A world of opportunity: Rob Citrone’s best ideas

Welcome to another episode of Goldman Sachs Exchanges, Great Investors. I'm Tony Pascarello, Global Head of Hedge Fund Coverage in Global Banking and Markets. And today I'm thrilled to be speaking with Rob Citrone. Rob is the founder of Discovery Capital Management, a hedge fund that manages about $3 billion. Discovery focuses on macro investing with a particular focus on the emerging market.

And they're coming off two massive years in a row, returning about 50% in 2023 and in 2024. I'm excited to hear about Rob's career, his investment framework, and of course, his view of the world as we see here today.

Rob, welcome to Grand Investors. Great to be here, Tony. It's a pleasure. Let's start with the big picture. How you thinking about the markets right now? Well, I think the markets are offering a lot of opportunities, both on the long and the short side. And we're seeing lots of big swings in people's views of it. I think we have a different view than a consensus, which is not kind of like. We're relatively constructive.

And we actually think 2026 is going to be a big year for the U.S. We think the U.S. economy is going to boom. on the back of significant tax cuts in 26. I think it's it's slowing now but we don't think it's it's if it's a recession it's a It's kind of what I call a fake recession. It's a recession where you have two negative GDP numbers, but mainly because of massive imports, people getting ahead of the tariffs.

We don't think real final demand is really going to go negative if it does it very slight. And then we see the economy picking up in the third and the fourth quarter. We see a lot of reshoring of companies coming. You talk to office park managers, and they're full now. I mean, they've got a lot of LOIs that they've signed. There's a lot of companies here coming to expand. I think in the end, the tariffs will be a good process ultimately for the U.S.

And if I look at the U.K. deal, I think it's a very good deal for the United States when you go through it. I hope a lot of the other ones will be solid deals. I think in the end, most tariffs are around 10%. I think China will be a little bit higher, but not egregious. And I think we need to have a bit fairer trade, and so I think it's not a bad thing. Okay. So two questions on that. One is, is the constructive story on 26 a function of the policy? Is it a function of Trump 2.0 policy?

And then the attendant question would be, what are some of the high conviction views you want to play today or maybe just set up for around the corner? I mean, I think it's part of the policies of what Trump is doing. I think also getting rid of some of the wasteful spending and doge I think is also a great thing. But, you know, it's really about the U.S. private sector, and it's been about the U.S. private sector for the last, you know, 15 or 20 years.

And I don't think that's changed. And the technology advancement. Advantage we have is enormous. I think the U.S. keeps that. So it's a combination of policies, but really it is the exceptionalism of the United States private sector and the corporate sector in the U.S. Today, I mean, I think part of the way to play this is We're constructive on the last, but...

You know, evaluations kind of reflect that a lot. So we think some of the best opportunities, quite frankly, are in Latin America and some other places outside the United States.

We're incredibly bullish on Latin America. You have very cheap assets down there, and you can make very large returns, not just in equities in Latin America, but you can be in the local fixed income, you can be in credit. You can be in the currencies. There are very large returns to be had there. So we see a political revolution moving to the right, center right, to market economies.

to more freer democracies. And we see four big elections in Latin America in the next 18 months in Chile, Peru, Colombia, and Brazil. And it sounds like the bias, the bias coming out of those should be net positive for risky assets in those regions. 100%. And the other thing is that, you know, if we're a little bit wrong about, you know, how things play out in the U.S.,

Latin America is a little bit of a safe haven in all this. If you look, no country in Latin America got more than a 10% tariff. Mexico's got the USMCA, where most of the goods still are tariff-free if you're compliant. So we see a lot of positive things happening there that can shield you if the U.S. doesn't do so well. And do you feel like that's getting its due or do you feel like the Latin American trade is?

lost the months, the smoke, and everything that's going to happen. It's been lost for a long time because it's been a lost decade in Latin America. It's been a lost 25 years since the particular crisis. And so not many people focus on it. I was just at a conference this morning meeting Argentine companies in a couple of meetings. I had some other investors in me. Those investors had never been in Argentina, or if they had been there, they hadn't been invested.

So there's a lot of opportunities still in Latin America where people just don't. People are really focused on emerging markets in Asia and rightly so with China and over the years. But I think that's shifted now. I think China is a place where it's going to be a very difficult next 10 years.

And if we circle back for one second, it sounds like, in the end, you're still a believer in U.S. exceptionalism. Yes. Makes the two of us. Do you worry about the flow of global capital at all in that context? I do worry about it. We're seeing a lot of flows from official central banks and others right now that have obviously seen the dollar come under some pressure. So how long is that going to continue? And the dollar, I think, is the hardest thing to call.

I think we're pretty constructive on the equity market in the U.S. after the kind of sell-off that we've had. And we think that the rates, we're in the camp, the rates are going to rise in the U.S. and the 10-year is going to be over 5%.

sometime towards the end of this year, mainly because the economy is picking back up, but also inflation is going to stay sticky with the policies in the short term. So we don't see a rally in interest rates. We don't see the Fed cutting interest rates, but the hardest cause.

i want to take a quick step back i'm just curious how you would characterize your style of investing and then as an adjunct to that how much has it evolved Well, I really believe in this top-down and bottom-up approach where you can use the macro at the same time, pick individual stocks. I think it's been a huge advantage for us. I don't think many people do it. Certainly not many people do it very well. We've been doing it for 26 years at Discovery.

But I really learned a lot from Julian Robertson and George Soros and having worked closely with each one of those. The gentleman, you know, some of the best legendary investors we've ever seen. And, you know, I kind of combine what I think are the best of the two. You know, Julian with a little bit of a long-term strategic view, cross-checking all the ideas with his Rolodex city.

And then George was a master trader, putting on big positions, taking risk, and then taking it off quickly if things change and managing the risk. So I kind of try to combine the two of those in discovery. Got it. I'd be curious, and you referenced this earlier. How important has the short side been, particularly as it relates to the equity asset class, how important has the short side been

to your money management and your risk management. I remember when we first met, this must be at least a dozen years ago, we were at a round table dinner and you talked about kind of the significance of some of your single stock. which was a brave thing to say at a table of hedge fund folks. A lot has happened in that context. Think GameStop and all that. Flash forward to today, how important is it to what you do?

I think it's incredibly important, and, you know, I think it's a lost art. Not many funds are doing it anymore. You know, I learned it from some of the best, from Julian and from George, and particularly Julian and what we did in eventual stocks when I was at Tiger for over five years. It has really led to the fact the last two years, you quoted we were 50% roughly each year, the last two years compound 120%. Well, we had a net 10% equity exposure over that period.

Plus 10. Two rippers. Two rippers only plus 10. So we did it the way you're supposed to, the old-fashioned way. We did the longs and good shorts. And those individual shorts were hugely valuable. Example, we caught three of the four regional banks that went bankrupt. we were short and we wrote in our outlook in the beginning of 23 that regional banks were some of the best areas to be short in the united states and had you battled that for a while did you nail

We nail the timing on the regional banks. You don't always nail the timing on the shorts. And shorting is a dangerous game, and you have to be very careful, and you have to make sure you're managing the risk. And I think we've done a really good job through that, because even through all the GameStop and all the other stuff, I think we've...

well. Here's a question I've always wanted to ask you, which is, you do so much. You trade so many different asset classes. At times, I presume you have a lot of line items in the plot. How do you keep track of it all? How much is kind of in your head? How much is on a spreadsheet or a risk management system? How do you do it? You know, I'm very familiar with the companies we invest in to a large degree. So I've been doing this for almost 35 years.

I have a lot of it in my head. Of course, I have great reporting and real-time reporting as well. So I have a real-time P&L system. I can see what's happening in the portfolio. I break the portfolio down into kind of themes. So instead of having to think about each individual line, I can think about the big themes that we have. Like Argentina long has been a big theme for us. India on the long side has been a big theme. Short regional banks has been a big theme.

China over the last few years has generally been a short theme for us. So I think of things in terms of themes that helps me think about the risk and help manage the risk. You also tend to have what I would characterize as pretty high conviction views. And despite, again, like I said, many line items, you also can concentrate.

quite a bit um how does that how does that kind of translate into the way you take the risk and the way you manage the risk and are there times when you're particularly concentrated and other times when you're not or is that always kind of a hallmark of what Well, I think there's special times every five or ten years where there's a really spectacular trade and investment that we then will concentrate in a meaningful way. 2013 in the dollar yen, where we made over a billion dollars.

In fact, I mean, Disgusted quite. a bit with George, and I kind of convinced George and Scott Besson at the time to go big in that. And, you know, Scott says I'm responsible for 75%. at Soros kind of jokingly over that time but and then the latest one is Argentina where you know I saw the movie happen in 1991 I was in Argentina in 91

And this was a very similar movie where Argentina in 91 had a reform program that generated a good fiscal balance. They were able to bring inflation down, coming from a very depressed level. And the market in all asset class was the best performing market for four years. This is the same movie in Argentina today, starting, you know, back about 18 months ago, and we got very large and all that.

And we do it in a way where we use all the assets. So you're having many tools in your toolbox, not just doing equities, but being able to do local rates or currencies. Credit is a very big advantage for us. But we took a concentrated bet, but we also took it in a way that we minimized the risk as much as possible. For instance, in the dollar credit bonds that I took, I only did bonds that basically amortized out there.

term, and yet those bonds were yielding 35%, which was crazy because the probability default was very, very low. over that period. So, you know, I think there's, they come around every, and I said to our investors, you know, two years ago that Argentina, or actually after Malay was elected, that Argentina is the best thing I've seen since.

This is the best trade. And you have to do that, but you have to manage the risk. If we're wrong and things were to change, we'd have to be liquid enough to get out. And both Lian and Argentina are good examples of things that we've structured in a way so we can get out. and then when you have when you have a setup like that when you have say a country And as you've referenced, you can prosecute that bet a bunch of different ways. Yes. Equities, credit, currency.

How do you, first of all, how do you decide? And then within that, do you sometimes mix kind of a pro-risk trade with a risk-off trade or is it kind of all shooting in the same direction across a bunch of different... I would say generally when it's a big idea like that, they're generally in the same direction. So you're not counter trading anything or hedging anything.

But what I do is I look at the expected return and what the downside of each of the positions is and then try to meld it together in the better way. One of the things that was very helpful in Argentina, especially early on, is the equities actually were performing in 23, and the bonds were not. So we were losing money in the dollar bonds, and the equities were actually going.

And that helped to counteract some of the declines. So you do get some benefit of having some diversification, but the key is to have liquidity to exit and also get into the trade effectively. has really helped but sometimes like the equities rallied quite a bit in Argentina early on so we reduced equities at fixed income and then dollar fixed income and then when we were able to go into the local peso market at 35% discount with 75% interest rate.

And we knew that discount was going to come down and ultimately they were going to, you know, get rid of the capital controls and it would merge the two rates. That was a home run trade. So we put capital there, which we had not had any there. We had to be careful on how much we put there. But, you know, we got a good 10% position.

So there's a hypothesis that markets just continue to get more and more efficient. And yet, here you are coming off one of your best five periods of money management in a long, long career. And so how do you, I guess the first part of the question is, do you agree with this kind of arc of efficiency? And then how do you square it with how good the haunting has been for you personally? Well, I actually think markets in the last 5 or 10 years are getting less. Less. A lot less.

They just don't discount things ahead of time as much as they used to in the past. And that actually makes timing difficult. What we're seeing is with more retail money involved and more just what I would call machine money, they don't anticipate much. They react to headlines. They react to news. And so we see much bigger reactions.

to news and the discounting isn't as early so it actually if you have an ability to stay with your position it actually has made it easy but it's made the timing a bit. So I would say markets are less efficient. I think it is easier for how we manage money. It's easier for us now. But for most people, it's much harder. And I would say that we've been investing the last few years with confidence. and not scared. And I see a lot of investors who are investing scared because they have

Sure. It feels like a bit of an out of consensus view on the efficiency point. Now, maybe it's one of those things that people just have said at any point in market history, oh, it was easier in the old days, but you're on the other side of that. so giving kind of everything discussed at this point it feels to me like you'd say

the opportunity set is going to continue to be really pretty fertile, whether it's in the macro space or the EM space. Is that fair? Absolutely. Yeah, that's a great opportunity for us. I don't know if there's been a time, and certainly in my 35 years of investing. that it's been a better environment for what we do at Discovery and for the skill base that we have, for the contacts and insight we have, for instance, in Latin American expertise we have. I don't know if anybody has any better.

And for some of the places that, you know, and being able to change mine quickly. you know, having not only a macro, but the micro view. I mean, I've always had a number of technology individual analysts, because if you don't understand what's happening in technology, I don't know how you can invest. So it's been so helpful to our macro view to have understanding.

technology. It's obviously been a great place to invest as well. And I guess in a different spirit, Because everything we've discussed feels quite, again, quite exciting, high quality.

What do you worry about? What keeps you up at night? Where can you be wrong? Well, keeping up at night is not a problem because I get up for the last 25 years at night at 3 in the morning every night for the close of Asia and the Open of Europe. So I've been doing that for 25 years. And then you're back to bed after you get a glimmer? Back to bed after about 20 minutes, yeah.

But we do trades, and I'm involved in making decisions in that period of time. And I'm planning ahead of that, but I do make decisions at that time. It's really a tremendous advantage because it gives you the feel for the market on a 24-hour basis. And also, I don't know why is the case, but if I ever want to buy the U.S. market or buy futures, it's usually the weakest time of the day is, for some reason, the close of Asia and the open of Europe. The markets tend to be the weakest point.

I should actually go back and do a study on that, but that's my feel from doing that. So it's a big advantage. I mean, the world is a very complex place, so there's a lot of dangers out there. So I think that's kind of the biggest risk, the unknown, that you don't know what's going to happen that could be a big surprise. I'll be curious for your 3 a.m. wake up what time you go to bed then you have your 20 minute

bout and then you go back to bed and then what time do you wake back up? What's a night's sleep? I try to get to bed by 11.30 because I want to have three and a half hours of uninterrupted REM sleep. Apparently, the Israeli army has studied this very closely, and if you have three and a half hours of uninterrupted sleep, the other stuff is just superfluous to some degree. You can get a rest. But if you only get two hours, get woken up two hours,

that's actually not very good. So I try to get three and a half hours. Then I'm up from, it's actually 3.15, I get up 3.15 to about 3.30, 3.45, somewhere around, depending on what's happening. On Sunday night, with all the stuff happening in China and all that, I was up for a little bit longer this last Sunday.

And then I go back to sleep and I get up around 6, 6.30. Okay. And then that segues to my next question, which is there's not a lot of people who have a track record like yours. There's not a lot of people who have run head. for as long as you have, where every day something of a knife fight um and so what's been the key to your longevity

You know, I think number one is you've got to love it. I love it. And I feel like I have a front row seat to the world. I got to work with some great organization, Fidelity, Tiger, and what we've done at Discovery. And so I'm really involved in the investments that we do. Let me give you an example. So I went down to Argentina.

for one day, the day of their liberation, where they got rid of the capital controls and announced the IMF program. And I got a chance to meet with the president before he met with Scott Besson. Then I met with the economic team for a couple of hours before they met with Scott Besson. It just, you know, to be part of that event, which is a big deal for that country, and to help influence it and be part of it is a really powerful thing. I helped get the president of Mexico to call.

President Trump, she first wrote a letter to him and to some of her advisors I know. I said, look, you've really got to develop a personal relationship with him. He likes to talk. Letters aren't going to work. She called them immediately. They've developed six phone calls now. They've developed a pretty good relationship. She's done an amazing job at managing that relationship. So we're actively involved in our...

You know, really, I feel like I'm a front row seat to the world. You think I'll try to your last breath? I think. Okay, as our viewers probably figured out right now, you're a Steelers fan. You're one of the owners of the Pittsburgh Steelers. What's that experience been like? How involved are you? Yeah, it's been an incredible experience. I'm a lifelong fan, so I grew up as a kid, as a big Steeler fan. But to see it from the inside and be involved in it is really...

But it's also been very special to get my family involved in it, my kids involved in it, and Cindy involved in it. Cindy and I have been on the board, really, for the last 17 years. And it's been a wonderful... learning experience from. But you feel even closer to the team, you have even more conviction in what's happening, and you feel like you at least have some input into it. So it's been very powerful. But I really focus on managing the hedge fund, and I let Art Rooney and Omar Khan.

Coach Tom, they already run the operation. They know what they're doing. Okay. All right, so we'll finish as we deal with the lightning round. First question, what's your greatest strength? I think the greatest strength is I'm able to connect so many dots around the world and put them together. and have done this and can do it quickly. And I'm decisive and got to be decisive in this business.

And to link back to earlier in the conversation, that is pattern recognition that's between the ears. Is that right? Absolutely. And it's also insight that I get from all the different content. I'd better pick up the phone and talk to some of the leading people in the key countries we're investing in. It's just amazing. What's the best piece of advice?

you've ever received. This could be markets advice or otherwise. You know, I think it came from my dad when I was really young from the day I can remember that, you know, he always basically said, whatever you do, do 100%. And if you can't do it 100%, you don't do it. So I always thought you had to do 100%. So I never, you know. I never thought otherwise. And I think that really helped me from an early age on. And when you have success early on and you compound it over time, it makes sense.

So if I think about the people that I speak with in our industry who are running hedge fund money in particular, have been successful for a decade. To sustain that excellence requires an enormous amount of work and focus and effort, and there's almost no other path. You referenced George Soros earlier. You referenced Julian Robertson earlier. Who are some of the other investors that you... Well, I certainly admire the two of them, and I learned from them, and I think they're two of the greatest.

I admire what Dave Tepper's done for many years. He's a Pittsburgh guy as well, so I think there's a special affinity there. He went off to the dark side with the Carolina Panthers, but we had him for the Steelers for a little while. I still think he secretly roots for the Steelers.

But I really admire what he's done. And Stan Druckenmiller, again, another Pittsburgh guy. That track record is phenomenal. So there must be something in the water in Pittsburgh that's special. But, yeah, those are the two other guys that I really have a lot of respect for. away from the markets and I guess away from National Football League.

Where else do you spend your time? What else is of your interest? Well, I do a lot in the philanthropic area, a lot for mental well-being for the youth. We have a big program in Pittsburgh we've had for a number of years, even before COVID. We have five people on the ground there, and that's something that we do a lot. Also in education and serve on the board.

college and we get involved in education or stuff like that but then i like to not very good at it but i like to play golf on the weekends and that's kind of fun last question uh what advice would you give to a young person entering our business Yeah, I think the best advice I can give is you have to love it. You have to love it. I mean, really love it. And the second thing is, as you're developing your career, the relationships you build are the most important.

And you need to focus on building relationships and build relationships that are truly lasting. You have to give something in that relationship as well. And you have to keep your integrity and your honesty. Okay. Beautiful. We're going to leave it there. Rob, thanks for doing this. Tony is fabulous. Thank you very much. Thank you all for listening to this episode of Goldman Sachs Exchanges Great Investors, which was recorded on May 14th.

2025 i'm tony pascarello if you enjoy the show we hope you'll follow us on apple podcast spotify or youtube or wherever you listen to your podcasts and leave us a rating and a comment