The hedge fund comeback with Steve Cohen the Founder of Point72. Ilana Weinstein the Founder & Chief Executive Officer of The IDW Group. Dmitry Balyasny the Managing Partner & Chief Investment Officer of Balyasny Asset Management. Mike Rockefeller the Co-Chief Investment Officer of Woodline Partners.
Moderated by Barry Ritholtz the Founder & Chief Investment Officer of Ritholtz Wealth Management.
SPEAKERS
Steve Cohen
Founder
Point72
Ilana Weinstein
Founder & Chief Executive Officer
The IDW Group
Dmitry Balyasny
Managing Partner & Chief Investment Officer
Balyasny Asset Management
Michael Rockefeller
Co-Chief Investment Officer
Woodline Partners
MODERATOR
Barry Ritholtz
Founder & Chief Investment Officer
Ritholtz Wealth Management
TIMESTAMPS
EPISODE TRANSCRIPT
Barry Ritholtz: (00:00)
All right, so this is really a fascinating crowd, and I think I have the easiest job of the whole three day event, because this is quite an illustrious panel and I know they all have a lot to discuss. When we look at the state of the hedge fund industry since the Great Financial Crisis, the performance has been a little lackluster, and there have been lots of conversations about what's going on in the hedge fund world, and are we ever going to see the sort of uptick that we saw pre-crisis. And I think the past two years has brought that question to the fore where we've seen tremendous performance, tremendous alpha and a lot of attraction of assets. And to talk about the question, "Is the hedge fund industry back?" is the panel, and let me introduce everybody very briefly.
Barry Ritholtz: (01:03)
Steven Cohen is the founder of Point72. He is a legendary hedge fund investor as well as proud new owner of the New York Mets. Dmitry Balyasny runs one of the more interesting hedge funds in the world. They manage about $9 billion, returned more than 30% last year. Ilana Weinstein is the founder of the IDW Group, one of the hedge fund industry's leading headhunters, and she knows all about talents and what it takes to get on top and stay on top. And at the end of our panel is Mike Rockefeller. He's the founder of Woodline, which was one of 2019's biggest hedge fund launches, in less than two years has eclipsed more than $5 billion in assets under management. And so let's start with a question for everybody. Are hedge funds back? Is the industry in a better place than it was before the pandemic lockdown? Let's start with Steve.
Steven Cohen: (02:08)
I mean, I don't know, have they ever left? I mean, hedge funds have been around for a long time. I mean, there are ups and downs. Listen, the markets have obviously been pretty good since March of last year, and there's been a lot of interesting... There have been sparks, and there have been new companies that have been IPOed and so there's a lot of stuff going on underneath the surface, a lot of rotations in the markets. And so lots of opportunities to create alpha. And I think the performance has been good, I don't think it's been extraordinary, and so usually, in up markets there's an opportunity to... We all tend to look okay, and we'll see what it looks like when the world changes.
Barry Ritholtz: (03:02)
Anyone else want to jump in?
Ilana Weinstein: (03:03)
I do think we're in a better place, but I think part of that is because there was a real calling of the industry from 2015 to 2018. As much as we've seen these fantastic headlines tuning the resurgence of hedge funds in the past year and change, there were all these headlines if you remember also predicting their demise back then and doomsayers about the industry. And we saw a lot of funds go out of business, big funds that once upon a time were brand name funds like Eton Park, and Blue Ridge, and Convexity and Pine River and Blue Mountain, and the list is honestly too long to recount. These were not two-bit players, these were real funds that just couldn't make it. And I do think where we are now is in a better place because like any industry that matures, and we are maturing, we're still young but we're maturing, there is a weeding out of weaker players.
Ilana Weinstein: (04:00)
And I think a healthier set of funds remain, and yes, COVID like Steve suggested that the opportunity set was great for funds, there was a lot of volatility, fundamentals came to the fore, great sector themes were accelerated, but there's also a path dependency to investing and you can take more risk when you're up, and buy at the bottom with both arms. And I think the fact that we do have now and this is continuing to evolve, we'll see more funds go out of business and new ones thrive, but the fact that there is a stronger set of funds today, I do think has helped in lifting returns.
Barry Ritholtz: (04:40)
Dmitry, what are your thoughts? What's the state of the industry today?
Dmitry Balyasny: (04:43)
Yeah, I agree with that. I think it's stronger. I also agree some capacity came out of the industry which was helpful. I mean, there is a little bit of cyclicality to the strategies, so if you look at just overall long short returns and equities from '16, '17, '18, they weren't that great, so we got a little bit of a bounce back from that same thing with macro had pretty slow period with very low volatility. We're getting a little bit of a bounce back from that. And I think in general, hedge funds do well when there's some sort of significant change in the markets that lead to more durable flows for some period of time, which we definitely got last year. We've gotten kind of bits and pieces of that this year, so there's a decent amount to do.
Barry Ritholtz: (05:32)
And, Mike, you come from a very different perspective, your fund launched much later than these gentlemen. You're 2019, you're West Coast based and most of us are East Coast based. How do you see the world of hedge funds today? What does it look like from your perspective?
Mike Rockefeller: (05:50)
There's no question 2019 and 2020 were strong years for hedge funds and long-short equity funds, but I'm going to give you a headline, Barry, that you haven't heard, and that is for equity long-short, 2021 is shaping up to be one of the worst years for the industry. And so you say, "How can that be?" On an absolute basis, hedge funds and equity long-short are up 8%. That is true, but from an alpha perspective, when you look at the prime broker data from Morgan Stanley and others, alpha generated is actually down 7%. So I think it's important to see, okay, where are those returns coming from? Is it driven by the major equity markets being up double digits, S&P almost 20%? Is there anything beyond what's going on besides the data and factors in the market? The data would suggest No. That being said, I am optimistic for the industry. Those are averages, and there are funds that are generating alpha, and I think LPs are as smart as ever in being able to understand what's driving returns, and so I think this will be a great year when it's over to see who those funds actually are.
Barry Ritholtz: (07:18)
So let's stay with that concept of alpha, and I have to ask the question, why are so few funds persistently successful? Why does it seem that alpha is so fleeting and such a small group of outlier funds have consistently come up with a process for managing a business generating above average returns and doing so persistently over long periods of time? For anyone who wants to jump on that?
Steven Cohen: (07:46)
Well, listen, I think there are a number of reasons. I mean, I think a lot of funds tend to be very focused on particular sectors, and sectors could go in and out of favor, and sometimes it's hard to generate alpha when things aren't going well in sectors. And in multi-manager platforms that I run, Dmitry runs, we can sort of move money around and take advantage of where the action is. We at Point72, we're providing our portfolio managers and our analysts with tons of resources, tons of new tools, and so our people have advantages as far as what they can use, and what they're offered as opposed to a smaller fund, that just doesn't have the resources that they need or would want or could afford to compete against the bigger funds. We're very talent oriented, and so we're constantly regenerating our talent, and they're always trying to hire the best and brightest. And so, it's sort of... I mean, smaller funds they lose one important person, it's hard to recreate that person again.
Barry Ritholtz: (09:13)
So let's stay with the concept of talents, and go to Ilana who runs a talent recruitment firm. How do you identify the best talents in the hedge fund space? How do you recruit them? And more importantly, how do you retain them once you get these people in the door?
Ilana Weinstein: (09:31)
We need like a whole panel on that topic, at least.
Steven Cohen: (09:35)
You can take the next 35 minutes.
Ilana Weinstein: (09:38)
All right. I think everyone's here more to hear what you have to say.
Steven Cohen: (09:42)
No, I rather hear you.
Ilana Weinstein: (09:43)
So, if you remember nothing else, talent is everything. It is everything. And this industry is much about human capital, as it is about managing capital. You can forget about alpha if you cannot attract and retain a winning team. And I think part of it all comes down to first defining what excellence is. people bandy about the term analyst and PM and head of business and founder, but they often mean different things, depending on the fund that we're talking about. So I think it's useful to focus on the skill set. With an analyst, we're really looking for somebody who is fantastic at identifying and systematizing opportunities, acquiring information, looking for patterns to figure out what's important and what's not, and velocity of ideas.
Ilana Weinstein: (10:46)
With a PM, we're looking for more of a risk gene, and somebody who can commit capital, and knows when to lean in and when to lean out, can be flexible, has the ability to construct a portfolio with diversification, and has a sense of how to really pull the levers of sizing and positioning. And I think a head of a business depending again, on what we're talking about, if it's somebody who sits at Point72 or Balyasny at a top multi manager, then we're talking about somebody who's almost like the coach of a all star basketball team, or maybe owner of a baseball team, who has a group of all star players, and really understands how to bring the best out of them without micromanaging them too much, and can really press on the nexus of ambition, youth and potential.
Ilana Weinstein: (11:52)
And ultimately, once you've identified what you're after, you have to provide something that the person isn't getting where they are today. And our industry, I don't think structurally, lends itself for the most part to evolution, because most funds, most of these 12,000 funds are small funds. There is a founder at the top who is the committer of capital, and when you get to a point or even if they're big funds, it may or may not surprise you. You could be a $30 billion single manager fund, and when you peel back the curtain, the investing team is maybe 10 individuals who matter. So if you want to move into running a business and committing capital, you have to leave, by its very nature you have to leave and either start your own thing, or go to a multi manager which will give you the autonomy and the tools to be successful.
Ilana Weinstein: (12:48)
But ultimately, this industry is about wanting to be treated fairly, having agency and being empowered, and the things that lend themselves to that or a funds approach to compensation, how much autonomy people are given and the skills that they're learning. I think in today's environment, which has become more and more complex, whether it's because of Reddit and melting ice cube shorts, or just the amount of data that everyone has access to in the industry, you need an infrastructure that's going to help you pair great ideas with superior risk management. And there are only so many funds that can teach you to do that. So that's also a big selling point for why people would leave.
Barry Ritholtz: (13:39)
So let me follow up that question and it's open for everybody. If you have a repeatable process, and you have a team in place that you have confidence in, through the changes in markets like WallStreetBets and Reddit and things like that, do they make any difference? Or can your team just adapt and adjust to whatever comes his way? Let's open up to anybody.
Dmitry Balyasny: (14:03)
Oh, I think it depends on what your strategy is. I think like the Reddit situation makes it tougher to run a concentrated portfolio, particularly on the short side. And so if you have a fun with a significant amount of AUM, and a relatively small number of short positions, you really have to adapt your strategy. For diversified platforms, I don't really think it makes much of a difference if we have thousands and thousands of short positions and pretty tight concentration limits, particularly on anything with high short interest. But if I could also step back on your previous question to why there's so few firms that are persistently successful, I think in addition to resources, which I totally agree with.
Dmitry Balyasny: (14:49)
I think the basic issue is markets are pretty efficient, and the amount of alpha spread that you can make consistently on levered basis, it's pretty small, right? A good long-short team, they can make 3, 4 or 5% a year over five years on GMV unlevered. That's pretty good, right? One year they might make 10, next year they might be at zero, but over time if they're hitting 4 or 5%, that's pretty good if you're neutralizing factors. So if you have a fund where you got a couple of groups of these guys, like it's just not enough return, you really need to lever it, and in order to lever it, you need to have a lot of people otherwise you have a lot of risk with a few positions or a few people getting cold. So now you're in a completely different business. Instead of just managing investments. you're managing a lot of people and people management's not easy, right?
Steven Cohen: (15:40)
No. People are no problem.
Dmitry Balyasny: (15:44)
Yeah.
Steven Cohen: (15:45)
So if you have people, you have problems, pure and simple.
Barry Ritholtz: (15:50)
So you better off with with a smaller startup firm where it's the manager, a small team and their portfolio? Do you feel like you have an advantage, Mike, against these guys, because you're not managing 1600 employees?
Mike Rockefeller: (16:07)
I think certainly being smaller is is an advantage, but I think scale is also an advantage. And in order to attract and retain the talent, you do need scale because if you think about what people want, and there's a lot written on this, there's a book by Daniel Pink called Drive and he talks about what motivates people, what do they really want. They they need all of the tools and resources to be the best at what they do, and that's the scale part because you can't offer them that unless you have a larger firm. They want autonomy, they want to be able to live and die by the decisions that they make. I think the multi-manager multi-PM model lends itself to that.
Mike Rockefeller: (17:00)
The last piece is kind of soft, but I believe in it 100% is purpose. People want purpose. And there's a lot of money in this industry, and of course, people want to make money but we have real evidence at Woodline and I think, I've heard Ilana speak on this as well, money isn't the only thing. At a certain point, people want more than that, they want partnership, they want to work with great people. They're willing to sacrifice short term compensation for long term wealth creation. And so if you can offer that to people, those three elements, I think those are what's going to drive retention and ultimately what we were talking about, sustainable returns for LPs.
Ilana Weinstein: (17:46)
Yeah. It's really not about the number. I know you and I joke about this, whether it's about the number, but it's about the approach to compensation, which I alluded to earlier. People want to be treated fairly, they don't want to be netted. They don't want to feel... They're fine not to get paid if they didn't perform, but if they did, they don't want their compensation going to subsidize the rest of the team that didn't do particularly well. And I think this goes back to your question before about why so few funds are persistently successful?
Ilana Weinstein: (18:29)
In recruiting talent, you can't be that transactional. And what I mean by that is even though this is a transactional industry, we raise money, we charge fees, we do well, we succeed, we eventually go out of business. It's very clear. When you hire people, there are always pivot points. I don't care if it's the same role, they're going to a new fund, there are nuances that they're going to have to learn, be it the nets, the approach to risk management, concentration, diversification, they may need to understand how to now build and hire a team if they have a more expansive remit, and they need more infrastructure underneath them.
Ilana Weinstein: (19:14)
And you need to give people room to fail and to learn, otherwise, you're not really collecting any ROI on all of the effort that you went through to get these great people and talent is scarce through the door in the first place. And then the flip side of that is, there does come a point where you have to pull the plug, and founders can't be afraid to do that because the number one corrupting thing out of fund is a lot of deadwood because then people again, they can't get paid the way that they would want to, and at the end of the day, if you are continually and again this may come as a surprise it may not. That $30 billion fund with a team of 10 that matters, they're not all A pluses, you peel back the curtain, it tends to be the same one or two people driving returns year after year. And it's fun to be the smartest guy in the room up to a point, but after a while you start questioning whether you're in the right room.
Barry Ritholtz: (20:15)
So so let's bring in the LPs into this conversation. I used to think that LPs were looking at performance and not a whole lot more than that, but you guys are confirming what I've sort of evolved into noticing, which is LPs are looking at a whole lot more than just past performance. They're looking for the ability to manage a team, they're looking for process. Tell us a little bit about how you perceive what limited partners look for when they interview a hedge fund as a possible investment.
Dmitry Balyasny: (20:52)
I mean, I think they're looking at the odds of persistent alpha generation. So in order to just the same way that we interview a PM and try to figure out, is this person persistently going to generate alpha for us, they're looking at the overall fund asking the same question, and then that goes back to what's your edge in various areas? Whether it's recruiting, developing people, it's just as important as recruiting. The vast majority of our PMs, they weren't super senior PMs when they started with us. And helping to develop them, helping to develop their analysts, people look at that they look at your risk management.
Dmitry Balyasny: (21:29)
It's like all the things that you evaluate to see okay, I'll con... In order to get in the door, your past returns have to be pretty decent, otherwise, nobody's interested. But to figure out if somebody wants to invest, like you're trying to figure out what are the odds that those returns are gonna sustain, and then it's evaluating all these different pieces that lead to that.
Barry Ritholtz: (21:49)
Steve, you want to jump in on that?
Steven Cohen: (21:51)
Yeah, I don't know. I mean, I think LPs are looking for a stability return, they're looking for... They're not looking for any surprises, they want an infrastructure operations where they can depend on their... You're not going to find out something wasn't handled correctly, or something financially was wrong, as far as accountingwise or anything of that nature. They want sustainability, they're thinking long term, they want to be involved in a fund not just for the next year. They want to be involved in the fund for five to 10 years. And they want to believe that a fund has sustainability, they're developing talent. They're thinking about the world not just the way it is today, but the way it is going forward, that the firm's adaptable. As far as I'm concerned, I'm always thinking about new businesses, new ideas. And you know the world is constantly changing, so what worked yesterday may not work tomorrow. And if I am an LP, I want to hear that. I want to hear that somebody is engaged thinking about the world, thinking about where it's going.
Barry Ritholtz: (23:03)
Mike, you don't have the same length of track record that some of the other funds have. How do you deal with LPs and what they're looking for as a relatively new fund? Is there any advantage to having been around a little less?
Mike Rockefeller: (23:22)
Well, I think there's certainly an advantage to be able to learn from Dmitry and Steve and my partner, Karl Kroeker and I came from Citadel, so we see what it takes to actually create a business and it was interesting. Before we actually launched Woodline, Carl and I we went out and interviewed a lot of top fund managers and LPs, and asked, "Okay, what do we need? What do we need to do first?" And the answer was somewhat surprising. It was, "Go and hire yourself a rockstar Chief Operating Officer." And so, we went out and did that, and couldn't have gotten anyone better than Matt Hooker. But why is that? Well, it's to Steve's point, these are businesses. And Carl and myself and our team, we know about investing, but we don't know how to run a business. And the complexities in today's world of managing a hedge fund are pretty immense, between the technology, the risk management, legal compliance, cybersecurity is a big issue. You need a fully built out operations team to ensure that this business is going to be sustainable for a long period of time.
Barry Ritholtz: (24:41)
And how did you deal with that during the pandemic and lockdown and work from home, I think that caught a lot of places unprepared, what was your experience like?
Mike Rockefeller: (24:53)
Well, fortunately, a lot of our systems were cloud based, so 10 years ago it would have been a different story, but because we were a newer launch, we already had a lot of the systems in place, and we were able to transition to work from home like a lot of funds that thrived through through the pandemic.
Ilana Weinstein: (25:13)
You know people underestimate the transition from analysts to PM to head of business to founder, and what Mike is talking about in terms of having to, they think they're just going to kind of go out, hopefully raise money, and the other stuff will fall into place because they have capital. There's so much complexity that goes into running a business. We have a guy in play now as a candidate, who is it almost two billion, and he raised it relatively quickly during COVID in the last two years. And the reason he's a candidate is because his operating team, his non-business team is a disaster. And he's spending so much time on non-investing issues, and he either has to sort of restructure his whole fund or what he's learning is about himself, he doesn't want that headache, he'd rather sit someplace that's going to give him resources and give him capital. You're not gonna have to also... It's not like you raise it, and you're done, you're constantly out there speaking to LPs. He doesn't really enjoy that aspect of it.
Ilana Weinstein: (26:20)
And I do think that that people underestimate how difficult that is, not even just raising the money, but actually manning the ship. On the point of new funds, Mike launched with what? Two billion, two and a half billion, something like that. It's so unusual, and I think it speaks to, you ask what do LPs want? For a new fund, what's really important to them is the DNA of where the person is coming from. So it's you being you, it's the success you had at Citadel and it's the fact that you came from Citadel. And that's a bet that LPs are willing to make. There's more predictive success, a higher degree, rather of predictive success around Mike than somebody who comes from a fund that kind of had a merit track record. And the idea that this person's going to do something different than the funded did, is you know, that's a bigger risk to take.
Ilana Weinstein: (27:24)
I had my team poll the biggest launches in the last two years, so defined as let's call it a billion or greater or got to a billion quickly, and there's only about for all the hundreds of funds that have "launched," there are only about 10 to 12 in that category for each year. And almost every single one of them came from either a top multi-manager or a fund with great pedigree like Viking. Viking alone has had five launches including this year in the last 24 months.
Barry Ritholtz: (28:00)
So is there an inherent tension with a firm like Viking between scalability and persistence of returns? Are people launching because at a certain point you begin to top out? What's the tension?
Steven Cohen: (28:16)
Let's say you hire great people, and there's going to be a percentage of people that are eventually going to want to be me or be... Mike worked for Ken and he wanted to go out on his own, right? I worked for somebody at some point, and I went out on my own. And if someone's got a bug to do that, you can't stop it. Okay, they have to go out and do it. Now, they may succeed, they may fail. And so when someone comes into my firm, they want to start their own firm, I say, "Thank you. Thanks for..." Relationships don't have to end, they can evolve and change. But if someone's got a bug to start their own firm, there's nothing you can do about it.
Barry Ritholtz: (28:57)
If you smell someone is got a foot out the door, but you think they're talented do you want to stake them? Do you want to push them out and say, "Hey, let's continue this relationship but go out on your own."?
Steven Cohen: (29:09)
Well, it's case by case. One of the problems with staking people outside your firm is you really can't control what they do outside your firm, and sometimes they start doing things and they start drifting. And so it's possible I might do it and possible I won't.
Barry Ritholtz: (29:28)
Mm, interesting. I want to shift gears a little bit because time is tight. We mentioned work from home and all you have to do is pick up the Wall Street Journal. Goldman Sachs wants people back in the office, Jamie Dimon is pounding the table to have people back in the office, but there's a sense of a hybrid model as being a little more flexible and a little more attractive to very top talent. What are your thoughts on this space? Is everyone going to end up back in the office or are we going to end up with some different model?
Steven Cohen: (30:02)
I mean, my view is I'm open to a hybrid model. I mean, I like working at home. I actually like it. I don't feel I have to be in the office five days a week. I can run my firm from wherever I am. I mean, Dmitry, you were in Jackson Hole.
Dmitry Balyasny: (30:21)
Yeah, I mean, it's like in Chicago, thinking how many PMs we had in the office there, I think we have like three or four PMs in Chicago pre-COVID. Most of our PMS are in New York in London, and so everybody spread out anyway. So we got like 10 offices around the world, so wherever you are you're seeing some portion of your people, but usually a small portion anyhow. So yeah, we're definitely doing hybrid. I think, the sort of pillars that we're trying to go to they're like, one is you have to be with your team some percentage of the time on a regular basis, right? That's gonna vary team to team, but it can't be like, "Oh, we never see each other, and it's going to be great." So you have to get you have to get together on a regular basis, whether that's in the office or the office, some combination of the two.
Dmitry Balyasny: (31:13)
And outside of your team, you have to show up once in a while, even if it works well with your team. You have to show up in the office on a regular basis, whatever it is, two days a week or four days a week, that depends on the person, but you need that to just have some connectivity with people who you're not going to just normally talk to because you're not going to talk to the guy if you know you're trading healthcare and the guy's trading industrials, you're not necessarily going to talk to him, but you run into him in office, and it might be a very interesting conversation that leads to a thought you wouldn't have had, right?
Steven Cohen: (31:46)
Dmitry, the reality is, we have offices.
Dmitry Balyasny: (31:48)
Yeah, exactly.
Steven Cohen: (31:49)
And you do too everywhere. Okay, I'm in New York twice a month. I mean, I have hundreds of people there that I don't see anyway, and they don't see me. So really what you got to do is you got to set up communication, and there's so many different ways to communicate today, Zoom or IM or chat or whatever the case may be that you can be very effective in communicating, and it feels like you there but you're not there. So it works. That was the big surprise of work from home, that we all thought it would be like what would be like being out of the office, the amount of time we're out of the office, and the big surprise and the big learning was we can do this regardless of where we are.
Ilana Weinstein: (32:40)
I mean, this has been like a huge experiment, let's all work from home for a year and see what happens. And in fact, the industry has had some of its best returns; long-short, equity, alpha notwithstanding this year.
Steven Cohen: (32:52)
That's also a bull market too.
Ilana Weinstein: (32:53)
Yeah, it was a bull market, but it was also a market for which we had never had a playbook, we'd never experienced COVID. We never experienced anything like this before. I don't think Steve and Dmitry necessarily need to be in the office 24/7, but I do think it is important for analysts in particular, to be close to their PMs. They can't be trained, otherwise, as effectively you need this for collaboration, you need this for creativity, you need this for spree décor. I will tell you, and maybe I shouldn't say this, but I'll say it. In some ways, my job has become a lot easier in the last couple of years.
Steven Cohen: (33:31)
But you're charging the same amount.
Ilana Weinstein: (33:35)
And you're still getting great candidates. So what I mean by that is people have a step back perspective. They can say to themselves, if they were sort of on the fence of should I leave or shouldn't I, now they're working from home, they can more clearly see what their value add is versus other people who are maybe just benefiting from being in the room with other smart people, and the stickiness to some extent, I think gets eroded when you're just not there. I'm all for flexibility, but I think as a founder you do want your people there enough of the time where... People have good days they have bad days but if they're there, there is sort of this almost psychological smoothing effect I think goes on, they just sort of get used to it. It's for better or worse, the devil known and they start risk weighting all the things that could go wrong if they left versus staying put. It's economic loss-aversion theory of play with talent.
Ilana Weinstein: (34:33)
But when you're working remotely, that's not as much of a barrier to entry. And this year, we have had, which I've never had before, people that we have gone after for years calling us telling us they're ready to leave. And maybe it's coincidence, but I'm not sure.
Barry Ritholtz: (34:50)
What about the flip side of this. From the employee side, "Hey, it's convenient. I don't have to leave my house to three days a week." What about what Jamie Dimon talks about with building a corporate culture, making sure all the members of the team are pulling in the same direction. How challenging is it to manage when everybody is in far flung locations?
Steven Cohen: (35:14)
[crosstalk 00:35:14]
Dmitry Balyasny: (35:14)
You definitely got to work at it, but I think you had to work at it before. To Steve's point, if you got offices all over the place anyway, you have the same problem. How do you get connectivity with your guys in Europe or Asia?
Steven Cohen: (35:24)
I mean, Jamie is sitting in New York, he's got offices everywhere. He's got the same issue. Okay, the real issue is how do you communicate in a way with... He's got a million people who work for him. We have 1000 or whatever, 1500 or whatever the case may be. There's still the same issues. How can you be effective as a leader communicating what you need to communicate across your platform? And can you get your message across in an effective way? And I think you can, and I think it has to be some combination. Listen, people want to be together. They want to feel like they're part of the firm. That's why I think a few days a week makes sense. There's some people who want to be in five days. They can be in five days, I'm not saying they can't be in five days, but I do think we have to be flexible. And if people want to do it differently, and as long as they're doing what they're supposed to do, and they're being part of the firm and communicating, I'm okay with that, I'm flexible.
Dmitry Balyasny: (36:37)
Yeah, I think it's also a bit of a recruiting advantage if you can give people flexibility, right? It's a competitive talent market out there, so our two fastest growing offices are in Austin and Miami.
Ilana Weinstein: (36:47)
Yeah, you can not be flexible. Just the stigma of saying I want to work from home on a Friday or a Monday I don't think exists anymore. and wanting to work in other cities is something that founders have absolutely accommodated. This is not really a work from home issue, the issue of developing and managing people, it's not just about being in the same office. I don't think this industry as a whole, we have a bigger issue, which is this industry as a whole does not do a great job of it.
Steven Cohen: (37:18)
No, speak for yourself.
Ilana Weinstein: (37:22)
There are exceptions to, pardon me, every rule, but as a general rule, the hedge fund managers are great investors, they're not great managers of people. And I think that day in and day out, PMs are drinking from or founders are drinking from a fire hose of information, they're making a ton of risk decisions simultaneously, they may be overseeing hundreds of positions, and you layer on top of that having to motivate, empower, and engage your people. It's tough, but we as an industry have to get better at this because the analysts are coming and telling us that their founders and PMs are giving the minimal attention, and they have to pitch and pound the table to get their ideas in a book in the portfolio, and they don't have a lot of clarity as to why some ideas make it and some don't.
Ilana Weinstein: (38:20)
And so it really speaks to needing to drive mentorship and learning because young people have more options, certainly than when I was coming out of business school, right? The two portholes were really investment banking and consulting and maybe also private equity. Now there's VC, you could join a fin tech company, you can trade crypto, you can go to outer space. I mean, literally the sky's the limit. And so if we want to do a better job of getting the brain trust coming out of school into our industry, we have to get better at this. And I've seen the numbers coming out of HBS to hedge funds and they are going down.
Barry Ritholtz: (38:56)
So let me stay with you, Ilana on a question that you and I have talked about. In general, the financial industry, speaking broadly, has had difficulty recruiting women and people of color. And as bad as the finance industry is, hedge funds lag even that, when you're talking about being a broad manager, how can the industry address that?
Ilana Weinstein: (39:22)
Well, first off, this isn't just hedge funds. I mean, this has been pervasive. When I pre-starting my firm, which was 18 years ago, I was in finance. I was an analyst at a bank. I went to business school when it was barely 30% women. I worked in consulting. I did a whole bunch of things, and I absolutely dealt with my share of sexism, misogyny, and bad behavior. And I am thrilled that when my son goes into the workforce and your daughters go into the workforce, that kind of overt, those bad actors, there's going to be a zero tolerance for. That is a big change from when I was just sort of cutting my teeth. Vis-a-vis, but we're still a young industry and it has to start at the bottom. There's never been more heightened awareness. Sitters and allocators are deploying to women and minority owned funds, LPs are serving their managers as to the diversity, leadership and ownership of their workforce, and heads of talent are being mandated to really focus on recruiting more women and minorities. But at the end of the day, these guys have to have a robust class of diversity candidates to pull from the ranks of Goldman and JP Morgan and fill in the blank bank so that those people can then be trained properly and develop at one of the hedge funds that matter.
Ilana Weinstein: (41:04)
And I say it that way because to our previous discussion, so few funds really control the AUM in this industry. It's not just about joining a hedge fund, it's about joining a winning fund and being trained properly and having a chance to be one of these guys, eventually. But we're still early on. We look at where medical school is, now it's over 50% women, law school's over 50% women. I just saw Wharton's class is now 52% women, so it's going to take time. From the beginning... Let me just say one more thing. From the beginning of when I started my firm, I have always had founders stress the importance of bringing more diversity candidates to the table and asking if there's any way for the successful candidate to please be a person of color or a woman. We don't have where to pull from. So that's when I talk about coming through the ranks and evolving, by the time we get involved, which is at a very senior level, we need a deep bench. Another important point is it's about a desire for racial and gender equality, but it's also a desire for founders we work with, for a diversity of background and thought, because having everybody think the same, having everyone grew up in Virginia, went to Princeton and UVA is a surefire way to drive down returns. You want divergence in terms of points of view.
Barry Ritholtz: (42:43)
So we're down to our very last question the last few moments we have. And I'm going to ask everybody this, and I want to open this. We'll start with Mike. All of you run successful businesses, what's been the biggest surprise running your firm?
Mike Rockefeller: (42:59)
I'll keep it quick here. There's no question, it's the compounding effect of great teams, and what you can do with lots of great people working together.
Barry Ritholtz: (43:12)
Dmitry.
Dmitry Balyasny: (43:13)
I think the scale that you need to be successful, if somebody even, not 20 years ago when we started, but even 10 years ago would have told me we'd have 1000 people to run $12 billion, I'd be like, "That's a lot." Right? But that's kind of what you need these days.
Barry Ritholtz: (43:29)
Go ahead, Ilana.
Steven Cohen: (43:29)
Yeah, Ilana you want to go?
Ilana Weinstein: (43:33)
Just how much I've learned from these guys, I really didn't anticipate how energized, how much we would develop because of all of the information that we get from dealing with the best founders and the best people in this business. We're just so much smarter for it.
Barry Ritholtz: (43:50)
Steve.
Steven Cohen: (43:51)
I mean, it's a people business, and you just have to treat people really well. You have to care about them. If you don't care about them and you treat them like just somebody who you're just gonna plug in, they're going to pick up on that and they're not going to be happy.
Barry Ritholtz: (44:05)
Well, Mike, Dmitry, Ilana, Steve, thank you so much for an informative panel. Let's hear it for our panelists.