk. I
usually never speculated on outright vault, and I had a
long VALL position, and I normally would have structured that
as a spread, and I didn't. And though I was
directionally right, I bought really expensive wall and therefore didn't
(27:31):
make much money. Got hit on volatility in a much
larger fashion than I thought I would, And I was
in that camp of not a big draw down, and
it was almost unreal to people that I knew, Like,
why would they let you go? Because there's not a
lot of verifiable information out there. That always sounds very
suspect to people. I wish I could be more colorful
(27:54):
for that.
Speaker 3 (27:54):
No, no, no, then that's really helpful. But on this note,
I'm also curious. Do pms ever go to like risk
managers or the people above them and beg for like
either more money or more risk tolerance.
Speaker 4 (28:09):
Oh? Absolutely, And a lot of firms actually have, you know,
programs where if you have something that's really scalable that
you think is very functional, they may give you sort
of a side account and you get paid on that,
but it's not part of your regular book. Once you
work in BD, a lot of the people who you
bring in sort of ask you questions like, Hey, I
(28:30):
want to do this, Who should I ask? When should
I ask? I generally tell pms, unless it's an actual
trade idea, don't just ask for more capital unless it's
one of two situations. Number One, you just got there
because they love you, you haven't done anything wrong, and
they just probably paid up to get you. Number Two,
you've just made a hundred million bucks. Other than those
(28:50):
two situations, don't ask for things.
Speaker 2 (28:53):
Wait, let's learn more about violating your own risk book.
There's a famous story from Stan Druckenmiller. He apparently like
bought the very top of the internet bubble, and he says,
you asked me what I learned. I didn't learn anything.
I already knew that I wasn't supposed to do that.
I was just an emotional basket case and couldn't help myself.
So maybe I learned not to do it again, but
(29:13):
I already knew that. When a fund manager is sort
of like violate or a PM is violating some of
their own things, do they know it? Do they feel differently?
Do they get like some sort of acidic taste in
their mouth? When I like go on tilt when I
play poker, I always sort of know it, but I
can't help myself anyway. Like I just do it and
I go all in and I know I hadn't then
I have to embarrassingly walk out of the table. Like
(29:35):
what does that feel like? Talk about like what's going
on in someone's brain when they're like taking these risks
that on paper they shouldn't be.
Speaker 4 (29:42):
Well, usually you only recognize in the rear view. If
you slow down and think through the trade, you know,
you sort of realize that, hey, you probably shouldn't do this.
But I think you're parallel with being on tilt at
a poker table. It's it's that knowledge, you know, as
can you call somebody or after you raise that instant
feeling that man, I just leaped up. It's that feeling,
(30:04):
only you're going to feel it for a few days,
and you're going to get a little email or call
from your risk manager, and then you're not going to
know what that sit down is going to be like.
It might be, Hey, no big deal, get back out there,
you know, don't worry about it. It may be an
entirely different conversation. You may be told to go to
HR don't take your jacket, or take your jacket, I
(30:26):
should say. But it isn't a bad feeling. And I
think some of the better mentors that I've had through
the years have kind of taught me like that mental
health thing and where you're at is very important. And
I think it's even worse when you're at a multistraat
or a situation where you have a single plot that's
it if that one client isn't happy, you are probably
(30:50):
out for at least six months and potentially much longer.
The BD process to bring a new PM on board
is somewhere around three months on its own.
Speaker 2 (31:00):
Do you do post mortems on winning and losing trades?
Speaker 3 (31:03):
Kind of?
Speaker 2 (31:03):
You know, like after I forget talk about poker, you
go back and you run the poker hand through a
solver and you see if you played it correctly, often
whether you made money or lose money. Is there an
equivalent process that's done in the trading world.
Speaker 4 (31:17):
N hundred percent. As a matter of fact, if you
guys have never had Brent Donnelly on, he wrote a
book called Alfit Trader, and I've probably never seen that
information written down in one place before.
Speaker 2 (31:27):
But right, yeah, we should have them back on or
something to talk about just now, but keep tell us
more about it from your perspective, Yes.
Speaker 4 (31:33):
You know, and that is part of the other process,
like we mentioned edge, like the other parts of the
beating process that I want to know the process by
which somebody selects trades. I want to know about their
portfolio construction, and I want to know their approach to risk,
Especially on risk, you'll find that very good pms, and
especially these firms, the firms themselves, even though the PM
(31:56):
may not see it, they know exactly how many bets
you've taken. They know about your hit rate, they understand
your skew. They can sort of tell when you're deviating
from your wrist mandate. They have a lot of analytics.
But it's been my experience that the best pms look
at it themselves. They're almost religious with it. You know,
how did I do today? It's very similar to an
(32:16):
athlete watching tape or a dancer. My daughters loves dance.
You know, she'll watch tape of herselves. This is what
I missed, this is what I didn't do. And the
great benefit of doing it in a statistical fashion is
you can remove, oh, I won't count that because it
was a Tuesday and a full moon. Any excuse you
have goes out the window. Those are the numbers on
(32:37):
this note.
Speaker 3 (32:38):
And since Joe brought up poker earlier, are there like
popular ways to become a better better better? Does that
work for all?
Speaker 2 (32:48):
Better?
Speaker 3 (32:49):
A better better better? And I'm thinking, you know, I'm
thinking back to Liar's Poker. That's a famous example. And
then wasn't there something at Jane Street that Sam Bankman
Freed was doing a bunch of different like gambling games
things like that.
Speaker 4 (33:03):
Yeah.
Speaker 3 (33:04):
Like what is popular in terms of I guess building
up your risk returnals.
Speaker 4 (33:10):
Well, I think anything where you have some element of strategy,
And I think one of the reasons that poker is
so popular is that it combines not only strict strategy
like you might see in chess, but also a fair
degree of complete randomness and you're going to take some
bad beats and that's going to happen in trading. It's
(33:30):
easy to forget, but a really good PM might have
a fifty two fifty three percent hit rate on their trades.
It becomes what their skew is how much they make
on their winners versus how much they lose on their losers.
So anything where you're actually becoming more in tune to
your own risk taking, your ability to think in what
most people call probabilistic terms, or thinking in bets after
(33:53):
they any Duke book, any exercise like that, and I
think poker is probably just the most popular. It's also
a great fun I don't know whether i'd say team
building game, but it's a fun social game that people
play often around hedge funds, and it fits with the
gambling mentality, so we hear about it a lot, but
there are a lot of different internal games that people
(34:14):
engage in.
Speaker 2 (34:15):
I just have one last question, and it goes back
to the role of the analyst, and you mentioned, oh,
maybe you know, an analyst could be valuable if they
really know the history of what happens, if they're X
or Y. I can just look that up on three
on chagbtr perplexity these days, like, how realistic is it
in your view that firms could meaningfully reduce analyst headcount
(34:38):
by using artificial intelligence, or if they save money on
by using artificial intelligence, would that just create new roles
for more sort of advanced research. Where are we at
with this? You must talk to people about what they're
doing with this.
Speaker 4 (34:52):
I think there's lots of things they can do. And obviously,
you know you're talking about pret secretive organizations, so there's
an enterprise sharing issue there to deal with. But yeah,
a lot of things could be really computerized. But you're
also looking for people who are going to be able
to tie the story and the narrative and with what
(35:13):
was going on with the instruments, and it's probably not
something so simple as you know, what did the dollar
in do the last time the FED hiked? It might
be something more like what was a red screens puts
foot steepener doing the last time the FED hiked, which
you're going to require a lot of modifications to those
AI models. I'm always hesitant to talk about this because
(35:36):
I can remember we were told that all the paper
companies were going to go out of business because everybody
was going to read everything online. And what happened. We
just all printed it.
Speaker 2 (35:44):
Oh, yeah, that's true. And they and they a lot
of them also sell cardboard boxes and so they benefited
from e commerce. Those same companies actually absolutely.
Speaker 4 (35:53):
Georgia Pacific is probably huge in Amazon's warehouse. But I
think that there will always people who because this industry
thrives on you know, I can do this even though
the odds are very much against me, and they will
definitely use any edge they can get informationally as far
as analytics or anything like that. But usually there's something
(36:16):
that you're going to have to ask that maybe not
everybody understands or nos. I think everybody who's in this
business got into it in one way or another, and
somebody handed them what I just generically call, you know,
street born, which is the market Wizard's books or any
of those types of things, and they're fantastic because what
I got out of reading those types of books is
(36:37):
there's a lot of different ways to make money. You
just have to find out what you're good at and
how you can apply your particular set of skills and
attributes to doing it. And I think that there's going
to be somebody who gets really good at asking you
one of these am models market questions, and that person
who's going to get built up. We're already seeing increase
(36:58):
for heads of AI at several different funds, and I
think that that's going to continue as they explore more
and more, you know, what they can actually do with it.
They have no problem spending money on the either the
AI or the human being. It will ultimately come up
to who can perform.
Speaker 3 (37:14):
So how do you avoid I guess group think among
your pms, because the whole point of multistrats is those
uncorrelated returns, and you don't want everyone just putting on
the same trades, either literally or maybe through another angle.
And I'm thinking specifically about journalism. So some newspapers used
(37:36):
to always move reporters from a certain beat after they'd
been there for like ten years or something, and the
idea was just to shake it up a little bit
and make sure that they're not getting like too cozy
or too comfortable with that particular industry. The downside of
doing that, of course, is that you lose expertise. But
I'm just wondering, like, how do people, yeah, how do
(37:58):
people avoid that group think aspect and make sure that
everyone's doing you know, new stuff kind of independently.
Speaker 4 (38:05):
Well. One way is limiting the communication between the pods.
Some places do not really allow their pods to communicate.
Another way is basically structurally, you don't want to see
people hang on to each other's trades. You're going to
be looking at this from you know, a macro view
within the firm. You're going to see this type of
(38:27):
trade that this person had on is increasing in size
in the firm. But by and large, if you've fired right,
you're going to hire independent thinkers, and a seasoned PM
will tell you I might like somebody else's idea, but
I can't really trade it properly unless it's my idea too,
I kind of have to adopt that as my own.
(38:47):
So group think is not as prevalent as you would
think because it's structurally prohibited in some places and the
places where it's not. You know, a seasoned PM is
like any I may love that trade that you pitched me, Joe,
but yours and I can't. I'm not doing my job
if I say, Joe, when are we getting out of this?
That's not what I'm paid to do. So part of
(39:08):
it is on the part of the PM internally, and
then the other part of it is on the fact
that they don't want to be seen as copying the
p next guy's trades.
Speaker 2 (39:15):
All right, but just real quickly, maybe you don't want
to do groupthink or copy the next guy's trades. But
if there's a hot beta, right, you're always looking for alpha.
But if there's a hot beta like AI beta or whatever,
or falling inflation beta like some of these long term trends,
but that's not your thing. Do pms find ways to
backdoor their acid class into the hot trade in a
(39:36):
way that like may the fact to become trade crowding.
Speaker 4 (39:40):
Yeah. A former boss of mine used to say, there's
never been a risk management framework the smart trader could outwit.
Speaker 2 (39:48):
That's what I'm wondering. That's like, is it this cat
and mouse game where you're, in part trying to outwit
the person who could tap you on the shoulder by
trading something that looks like something else.
Speaker 4 (39:56):
Yeah, there's a lot of downside to doing that, you know,
if you don't have a trade kind of properly thought out.
But you know, in general, if I hire one of
you to trade credit and the other one to trade
the front end of the yield curve, and you know,
all of a sudden, Brazil is very hot the real
and you're both asking me for limits on the real Like,
(40:19):
you won't have limits in something that you don't already trade,
so you can't really deviate for your mandate too much.
Speaker 2 (40:27):
It's kind of a I'll just find a credit spread
that's correlated with the rail yeah.
Speaker 4 (40:32):
Or you know, there are a lot of ETFs that
basically contain macro trades if you will, and I have
often wondered, you know, are those there so that mutual
fund managers can you know, and investigate equities, can speculate
on the yield curve. But there are always ways to
do it. You just have to kind of hire the
right people who aren't necessarily going to do that. And
(40:54):
if you get in trouble for something like that, I
sort of like to say that this is the second
most waryuristic streight in America. Word gets out is large
of an industry, it is, it's not that big in
an individual areas. And if somebody has really done something untoward,
then it's people are going to hear about it.
Speaker 2 (41:13):
Brian Yelvington, thank you for coming on odd Lots and
talking about getting and keeping multistraat jobs. Our journey continues.
Thank you so much. Really appreciate chatting with you.
Speaker 4 (41:24):
Thank you, thank you for having me. It's great to
get to talk to you guys.
Speaker 2 (41:39):
Tracy, if I were like young, I think I or
if I were in college or something, I think I
would have taken that trading job.
Speaker 4 (41:45):
Now.
Speaker 2 (41:45):
I mean, I like the way my direction, life direction went.
But if I wanted to do over, I'm curious what
that fork in the road looks like.
Speaker 3 (41:51):
There'ought Yeah, that's so sad will.
Speaker 2 (41:54):
Be a different puck, you know, Like I feel like
I would I would trade you know what happened, there
would still be an odd one. I would trade for
a while, I would blow up. I would get a
job in journalism, and then I would be one of
those journalists who reminds all of their colleagues all of
the times that they used work and finance. You know,
I would find like the person on the call, they're like,
(42:15):
I just love the you know, It's like I was like, oh,
I used to work in a multi strategy hedge fun. Yeah, yeah, yeah, yeah,
well I used to be a trader. Anyway.
Speaker 3 (42:21):
Sorry, keep going, Joe, how many times have you brought
up that interview with the trading company on this note?
Speaker 4 (42:27):
Yeah?
Speaker 3 (42:27):
Okay, that was really interesting. One thing that kind of
jumps out at me is the last discussion about you know,
how do you avoid everyone just taking on the same risk.
It really seems to me like it's correlation built on correlation,
built on correlation, right, And I often think correlation is
(42:47):
one of the hardest things to actually nail down on
Wall Street. So you know, you gotta wonder so far,
so far, you know, a bunch of multistrats survived April
pretty well, so I guess we'll see.
Speaker 2 (43:02):
I think if I were a risk manager and I
had one person trading credit and the other person trading
the short end of the old curve, and suddenly there
are month to month return started looking identical, and it
happened to be identical with the person who traded Brazilian rayal.
That would set off a red flag for me. You know, like,
I feel like the return profile itself is probably part
(43:26):
of the hint, right that even if you can't really
articulate why this person's traded is secretly this person's trade
in disguise. If there re tuned profile looks too similar,
that probably sets off some red flags.
Speaker 3 (43:39):
We got to talk to a risk manager, don't Yeah,
we should do that.
Speaker 2 (43:43):
Okay, if you're a risk manager, you want to talk
about what that job is like or if you know,
one shoots a message.
Speaker 3 (43:50):
All right, shall we leave it there.
Speaker 2 (43:51):
Let's leave it there.
Speaker 3 (43:52):
This has been another episode of the All Thoughts Podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (43:57):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our producers Carmen Rodriguez at Carman Arman dash Ol
Bennett at Dashbot and Kilbrooks at Kilbrooks. From our Odd
Lots content go to Bloomberg dot com slash od lots
were the daily newsletter and all of our episodes, and
you can chat about all of these topics twenty four
to seven in our discord Discord dot gg slash od lots.
Speaker 3 (44:18):
And if you enjoy odd Lots, if you like our
ongoing exploration of multistrap funds, then please leave us a
positive review on your favorite podcast platform. And remember, if
you are a Bloomberg subscriber, you can listen to all
of our episodes absolutely ad free. All you need to
do is find the Bloomberg channel on Apple Podcasts and
follow the instructions there. Thanks for listening, then, in the
(45:05):
e
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
I'm Jill Wisenthal and I'm Tracy Alloway. Tracy, there's a
lot we've discussed about multi strategy hedge funds, but there's
still a lot we don't know. And specifically, although I've
come to learn things about comp and alignment and the
importance of risk management and risk models and all that stuff,
(00:39):
I actually don't know, like how how the pods make
good trade.
Speaker 3 (00:45):
This is part two hundred and ninety eight of our
attempt to understand multi strat hedge funds.
Speaker 2 (00:50):
That's what it is.
Speaker 3 (00:51):
But you're right, we haven't really looked at it from
the I guess the perspective of a PM who is
actually working there, and what it takes to get hot fired,
what it takes to avoid getting fired, and things like that.
Speaker 2 (01:04):
I have a feeling that like avoiding getting fired is
a really big part of the story, Like you want
to do well right, you want to make money and
all that, but I also get the impression that you
just want to hang onto that seat for a really
long time, and that a big part of I don't
know if the game is the word. But a big
part of the game is yeah, holding onto that seat,
avoiding being part of any given call, Avoiding having your
(01:28):
name show up on Bloomberg in a story that gets
read spiked about so and so out after losing two
hundred and sixty million or whatever in the trade.
Speaker 3 (01:36):
This is exactly what I was wondering, like, how do
the drawdowns actually impact a bunch of pms. Is it
like really embarrassing and does it have like an actual
effect on their trading? I imagine it does, and it
must have an effect on their confidence as well. But
I am very interested in this subject, and we have
joked a number of times about, you know, if we
were at a multistrat hedge fund things like that. So
(01:58):
maybe we'll get a better idea.
Speaker 2 (02:00):
We definitely have to learn more about the pod level,
because I do get the pressure from talking to some people.
We talked to Running Cosgrave recently. It's like, oh, you
just put a bunch of people in a room and
if you have the risk management right, it kind of
works out. Anyway, We're going to continue our journey of
learning more about these big out.
Speaker 3 (02:14):
There's a natural affinity between podcasts and pod shops.
Speaker 2 (02:18):
Oh, it's pretty sad. God, wouldn't you hate it if,
like if we screwed up or like we had like
an episode that didn't do very well and our traffic
was down or something, and there was like a big
article on It's like Joey Tracy out after you know,
after one month of underperformance of the podcast.
Speaker 3 (02:32):
Oh yeah, Well, this is the other thing, Like what
happens if you outperform for like half the year and
then you underperform for the second half of the year,
And how is that actually calculated in terms of your comp.
Speaker 2 (02:43):
Totally And this came up before, which is that people
who have really good starts the fund at the fund level,
you don't want them taking off risk just to lock
in their annual bonuses. These are important questions. Anyway, let's
dive right into it. We have the perfect guest, someone
with a long track record and experience across many as
spects of this space. We're going to be speaking with
Brian Yelvington. He's currently a consultant for executive search firm
(03:05):
Carrington Fox, but he's been a former analyst in PM
at several large multi strat funds, Millennium or Capital et cetera,
A few others in there, and so up. Brian, thank
you so much for coming on odd lots.
Speaker 4 (03:18):
Thank you for having me. Great to be here. I
always enjoy the podcast and enjoy hearing the very subject
you guys come up with.
Speaker 2 (03:25):
Oh, thank you, we'd love to hear it. We're gonna
clip that and put it in the mix before we
go on, like why do you just give us the
real brief version of like who are you? And why
are we talking to you? Other than the fact that
if I go to your LinkedIn page there are a
bunch of famous companies listed on it.
Speaker 4 (03:39):
Yeah, probably a few too many for my taste, to
be honest, I've kind of been one of the few
people who've been both a pod PM as well as
kind of helped bring those people into a large multi strat.
I left the risk taking world and went to work
in the business development area. Business development is just to
badly disguise you from this for manager selection, although it
(04:02):
means very different things at very different firms. So I've
seen it both from junior analysts side to a senior
PM to the person who's the necessary, if not sufficient
gatekeeper at a hedge fund.
Speaker 3 (04:17):
I'm trying to think where to start because there's so
much for us to talk about. But if I'm a
PM and I am applying to a multi strat, what
would my CV or resume actually look like? And then
b would I even be applying to a multi strat?
Or would I be headhunted and they would find me?
Speaker 4 (04:35):
The chances are generally better that if you're an established PM,
you would probably come either through direct from the BD
team who said, we need somebody who represents the same
risk that Tracy represents. We hear she's great, We'd love
to speak to her, or through an executive search firm
(04:56):
who's there's a lot of turnover in this industry and
they do a lot of business as a result.
Speaker 2 (05:02):
So how do you know if someone is actually good?
Because this seems to be like one of the core
challenges in really all investing, right, like past results are
no guarantee of future returns. Everything always says that you
don't know what's just a lucky streak, et cetera. So
let's go through this process you want to establish if
someone is actually a good investor or trader or portfolio
(05:23):
manager or whatever. Walk us through the steps of like
how you actually would identify if Tracy is good at
her job exactly.
Speaker 4 (05:31):
Well, first to caveat, you're never going to know, Okay.
The reason that past performance is not indicative of future
returns is because it's the future and we never know
how somebody's going to act. So what I'm going to
do during our first conversation Tracy is I'm going to
ask sort of like you guys did a little bit
about your background. I'm going to be looking for things
(05:53):
like where we might know people in common, where you
might have worked through a really good group or something
like that that had a great reputation. And then we're
going to get into the nitty gritty of the conversation
where I asked you in great detail, you know, what
is your edge? That part's actually not too detailed. You
should be able to elucidate that sort of standing on
(06:14):
one foot. Then I'm going to go into wait.
Speaker 2 (06:17):
Yeah, can you pause, just give me if that's an
easy part, what is it? Because this is actually something
that I'm completely in the dark about. How does someone
go about articulating an edge in plan English during an interview?
Like what does that actually sound like? You say? Okay,
Like Brian, what's your edge. You used to trade fixed
income at where and where? Brian, what was your age?
Speaker 4 (06:37):
Well, I probably didn't have a very good one, but
my edge was usually from the research side. What I
will tell you is pms who are extremely good at
their jobs, have boiled down what their edge is to
a very well defined two or three sentence elevator pitch
style answer. And the reason that they're able to do
(06:57):
that is because this is something they've been doing a
long time, and they've made a huge number of mistakes,
and they know exactly the alpha that they want to identify,
are good at identifying and what they go after. So
it's going to sound different for everybody. For you know,
a macro RV type of fund, it may be that
they really anticipate the the shifts and monetary policy. For
(07:21):
a credit fund, it's that maybe they understand, you know,
corporate actions and they're really good at reading between the
lines of maybe even a specific niche of companies. So
it's going to differ, but you can usually tell by
someone's answer there how much they thought of it. The
bad answers tend to be something that relies on experience.
(07:42):
I'll note that there are too many octagenarian PMS or
something that relies on well, I'm just really good at this.
You kind of have to be able to identify it
to be good at it.
Speaker 3 (07:53):
So going back to performance metrics, like what figures or
numbers are actually available? Well, here, you know, does a
potential PM come bearing sharp ratios? And then how does
the potential hiring firm actually do due diligence on some
of those numbers.
Speaker 4 (08:11):
It's difficult. And the reality is that you know P
and L even within a firm as a BD person,
and again BD is very different from firm to firm.
But if I were to hire Tracy as PM.
Speaker 3 (08:26):
I'm regretted using myself as an example, by the way.
Speaker 4 (08:30):
No, we're going to have you do well, okay, right,
we'll flunk out somebody else. But if we were to
hire Tracy in some places, I might not even be
aware of how she's doing six months after we hired,
and others I would have kind of perfect inside p
and ls are extremely closely guarded secrets and usually they're
(08:50):
not discussed within the firm except for a very few
select group of people. And nobody's going to attest to
that P and L. Right, you of your own accord, Tracy,
might provide some assurance to somebody. Maybe it's because your
past cap or something. They can't ask, but you can
certainly say, hey, by the way, there's proof that I
(09:12):
did what I did. That's your priority.
Speaker 2 (09:15):
Wait why can't they ask?
Speaker 4 (09:16):
I believe that's the employment law. Yeah, you're allowed to ask.
It might not been designed to protect hedge fund pms,
but I believe it does cover them somewhat.
Speaker 2 (09:28):
Tracy, I've brought up a bunch of chodes. I told you.
I have talked about the time that I interviewed at
a prop trading firm, right many many times.
Speaker 3 (09:35):
Joe, Yes, are you going to tell the story again?
You can if you want.
Speaker 2 (09:39):
I'll just tell the brief one, which is that when
I was living in Austin, which you are, Brian, you're
there now, I interviewed at a prop trading firm when
I was right out of college. There were two hundred interviews,
and they asked me about my own trading when I
used to date trade on each trade by myself, and
I told them a little about my trades. They made
me play a video game to test my hand and
(10:00):
I coordination, and then they made me play ping pong
against the CEO. I'm not really sure what that was
all about, but then I was one of I was one.
I was one of four people who got to offer
the job, and then for some reason I didn't take it.
Speaker 3 (10:12):
Didn't you work at a sandwich shop?
Speaker 2 (10:14):
To the now, I'm making sandwiches at the Wheatsville food
co Op at the time, and all my friends were
working there. I was like, I don't really feel like
working the corporate life just yet. And everything worked out
and it was fine. That's still one of the stranger
times in my life. But it was kind of like
this where they asked me specifics. All right, here's a
more important question. It's great to say, like, if you're
a PM, then you show, but the first you got
to become a PM. What does an analyst do? So
(10:37):
so a PM has a pod and they have analysts
in their pod, what does an analyst actually do?
Speaker 4 (10:43):
Just as with the street, you know how they're analysts
and function and analysts and rank as you will, pods
will generally have analysts covering, you know, specific areas. Basically
at most firms, it's sort of a euphemism. If you
have trading authority you're either a trader, a SUBPM, or
a PM. If you do not have trading authority, but
(11:05):
you're still committing or contributing to investment decisions, you're an analyst.
It's just a generic catch all term. But you are
generally in charge of building the you know, specific type
of surveillance that the pod needs. You may have names
or industries or specific areas of a specific market to cover,
(11:25):
and you're being eyes and ears, and you will have
specific projects. Yeah, in our current environment, there's no no
shortage of things to test out and look into as
to how policies may change. So if you're in a macropod,
you're probably pretty busy right now.
Speaker 3 (11:40):
Presumably you don't have to make perfect PowerPoint presentations for
potential deals and things like that. It's much more idea
generation and I guess like back testing.
Speaker 4 (11:50):
There's you know there. Again, it kind of depends on
the type of pod that you're in. If you're in
a very directional macropod, you're probably looking for a lot
of historical analogs, you know, house pods, he responded in
the past. If you are in a more quantitatively oriented pod,
maybe something that does some form of arbitrage. He has
lots of back testing, lots of mathematical confetency. But it's
(12:13):
interesting who I've seen make the jump. I've seen a salesperson.
We basically just sent out a weekly commentary with a
model portfolio in it, and people loved it, and PM said, Hey,
we want to talk to this person. Who you go
talk to him? For US analysts public machine analysts. Joey
(12:34):
and I actually have a mutual friend that you've had
on the show before who was kind of writing for
a newsletter, and it was a newsletter. I can tell
you that most every PM I knew in macro was
reading and he built his audience on Twitter or X. Sorry,
that doesn't make a very good verb.
Speaker 3 (13:06):
All right? And then if I am running a pod shop,
what exactly am I looking for in terms of potential PM?
So I get probably past performance, even though as we discussed,
it's not a perfect indicator of future performance. But am
I looking at personality like would I hire a complete
(13:27):
jerk who happens to be a star trader because it
doesn't really matter how he works with other people because
he's going to be completely independent, Or would I be
looking at it very holistically and taking a sort of
moneyball approach where I'm trying to fill in or plug
specific gaps in my overall business with maybe players or
(13:48):
traders that are undervalued by the market.
Speaker 4 (13:51):
I think you're always trying to play the moneyball approach. However,
most puge funds differ a lot in how internally they communicate.
There are some hedge funds where you're really not allowed
to talk to people from other pods, Like I might
say something to you Tracy, like I like the market here,
I don't like it here, But I would never say,
(14:12):
you know, I'm shorting the two year versus the three year.
DBO one weighted something specific, and that's to avoid kind
of cross contamination of the pods. Whereas there are others
who really value the esprie de corps and they like
to have people collaborate and those places. Not only are
you going to have the typical meetings with BD and
(14:35):
risk and the CIO, but you're also going to meet
a lot of other pms to make sure that you
know you're not a jerk.
Speaker 2 (14:41):
Let's talk more about getting a job as an analyst.
There are probably a lot of people, maybe they're in
college listening to this episode right now. I think that
if I were young and in college and didn't have
any obligations, I would like, Oh, this sounds really fun
working for a multi strategy hedge funds. I would love
to get my door in one. What would be like?
(15:02):
What should I do to get that first role.
Speaker 4 (15:04):
There are a few firms that hire direct from college,
direct from university. Those are very very small programs. Normally,
there's only a few of them at scale. I would
say typically people who first move into a pod as
an analyst or perhaps a sub PM generally come from
the cell side or maybe prop but they generally have
(15:26):
spent a couple of years on the cell side, have
a lot of the great training that the street can provide,
and have advanced themselves to where they are saying, you know,
I no longer just want to make markets. I actually
want to trade my own risk.
Speaker 2 (15:40):
So you get a job on the cell side, and
you establish yourself as someone who knows something, who people
like reading from, and who people like reading their You
know their takes and their models and have interesting insights
to say about whatever asset classes is being traded.
Speaker 4 (15:54):
Either that or you have a business that actually would
work good on the buy side happens to be in
the cell side. But in terms of how you get
that first job, I would say, be useful. I think
that everybody is kind of concentrated on the you know,
I want to be coming up with the ideas that
go into the book, and you sort of grow into
that slowly. But if you're somebody who you know has
(16:18):
read the history or done the work or researched, you
know what happens when on the first bed cut, what
happens on the last what happened in the dollar the
last time we had tariffs. Those sorts of analogs in
the macro world are very good. If you understand restructurings,
you're probably going to be pretty valuable to high yield
or distress pod. You're not going to get that. You know,
(16:40):
I've got the con kind of job right away, So
you need to be useful in the job you're applying for.
Speaker 1 (16:47):
And then you.
Speaker 3 (16:48):
Kind of touched on this before, but I would love
to hear more what are the pools that multistraats are
actually drawing from and have those changed over time, Like
you know, when they first started popping up, were they
hiring from fund of funds? And the cell side, and
then as they progress, maybe get a little bit more
experimental and start diversifying into other industries to draw pms from.
Speaker 4 (17:13):
Yeah, I mean, for instance, we've seen a lot of
interesting commodities pms over the past few years, and a
lot of those are at trade houses, or perhaps they worn't.
For large boiling gas companies, a lot of which are
really more engineering than trading, they'll look anywhere if there's
sort of, you know, a definable edge. And we were
(17:33):
talking a little bit about the process of interviewing. Part
of what somebody is looking for is, you know, can
we do what you do? I'll give you an example.
Funds really want to expand their balance sheet and be
as efficient with it as possible. If we look at
gross notional exposure to net assets for multistrats, we hovered
around ten ten x through about twenty twenty, and since
(17:55):
then now we're between fourteen and sixteen and that's grossing
sets up as a multiple of their investible assets. So
that tells you they're looking for things that are a
little bit more highly leverageable. But any edge they will
look at. You know, fifteen years ago, no multistrap traded
munis most all of them do. Now, you know, there
(18:17):
were certain businesses like index rebounel, things of that nature
basis type trades that once were the exclusive province of
the street and now because in the ability of a
lot of these multi strats to effectively lose use their
balance sheet, they can engage in those businesses. Right.
Speaker 2 (18:37):
This is run of the themes that's come up as
the sort of like post dog frank era or a
lot of certain types of trades that used to exist
in house at the major banks are now have now
effectively been outsourced in some manner to buyside entities where
it's more appropriate to take these risks. Let's talk about
your time when you were a PM. We talked about
(18:57):
the value of the seat and not getting fired. And
I also get the impression that on a sort of
day to day or week to week or trade to
trade basis, there's a lot of constraints from the risk manager.
Talk about the incentives of the PM to survive and
make it to the next year and make it to
the next bonus season.
Speaker 4 (19:14):
I mean, you can essentially think of working for a
multistrat is you're running your own business. Okay, you're sort
of running your own fund. But you only have one client,
so you have to make very sure that that client's happy.
Your constraints are usually put in, you know, two terms.
You'll often hear the term capital thrown around. You know,
(19:35):
Tracy manages seven hundred million in XYZ and Joe has
fifty million in ABC, that sort of thing. The truth is,
those aren't really easily comparable numbers, right. The hedge fund
itself is inherently leveraged. They'll typically allocate somewhere between three
and four times their notional value, maybe even more in
(19:57):
terms of allocations to traders a billion dollars, you're allocating
out theoretically three or four billion. But there are two
numbers that are going to matter a lot to a PM.
The first one is how much can I lose? That's
your draw down, and there are two ways to measure that.
Most hedge funds are going to measure it on a
peak to trough basis, meaning even if you're up five,
(20:21):
if you give back suppose you're stopped is seven. If
you give back seven, then that's going to be your
draw down, even though you really weren't down from zero
much at all. The other way to measure that is
from zero from flat. So you can actually be fired
from one of these places and be up money on
the year. When it happens, you just gave back too
(20:41):
much of your sort of new money.
Speaker 2 (20:43):
So actually explain that further a why would you fire
someone who's managed money profitably? But then here's another related
question to that is, like you hear about, Okay, someone
gets fired from place X, and then they go get
a new job at place y. But if there objectively talented,
and maybe they're not, but if by some measure that
(21:04):
it can be established that they're talented, why are the
pods so quick to fire them? I mean, I get, yeah,
you lose money, that's not good. But if you know
losing money happens if the person has talent, why the
quick fires.
Speaker 4 (21:17):
It helps if you think of the multistraat itself as
managing a portfolio themselves, but it's a portfolio of risk takers.
Not to be reductive, but generally most of those types
of decisions are made on a fund by fund basis.
In other words, you know, maybe this person is not
as uncorrelated to what we have as we already thought.
(21:38):
They are not really making a lot of money. They
just exceeded their draw down, because it's not like they
don't know that it's a picatrough number. They're perfectly aware
of it. Or perhaps there's another opportunity in the market
to replace them with someone better. They're always looking to
optimize their portfolio of risk takers as far as the
other firm. They could be thinking, this person does fit
(22:01):
what we need and we really like their risk profile.
Even a really great PM is going to have a
significant draw down every two to five years, and there
aren't too many who've gone ten plus years with no
losing gears. You know, you just don't want to be
that person who experiences that five percent of the time
broad down in your first few months. And a new thought.
Speaker 3 (22:23):
I used to know a credit guy who always said, like,
you're not a proper credit trader until you've had at
least one major blow up. Maybe maybe that's true. But
on this note, Okay, if I get a big draw down,
I understand maybe it depends on where I am with
my career, and if I get it in the first
six months of working at a shop, that would be
(22:44):
very bad. But if it's in you know, year six
or something, maybe it doesn't matter so much, But how
embarrassed am I when that happens? And am I like
publicly shamed within the organization for this happening? Or how
does it work exactly?
Speaker 4 (23:01):
You know, it's sort of funny because obviously we had
a period just a few months back where there were
a lot of headlines about large losses. Is the marketplace
views it, it's going to feel awful to the PM, right,
you never want to be on the screen for a loss.
But whenever you see somebody up there with one hundred
million dollar loss, that means they had one hundred million
(23:22):
to lose, which means that they were managing a large
book and they were taking a lot of risk. And
if you'll notice, some of those pms from a few
months ago are still exactly where they were. You are
really generally better off getting bounced for a large loss
than you are a small one.
Speaker 2 (23:41):
This goes fits with something one of my beliefs that
a billionaire is someone who either has positive one billion
dollars in net worth or negative one billion in one
billion in debt, because you have to be like really
rich to have lost that much money. And anytime you
hear about like a former billionaire and they lost everything.
They're almost all as still somehow living large. So being
(24:02):
deeply deeply in debt is almost as good as having
tons of money. So I'm glad to hear this. How
does that constrain your actual trading? Okay, you know that
draw down number, you know at the point we're going
to get stopped out of the seat, How does that
actually translate into thinking about the trades that you put on?
Speaker 4 (24:20):
I hate to do And it depends, But it sort
of depends on where you're at. Because even though common
draw down for limits are usually somewhere between seven and
ten percent for what's called a stop out, you might
end up getting your capital reduced well before that at
three and a half or five, and that makes it
really really hard to come back. The key is, you know,
(24:42):
do you have a process, do you have risk management
and portfolio construction where you are still applying your risk management.
I'm only going to risk as much my risk capital.
What is between me and a capital reduction or draw down?
I'm going to be pick here. I'm going to trade smaller.
There are a lot of funds that have you know,
internal coaches, psychologists like it's windy Rhodes is based on
(25:07):
real people who do real things. And you know, certain
firms will sit you down and talk to you, or
they'll make you take a time out. Other firms will
just say that's it, you're out. But psychologically it makes
you you want to get it back, which is not
a great feeling because even when you get there, you're
just at flat and it really impacts your risk taking tolerance.
(25:31):
I think one of the best things that you know,
I ever heard was if you're kind of in a
losing street, just get flat and go away. Don't keep
any marginal things. You can always buy it back later.
You can always sell it later. But get your mind right.
But it does negatively affect you and you kind of
stew your thinking either to I'm going to take more
(25:51):
bets to get it back faster, or I'm not going
to do anything because I'm going to be so picky.
Overtrading is really common. I'll give you a for example. Well,
people coming from the cell side almost always overtrade when
they first get to the buyside. The reason is trading
has a positive expected value for them. They are in
the bid ask. Not only that, but facilitation desk on
(26:13):
the cell side. They lose money if VALL explodes, but
they generally make a lot of more money after it subsides.
The bid ask widens out and they could collect a
lot of clients flow in the back end of that.
One of the questions that I always ask people is,
you know, tell me about your biggest draw down. What
did happen, When was it, what was going on? What happened?
(26:34):
Would you do? And the sell side traders will always
have very quick times to recovery, and they expected to
get it back, but that's not the positive expected value
you have on the buy side. It costs your money
to trade.
Speaker 3 (27:02):
Brian, tell me about your biggest draw down and what
it was and what you did well.
Speaker 4 (27:07):
My biggest drug I was losing my job. I can't
name numbers, but essentially I violated my own risk. I
usually never speculated on outright vault, and I had a
long VALL position, and I normally would have structured that
as a spread, and I didn't. And though I was
directionally right, I bought really expensive wall and therefore didn't
(27:31):
make much money. Got hit on volatility in a much
larger fashion than I thought I would, And I was
in that camp of not a big draw down, and
it was almost unreal to people that I knew, Like,
why would they let you go? Because there's not a
lot of verifiable information out there. That always sounds very
suspect to people. I wish I could be more colorful
(27:54):
for that.
Speaker 3 (27:54):
No, no, no, then that's really helpful. But on this note,
I'm also curious. Do pms ever go to like risk
managers or the people above them and beg for like
either more money or more risk tolerance.
Speaker 4 (28:09):
Oh? Absolutely, And a lot of firms actually have, you know,
programs where if you have something that's really scalable that
you think is very functional, they may give you sort
of a side account and you get paid on that,
but it's not part of your regular book. Once you
work in BD, a lot of the people who you
bring in sort of ask you questions like, Hey, I
(28:30):
want to do this, Who should I ask? When should
I ask? I generally tell pms, unless it's an actual
trade idea, don't just ask for more capital unless it's
one of two situations. Number One, you just got there
because they love you, you haven't done anything wrong, and
they just probably paid up to get you. Number Two,
you've just made a hundred million bucks. Other than those
(28:50):
two situations, don't ask for things.
Speaker 2 (28:53):
Wait, let's learn more about violating your own risk book.
There's a famous story from Stan Druckenmiller. He apparently like
bought the very top of the internet bubble, and he says,
you asked me what I learned. I didn't learn anything.
I already knew that I wasn't supposed to do that.
I was just an emotional basket case and couldn't help myself.
So maybe I learned not to do it again, but
(29:13):
I already knew that. When a fund manager is sort
of like violate or a PM is violating some of
their own things, do they know it? Do they feel differently?
Do they get like some sort of acidic taste in
their mouth? When I like go on tilt when I
play poker, I always sort of know it, but I
can't help myself anyway. Like I just do it and
I go all in and I know I hadn't then
I have to embarrassingly walk out of the table. Like
(29:35):
what does that feel like? Talk about like what's going
on in someone's brain when they're like taking these risks
that on paper they shouldn't be.
Speaker 4 (29:42):
Well, usually you only recognize in the rear view. If
you slow down and think through the trade, you know,
you sort of realize that, hey, you probably shouldn't do this.
But I think you're parallel with being on tilt at
a poker table. It's it's that knowledge, you know, as
can you call somebody or after you raise that instant
feeling that man, I just leaped up. It's that feeling,
(30:04):
only you're going to feel it for a few days,
and you're going to get a little email or call
from your risk manager, and then you're not going to
know what that sit down is going to be like.
It might be, Hey, no big deal, get back out there,
you know, don't worry about it. It may be an
entirely different conversation. You may be told to go to
HR don't take your jacket, or take your jacket, I
(30:26):
should say. But it isn't a bad feeling. And I
think some of the better mentors that I've had through
the years have kind of taught me like that mental
health thing and where you're at is very important. And
I think it's even worse when you're at a multistraat
or a situation where you have a single plot that's
it if that one client isn't happy, you are probably
(30:50):
out for at least six months and potentially much longer.
The BD process to bring a new PM on board
is somewhere around three months on its own.
Speaker 2 (31:00):
Do you do post mortems on winning and losing trades?
Speaker 3 (31:03):
Kind of?
Speaker 2 (31:03):
You know, like after I forget talk about poker, you
go back and you run the poker hand through a
solver and you see if you played it correctly, often
whether you made money or lose money. Is there an
equivalent process that's done in the trading world.
Speaker 4 (31:17):
N hundred percent. As a matter of fact, if you
guys have never had Brent Donnelly on, he wrote a
book called Alfit Trader, and I've probably never seen that
information written down in one place before.
Speaker 2 (31:27):
But right, yeah, we should have them back on or
something to talk about just now, but keep tell us
more about it from your perspective, Yes.
Speaker 4 (31:33):
You know, and that is part of the other process,
like we mentioned edge, like the other parts of the
beating process that I want to know the process by
which somebody selects trades. I want to know about their
portfolio construction, and I want to know their approach to risk,
Especially on risk, you'll find that very good pms, and
especially these firms, the firms themselves, even though the PM
(31:56):
may not see it, they know exactly how many bets
you've taken. They know about your hit rate, they understand
your skew. They can sort of tell when you're deviating
from your wrist mandate. They have a lot of analytics.
But it's been my experience that the best pms look
at it themselves. They're almost religious with it. You know,
how did I do today? It's very similar to an
(32:16):
athlete watching tape or a dancer. My daughters loves dance.
You know, she'll watch tape of herselves. This is what
I missed, this is what I didn't do. And the
great benefit of doing it in a statistical fashion is
you can remove, oh, I won't count that because it
was a Tuesday and a full moon. Any excuse you
have goes out the window. Those are the numbers on
(32:37):
this note.
Speaker 3 (32:38):
And since Joe brought up poker earlier, are there like
popular ways to become a better better better? Does that
work for all?
Speaker 2 (32:48):
Better?
Speaker 3 (32:49):
A better better better? And I'm thinking, you know, I'm
thinking back to Liar's Poker. That's a famous example. And
then wasn't there something at Jane Street that Sam Bankman
Freed was doing a bunch of different like gambling games
things like that.
Speaker 4 (33:03):
Yeah.
Speaker 3 (33:04):
Like what is popular in terms of I guess building
up your risk returnals.
Speaker 4 (33:10):
Well, I think anything where you have some element of strategy,
And I think one of the reasons that poker is
so popular is that it combines not only strict strategy
like you might see in chess, but also a fair
degree of complete randomness and you're going to take some
bad beats and that's going to happen in trading. It's
(33:30):
easy to forget, but a really good PM might have
a fifty two fifty three percent hit rate on their trades.
It becomes what their skew is how much they make
on their winners versus how much they lose on their losers.
So anything where you're actually becoming more in tune to
your own risk taking, your ability to think in what
most people call probabilistic terms, or thinking in bets after
(33:53):
they any Duke book, any exercise like that, and I
think poker is probably just the most popular. It's also
a great fun I don't know whether i'd say team
building game, but it's a fun social game that people
play often around hedge funds, and it fits with the
gambling mentality, so we hear about it a lot, but
there are a lot of different internal games that people
(34:14):
engage in.
Speaker 2 (34:15):
I just have one last question, and it goes back
to the role of the analyst, and you mentioned, oh,
maybe you know, an analyst could be valuable if they
really know the history of what happens, if they're X
or Y. I can just look that up on three
on chagbtr perplexity these days, like, how realistic is it
in your view that firms could meaningfully reduce analyst headcount
(34:38):
by using artificial intelligence, or if they save money on
by using artificial intelligence, would that just create new roles
for more sort of advanced research. Where are we at
with this? You must talk to people about what they're
doing with this.
Speaker 4 (34:52):
I think there's lots of things they can do. And obviously,
you know you're talking about pret secretive organizations, so there's
an enterprise sharing issue there to deal with. But yeah,
a lot of things could be really computerized. But you're
also looking for people who are going to be able
to tie the story and the narrative and with what
(35:13):
was going on with the instruments, and it's probably not
something so simple as you know, what did the dollar
in do the last time the FED hiked? It might
be something more like what was a red screens puts
foot steepener doing the last time the FED hiked, which
you're going to require a lot of modifications to those
AI models. I'm always hesitant to talk about this because
(35:36):
I can remember we were told that all the paper
companies were going to go out of business because everybody
was going to read everything online. And what happened. We
just all printed it.
Speaker 2 (35:44):
Oh, yeah, that's true. And they and they a lot
of them also sell cardboard boxes and so they benefited
from e commerce. Those same companies actually absolutely.
Speaker 4 (35:53):
Georgia Pacific is probably huge in Amazon's warehouse. But I
think that there will always people who because this industry
thrives on you know, I can do this even though
the odds are very much against me, and they will
definitely use any edge they can get informationally as far
as analytics or anything like that. But usually there's something
(36:16):
that you're going to have to ask that maybe not
everybody understands or nos. I think everybody who's in this
business got into it in one way or another, and
somebody handed them what I just generically call, you know,
street born, which is the market Wizard's books or any
of those types of things, and they're fantastic because what
I got out of reading those types of books is
(36:37):
there's a lot of different ways to make money. You
just have to find out what you're good at and
how you can apply your particular set of skills and
attributes to doing it. And I think that there's going
to be somebody who gets really good at asking you
one of these am models market questions, and that person
who's going to get built up. We're already seeing increase
(36:58):
for heads of AI at several different funds, and I
think that that's going to continue as they explore more
and more, you know, what they can actually do with it.
They have no problem spending money on the either the
AI or the human being. It will ultimately come up
to who can perform.
Speaker 3 (37:14):
So how do you avoid I guess group think among
your pms, because the whole point of multistrats is those
uncorrelated returns, and you don't want everyone just putting on
the same trades, either literally or maybe through another angle.
And I'm thinking specifically about journalism. So some newspapers used
(37:36):
to always move reporters from a certain beat after they'd
been there for like ten years or something, and the
idea was just to shake it up a little bit
and make sure that they're not getting like too cozy
or too comfortable with that particular industry. The downside of
doing that, of course, is that you lose expertise. But
I'm just wondering, like, how do people, yeah, how do
(37:58):
people avoid that group think aspect and make sure that
everyone's doing you know, new stuff kind of independently.
Speaker 4 (38:05):
Well. One way is limiting the communication between the pods.
Some places do not really allow their pods to communicate.
Another way is basically structurally, you don't want to see
people hang on to each other's trades. You're going to
be looking at this from you know, a macro view
within the firm. You're going to see this type of
(38:27):
trade that this person had on is increasing in size
in the firm. But by and large, if you've fired right,
you're going to hire independent thinkers, and a seasoned PM
will tell you I might like somebody else's idea, but
I can't really trade it properly unless it's my idea too,
I kind of have to adopt that as my own.
(38:47):
So group think is not as prevalent as you would
think because it's structurally prohibited in some places and the
places where it's not. You know, a seasoned PM is
like any I may love that trade that you pitched me, Joe,
but yours and I can't. I'm not doing my job
if I say, Joe, when are we getting out of this?
That's not what I'm paid to do. So part of
(39:08):
it is on the part of the PM internally, and
then the other part of it is on the fact
that they don't want to be seen as copying the
p next guy's trades.
Speaker 2 (39:15):
All right, but just real quickly, maybe you don't want
to do groupthink or copy the next guy's trades. But
if there's a hot beta, right, you're always looking for alpha.
But if there's a hot beta like AI beta or whatever,
or falling inflation beta like some of these long term trends,
but that's not your thing. Do pms find ways to
backdoor their acid class into the hot trade in a
(39:36):
way that like may the fact to become trade crowding.
Speaker 4 (39:40):
Yeah. A former boss of mine used to say, there's
never been a risk management framework the smart trader could outwit.
Speaker 2 (39:48):
That's what I'm wondering. That's like, is it this cat
and mouse game where you're, in part trying to outwit
the person who could tap you on the shoulder by
trading something that looks like something else.
Speaker 4 (39:56):
Yeah, there's a lot of downside to doing that, you know,
if you don't have a trade kind of properly thought out.
But you know, in general, if I hire one of
you to trade credit and the other one to trade
the front end of the yield curve, and you know,
all of a sudden, Brazil is very hot the real
and you're both asking me for limits on the real Like,
(40:19):
you won't have limits in something that you don't already trade,
so you can't really deviate for your mandate too much.
Speaker 2 (40:27):
It's kind of a I'll just find a credit spread
that's correlated with the rail yeah.
Speaker 4 (40:32):
Or you know, there are a lot of ETFs that
basically contain macro trades if you will, and I have
often wondered, you know, are those there so that mutual
fund managers can you know, and investigate equities, can speculate
on the yield curve. But there are always ways to
do it. You just have to kind of hire the
right people who aren't necessarily going to do that. And
(40:54):
if you get in trouble for something like that, I
sort of like to say that this is the second
most waryuristic streight in America. Word gets out is large
of an industry, it is, it's not that big in
an individual areas. And if somebody has really done something untoward,
then it's people are going to hear about it.
Speaker 2 (41:13):
Brian Yelvington, thank you for coming on odd Lots and
talking about getting and keeping multistraat jobs. Our journey continues.
Thank you so much. Really appreciate chatting with you.
Speaker 4 (41:24):
Thank you, thank you for having me. It's great to
get to talk to you guys.
Speaker 2 (41:39):
Tracy, if I were like young, I think I or
if I were in college or something, I think I
would have taken that trading job.
Speaker 4 (41:45):
Now.
Speaker 2 (41:45):
I mean, I like the way my direction, life direction went.
But if I wanted to do over, I'm curious what
that fork in the road looks like.
Speaker 3 (41:51):
There'ought Yeah, that's so sad will.
Speaker 2 (41:54):
Be a different puck, you know, Like I feel like
I would I would trade you know what happened, there
would still be an odd one. I would trade for
a while, I would blow up. I would get a
job in journalism, and then I would be one of
those journalists who reminds all of their colleagues all of
the times that they used work and finance. You know,
I would find like the person on the call, they're like,
(42:15):
I just love the you know, It's like I was like, oh,
I used to work in a multi strategy hedge fun. Yeah, yeah, yeah, yeah,
well I used to be a trader. Anyway.
Speaker 3 (42:21):
Sorry, keep going, Joe, how many times have you brought
up that interview with the trading company on this note?
Speaker 4 (42:27):
Yeah?
Speaker 3 (42:27):
Okay, that was really interesting. One thing that kind of
jumps out at me is the last discussion about you know,
how do you avoid everyone just taking on the same risk.
It really seems to me like it's correlation built on correlation,
built on correlation, right, And I often think correlation is
(42:47):
one of the hardest things to actually nail down on
Wall Street. So you know, you gotta wonder so far,
so far, you know, a bunch of multistrats survived April
pretty well, so I guess we'll see.
Speaker 2 (43:02):
I think if I were a risk manager and I
had one person trading credit and the other person trading
the short end of the old curve, and suddenly there
are month to month return started looking identical, and it
happened to be identical with the person who traded Brazilian rayal.
That would set off a red flag for me. You know, like,
I feel like the return profile itself is probably part
(43:26):
of the hint, right that even if you can't really
articulate why this person's traded is secretly this person's trade
in disguise. If there re tuned profile looks too similar,
that probably sets off some red flags.
Speaker 3 (43:39):
We got to talk to a risk manager, don't Yeah,
we should do that.
Speaker 2 (43:43):
Okay, if you're a risk manager, you want to talk
about what that job is like or if you know,
one shoots a message.
Speaker 3 (43:50):
All right, shall we leave it there.
Speaker 2 (43:51):
Let's leave it there.
Speaker 3 (43:52):
This has been another episode of the All Thoughts Podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (43:57):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our producers Carmen Rodriguez at Carman Arman dash Ol
Bennett at Dashbot and Kilbrooks at Kilbrooks. From our Odd
Lots content go to Bloomberg dot com slash od lots
were the daily newsletter and all of our episodes, and
you can chat about all of these topics twenty four
to seven in our discord Discord dot gg slash od lots.
Speaker 3 (44:18):
And if you enjoy odd Lots, if you like our
ongoing exploration of multistrap funds, then please leave us a
positive review on your favorite podcast platform. And remember, if
you are a Bloomberg subscriber, you can listen to all
of our episodes absolutely ad free. All you need to
do is find the Bloomberg channel on Apple Podcasts and
follow the instructions there. Thanks for listening, then, in the
(45:05):
e
Hosts And Creators
Joe Weisenthal
Tracy Alloway
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.