21st Century Investing Strategies From Dmitry Balyasny

Barry speaks with Dmitry Balyasny, managing partner and chief investment officer at Balyasny Asset Management (BAM), a firm he co-founded in 2001. They discuss his career path, his thoughts on the current market environment for trading, hedge funds and more. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 2:42Barry Ritholtz?

  On the latest Masters in Business podcast, strap yourself in, another great one. Dmitry Balyasny, he's co-founder of the hedge fund Balyasny Asset Management. They're a $28 billion multi-strat firm, 170 portfolio teams, 2,300 people working in their offices around the world. Started as a trader at Schoenfeld, grew into both a manager and just a person looking at the world and identifying inefficiencies and coming up with ways to capitalize in it. Fascinating conversation. Not only are they one of the most successful multi-strats,

• 3:25Barry Ritholtz?

  but they have a somewhat unusual business manager. They have lots of partners who are employees, traders, business people, fund managers. Really, just a fascinating approach to corporate culture, to creating the right set of incentives and creating a high-functioning meritocracy. Very few people have seen the world of hedge funds develop from a trading perspective the way Dmitry has. I thought the conversation was absolutely spectacular. And I think you will also, with no further ado, my discussion with Dmitry Balyasny.

• 4:04Speaker 05

  Thanks for having me, Barry.

• 4:05Barry Ritholtz?

  And we got to say hello to Mike on the way in. We'll talk about that a little later. I'm fascinated by your background. You immigrated from the Ukraine at age seven. How did that affect your perspective in terms of taking risk and just looking at the world?

• 4:24Speaker 05

  I think it was probably very formative in building a thick skin.

• 4:32Speaker 05

  So, back in Kiev, we're living in Communist Soviet Union. Parents would stand in line to buy jug of milk for a couple hours. I'd never been in a car until I was in the US, never taken a flight until we immigrated. So, very different life there. A lot of discrimination from a religious perspective, an ethnic perspective, being Jewish in Kiev at the time. And then coming here, didn't speak the language. Different type of discrimination for being Russian during the height of the Cold War, although never really thought of ourselves as Russian.

• 5:17Speaker 05

  So, it builds, you know, I think it builds character and builds perseverance and a thick skin to be able to deal with the difficulties and figure stuff out.

• 5:27Barry Ritholtz?

  You go to college at Loyola University in Chicago where you study business. What was the career plan?

• 5:35Speaker 05

  I wanted to invest, so I did a lot of sales-type jobs in high school because I figured out that was the only way you could get paid because you got commission as opposed to salary as a kid. But I wanted to transition from selling stocks as a stockbroker, which I was doing in college, to trading and taking risk and investing. I wasn't sure how I was going to do that and what format, but I was interested in trading and investing from a young age. Read Market Wizards, followed the careers of the top traders at the time, applied to every hedge fund I could find. And I was lucky enough to answer a newspaper ad of all things when Schoenfeld Securities ran a newspaper ad in Chicago when they opened up that office.

• 6:19Speaker 05

  It was the one and only time they actually ran a newspaper ad, so I was lucky that I was following the want ads every week.

• 6:24Barry Ritholtz?

  I recall seeing, you know, traders wanted Schoenfeld Securities. They were down on Wall Street back in the mid 90s. So you began trading for Schoenfeld in the mid 1990s. What was the trading environment like? What were you doing for them on the desk?

• 6:39Speaker 05

  Well, at the time, they were looking for people who didn't have a lot of preconceived notions and kind of systems and strategies that they really thought worked because they wanted to start them from scratch and kind of teach them their methodology, which was working well at the time. And that fit me very well because I was making a lot of money at the time in commissions as a broker, but I was promptly losing at trading because I didn't know what I was doing from a trading standpoint.

• 7:07Barry Ritholtz?

  You had to support your trading habit with commission sales.

• 7:10Speaker 05

  Yeah, exactly. Exactly. And so I would give people lots of great advice and then proceed to go do the opposite in my own trading. So I needed to go somewhere to learn a method that had more structure and discipline. And so they started you with a very small amount of capital and very tight risk limits in terms of, you know, what you could trade, when you could trade, what size you could trade. And from there, once you showed some proficiency, your risk box would expand.

• 7:39Barry Ritholtz?

  Meaning more capital, little lustrains on what you could do and how long you could hold things.

• 7:45Speaker 05

  That's right. And so I started with, you know, very short time periods, very small risk. Didn't make any money for the first year, which was difficult because the salary was zero. But after that, I started kind of getting the hang of it and making money pretty consistently.

• 7:59Barry Ritholtz?

  How did you work your way through the various roles at Schoenfeld? Because eventually you end up allocating for their internal funds, right?

• 8:07Speaker 05

  Yeah, so it was a almost completely flat management structure. So at one point, there were over 1,000 people on the trading side.

• 8:19Speaker 05

  And there was a handful of people in senior management and, you know, virtually no people in middle management. It was very, very flat. And so you were basically a trader, you could run a group of traders, or you were just managing and not really trading. And so I kind of worked my way up from a pure trading position where after I was successful for three or four years, I went to Steven and asked him if I could start hiring people to trade some of my risk. And he was kind enough to say, sure, if you're willing to pay for them, you can hire them. And that was good enough for me. And so I did the same thing. I ran an ad in the paper and I started hiring the initial traders, some of whom are still with us today 25 years later.

• 9:03Barry Ritholtz?

  Wow.

• 9:04Speaker 05

  And then I would allocate some of my risk to them. And then as that became more successful, I hired more traders, eventually analysts, eventually portfolio managers. And we spun off into a division. And while I was doing that, Steve gave me the opportunity to co-invest in a portfolio of hedge fund managers, external managers that we would allocate to. And that was a great experience. I got to meet a lot of the top hedge fund guys at the time.

• 9:28Barry Ritholtz?

  So from building a whole division at Schoenfeld, what led you to found Balyasny Asset Management?

• 9:35Speaker 05

  It was always very entrepreneurial. And so, again, it was like a very flat firm. So I always felt like I was building my own business. And our strategy started to divert from the rest of the firm. Like, we became more fundamental, we were holding things longer. We needed to meet with company managements, we needed sell-side coverage. And so that led to separate office space, separate strategies, different types of PMs and traders that we wanted to hire. And eventually it led to needing to take in external capital, because it was a more, higher capacity, you know, type of strategy that demanded external capital. And so we gradually moved from, you know, an internal group to a division, to a proprietary funded, you know, hedge fund, to a traditional, you know, externally funded hedge fund over a few years.

• 10:20Barry Ritholtz?

  So we'll talk a little later about some of the technology that you guys have built internally. But mid 90s had to be an incredible environment for trading. And it seemed like every month, there was a whole different set of technology that came down the pike. Tell us about your experiences in the 90s. And are there any parallels to what's going on today?

• 10:44Speaker 05

  Well, I think the world has moved tremendously in terms of the trading technologies that people are using today. When I think about, at the time that I first started as a broker, that's really going to date me, but we had one monitor that would be on a little carousel that you would spin around between four different brokers when you needed a quote. And when I started trading at Chillicothe, we had a person whose job it was to be the printer-reader. And so you didn't get your fills electronically, you would get your fills coming back on a printer. And some poor guy's job was to read out your prints, so you would know where you got filled. So you contrast that with all the AI and data technology today that we and others use for

• 11:29Speaker 05

  trading and investing, and it's just tremendously different world. From the overall technologies coming through the pike, the internet, I would say, was bigger change in terms of going from very little interaction, I would say, with technology for most companies at the time, and really most individual people, to tremendously jumping in and trying to figure it out. Although I think AI will likely be a larger, more substantive change over time. We're coming from a place where everybody's already enmeshed in technology in so many different ways, whether you're an individual with your phone, your computers, your laptops,

• 12:12Speaker 05

  or your meta glasses, etc., or a company with zillions of engineers. So I think it'll be more profound over the long term, but the change feels a little bit less than it did at the time.

• 12:24Barry Ritholtz?

  I mean, there's no doubt the internet was a sea change. Being able to plug into the hive mind was huge. Mobile was pretty big. But it sounds like you're saying artificial intelligence has the potential to be even a bigger change agent than...

• 12:40Speaker 05

  Yeah, I think so. I think over time, I think in terms of actual usefulness over time, and ability to make you better and smarter in lots of different tasks at work, at home.

• 12:52Speaker 05

  Et cetera, like I use these apps, you know, every day and they're still, you know, very new and rough. So you but you could see at the rate of improvement, if you project it out and you think about like where these are going to be in five, 10, 15 years, like I think it'll be, you know, pretty transformative.

• 13:08Barry Ritholtz?

  One of the things that really separates Bally Asney Asset Management from many other large multi-strat hedge funds are the amount of technology that you develop internally, tools, apps, research, databases. Tell a little bit, discuss a little bit about what's it like to constantly being on the bleeding edge of technology?

• 13:32Speaker 05

  Sure. So this was a big evolution for us, I would say, over the last, you know, six, seven, eight years. First 15 plus years, we mostly used external technologies and we had a pretty small internal tech team. And the idea was basically give people all the support that they needed, all the supporting type of tools, but do as much off the shelf as you can. And over time, as we expanded different strategies and added, you know, macro and commodities and quant and these more technologically sophisticated strategies, we really found that we needed to build a lot more things internally. And so now today

• 14:14Speaker 05

  we have 500 plus people in technology and other 100 plus people in data teams and AI teams. And we build a lot of really outstanding tools that not only support the investing teams, but really enable a lot of the investing functions, whether it's trading, research, risk, even operational in some aspects. When we have folks come over from other firms, a lot of times they're, because we don't really advertise it that much, a lot of times people are kind of blown away by some of the things that we've developed.

• 14:46Barry Ritholtz?

  So when I think of technology, I think of things, when you say trading, execution, the ability to get best execution. But risk is a big challenge. How do you identify how much risk is within a portfolio? And given that you're multi-strat, how much does the risk cancel each other out? How do you do that analysis? That seems like a moving target.

• 15:09Speaker 05

  It's really important. So first, the overall philosophy, right? Like this is a slugging type of business, right? So if you

• 15:19Speaker 05

  If you contrasted with like high-frequency trading, which is a hit rate type of business, right, you're going to have 99% of your trades or whatever are going to be profitable or tiny loss, right? Right. Tiny, tiny, tiny, and repeat, repeat, repeat. Right. Right, this is more of a slugging type of business. So if we have PMs, and we have 170 investing teams at the moment, right? When you hire- One, seven, oh. One, seven, oh. And so when you hire an investing team, chances are, depending on their track record, maybe 75% of them will wind up working out. If they have a lower track record, they're coming as like a former analyst making a transition to the PM, maybe it'll be 50/50, right? But if you can control the risk, you might lose, you know, 10 million, 20 million, 30

• 16:04Speaker 05

  million on somebody who doesn't work out, kind of life to date in their performance. But the ones that do work out, you're increasing their capital, you're growing their team, and they'll hopefully be with you for 10, 20-plus years, and you might make, you know, hundreds and hundreds of millions off of them, right? So how that plays into risk, right, in order to enable the slugging, you have to have very well-defined risk boxes within which people will operate to enable them to bet on the things that they're really good at betting on and try to exclude as much of the other stuff as possible. So for every strategy, we'll have, you know, stops, we'll have vol targets, vol limits,

• 16:47Speaker 05

  we'll have stress limits, liquidity limits, et cetera, and you create this box that's completely transparent and in partnership with the portfolio manager that you're hiring and customize it and iterate it. And then as their strategy evolves and there's new opportunities, you're, you know, adding to it, subtracting from it all the time, et cetera. But the idea is to create this, this- You know, platform for them within which they can create like a very steady, growing, you know, alpha stream that really plays to their individual strengths.

• 17:19Barry Ritholtz?

  You know, you mentioned market wizards at the beginning, and I can't remember, I've read all of them over the years, the first one a couple of times, I don't remember which trader it was, but the thing that stayed with me was it, your win-loss record isn't what matters, it's how much do you lose when you lose relative to how much you're gaining when you win.

• 17:40Speaker 05

  Exactly.

• 17:41Barry Ritholtz?

  And, and you could lose three quarters of the time if you're losing a little bit, but the winners are big winners.

• 17:45Speaker 05

  Yeah.

• 17:46Barry Ritholtz?

  Net-net, that's a big win.

• 17:47Speaker 05

  Yeah, we find our, it, it varies by strategies, but if you think about equities, in equities, we find portfolio managers who have hit rates in the 50s with decent slugging could be very, very good, right? If somebody's got a hit rate in the upper 50s with decent slugging, like that's, you know, that's an all-star. Or somebody could be more like 50/50, but they have very good slugging, you know, that, that works. It's hard to find somebody with, you know, 25% hit rate and enough slugging to kind of overcome that, because there's just, there's just too many reps.

• 18:17Barry Ritholtz?

  Too much churn.

• 18:18Speaker 05

  But in some other strategies, if you have, you know, commodities, for example, or a directional macro, there you can have like even a lower hit rate if they're very good at sizing, right? Because they have a smaller number of bets at any given time, and they're trying to find like a few larger, bigger trades.

• 18:35Barry Ritholtz?

  Pyramid the winners, ride the trends all the way out, really, really interesting. So, you start the firm in 2001, really the beginning of a lost decade, we didn't get back over prior highs in every asset class, pretty much till 2013. What was it like launching right into the teeth of that dot-com collapse?

• 18:56Speaker 05

  It was a great trading environment, actually, so we did very well. At the time, we were running a lot less capital, we started with $40 million, so, but the markets were less efficient, we were predominantly equity long-short. There was a lot of dispersion, there was a lot of things that were unwinding from the bubble in both directions. We were able to take advantage of that and really grow the, grow the business.

• 19:19Barry Ritholtz?

  What was the biggest surprise to you in terms of the direction the business grew and evolved?

• 19:27Speaker 05

  I would say in those years, there wasn't anything particularly surprising in, you know, 2008, we made people a little bit of money, but we had 50% redemptions. So that was a bit surprising, not particularly pleasant.

• 19:43Barry Ritholtz?

  They, people just, clients just panicked and said, I need liquidity?

• 19:47Speaker 05

  They need liquidity because so we didn't, we chose not to gate people. We had the option in our docs, but we decided we were liquid and we actually went to cash in Q4 of 08.

• 19:57Barry Ritholtz?

  Did, did that cash come flying back in 09?

• 20:00Speaker 05

  Uh, yeah, it took a few years, actually, but eventually, yes, eventually we got some credit for that.

• 20:05Barry Ritholtz?

  If you're positive in 08, what was 08, down 37%?

• 20:08Speaker 05

  Yeah, we were up like 50% or something.

• 20:10Barry Ritholtz?

  Oh, really? That's a win. Anything in the green is a win.

• 20:13Speaker 05

  So that was surprising, but outside of that, it wasn't anything too crazy.

• 20:18Barry Ritholtz?

  Coming up, we continue our conversation with Dmitry Balyasny, discussing what it was like building Balyasny Asset Management into a powerhouse. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

• 20:40Speaker 00

  At KKR, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, KKR has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. KKR, understanding what matters. Visit kkr.com/whatmatters.

• 21:11Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 21:53Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 22:37Barry Ritholtz?

  I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Dmitry Balyazny. He is the founder of Balyazny Asset Management, running about $28 billion in various strategies, and currently your title is Chief Investment Officer. How do you balance that role while simultaneously running a firm of 2,300 employees?

• 23:02Speaker 05

  Well, I think, number one, I have great partners and great management team, so that helps a lot. We have 20 partners today and a lot of top senior managements across all the departments. Besides that, I don't think there's a tremendous amount of difference in the hedge fund business between being a CIO and a CEO.

• 23:22Barry Ritholtz?

  Really?

• 23:23Speaker 05

  It's kind of a commingled type of function, because what are you doing as a CEO? Like, you're trying to figure out where to make money in the hedge fund, right? So that's basically how I spend my time, is like trying to optimize our investment strategies. And that really includes pretty much everything you need to do from a business standpoint. How do you get the best people? Where do you have edge? How do you build your competitive mode around a strategy? How do you break in and wedge into a new strategy? And then how do you grow it from there? Again, that's going to go down to finding the best people and enabling them to execute in that area. How do you support them with the best infrastructure and technology?

• 24:06Speaker 05

  So you have to work with all the departments to figure out how to do that.

• 24:10Barry Ritholtz?

  The one thing that continues to surprise me doing these interviews is how many people have said talent acquisition is absolutely the single most important thing.

• 24:21Speaker 05

  Yeah.

• 24:21Barry Ritholtz?

  They do. It sounds like you're in that camp as well.

• 24:23Speaker 05

  Definitely. It all starts with talent, right? And the talent starts with why are they going to come to you, right? Like, how are you going to differentiate? And that was always kind of the starting point from 25 years ago, because even at that time, we were competing with firms that were, you know, 25 times our size, right? And so how are you going to compete? And you're not going to write the largest check for somebody to show up, right? So you really got to compete on enabling them to be the most successful over time, right? So that's, you know, the insights, the collaboration across strategies, the culture that you can foster, helping them build their teams, helping them build the resources and infrastructure

• 25:04Speaker 05

  around them, coaching, learning from other people's mistakes, you know, having a very transparent environment. All these things that each individually might not be that important, but when you add them all up, it really makes the difference over the arc of somebody's career.

• 25:18Barry Ritholtz?

  And to put a little flesh on those bones, Bailevsky Asset Management has won numerous awards in terms of best places to work in money management, including taking the top award from Pensions and Investments, Best Places to Work. How much of this is comp and how much of this is corporate culture beyond just the dollars?

• 25:42Speaker 05

  I think comp is always part of it. Like, you certainly have to be competitive and you want to run a meritocracy. So the top people that are really driving the performance of the fund on the business side and the investing side should be super well compensated and have partnership opportunities. But besides that, I think the culture can lead to the performance, right? The culture is not just, it's a nice place and people are nice to you, like, that's great. But if you have like a culture that's really, you know, driven, but at the same time collaborative, right? And where people are collegial, but they also push each other and they're also constantly trying to figure out like better ways of doing things, right? And

• 26:24Speaker 05

  Want to succeed themselves and be the best, but also they want the person next to them to succeed and make the firm better, right? Like if you can create that type of culture like that really is one that high performers are going to want to work in and thrive at.

• 26:38Barry Ritholtz?

  Really, really interesting. So, so let's talk a little bit about high performance. You operate a multi-strategy platform. When I hear multi-strat, I think fundamental equity, macro, commodity slash futures trading, arbitrage, systematic quant.

• 26:58Speaker 05

  You got it.

• 26:59Barry Ritholtz?

  Am I missing any? That's a nice list.

• 27:01Speaker 05

  Those are the major strategies. They all have lots of subcomponents. So, you know, we have an arbitrage business, for example, that will include, you know, converts and credit long short and merger arbitrage and, you know, dozen different strategies, right? And commodities, we'll have folks that are trading futures. Directionally, we'll have folks that are doing a lot of RV type tradings. We have physical commodities now that we're building out. So, all these strategies have lots of sub-strategies associated with them, but generally that's, you know, the right idea. And you're constantly trying to enable the next set of strategies,

• 27:42Speaker 05

  right? If you can execute well in the ones that you're in this year, you have the option to figure out how to expand them, which might be more dollars than the stuff you're doing well. But also, what does that give you the right to compete in that's adjacent? And we're always trying to kind of figure out what is the next thing.

• 27:58Barry Ritholtz?

  Really interesting. There was an article, I'm trying to remember which publication I saw it in, that claimed you hired a trader with a $50 million pay package from a competitor. Is that remotely close to the sort of pay packages? And how much does a trader have to generate in profits to qualify for a $50 million package?

• 28:22Speaker 05

  Sure. So, you have to remember that the size of capital the folks are running these days has grown a lot. And so what publications like to do to get people to read the articles, right? Is put in large dollars as opposed to, you know, percentages.

• 28:36Barry Ritholtz?

  Denominator blindness, they leave out the context and it just looks like a big round number.

• 28:42Speaker 05

  Yeah, so you have like these headlines all the time. One on how much people get paid, two on how much somebody made or lost. And, you know, if you have something that says, you know, trader XYZ lost, you know, fifty million dollars, right? And that's like, wow, that sounds like a giant number, but you have to remember, we're managing twenty-eight billion, right?

• 28:58Barry Ritholtz?

  That's a normal drawdown in a bad week.

• 29:00Speaker 05

  Yeah, I mean, a typical portfolio manager, right, might be managing a couple billion in gross market value, right? So, you know, that's two and a half percent, which is not good, but it's not, you know...

• 29:11Barry Ritholtz?

  It's not a disaster.

• 29:12Speaker 05

  No, like, that's kind of the fluctuation that you're gonna get, right? And so from a hiring standpoint, it's the same thing. If you're hiring a trader with a fifty million dollar pay package, for example, one that pay package is composed of lots of different things. It's not all, it's not just, you know, here's fifty million.

• 29:28Barry Ritholtz?

  Including his P and L, for sure.

• 29:30Speaker 05

  Yeah, like, that includes, you know, it might include a guarantee for the time that the person is out of the market. It might include a budget for hiring out their team, right? A lot of these teams are five, ten, in some cases fifteen people, so that's expensive. And it also might include extra upside incentives, which are only paid out if the person delivers a certain amount of P and L. So, you know, they kind of like print one number, but it's actually like lots of different components. Usually with that type of number, you're budgeting that person to generate P and L of a hundred million plus a year.

• 30:06Barry Ritholtz?

  That's a good investment.

• 30:08Speaker 05

  Yeah, and they should have a track record of doing that.

• 30:10Barry Ritholtz?

  Right.

• 30:11Speaker 05

  And if you're right on that, that leads to very healthy returns net to our investor, which, you know, we've delivered over time.

• 30:17Barry Ritholtz?

  That's the game. You have over three hundred analysts and a hundred and seventy PMs. How many different teams do you, are you guys running? A hundred and seventy PMs? Is that a hundred and seventy specific strategies?

• 30:31Speaker 05

  So, it's a hundred and seventy teams. So, within the equities business, for example, you'll have like seventy teams, which sounds like a lot, but you have to remember that that's split across, you know, three distinct equities businesses that all have like a different front end. And it's also split across offices all over the world and folks are, you know, based in London, trading Europe, based in Hong Kong or Singapore or Japan, you know, trading Asia. So it's still fairly specialized.

• 30:59Barry Ritholtz?

  Mm-hmm.

• 31:00Speaker 05

  And each one of those teams will have a mandate where this is the group of stocks that they're focused on in the case of equities, or this is the macro strategy in, you know, RV or emerging markets or rates or directional that they're focused on in macro, or this person focused on, you know, trading gas or trading power and commodities. And they'll build a team of subspecialists, analysts around that.

• 31:23Barry Ritholtz?

  Really interesting. So I mentioned earlier, you've scaled up to $28 billion. Where does the general management strategy and style begin to get altered just by the size? At what point does that... We've seen a number of farms at 100, 200 billion dollars and just the sheer heft becomes challenging. You can't generate alpha at that scale, or at least not the same alpha. How large can this get comfortably?

• 31:58Speaker 05

  It's hard to say. I think that's a function of how markets develop over time. So if you have more companies, active capital markets, the world is growing, more places to trade in, you know, more credit instruments, more equity instruments, more macro instruments, then there's, there's kind of more to do. So if I think of the subset of strategies that we trade today, a lot of these things weren't significant businesses, you know, 10 years ago or 20 years ago. So a strategy like merger arbitrage has been around a long time. A strategy like index rebalancing really got going the last 10, 15 years, right? You know, power trading in the commodities markets, right? Not a lot of people doing

• 32:40Speaker 05

  that 20 years ago. So a lot of these things go from very small strategies to much larger markets, you know, over time. And that enables you to run more vol there, you know, increasing your capacity. The way that we go about it is... Every year, and we update it throughout the year, we measure our capacity for this year and the following. And so we look at bottom up by each team, like how much can they grow at a steady pace? We don't want people to grow too fast. And we don't want people to stay stagnant, right? Like you want to find a healthy pace of growth as you're expanding your coverage, as you're getting used to running larger dollar amounts and dealing with those constraints. And we look at the recruiting. So where can we expand?

• 33:25Speaker 05

  Who is coming in? What does the pipeline kind of look like? You know, we discount that because not everyone's going to work out. But you add those numbers together and that gives you a sense of what the growth path is likely to be. And over time, that's averaged about 20, 25% a year, you know, capacity growth.

• 33:44Barry Ritholtz?

  So you mentioned you're looking both internally and externally at recruiting. When you're looking internally, how do you identify and nurture talents? How can you tell when, hey, this person started out as a trader or a PM, but they really seem to have skills and can manage a larger group? That seems like a really challenging thing to do.

• 34:04Speaker 05

  We spend a lot of time on that, and I think that's one of the keys to how we're going to grow from here on out. Like recruiting is super important, but being able to develop your talent, I think as you have scale and you have more people to learn from, right? That becomes a bigger and bigger slice of your senior talent pool over time. So when we started off, and for a long time, the vast majority of our PMs were recruited, you know, externally. Today, like in Equities Business, which is the most mature of our strategies, 25% in the US are internally promoted. And I wouldn't be surprised if that was 50% in a few years, right?

• 34:47Speaker 05

  Because now you have more senior PMs from up and coming analysts to learn from, more programs that they can participate in to work their way up if that's the path that they want to choose, which, you know, that wasn't available. You didn't have the mentorship and the tools. So how do you help people and select?

• 35:09Speaker 05

  It's both quantitative and qualitative. So on the quantitative side, we try to measure as much as we can. So we have data on people's recommendations, right? Not just on the ultimate trades, but the data on their recommendations. And you see what is the performance and we track that, right? So you try to disaggregate the performance of the analyst from the PM and see if who's driving value. And if it's a particular analyst is doing great, like we want to make sure that person is getting more authority, more autonomy and more leeway over time, right? More growth opportunities. And the best growth opportunity for them might be with the team that they're on. They might become a more senior analyst.

• 35:52Speaker 05

  They might become a partner on that portfolio. Or they might raise their hand at some point and say like, "Hey, I want to be a PM." And we want to make sure that we facilitate a path to that if we agree that they are talented. And part of that is in partnership with the PM that they're working for. You don't want the person to just leave and go somewhere else to take that opportunity. You want to make sure that they replace themselves. They work in partnership with the PM. Maybe they co-run something for a period of time and then they have the opportunity to do their own thing. So it's definitely a combination of those. And it's the same thing on the business side. Like you're always on the lookout for emerging business leaders who can manage others. And we have a lot of leadership development that we do

• 36:33Speaker 05

  and also utilizing external coaches as well to help with that.

• 36:38Barry Ritholtz?

  That's really interesting, external cultures. You mentioned mentorship. How important is mentorship to the firm? And how significant was it in your own professional journey?

• 36:49Speaker 05

  Well, that's where a partnership culture is really important, right? So I think it's still fairly unusual in hedge funds, especially in our type of fund. And we've always wanted to build a true partnership where people own real equity in the business. You know, they buy in with their own money. Uh, they participate in all the economics of the business. And we have partners who are coming from the business side, running a particular, uh, department. Uh, we have partners who are managers, uh, heads of strategies on the investment side, and we have portfolio managers. And so that dynamically creates like a culture where folks are incentivized to make the firm better, to make someone else better.

• 37:32Speaker 05

  And they're obviously much more willing and excited to be mentors, uh, in those situations. And I think when you start with that, uh, and I started with, you know, two of my co-founders, Scott and Taylor, you know, 20 plus years ago, uh, in a partnership type structure. And I think that then flows down through the organization. And so now today we have, uh, mentors for, uh, you know, interns coming up, right? And you have mentors for, you know, younger, uh, associates in different areas of the firm. And then it goes, you know, all the way up and down the firm.

• 38:04Barry Ritholtz?

  Hmm, really, really.

• 38:05Speaker 05

  And so for myself, sorry, I didn't answer that question.

• 38:07Barry Ritholtz?

  No, but you did. Yeah, let's hear about your own mentorship.

• 38:10Speaker 05

  Uh, I mean, I certainly learned a lot from Steve Sholfo, working, working with him at the time and got really good opportunities there. Uh, I think at a young age, it was more, um, you know, certainly work ethic from, from my folks. Uh, and then it was a lot from, uh, sports, right? I did a lot of, uh, you know, basketball and, you know, taekwondo and things like that. And, uh, seeing kind of what was possible. Like I remember, uh, as a kid, like watching, uh, Taekwondo demonstration where our instructor, uh, Master Shim, uh, it was like a very slight Korean guy. He was probably, I don't know, 140, 130 pounds. Um, and he punched through a stack of, uh, seven cinder blocks.

• 38:52Barry Ritholtz?

  Hmm.

• 38:53Speaker 05

  Punched through. And, uh, you know, seeing that as a kid, you're, and I went to like examine the bricks after he did that. And like tried to punch it and I was like, wow, you know, that hurt. Um, and just. Seeing that just kind of shows you kind of what's possible because every day after practice you would see the guy sit there punching a lead slab, you know, for, you know, I don't know, 30 minutes.

• 39:16Barry Ritholtz?

  Wow.

• 39:17Speaker 05

  Right, and it just adds up over time.

• 39:19Barry Ritholtz?

  Reminds me of the demonstration This How Old I Am Bruce Lee did with the one-inch punch. Do you recall that?

• 39:27Speaker 05

  Yeah, I was just showing that to my kids the other day.

• 39:28Barry Ritholtz?

  Just an inch and he's also 140, if he weighs, soaking wet 140. And it's amazing the focus and power that you can create in such a small...

• 39:39Speaker 05

  That's exactly the thing. It's focus and perseverance, right?

• 39:42Barry Ritholtz?

  Mm-hmm, really, quite fascinating. So, let's talk a little bit about the current environment. I was kind of fascinated by something you told your team. You guys are trading too much and not investing enough, unquote. Explain.

• 39:59Speaker 05

  I think one of the keys to enduring success in the money management business is finding a balance between trading and investing. And you have to be true to your DNA and obviously the type of firm that you're at, right? But within each type of firm and each type of strategy, there's always this, you know, tension, right? Because you can't survive in a hedge fund-type model, you know, just being a long-term investor.

• 40:39Speaker 05

  And you can't really scale in a significant growing hedge fund being just a super-active trader, right? So you need some combination of the two. And so what we try to do, both at the individual level and at the strategy level, is help folks find that balance. Part of it is just seeing what's working and part of it is a lot of statistical analysis that we do. On each of the teams. So when I made that comment, we were coming out of a period where I noticed that folks were really trading a little bit too much in the fundamental equities business. And we're like a little bit overly focused on each data point, or we're kind of missing the forest from the trees, right?

• 41:23Speaker 05

  And we were chopping ourselves up a little bit too much, missing some of the bigger winners, and creating a lot of trading slippage costs. So we really worked hard with the teams to find more balance with that, like find some positions that you can really be a longer-term investor in. It doesn't have to be years and years, but it could be months and quarters and supposed to days to weeks. And find investments where there's multiple ways to win, where you're not playing for one particular data point. You're playing for a whole series of data points that's going to revalue that security over time. And that's been very effective, I would say.

• 42:07Barry Ritholtz?

  So how much of this is a function of the environment that we all find ourselves in at any given moment? Twenty-two was a double-digit down year for stocks and bonds, but it was followed by twenty-three and twenty-four, both years, back-to-back, plus 25%. At least for US equities. If you're shortening up your investing timeline in a plus 25% year, is it just as simple as, hey, you're leaving too much money on the table by trading?

• 42:36Speaker 05

  Well, for us, it's a little bit different because we're running pretty much market-neutral in almost all the strategies. So if you're running market-neutral, whether the market's up 25 or down 25, you're always going to have half your portfolio that's losing money on an absolute basis.

• 42:50Barry Ritholtz?

  But you're trying...

• 42:51Speaker 05

  Yeah, but you're trying to make the spread, right? Like, you're trying to make the spread between your longs and your shorts, right? So what influences our trading more than the absolute direction of the market is the volatility of the market. So if you're in a period that's very high vol, you're naturally going to be trading more to manage your risk. And also because you're getting stopped on things where they're hitting your targets like fairly quickly. And high vol is associated with fundamental events like changing very quickly.

• 43:22Barry Ritholtz?

  2022, 500 basis points of Fed hikes.

• 43:25Speaker 05

  So you're going to trade more during those periods.

• 43:27Barry Ritholtz?

  April of 2025.

• 43:28Speaker 05

  Exactly. Versus periods where things are sort of slowly, you know, trending. And that's okay. But over the course of the year, right? Those periods are going to balance out. Some will be higher vol, some will be lower vol. You want to find like the right amount of turnover to where you can capture your alpha, capture those relative mispricings and move on to the next thing. That generate a strong sharp combined with like enough capacity, right? You can have a very high sharp and low capacity. That doesn't really help in a scale, you know, hedge fund, right? You can't eat your sharp, but you need enough sharp to be consistent putting up a P and L that kind of matters for the firm and that matters for the team that you're running.

• 44:10Speaker 05

  And so for every strategy, like we try to come up with like, what is a reasonable range? Right? And it might be higher for, you know, a tech portfolio manager than, you know, utilities portfolio manager, right? But each of them should have a range that sort of is optimum for their style. And we try to help them, you know, find that.

• 44:31Barry Ritholtz?

  So with the benefit of hindsight, I'm looking back at 2024, a fairly low vol year. Hey, maybe we should be trading a little less and holding a little longer. And then 2025, volume spiked and at the end of Q1 and into Q2. All right, you guys can chop it up a little more. Is it just that simple or?

• 44:50Speaker 05

  Yes, but again, I would say the more nuanced answer would be there's lots of different types of trades that each person does. And you don't want any PM doesn't want their portfolio to just be one type of trade.

• 45:06Speaker 05

  Right. So you might have short term trades, medium term trades, long term trades, right? Structural trades, tactical trades, risk mitigation trades, et cetera. There's lots of different types of trades. And people run into problems when they get too focused on one kind of thing, right? And then when that thing is no longer working, it's very hard to then reinvent yourself because you don't have any other, you know, irons in the fire. Right? So again, we're trying to run a lot of analysis and find like, what is the team really good at? Make sure that's being expressed in the portfolio. Make sure there's enough balance of different types of trades and that they're not betting on things that they don't really have views on that can take them out of the game before

• 45:50Speaker 05

  the things they do have views on pay off.

• 45:52Barry Ritholtz?

  Coming up, we continue our conversation with Dimitri Balyazny, co-founder of Balyazny Asset Management, discussing the current market environment for trading. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 46:21Speaker 01

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• 48:54Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio and some of you are watching this on YouTube. My extra special guest this week is Dmitry Balyazny. He is the co-founder of Balyazny Asset Management, a multi-strategy hedge fund running over $28 billion. Do the different teams hedge their own positions or is that a function of firm-wide risk management and somebody else?

• 49:21Speaker 05

  We do both. So each team is responsible for running within their risk parameters. So they'll have, you know, in the case of the long-short portfolio manager, they'll have an ideal risk, right? How much of your risk is outside of factor risk, right? That should be, you know, sixty, seventy, eighty percent of your risk, depending on the portfolio and the style of the PM. But it's basically the vast majority of somebody's risk is their stock picking alpha, right? Depending on their skill and things like picking the right industry or trading the directionality of the market around, we might give them some more room or less room, you know, to do that. If you're a directional macro trader, you're gonna have, you're not gonna have that constraint

• 50:04Speaker 05

  because you're paid to directionally bet on the market, right? But you're gonna have other limits like stress limits, right? So if your directional bets don't work out and there's a gap tomorrow, you know, how much are you gonna lose in a stress scenario? So you have to, if that number is too high versus the agreed upon risk limits, you have to do something in your portfolio to hedge, you know, that, that risk, right? So it's a little bit different for each type of strategy, but the common philosophy is you wanna be able to run it to maximize your return while staying in the game, right? And delivering a relatively steady source of alpha over time.

• 50:46Barry Ritholtz?

  It's interesting because they're called hedge funds, but many hedge funds don't hedge. And it sounds like Balyasny really makes an effort to make sure that as a risk management approach, anything that's potentially downside, as you said, a gap, has to be hedged.

• 51:04Speaker 05

  Yeah, I mean, you're looking for consistent absolute returns. So how do you get that? Right? You need specialists who have an edge in a particular strategy, right? And they need a portfolio construction or risk management approach that maximizes that edge, maximizes the capacity of dollars they can earn off of those advantages that they have, and minimizing the things that can create large drawdowns that they don't really have, you know, edge in betting on. And so that's the analysis that you're constantly running and iterating on with the teams.

• 51:41Barry Ritholtz?

  So I heard a fund manager say, "We have no competition because none of us in our space have market share. For the most part, we're all less than 1% market share." How do you look at the competitive environment for other multi-strat firms? It seems like add them all up and you get a decent number, but there are, what are there, 11,000 hedge funds?

• 52:05Speaker 05

  Yeah, the way we think about it is we're not really competing with 11,000 hedge funds. So I think what you've seen over the last 20-plus years is a consistent market share gain from the larger platform firms, right? And now I think there's really like four or five, right? And if you look at the private equity industry, it's pretty similar. Like, there's probably more than 10,000 private equity funds. But the vast majority of dollars, vast majority of alpha, vast majority of people are really at, you know, half a dozen.

• 52:40Barry Ritholtz?

  Fat head, long tail.

• 52:41Speaker 05

  Yeah. So hedge fund industry's really headed in that same, you know, direction. So we really compete with, you know, half a dozen firms. And now there's also competition from some of the high-frequency firms that are kind of going upstream to some of the longer-duration discretionary strategies. And, you know, we're doing more quantitative stuff going the other way, right? So maybe there's a couple more. But you're really competing with half a dozen to a dozen firms that are running, you know, specialist strategies at scale. And then everyone else in those strategies, you kind of look at as like a generalist, you know, participant. And it's great to have generous participation. We want as much as possible from, you know, retail, from other funds, from, you know, prop, from banks.

• 53:25Speaker 05

  Like, the more liquidity there is, the more generous participation there is. You know, I think the better for specialized firms.

• 53:32Barry Ritholtz?

  So the current environment, kind of hard to compare to any other era. On the one hand, we had a fairly robust economy coming into 2025, following a whole bunch of Fed hikes. Now we're expected to resume Fed cutting. By the time this airs, we're probably 25 basis points lower than where we are today. The whole tariff start-stop, and now back to the litigation. The Supreme Court agreed to take to that. It looks like inflation is starting to percolate a little bit as the labor market seems to soften. How does the firm look at all of these macro cross currents? Are they significant? Or are they just background noise or somewhere in between?

• 54:16Speaker 05

  Well, I would just say it's a really interesting, fluid environment, particularly for macro and long-short equities. Because there's just so much change. So if you think about like, what is the worst environment to be in? It's not when everything is clear. Because when everything is clear, there's like no volatility, there's no change. It's hard to get any dispersion. So that environment might be good for passive strategies, but not good.

• 54:43Barry Ritholtz?

  Sideways markets don't really help.

• 54:45Speaker 05

  Yeah, so now there's a ton of money sloshing around, trying to figure things out, and that's a great environment, right? So if you think about this year on the macro perspective, right? You went from a very, you know, positive view in January of how everything was going to play out, to, you know, kind of the tariff mess and very pessimistic view of how, you know, the US was going to play out and what was going to happen to markets. We're down 20% in the S and P briefly. And now you're, you know, right back up and still like a lot of things kind of swirling around as to how it's going to play out. To your point on rates and inflation, there's been a lot of change. It's created a lot of relative value opportunities as you get different hiking cycles, different cutting cycles in different markets.

• 55:31Speaker 05

  Like, that's great for macro. In equity land, you have all the changes, not just from the economy, but from AI and how that's impacting tech, but also impacting companies that are customers or going to be run over because of AI, like creates great long short opportunities. So I think it's a really fascinating market. I don't have any giant prediction of how things are going to play out tomorrow, but if you have strong teams who are on top of the latest data points and you can figure it out a little bit ahead of the next person, just tremendous opportunities. Like this last week, Oracle reported a quarter, you know.

• 56:09Barry Ritholtz?

  Crazy, 37%.

• 56:11Speaker 05

  Right.

• 56:12Barry Ritholtz?

  For a giant company, amazing.

• 56:15Speaker 05

  I mean, when was the last time, you know, a company like that moved 35, 37% in a quarter?

• 56:19Barry Ritholtz?

  Right, the dot com collapse and it was in the wrong direction.

• 56:22Speaker 05

  Yeah, I mean, amazing, right? So if you could figure that out, or, you know, I think of some of these fintech companies circle when public, right? Usually, public offerings are pretty efficiently priced. You know, this one goes up 400% after it starts trading, right? And then it goes down 50%, you know, a month after that. So in the first three months, like think of the travel and the stocks. So amazing opportunities, right? If your teams can figure that out. So, you know, we're out there working hard, doing the research and, you know, figuring out the market.

• 56:51Barry Ritholtz?

  So it doesn't sound like you think the AI theme is overdone, but it certainly is creating a little more volatility and a little more opportunities.

• 57:00Speaker 05

  Yeah, I think the reality when we look back, you know, in 10 years or in 20 years, in the actual outcomes that have happened, it's probably underhyped. In terms of the stock prices across the board, like that's harder to say. Like there's some that are probably way overhyped, there's some that are probably under. A lot of companies have moved from one bucket to another where they were in the loser bucket and actually it turns out maybe they're a winner, or vice versa, where people got too optimistic and maybe they don't really have anything that's defensible and differentiated. So I think there's a lot of alpha to be gained in figuring that out.

• 57:41Speaker 05

  And it's hard to find things that are, you know, super bargain priced that have anything to do with AI. But in terms of like the longer term potential to really transform how people work and how companies work, I think it's probably underhyped.

• 57:56Barry Ritholtz?

  I've been fond of thinking of this in terms of, hey, the magnificent seven certainly have been overhyped, but the magnificent 493, people haven't really been paying attention to.

• 58:10Speaker 05

  Yeah, I mean, it's a good question, like, have they been overhyped, right? If you look at the dollars in earnings and cash flow that they're generating.

• 58:19Barry Ritholtz?

  Pretty impressive.

• 58:19Speaker 05

  And the market caps that they're growing, like, I think they're, you know, executing amazingly, amazingly well. I think it's quite different from what we had in the dot com era where companies weren't really making, making money. So that's one difference. The other 493, I think there's a lot of, you know, headwinds and tailwinds. So some companies are going to figure it out, right? And they're going to kind of make the leap into the future and figure out how to be much more efficient. And you're starting to see that in some of the commentary on the earnings calls where margins inflect positively for, you know, the way that they figured out how to leverage the tech. And others are going to disappear, right? So I think it's going to create a lot of opportunities.

• 59:02Barry Ritholtz?

  So the trader in me sees, recording this on the 15th, another set of all time highs. I always learned on the desk, all time highs are bullish. What's your perspective on all time highs?

• 59:16Speaker 05

  Yeah, I think like you have this two tiered market that you mentioned where you have the kind of tech leaders and AI leaders and everything else. Everything else, companies definitely got hurt more with all the tariff ups and downs and inflation ups and downs earlier this year. That seems to be certainly calming down. And the partially, you know, top down is calming down and partially bottom up companies are figuring out, you know, how to navigate these things and maybe it's not as troublesome as they thought. And so you're seeing like better execution and probably a little bit more positivity

• 1:00:00Speaker 05

  from companies than you were seeing, you know, certainly six months ago. And that's starting to get reflected and the market's broadening out a little bit. But, you know, the largest, you know, tech companies certainly have, you know, tremendous advantages that they're continuing to press.

• 1:00:15Barry Ritholtz?

  So, last of our regular questions. What are traders and investors not thinking about or talking about, but perhaps should be? What topics, assets, geography, policy, data points? What's getting overlooked but shouldn't?

• 1:00:31Speaker 05

  I think it's, I don't know if it's getting overlooked, but I would say when you think about AI, where it's going, what are the ramifications for every type of company? Right? So, at the moment, while AI is making us much more productive and efficient, we haven't let go of one person because AI has automated their job, right? Like, we're just hiring more AI people. Right? But if you look out, you know, five years from now, is that still going to be the case? You know, probably not, right? Like, some jobs are going to get automated. Right? And, you know, we're kind of on the, you know, high end, I would say, of, you know, skills that are necessary to work at a leading hedge fund.

• 1:01:13Speaker 05

  If you think of like a typical company where there's a lot of folks doing like very bureaucratic type of things, like a lot of pretty mundane tasks, like, all that stuff is going to be automated. I don't know if it's in a year or in five years, like, but somewhere in that timeframe, it's going to be automated.

• 1:01:28Barry Ritholtz?

  We're starting to see that with, with the entry-level jobs.

• 1:01:31Speaker 05

  Yeah.

• 1:01:32Barry Ritholtz?

  Under thirty unemployment is like 9.9%. Double regular unemployment.

• 1:01:37Speaker 05

  Yeah, exactly. And so, as you think about that, like, what does that mean for every type of company, right? If you're... A company that can really harness that and you could produce your products, your services at a much lower price point and you figure that out ahead of the competition, like your margins might explode to the upside. On the other hand, if everybody in your space is doing that, like maybe your margins are actually going to collapse, right? Because everybody's going to drive down pricing. And then how does it flow downstream? Like, do you need as much office space if you're going to have less people in a particular area, right? So like, all these kind of things, I think everyone is focused, because there is a lot of volatility, everyone is focused very much on like, the next quarter. But if you think out, you know, two, three, four years, like, how's this space going to look?

• 1:02:21Speaker 05

  And that's kind of the balance of trading and investing, you know, you've got to have one eye on each.

• 1:02:25Barry Ritholtz?

  And before I get to my favorite questions that I ask all of my guests, I have to ask you about some of the philanthropy you participate in. Tell us a little bit about the Atlas Fellowship and some of the other things that you've been doing over the past couple of years.

• 1:02:42Speaker 05

  Sure, so this was a program that my wife Rebecca and I started, I think this is five years ago now. We were looking to start an initiative to help kids go to college who were a bit under-resourced, maybe first, and their family to go to college, et cetera. And as we're looking at these scholarship opportunities, particularly in finance, we couldn't find any program that had a combination of internships with scholarships. There were some that had, ones that were captive to a particular company, but then you were, you know, beholden to work just at that company forever. But there wasn't anything that was diverse, right? Where someone could get real exposure across the industry.

• 1:03:24Speaker 05

  And so, that's what we started with, with Atlas Fellows, where we give kids who are super bright, driven, merit-based scholarships, right? So these are like, top students in the class. A lot of times from diverse backgrounds from with no connections to finance, right? And they get scholarships of up to 20 grand a year for four years. And in addition to that, they get fully paid internships at finance firms for all four years.

• 1:03:53Barry Ritholtz?

  Not just your firm, but a broad variety.

• 1:03:55Speaker 05

  Exactly. So we take them their their first internship when they're coming out of high school. And that one is typically done at BAM. And they work either our investing teams, our data teams, our tech teams, our business teams. And then the next year, they go to work at a bank, or they go to work at another hedge fund, or they go to work at a prop firm or a VC firm. And every year, they they rotate. And we just had the first cohort graduate last year. They all got jobs in finance, some in Chicago, some in New York. And employers are really competing over the kids, like they're super smart, driven, passionate kids. And now they've had four years of finance internships at top firms. So I think it's working really well, and we're working to to scale it up.

• 1:04:36Barry Ritholtz?

  They become a hot commodity.

• 1:04:38Speaker 05

  Yeah, exactly. And just like the fund, like now we got 100 kids in the program, and we're trying to really scale it up to hundreds.

• 1:04:43Barry Ritholtz?

  Wow, that's great. All right, so let's jump to our favorite questions that we ask all of our guests. Starting with, we talked about mentorship at BAM. Let's talk about who were your mentors? Who shaped your career? You mentioned Steve Schoenfeld. He had to be significant. Tell us about him and anybody else that made a difference.

• 1:05:03Speaker 05

  Yeah, I think what Stephen did really well at the time in the firm was it was a super entrepreneurial type of environment. Everyone was kind of in business, running your own little business, right? And most folks kind of stayed as one man shops, right? As a one man trading unit, right? But I had the opportunity to kind of build that into a unit of, you know, five, and then 10, and then 20, and then 30, and then, you know, then we spun off. So just the freedom and support, you know, to to do that was really helpful, right? And then a lot of business learnings from, you know, seeing how he allocated to different

• 1:05:47Speaker 05

  people, seeing how they manage risk, like that was very, you know, very helpful. And then philosophically, I would say the biggest impact was reading Atlas Shrugged in college, which I read in an English class in college. That really kind of articulated a moral, you know, philosophical framework around, which I think makes it much easier to build a successful business, right?

• 1:06:13Barry Ritholtz?

  Hence the name Atlas.

• 1:06:15Speaker 05

  Yeah, exactly. It's the name of our fund and the name of, you know, our scholarship program. I think a lot of times people have all sorts of conflicts with, you know, being successful and at the same time, you know, being a good person and helping the world. And I don't actually think there's any conflicts. And that objectiveist philosophy in her work, like, really does a good job of laying that scaffolding for people. And I think it makes it, you know, much more fulfilling and less conflicted to also be successful in all realms.

• 1:06:51Barry Ritholtz?

  So, since you mentioned Atlas Shrugged, let's talk about books. What are some of your favorites? What are you reading right now?

• 1:06:58Speaker 05

  Yeah, that's definitely the number one. The current one that's on my bookshelf is a fun one. It's from this explorer. I didn't know there were explorers anymore, but there are apparently. And we had this guy, Mike Horn, at our VC conference. We do like a public-private VC conference every year called Elevate. And we had him as a guest speaker. And we had two guest speakers this year. We had Steve Kerr, the coach of the Warriors, and we had Mike Horn. Steve went first, and he was amazing and had great, you know, stories on teamwork and collaboration and work ethic and Michael Jordan stories and Steph Curry's stories. So it was great. And then Mike had to follow him. And I was like, oh, my God, how is this guy gonna follow Steph Kerr?

• 1:07:38Barry Ritholtz?

  That's a tough follow, right.

• 1:07:39Speaker 05

  And my partner Scott brought him on. And Scott's great at finding, like, talent that's, you know, other folks haven't discovered yet. And this guy, you know, has circumvented the equator several times around the world, you know, self-powered walking, et cetera. He's gone to the North Pole, South Pole, swam the Amazon, like, all these, you know, insane stories, one after another. And he's got a book called, I think it's called Nothing Is Impossible, or something along those lines. And you started, like, you shake hands with this guy, and he's not like a particularly big guy, but you, like, crushed my hand. And I go, Mike, how do you get, and he's 60 years old, how do you get this handshake?

• 1:08:21Barry Ritholtz?

  Oh my gosh.

• 1:08:21Speaker 05

  And he's like, well, I, you know, kitesurfed across Antarctica and that involves, you know, holding a kite across, you know, frozen Antarctica for 14 hours a day as this huge wind is pulling you along. And it's like, okay, that's, that's how you get

• 1:08:36Barry Ritholtz?

  Builds up a little grip strength.

• 1:08:37Speaker 05

  That's how you get some grip strength.

• 1:08:38Barry Ritholtz?

  Yeah.

• 1:08:39Speaker 05

  Uh, but he had like these amazing survival stories and just mental fortitude stories that I think really relate to trading and investing. Uh, so he was an awesome speaker and so I just got his book.

• 1:08:50Barry Ritholtz?

  Huh. Um, have you ever read Endurance, the Shackleton story?

• 1:08:54Speaker 05

  Yes, yes, I read it, watched the movie. That one was hard to sit through.

• 1:08:57Barry Ritholtz?

  Uh, the book is just, like, it couldn't be fiction because nothing is believable. It's so amazing it had to be real.

• 1:09:04Speaker 05

  Yeah, this is along those lines, but less abusive and more fun.

• 1:09:08Barry Ritholtz?

  Um, let's talk about streaming. Anything interesting that you're watching or listening to these days?

• 1:09:14Speaker 05

  Uh, I mean, shows I like, uh, I really enjoyed the Three Body Problem, those on Netflix. That was a fun one and then

• 1:09:19Barry Ritholtz?

  The book is a tough slog.

• 1:09:21Speaker 05

  I read the book actually afterwards.

• 1:09:22Barry Ritholtz?

  So it's a little challenging because it's originally

• 1:09:26Speaker 05

  Chinese.

• 1:09:26Barry Ritholtz?

  Chinese and transit, but, but the show is really

• 1:09:28Speaker 05

  The show is really good. And, and the, and the books, the books, like the creativity in the books are really fun. Um, so that was a good one. You know, Yellowstone, uh, is great. So the usual ones there. I'm listening to, I think podcasts are like the greatest invention in the last, you know, five, 10 years of, of, um, not that they weren't around before, but like popularized in terms of being able to just expand your, your knowledge set in a very efficient way. So I try to listen to as many as I can. I, I listen to, you know, a lot of yours. I listen to a, a lot of Tim Ferriss's. He's got all sorts of super interesting people on there. The Invest Like the Best ones, uh, there's a ton on there. So there's a lot of finance ones. There's a lot of VC ones I enjoy. I was just listening to one, uh, they had Vinod Khosla and then another one with Marc Andreessen.

• 1:10:13Speaker 05

  They're just like super thought provoking. Uh, and so I, I encourage like all our young people coming up that, that ask just, you know, you have this like amazing resource you could tap, you know, Spotify and And you got, you know, a thousand different podcasts from world's best people in every field that you can listen to sharing their insights.

• 1:10:29Barry Ritholtz?

  There's no excuse to be bored these days.

• 1:10:31Speaker 05

  No, it's amazing. I remember when I was coming up and I wanted to hear like, how do hedge funds make money, right? Like, you couldn't figure that out. Like, if you had no connectivity to a hedge fund, like, how are you gonna figure that out? You read Market Wizards and now what? Right? But besides, uh, besides that, reading all the books that are available now, like the podcasts, like, amazing resource.

• 1:10:50Barry Ritholtz?

  Absolutely. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either trading, investing, multi-strat hedge funds?

• 1:11:01Speaker 05

  I mean, one is just follow your curiosity, uh, which hopefully leads to a passion of something that you want to really do, right? Um, don't go into finance, hedge funds, whatever it is, because your, your friend is making a lot of money, right? Like, you gotta be interested in the work. Like, you gotta be driven and curious and hopefully passionate about what it is that you're doing because, um, you know, it's like pro sports or anything else, like, just because, you know, LeBron makes a lot of money, doesn't mean you're gonna go make a lot of money playing basketball, right? Um, you know, one, you know, he's 6'11", but besides that, like, he's put in a lot of work over the years, right? And it's because

• 1:11:44Speaker 05

  he loves the game of basketball, right? If you don't love it, you're not gonna put in the work. And, and trading for sure, if you're, if you don't love the process, and you don't love sitting there looking at the screen and trying to figure things out, uh, you're not gonna survive the emotional ups and downs, because there's lots of downs in addition to the ups when things, uh, work out. So that's the first thing. The second thing I would say is go to a firm that's growing, right? And where there's a culture that, where you can learn from others, right? Where you can get good mentorship, there's top people you can learn from, um, and you'll have some amount of access to be able to, to do that. The particular thing that they're trading or investing or how they're doing it, like,

• 1:12:28Speaker 05

  that's a lot less important, because you might change, the company might change. And then the third thing is like, once you're in a seat that's a decent seat, uh, you know, ask for feedback. Like, here's what I did. Here's what I think I could have done. You know, what do you think? Right? Don't ask for feedback when the market opens or the person's like in the middle of a, you know, disastrous day. But when things are quiet, right? Early, late, right? Lunch hour. Like, you know, get, get feedback proactively, right? Don't sit around waiting for your year-end review to see how things are going. And, you know, iterate it together with, you know, the people that you're working with.

• 1:13:05Barry Ritholtz?

  And our final question. What do you know about the world of capital markets, trading, investing today that would have been useful in 1994 when you were first starting out?

• 1:13:15Speaker 05

  I think the things that we've been doing the last, you know, five years, I wish I had figured those out earlier. So investing more aggressively across strategies, right? I think we were too equity-heavy for too long. We weren't serious enough about how do you build those strategies outside of equities? And not serious enough about hiring top people to manage those areas and then building like all the tech and the infrastructure that you needed to really be competitive and leading in those areas. So I wish I would have figured that out a little bit, a little bit earlier and pushed

• 1:14:00Speaker 05

  at it harder. But I think it's on the, on the right trajectory now.

• 1:14:05Barry Ritholtz?

  Dmitry, thank you for being so generous with your time. This has been absolutely fascinating. We have been speaking with Dmitry Balyasny, co-founder of Balyasny Asset Management. If you enjoy this conversation, well, check out any of the 550 we've done over the past 11 years. You can find those at iTunes, Spotify, Bloomberg.

• 1:14:30Barry Ritholtz?

  Here on YouTube as well. Check them out. They're really a great collection of resources. And be sure to check out my new book, How Not to Invest: The Ideas, Numbers, and Behavior That Destroy Wealth and How to Avoid Them at your favorite bookstore. I would be remiss if I did not thank the crack team that helps us put these conversations together each week. Alexis Noriega and Anna Luke are my producers. Sage Baumann is the head of podcasts here at Bloomberg. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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