Latest / Macro Hive Conversations With Bilal Hafeez / Ep. 352: Richard Schimel on Platform Evolution, Collaborative Culture, and Navigating Market Risks

Transcript

Ep. 352: Richard Schimel on Platform Evolution, Collaborative Culture, and Navigating Market Risks · Macro Hive Conversations With Bilal Hafeez

0:02
Welcome to Macro Hive Conversations with Bilal Hafeez.
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0:56
Now, on to this episode's guest, Rich Schimmel.
0:59
Rich is the co-founder and co-CIO of SyncTiv
1:02
Capital Management, a leading multi-strategy alternative asset manager.
1:07
Rich has over 30 years of experience in the investment
1:09
management industry.
1:10
Prior to SyncTiv, Rich was head of Abtegon Capital, a
1:13
division of Citadel, where he served on the firm's portfolio
1:16
committee.
1:17
And prior to that, Rich founded and served as the
1:19
CIO of Sterling Ridge Capital.
1:21
And earlier in his career, Rich co-founded Diamondback Capital,
1:25
where he co-managed the firm, as well as portions
1:27
of the firm's overall investment strategy.
1:30
And before Diamondback, Rich began his buy-side career at
1:32
SAC Capital, where he was a portfolio manager.
1:36
Now, on to our conversation.
1:38
Greetings and welcome, Rich.
1:39
It's fantastic to have you on the podcast show.
1:42
Thank you.
1:42
Thank you so much for having me.
1:44
I'm looking forward to the conversation.
1:45
Now, Rich, for the benefit of our audience, I always
1:48
like to ask my guests something about their origin story.
1:50
So it'd be great to hear from you.
1:51
where you went to college, what you studied, and was
1:54
it inevitable you'd end up in finance?
1:57
So I went to the University of Michigan, studied economics,
2:03
and, you know, I somewhat always knew that I wanted
2:07
to be in the financial world growing up.
2:11
My father was a stockbroker, he still does it at
2:14
85 years old, four days a week.
2:17
And so, you know, it was something inevitable.
2:20
I did a lot of summer internships, high school, college,
2:24
and didn't know exactly what I wanted right, you know,
2:28
coming out.
2:28
But I wound up on a bond trading desk at
2:32
Payne Webber at the time, and my career started from
2:35
there.
2:36
And so you started off in bonds, and, you know,
2:39
you've ended up where you are now, SYNCTIV, you know,
2:42
which is, you know, a leading multi-asset fund, you
2:46
know, with an equity sort of focus.
2:47
So how did you find your grounding or your initial
2:50
start in fixed income?
2:51
I mean, how and bond trading?
2:53
I mean, how has that helped you of your career?
2:55
It's helped a lot.
2:56
I mean, when I started, I was on the government
2:59
bond trading desk.
3:01
And my first opportunity was fairly young in my, you
3:05
know, early 20s, to be trading the short end of
3:08
the yield curve.
3:09
And you just learn a lot about money flows.
3:13
And, you know, I was trading treasury bills, and I
3:16
was trading the short coupon world, and anything like two
3:21
years and under, and then I had opportunities to trade
3:24
throughout the yield curve and proprietary trade.
3:28
And, you know, what I learned there was really about
3:30
risk management, and finding, you know, different dispersions that were
3:36
happening on the yield curve, and then looking for opportunities
3:41
and really producing P&L.
3:44
And that was the goal.
3:45
And then also dealing with clients as well.
3:48
From there, I went to Morgan Stanley in the same
3:50
role.
3:51
But then I started to feel that the business itself
3:55
back then, I mean, I'm dating, eSpeed was coming in
3:58
through Tanner, the markets were becoming more efficient way back
4:02
when that was in, you know, the 90s, because I
4:05
started in 1990.
4:06
And I decided I wanted to go to the buy
4:10
side.
4:10
I had been on the sell side for 10 years.
4:13
I looked at a bunch of different hedge funds, and
4:16
I wound up landing at SAC Capital to do financials,
4:21
global financials.
4:22
And you know, to answer your question, the background really
4:26
helped the macro background for that particular sector.
4:30
At first, SAC wanted me to do bonds, but for
4:34
me, they weren't really a bond house.
4:36
They were mostly equities.
4:38
I had been around equities my, you know, upbringing, so
4:41
it felt like it would be a good edge I
4:43
would have having that macro background for financials.
4:46
And it worked out well.
4:47
I mean, it's really just learning another product, but I
4:51
utilized my same risk management skills and, you know, was
4:56
successful there.
4:57
And then, you know, I went on to leave about
5:00
five and a half or so years later and launched
5:03
Diamondback Capital.
5:03
And, you know, the transition from sell side to buy
5:06
side can often be quite difficult.
5:08
You know, I've known many people over my career who've
5:10
tried to make that transition, and many have struggled.
5:14
You know, when you have a franchise, you could have
5:16
the illusion that you can add alpha, but when you're
5:18
on the buy side, you don't have that franchise.
5:20
So, I mean, how did you find the transition of
5:22
moving from, you know, Payne Webber, Morgan Stanley over to
5:26
the buy side?
5:27
I mean, of course, it's not something that's, you know,
5:31
easy where it's going to be like day one.
5:34
You have to really put the time in.
5:36
I'd say the most important part of the move over
5:40
was sticking to my same risk management skills.
5:44
You know, when you're looking at securities, where is the
5:49
opportunity?
5:51
Where do you think the opportunity is doing the work
5:53
and then, you know, executing on it?
5:56
No different than when you go to the buy side.
5:59
I think the velocity is faster, especially on the equity
6:03
side.
6:04
So really, you know, that was one of the things
6:07
was the velocity of ideas and also learning just the
6:12
what's happening on the equity side as opposed to the
6:16
fixed income side.
6:17
But I will say that having the fixed income background
6:21
really helped where most equity people at that time, macro
6:26
wasn't even part of their kind of mosaic.
6:28
It was so I was able to bring over a
6:31
skill set that helped me on, especially on the financial
6:34
side.
6:35
You know, I had to really spend a lot of
6:37
time with analysts on the sell side and building my
6:40
own team at SAC.
6:43
But spending the time learning how, you know, the companies
6:47
are built, their balance sheets, what's going to, you know,
6:50
move the company's different catalyst path, you know, that was
6:54
all new.
6:55
But the core of risk management and being able to
6:58
manage risk was similar.
7:00
And then you said, you know, you left SAC to
7:02
set up Diamondback.
7:04
So what was the rationale for doing that rather than
7:06
staying at a place like a premier place like SAC
7:09
or another fund like that?
7:12
Yeah, SAC was a great place to build a career,
7:14
had a team.
7:15
I think for me, it was more of just, you
7:18
know, wanting to be an entrepreneur and start my own
7:22
business.
7:23
You know, I was fairly young at the time, I
7:25
was probably about 35 or so, and I really had
7:29
a strong feeling about culture and collaboration of culture.
7:33
And, you know, one thing being an SAC, I love
7:35
the model, I put the multi-manager model, and they
7:38
were the first to do sectorized and have, you know,
7:42
different pods that focused on specific sectors.
7:46
And that kind of evolved in the 90s for SAC,
7:50
and they were the first to do it.
7:51
And then, you know, I liked the way it was
7:54
diversified.
7:55
And that, you know, you had all these different alpha
7:58
pools.
7:59
But I really wanted to instill my own culture and
8:02
have much more of a collaborative culture.
8:05
Okay, absolutely.
8:06
And that makes sense.
8:06
And then you also then went on to work in
8:09
sort of the Citadel universe, so to speak.
8:12
And what was that experience like?
8:14
Citadel, listen, was, you know, it was a good experience.
8:17
You know, I knew going in there, I had been
8:19
running another fund at that point in time, and Ken
8:23
came to me and wound up purchasing, acquiring my fund,
8:27
and he wanted me to build a similar platform under
8:30
his umbrella, like Diamondback.
8:32
You know, we had been competitors.
8:34
I knew a lot about Citadel, technology was one of
8:37
the things that fascinated me there.
8:40
And I was able to really go in there and
8:43
learn a lot and take away a lot of things
8:46
from there on the technology side and different things that
8:49
have evolved over the years, because early on in the
8:52
multi-manager space, there wasn't as much on risk models
8:56
or different things that you're focused on today.
8:59
So it was a good place to be.
9:01
I built a 150-person platform there.
9:04
And then after a couple of years, you know, I
9:07
came up with the idea of Syncdiv, because the platform
9:10
space had really evolved from the times of SAC and
9:14
Diamondback and a lot of capital flow had moved into
9:18
the space.
9:19
And so I felt that there was a real opportunity
9:21
to build a differentiated platform.
9:24
And then how would you describe Syncdiv then?
9:27
Obviously, you've learned a lot from these other organizations you've
9:30
worked for.
9:30
So presumably, you've kind of taken the best ideas, added
9:33
in your own ideas, and you've created Syncdiv.
9:35
I mean, how would you describe the platform?
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I mean, Syncdiv is the culmination of my, you know,
9:41
35 years in the business.
9:43
I would say that Syncdiv for me at that time,
9:46
what I saw is that a lot of the platforms,
9:49
say the Millenniums, Citadels, Point72, the assets have grown so
9:54
much.
9:55
What they needed PMs to do has changed a tremendous
9:59
amount from the earlier days.
10:01
So, you know, no more where people are running $500
10:04
million books.
10:05
They would have to run $2, $3, $4 billion, manage
10:08
seven to nine people.
10:10
You know, the skill set of a person to do
10:12
that, there's not a big pool of talent to do
10:15
that, which is where we get this whole competition for
10:19
talent everyone talks about.
10:21
Where I felt I could be differentiated and almost you
10:26
could say disruptor is that I could do something that
10:30
they can't do anymore because they're so big, they wouldn't
10:34
have the liquidity to do it.
10:35
So Syncdiv was born on that premise of, OK, I
10:39
took a lot of data over my 30 plus years,
10:43
looked at it, where is the sweet spot for PMs?
10:46
Where do they have a certain capital size that they
10:51
can go across market caps and they can be able
10:56
to be more nimble, but really spend a lot of
10:59
time in the mid and large cap space where there
11:02
was a lot of alpha there that wasn't looked over
11:05
as much because many of the larger platforms now have
11:08
been investing in the mega cap because of liquidity reasons.
11:11
So that was the first main point of, you know,
11:16
building a platform that could be different.
11:19
And then investors could look at it and say, well,
11:21
I could have those, but I could also were uncorrelated
11:24
to those.
11:25
So, you know, it's uncorrelated returns.
11:28
The other part was the culture, which we've always, my
11:31
partner and I have always instilled in our businesses, collaborative
11:35
culture.
11:36
And, you know, why, why when these models are inherently
11:39
siloed, why did we want it that way?
11:43
Because we've always found in our careers, we both worked
11:46
on the sell side.
11:47
You know, you have the big trading desk, very collaborative.
11:50
We always felt that there's a lot of smart people
11:53
under one roof.
11:54
And why not be able to share information?
11:56
It served us really well in 2008.
11:59
We were the only platform at that time up on
12:01
the year.
12:02
And part of it was the input we got from
12:04
our credit teams, our macro really helped the equity side.
12:08
So if you have people that are just siloed, they
12:10
never get that information.
12:12
So we've always instilled that in our businesses.
12:15
You know, during COVID, we have a drawdown in March.
12:18
And part of the reason was information flow from our
12:21
tech teams, our health care teams to the other teams
12:24
and how it would affect those sectors.
12:26
So we've always found that that is really helpful.
12:30
Absolutely.
12:31
I mean, one of the things that the pod shops
12:33
do talk about is the reason they try to be
12:36
siloed is they don't want crowding of trades.
12:38
They don't want everyone to have the same idea.
12:40
So how do you get around that issue?
12:42
Because obviously there's that's the other side of collaboration, I
12:45
guess.
12:45
Yeah, it's a good point.
12:46
So how we do it is because the way we
12:49
built the model with more reasonable size out of our
12:52
applications, let's say on average around 500 million that we
12:55
GMV that we will allocate.
12:58
You can have specialists in particular sectors.
13:01
OK, and you may have three to five teams.
13:04
We typically don't go over five teams in a sector
13:06
that might have specialties in different subsectors.
13:11
And when we look at PMs and we're doing our
13:15
due diligence and we're assessing PMs coming in, we look
13:20
at their coverage universe.
13:21
We do statistical analysis.
13:23
We look at the risk contributions of each person to
13:26
the overall fund at the top.
13:29
So that really does reduce overlap.
13:32
You're going to have some in every platform, but the
13:34
key is to have more diversification.
13:38
So we do a lot of work as someone is
13:40
being assessed to come in.
13:42
And what is their coverage universe?
13:44
How does it match up to the people we have?
13:46
And that's how we prevent it.
13:47
And in terms of picking managers, I mean, this is,
13:51
you know, I guess part of the secret source.
13:52
But, you know, how do you know somebody is actually
13:54
delivering alpha?
13:55
Because, you know, a lot of returns often can be
13:58
disguised beta in some form.
14:00
They could just be lucky.
14:01
You know, they just hit some early home runs and
14:03
then you sort of mistake that for long run, sustainable
14:06
returns.
14:07
I mean, how do you assess a good manager?
14:09
I mean, listen, I've been looking at, you know, thousands
14:12
of thousands for many years.
14:14
You know, a lot of it is, number one, what's
14:17
their expertise?
14:18
You know, do they have an expert?
14:19
They have to have an expertise in a particular sector
14:21
for a long period of time to how do they
14:25
manage risk?
14:26
What do they do in the real extreme volatile times?
14:30
How do they handle their books?
14:32
You know, what types of things do they do to
14:35
minimize losses?
14:37
Do they just lean in?
14:40
They double down.
14:41
Do they cut gross?
14:43
I look at all those things.
14:45
Obviously, you're looking at, you know, shop ratio returns, all
14:51
those kind of table state type of things.
14:54
And then it's really understanding their personalities and going back
14:58
and doing this assessing, you know, what are the things
15:02
they've done through their career?
15:03
Have there been repeatable type of maybe mistakes they've made
15:07
over the years?
15:08
And are there patterns?
15:10
You know, we're in a business of pattern recognition.
15:12
So it's no different with PMs recognizing, you know, the
15:16
patterns and also can they fit in our culture?
15:19
You know, can they be in the culture of SYNCTIV
15:23
and fit in?
15:24
So all those things go into, you know, how we
15:27
assess.
15:28
I mean, look, we have a lot of tools to
15:30
assess alpha today.
15:32
You know, we have the risk models.
15:34
We have a lot of different things you can do
15:35
to assess how people are making money.
15:38
But the reality is in today's models, different than way
15:42
back when, you know, is that majority of these platforms
15:46
are market neutral.
15:48
They have limits on style factor risk.
15:51
Idiosyncratic risk is very high.
15:54
So that's really what they're producing is alpha.
15:57
There's really not that opportunity to make returns through beta.
16:01
Absolutely.
16:02
And then in terms of drawdown, when a manager is
16:05
going through a drawdown, what do you do as their
16:08
boss?
16:11
You know, the one thing I think that we really
16:13
are different as far as that goes is we all
16:18
all platforms have their risk limits and their drawdown rules.
16:22
And we govern, everyone's governed by the same rules in
16:26
SYNCTIV.
16:27
Everyone might have different numbers of different places, but there's
16:31
a lot more to it than just, OK, you get
16:33
to a number I cut, you get to this number,
16:35
you're out.
16:36
We spend a lot of time on mentoring, OK, mentoring,
16:40
coaching, reviewing.
16:42
You have to work with PMs during hard times.
16:46
It doesn't always mean it's not always black and white,
16:50
like, OK, you hit this, you're out.
16:52
You know, I like to get in front of that
16:54
early.
16:55
So what we, you know, our risk team spends a
16:58
lot of time and they're an extension of myself and
17:01
my partner where PMs reach out to them, talk about
17:05
themes in their books, talk about style factor risk they
17:08
may have, talking about where they're struggling or where they're
17:11
doing well.
17:13
And then we do reviews with our PMs every month
17:16
where we're on them and, you know, going through different
17:19
scenarios and coaching them on things and they come to
17:23
us.
17:23
So I think that's rare where you have the two
17:25
founders and CIOs, co-CIOs, actually in the weeds.
17:30
We still manage money and we still really love coaching
17:35
and mentoring.
17:36
And I think people come here because of that.
17:39
You know, so when you talk about talent, you can
17:42
acquire talent, you can have a talent that grows organically,
17:48
or you can do it through SMAs.
17:51
Those are the three ways of being able to have
17:53
talent.
17:54
We've actually done a really good job of growing talent
17:57
through organic growth as well.
18:00
OK, no, that sounds great.
18:01
And in terms of markets themselves, you predominantly focus on
18:06
public markets.
18:07
But of course, you know, the last 10, 15 years,
18:09
at least since the global financial crisis and all the
18:11
regulation and such, you know, we've seen this explosion in
18:14
private markets.
18:15
What's your thoughts on private markets as an asset class,
18:18
its popularity with asset allocators?
18:21
You know, I think that there's certainly a place for
18:25
them and private equity, private credit has been a massive
18:30
growth, you know, it's had a massive growth over the
18:32
last 10 years, 10, 15 years.
18:35
Private credit probably over the last five or seven years
18:38
where a lot of capital went into that.
18:40
And I understand it because the banks pretty much got,
18:43
you know, disintermediated there after the financial crisis.
18:47
Now, whenever you have asset classes that completely just go
18:52
straight up, you're always going to have some type of
18:56
reversion.
18:58
And, you know, we're in a place today where everyone
19:00
there's a lot of panic on redemptions.
19:03
Now, redemptions and credit problems are two different things.
19:08
And typically when you have redemptions, it's OK, we keep
19:12
hearing the headlines of redeeming and everyone's redeeming.
19:16
And that's like the herd mentality.
19:17
But let's take a look at what are the actual
19:20
losses.
19:22
And you're always going to have some losses, but there
19:25
haven't been big losses at this point.
19:28
So, you know, we aren't credit has been really strong
19:30
to this point.
19:32
So, you know, in defense of that industry, do I
19:35
think you're going to get some reversion and there's been
19:38
a lot of growth?
19:38
Yes.
19:39
Do I think you're going to have the pendulum swing
19:42
back to more of the alternatives of hedge funds?
19:46
Yes.
19:47
I think we're seeing that this year.
19:48
I think investors are leaning more into hedge funds because
19:52
the returns over the past few years have been very
19:55
strong.
19:56
So I think there's room for, of course, there's a
19:59
place for all of it.
20:01
You know, if you talk to the new SEC chairman,
20:04
which I had breakfast not long ago, you know, their
20:07
focus has been like, how do we get more companies?
20:10
We have half the amount of public companies than we
20:12
did, you know, 15 years ago.
20:15
How do you get more public people who want to
20:18
go public?
20:18
You got to make it easier for them, these private
20:20
companies.
20:21
It hasn't been that easy.
20:22
So people are staying private.
20:24
And I think that's the focus.
20:25
We need more public companies.
20:27
And, you know, moving over to what's going on in
20:30
the world this year, maybe before we get to geopolitics,
20:33
we can start with one of the themes at the
20:34
start of this year, at least was AI, the growth
20:37
of data centers and so on.
20:39
Something like that as a theme.
20:40
I mean, first of all, what's your thoughts on that
20:41
theme?
20:42
And secondly, as a risk from a put your risk
20:45
hat on, how do you kind of allocate across that
20:47
theme?
20:48
Look, AI, you know, is something we were looking at
20:51
years ago.
20:52
And, you know, and it certainly has been a big
20:56
theme.
20:56
And then there's the companies that, you know, have connections
21:01
to AI.
21:02
And it just there's all different types of industries that
21:07
will have connections to AI.
21:08
And listen, it's real.
21:10
It's here.
21:11
And you have to invest in it in how you
21:15
think that it will play out.
21:17
We have look experts in the tech sector that have
21:22
exposure there or have in the past or in the
21:25
present.
21:26
So, you know, we're always looking at themes.
21:29
Themes is an important part of how we assess risk
21:33
here.
21:34
We started looking at themes back in COVID, because if
21:38
you think about COVID during, you know, when everything hit,
21:43
you know, in April, now we use a risk model
21:46
just like everyone else does.
21:47
But that doesn't really that's only looking at style factor
21:50
risk.
21:51
You know, when you look at thematic risk, that's very
21:55
different.
21:55
So we did a lot of work on different themes,
21:59
overlaying it on our books.
22:00
And two of the most prevalent during that time was
22:03
work from home and reopen and then overlaying it on
22:06
the books to understand where there's beta exposures were to
22:11
those particular themes, give that information to PMs so they
22:14
can understand, you know, where they stood.
22:17
No different with AI is being able to understand the
22:22
names that have a correlation to AI and it might
22:25
not just be in tech, it's in a lot of
22:27
other spaces.
22:28
So, you know, where is your exposure?
22:31
How are we playing it?
22:32
Look, power is another way of playing AI.
22:35
That has been a big theme of ours for multiple
22:37
years where we were successful as playing on the power
22:41
side.
22:41
And because to have these data centers, you need the
22:44
power, you need water.
22:46
So there's multiple different ways you can, you know, express
22:51
AI.
22:51
Absolutely.
22:53
And now you mentioned power.
22:55
Obviously, we have this Middle East crisis at the moment,
22:58
you know, the war, you know, with Iran and the
23:00
Strait of Hormuz being closed.
23:01
And we're just into the timestamp.
23:03
We're recording this at the start of April.
23:05
So things may change when we release this.
23:07
But something like that, you know, when you have this
23:10
kind of, you know, almost not quite random, but like
23:12
this shock to markets, how do you deal with that?
23:18
Look, I think what's important, I've been through many, many
23:22
crises and, you know, I've been through 08, I was
23:27
94 multiple in the 2000s.
23:32
What I would say is you have to constantly be
23:36
monitoring correlations, volatility.
23:40
And one of the most important things is that when
23:45
you really start seeing a pickup in that, that you
23:48
need to move your feet fairly quickly, meaning like if
23:53
you're using a dollar, it's now worth three dollars.
23:57
OK, so, you know, what are you going to do
24:00
to adjust for that?
24:01
So one of the really what we find important tools
24:06
to manage your risk is sometimes you have to and
24:09
the quicker you can do it, the better to get
24:11
in front of it is to take your leverage down,
24:15
manage your gross, because our job as investors for our
24:20
LPs is to protect the left tail.
24:23
So when you get into times like that, what you'll
24:25
find is my managers, it's not there have been a
24:28
handful of times in my career that I've had to
24:31
from the top 08 was one of them where we
24:33
cut the leverage very quickly.
24:35
Covid was one of them, too, in February.
24:38
You know, we cut two turns of leverage in two
24:40
and a half weeks.
24:42
08 we cut, you know, three turns of leverage in
24:45
four and a half weeks in the summer.
24:48
So that's the best tool in the toolbox to me
24:52
when you start getting in very high correlation and volatility.
24:56
But you have to track it and you have to,
24:59
you know, try to get there early.
25:01
And so that's one of the things that we will
25:03
do.
25:03
And then but you want look, we're in a business
25:06
of taking risks.
25:07
So during those times, like in March 20, coming into
25:11
April, tremendous amount of dispersion.
25:14
And that's where you've got to take advantage of it
25:15
and lean in.
25:17
And if you have cut your gross and protected your
25:21
risk in the left tail enough, gives you the opportunity
25:24
to lean into that.
25:25
You know, 08, we had a very strong fourth quarter
25:28
when things were unraveling because we had pulled the risk
25:32
back quickly before that.
25:34
Same thing with Covid.
25:36
And, you know, we had a really strong 20.
25:38
So with this, no different managing.
25:42
Now, this was an event now leading up to the
25:44
event.
25:45
You know, there was look, I go to the Middle
25:47
East on a regular basis.
25:49
Now we are in the process of opening an office
25:51
in Abu Dhabi.
25:53
I am a big believer in the region.
25:55
I am, you know, very, very impressed with the leadership
25:59
there on how they've handled this war, on how they
26:03
take care of their people, protect their people.
26:07
And I'm, you know, very excited to be part of
26:10
that.
26:11
And, you know, going there and seeing, you know, what's
26:14
happening there, you know, it gives you a different perspective
26:18
on what's happening in the world.
26:20
But when I was there in February, you know, there
26:23
were 19 ships there from the US.
26:25
So something was going to happen.
26:28
So as much as it was a shock, I think
26:30
the shock was how people were more set up.
26:35
So, you know, we've seen a lot of the macro
26:37
numbers.
26:38
And I think in general, people were set up more,
26:42
you know, short the dollar, long rates and short oil.
26:49
And, you know, and I think that a lot of
26:52
that stuff on one and long equities.
26:54
And so I think a lot of that reverted and
26:57
unwound.
26:58
It is lasting, I think, longer than most people probably
27:02
thought.
27:03
But if you look at the amount of missiles, the
27:06
amount of drones, that's come down substantially.
27:09
How this plays out, I think, as anyone guesses, it
27:12
changes on a day to day basis.
27:14
But while I would say, you know, as far as
27:18
being in the region on a regular basis, and we
27:22
are now going to be opening in the AEGM, you
27:27
know, I think that that has become that area has
27:31
become really the hub of the financial world besides New
27:36
York.
27:36
I mean, since Covid, you've seen a migration from London,
27:42
from Hong Kong, from all over.
27:43
And you can manage different time zones there very well.
27:47
So that hasn't changed for me.
27:49
You know, when you talk about when things get extremely
27:52
lean in, this is one of those times.
27:55
And then on the macro side, I mean, do you
27:56
have a view on the Fed over the course of
27:58
this year?
27:59
You know, people coming to this year expected the Fed
28:01
to cut a few times now, you know, with what's
28:05
happening in the Middle East, some people are wavering around
28:07
that as to whether they will cut.
28:09
Yeah, you know, it's interesting and I'll pull up the
28:12
page that I look at one point in time.
28:15
The last few days, we were pricing in a tightening,
28:19
half a tightening or so, which I think is way
28:23
out of, to me, my bingo card.
28:27
OK, if anything, before this happened, I would say that
28:30
the Fed was going to have to cut more because
28:33
we were going into a more deflationary environment.
28:36
So what do I think?
28:38
I think that this is a moment in time.
28:41
Let's hope it gets reconciled sooner than later.
28:44
And I think the Fed is on hold right now.
28:48
But if I had to choose which way they're going,
28:51
it's cutting rates more than they're raising rates.
28:55
And so beyond the Fed, I mean, do you have
28:57
certain sectors that you think are particularly interesting in the
29:00
US for the rest of this year, you know, trying
29:03
to leave aside the geopolitics that we see?
29:06
I mean, look, I do think that tech from the
29:09
first quarter really was an underperformer, you know, in a
29:13
lot of ways.
29:14
And I think that that's really interesting.
29:17
I mean, you've seen a massive dispersion between software and
29:22
semis, you know, software on the year is down 24
29:26
percent, you know, semis are up 10.
29:30
I'm not so sure.
29:31
And some of the software was affected much more by
29:35
AI, Entropic, Claude, so not necessarily the war.
29:41
And I still think that continues with look, AI is
29:45
real, it's going to definitely disrupt definitely different areas.
29:50
We saw it in the financials that have been a
29:52
strong sector and it really disintermediated certain areas like information
29:58
services.
30:00
You know, it started hitting wealth managers.
30:03
Do I think that AI is taking over right away
30:07
where like, you know, stockbrokers are gonna be a thing
30:11
of the past?
30:11
I don't.
30:12
I think that though people will be using AI, I
30:14
know from, you know, what we do here, we've built
30:17
a tremendous amount of tools, not just to make things
30:21
more efficient, but on the investment side as well, AI
30:25
tools for our teams.
30:26
So I really think that tech is certainly always gonna
30:30
be something.
30:31
I continue to think power, healthcare and biotech is getting
30:36
very interesting and there's a lot of opportunities.
30:40
So there's a lot of different ways to, you know,
30:45
have opportunities here.
30:46
And even though you go through times of disruption, that's
30:49
where the dispersion happens.
30:51
You know, I spent a lot of time in financials
30:54
my career and listen, you are in a time of
30:58
deregulation, you know, loan growth have been picking up.
31:03
IPOs were coming back.
31:05
Now, this war has disrupted some of that.
31:08
So you have to be cognizant and manage your risk
31:11
around that but I still think financials in certain areas
31:14
of financials have, you know, good opportunities right now.
31:19
That's great.
31:19
So now I did want to sort of round off
31:21
with a few non-markets questions.
31:24
You know, one of them is some of our audience
31:26
are younger and many of them are at college, they're
31:28
going to graduate later this year or have already graduated.
31:32
Yet the job market seems quite tricky right now.
31:35
So what advice would you give to such people?
31:38
You know, we run a summer program every year.
31:41
Typically we'll have seven to 12, you know, people who
31:46
come in, they work in our program, they're assigned to
31:49
a team and, you know, I'll speak to them on
31:52
a regular basis.
31:52
And I think in today, you know, today, the young
31:57
people, they feel so pressured in college that they need
32:00
to know what they want to do right at 19
32:03
years old.
32:04
And my first piece of advice is you don't.
32:07
It's good to have drive and you want to always
32:10
have that drive and you want to win and you
32:13
want to figure it out but like get the experience,
32:16
get your foot in the door, look at different things
32:19
and see where you really, where it resonates with you,
32:23
where you connect with it, where you think you can
32:26
have a passion for it.
32:28
So try different things and experience it.
32:31
And so it is tough, but I think that, you
32:36
know, if it's not exactly what you thought yourself or
32:39
pictured yourself doing, well, try something else where there might
32:42
be an opportunity.
32:44
You know, I always tell people when they ask me,
32:46
okay, what should I do when I'm at school and
32:48
I'm not in your program?
32:49
I said, look, pick a company, follow a company, you
32:53
know, listen to their conference call, build a model.
32:56
These are for people who may want to be on
32:58
the analyst side.
32:59
They may want to go through the banking programs.
33:03
And so just trying to do things to kind of
33:05
get their minds working and to stay in the game.
33:10
And I think that's important for a lot of the
33:12
young people is don't just come to these programs and
33:15
then you go back to school and then you forget
33:17
about everything.
33:18
Continue to work and to try to learn, continue to
33:23
learn.
33:24
The one thing I've been in this business over 35
33:27
years, I continue to learn.
33:30
I continue to learn from the younger people.
33:32
I continue to learn from my colleagues.
33:34
And that, look, for me, I don't plan on retiring
33:38
ever.
33:38
I love what I do and love building these businesses.
33:44
Now, that's great.
33:45
And I love reading books.
33:47
I'm always looking for book recommendations.
33:48
Are there some books that really influenced you or books
33:51
recently that you've come across that you'd like to recommend?
33:53
I mean, the one that sticks with me forever was
33:56
the Reminiscence of a Stock Operator that like someone had
34:00
told me and I've read it over and over and
34:02
over.
34:03
It's an old one, but you know, that one like
34:06
sticks with my mind.
34:08
You know, I have done some of the Jack Welsh
34:11
type books where I'm just running a business because now
34:16
I've been running a business for over 20 years, different
34:20
businesses.
34:21
And, you know, you can always get better.
34:23
You can always evolve.
34:24
You can always improve.
34:25
And some of the hardest things to do is when
34:28
someone's not producing and, you know, firing people.
34:32
It's not an easy thing to do.
34:33
It's part of the business.
34:34
And learning that like, sometimes that's better for the person
34:37
too, that they need to, you know, try something new
34:42
where, you know, it's better for both of you.
34:45
So I think things like that, I'm always trying to
34:48
get better and evolve.
34:51
That's great.
34:52
And then final question, if people wanted to learn more
34:55
about SYNCTIV or see more of what you're thinking, what's
34:58
the best way for them to do that?
35:00
We have a website.
35:03
They can go on there.
35:04
They can, we have a mailbox.
35:06
They can send resumes in.
35:08
I find myself doing calls with some of the younger
35:12
people in colleges, all different, even though I am a
35:15
Michigan guy and I am very loyal to University of
35:19
Michigan.
35:19
I've done multiple calls with many people from different colleges
35:23
who really reach out and they just want advice.
35:26
And if it fits in my schedule, I always try
35:28
to make the time because I remember when I was
35:30
that age and, you know, wanting to learn more and
35:35
absorb more.
35:36
That's fantastic, Rich.
35:38
So once again, thanks a lot for this conversation.
35:40
Rich, I learned a lot and you built a fantastic
35:42
company with SYNCTIV.
35:44
So well done and congratulations on that and good luck
35:47
for the foreseeable future.
35:48
Well, I appreciate you having me here and looking forward
35:52
to talking again sometime in the future.
35:56
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