We're going to talk about hedge funds. We're gonna bring in Alana Weinstein IDW Group CEO and founder, because for all the love the market makers are getting, the hedge funds don't seem to be feeling as much love. What are we seeing from the multistrats in terms of performance? After we seemingly saw a little bit of a rebound coming into May, are they still feeling it?
Okay? So what's beautiful about the multistrats is they're not as tethered. They are not tethered, I should say, to the market in terms of whether the market is up or bound or rebounding. That's for another category, which we'll get to. They are exceptional at managing volatility and putting up consistent performance. And what I would chine a light on right now, Shanali, is we have lived through one of the most volatile periods in recent memory, as we know,
over the last several months. And the fact that the multi managers have navigated this as effectively as they have, They've stayed in largely positive territory during the duration of this period, I think shines a light on the fact that the best ones I'll say it like this have money bowled.
The industry fascinating. So if you look at their ability to draw in talent, how does it compare to the rest Because you are seeing i mean, there's no other way to put it, crazy pay packages. You've been seeing seeing teams lifted out for one hundred million dollars. You're looking at Ken Griffin trying to put a four year non compete on in Florida. I mean, what does that talent war look like for the multistrats?
Okay? So, and that is the Multistrats are the biggest acquisitors of talent right by virtue of their name multi well, multi managers is really the you know, euphemism that I'm referring to. They need multiple managers to manage capital. First off, let me provide some perspective on these pay packages. It's not like someone who's getting an one hundred million dollar check and walking across the street and able to cash that. Okay.
Part of it is a hefty guarantee for sure to pay that person for the period they're sitting out.
Part of it is deferred.
Part of it is a wallet so that they can hire a cracker jack team, and a lot of it also is on the come where they're getting. If you normally get a twenty percent PAYOUTTIONALI, I'm going to give you a thirty percent payout up to two hundred million. That's an extra twenty million, but you got to make that two hundred million. The bottom line of all of this is you don't want to be beholden too what
I'll call the auction. So if you're a multi manager and you lose someone, which you inevitably will because this is a merry go round, someone leaves Peter to go to Paul, or you know what, there's a lot of capacity for this strategy right now, let me take a crack AT's starting my own fund. How are you going to replace that person? Do you always want to be in a bidding war? No, because then you're beholden to paying I would actually say maybe overpaying for air quotes talent.
These people are not necessarily as talented or remains to be seen as the headline numbers would suggest. That's a lot of money for the multi manager to have to recoup on their investment TVD on whether they will much smarter to grow talent in house and the best ones like point seventy two and Citadel are a factory for what I like to call alpha makers.
That's what I was actually going to ask about. So I don't obviously know as much about this industryationality, but it would seem to me that a lot of these people learn on the job. So can you foster a sense of loyalty? Does Steve Cohen do that? Does Ken Griffin do that? When you build them up from the bottom up, it doesn't help obviously IDW. If they make these well, it does.
Help IDW because the reality is if there is a culture, and that's very hard, it's not. They don't all they're not all created equal in terms of their ability to train and develop and mentor and make you Matt the best version of yourself that you can be at each point along the experience curve and also give you a pathway. It's not just about coming in as an analyst and being a good AT or coming in as a PM
and being a good PM. At Citadel, you can you can go very successfully as at point seventy two, from analyst to PM to running a business. How exciting is that you could be a business headed Citadel. Steve just created a new fund around one of his PMS turion. Right, So that's a pathway where now you have, in that example, point seventy two with you to raise capital. They raised a billion and a half out of the gate, and the PM has all of the incredible resources available to
him at point seventy two. That's not all multi managers created equal, and that's what creates stickiness and durability and.
Then the ability to build out a team under that. Perhaps you know, one question I have is where we're not seeing as much success. It looks like the long short business this year, for all of the volatility in the market, has not played out quite as well. And that comes after some really tough years and resources. Yeah, so well said, what's going on?
Okay, so you know, like you'll see the returns in May breaking news, Really not. They're going they're gonna be better than they were in April. So is the market. The problem with this is one the swings of volatility. Okay, I'm not gonna name names, but there are so many examples of funds that were down and like the mid teens in April and now we're up mid single digits. Think about that as an LP and think of how nervous that might make you about what's gonna happen next month.
And as an LP, what I'm thinking about is how much alpha am I getting net of fees relative to the underlying beta exposure. That's like very complicated. I don't want to think about that. I want alpha and I have the multi managers in order to access that, or I want beta and I can pay nothing for that. Right, buying an ETF for the SMP where the long short funds will raise money is not in their hedge fund product. You heard it here, fir s. They are not raising capital.
I don't care what they tell you. In their hedge fund product. Where they are raising capital is long only because there is appetite for the alpha component of a beta product. Can I just ask.
Quickly, I have a curveball question for you, all right, let's hear it. Traditionally, Harvard has been a feeder university for these masters of the universe. Right, do you see that continuing after this?
Well, my son goes to Harvard's I don't know how I'm supposed to answer that question.
You as Harvard, But who else can provide the best financial minds in the world.
Well, I mean, there's a lot of good schools out there. I wouldn't say Harvard has a walk on that. What I will tell you is it pertains to talent. And I've seen this up close. Literally. I visited my son a few weeks before the end of the year and I was hanging out with him and his friends who
are finishing their sophomore year. Matt and the aggressiveness by the top hedge funds, namely the multi managers in locking up these kids now now for their junior summer, and the pay packages talent the talent wear has gone way downstream as we've seen or and you guys alluded to it as well earlier, are huge even for kids so that they have first steps.
We got to leave it there.
Whish we had more time.
That is a lot of winsteam of the IDW group place.
We need to continue that conversation right