Bloomberg Audio Studios, Podcasts, Radio News.
Hello and welcome to another episode of the Add Thoughts podcast. I'm Tracy Alloway and I'm Jill. Why isn't thal so Joe? You know what I realized two months ago? Just two months ago, we were still getting a bunch of headlines about how private credit was the hot new thing on Wall Street and how multi strategy hedge funds pod shops were huge and growing. And we've done quite a few episodes on these respective topics. But you know, just a
couple months later, the headlines are starting to look very different. Yeah, and there's concern that if we get a substantial economic slowdown, you're going to get some sort of big blow up in private assets and things like private credit, private equity. You know, a lot of people have been predicting that might happen for a while. And then when it comes to multi strats, we've already seen a lot of talk about pain the pod shops given all the recent market volatilities.
So everything is feeling a little different right now.
Well, we are recording this on April twenty second, and we got a headline this has been in the news for a few days, but I guess it's just been confirmed. So speaking of you know, the asset allocators, where's there, Like, real money come in from right, and they're like, yeah, wealthy families and wealthy, but the real big money is in these huge pots of money that we're talking about teachers, which if those in the know, the Ontario Teachers Pension
or of course university endowments. We got a headline today again it's been out in the news for a few days, Yale considering selling in the secondary market some of its private equity stakes. So these huge pools of money that are really upstream from the private credits of the world and upstream from the hedge fund multi strands of the world. They're in a new era for all kinds of different reasons.
And so to even understand these various alts, we have to understand how the people who fund the alts are thinking. Right now.
I am so glad that you mentioned all of that, because that was a perfect intro, but also Yale specifically, because we all know that the emphasis on alts was pioneered by David Swanson over at Yale, and since then, you know, alts have been a big thing, not just in university endowments, but in lots of different types of institutional investing. So I'm very pleased to say that we do, in fact have the perfect guests to talk about all of this. We're going to be speaking with Joe Dowling,
Blackstone's global head of multi asset investing. He previously ran Brown University's endowment and this was one of the best performing endowments at that time. He did that for a decade before he joined Blackstone about four years ago. He's been called the King of hedge funds in some of our own Bloomberg coverage. So really, who better to talk about things like alternative investing, university endowments, and what's going
on right now in private assets than Joe. So Joe, Joe d Welcome to the show.
Thank you, Tracy and Joe, thanks for having me. Can we make this a four hour episode? I already have so many questions.
Anyway, go Tracy, Uh, okay, So first off, I'm going to have to be very careful in how I address each Joe respectively. But other than that, okay. So one of the things, you know, Joe and I have kind of nibbled at the edges of the university endowment model. And one of the things that we know for sure right now is that they are very large pools of capital, you know, worth billions and billions of dollars. And for that reason, we often see them compared to things like
pension funds, maybe sovereign wealth funds. In your experience, are there differences between you know, running a university endowment, investing for an endowment versus investing for you know, traditional large institutional funds.
Absolutely, But let's set the table with just how big the universe is, because I think that'll help us. Please, There's six hundred and fifty US endowments with a combined assets of eight hundred and seventy five billion. That's from Nikubo. I'm using Nakubo data. But the average endowment is only one point three billion in assets under management, and the median is two hundred and thirty five million.
I appreciate that you came prepared with numbers.
When you see a headline Yale considering a private equity stake IMiD, it's funding turmoil. Some reports have set it's up to six billion dollars. How big of a deal is this? Like how how much of an earthquake? Is that this entity which we associate with long term willingness to hold onto ill liquid stakes, timber so forth. How big of a deal is this.
I think it's a big deal because it's showing stress in the system. And the six billion dollar number is also a number that I've heard from outside investors who are actually looking at the portfolio. And what it signals to me is that Yale, who's been a pioneer, is being proactive. They have a new CIO. Remember David Swinson, who you quoted in the beginning, was the person who really pioneered the endowment model. But they have a new CIO, and I think it's a sign that he's going to
put his own stamp on the Yale endowment. Not surprising with what's happening in the political environment with the endowment tax, which is currently at one point four percent being considered to go to up to twenty percent. So that's a yeah,
that's a big, big number. So with regards to taxes, you might remember during Trump's first administration, under the Tax Cuts and Jobs Act of twenty seventeen, they introduced the first endowment tax, and it was a one point four percent excise tax on net investment income for really the
wealthiest endowments, And how did they define that. What they did was they took the total value of the endowment and divided it by the number of students, and if it was over five hundred thousand dollars, then you were subject to that tax. And now what's been proposed is an increase from one point four percent to twenty one percent. Now, what that would result in is seventy billion of extra
revenue over ten years. And I'm assuming they're the average endowment return is seven and a half percent to get to those figures, so call it seven billion a year of additional taxes. And it's going to change really the way endowments are managed. They're going to need to be more tax conscious, They're going to need to target higher rates of return, and I think they're going to have to continue to use the private markets.
Huh. So talk to us about how important was that special tax status to returns over the years, because also, if I look at returns, you know recently, over the past three years or so, they've they've already been lackluster. So I imagine with the additional tax pressure, that's going to be pretty painful. And then when you say endowments are going to have to be more tax conscious, what does that actually mean? Is that like investing in munis I
guess you already mentioned private credit. But what can endowments actually do here?
Yep, So a couple things. One I want to address performance, because you're entirely right. If you look at short term performance. Over the last three years, a global sixty forty portfolios out performed US endowments. The average US endowment return okay, underperformed the global sixty forty by six point eight percent, or three hundred and forty basis points per annum. The top coretile endowment returns underperformed by two hundred and fifty
basis points annually. Now that's over three years, and we all know investors tend to be short term. If you look at the five year number, okay, the average endowment has returned eight point three percent and has outperformed a global sixty forty by one hundred and seventy basis points, and the top core tile has outperformed by two hundred and fifty basis points. Over ten years, the numbers are
even more consistent with those figures. So over the past ten years, the top core tile has outperformed the global sixty forty by one hundred and sixty basis points and even ready for this, the bottom core tile okay, has outperformed a sixty forty poortfolio by thirty basis points annually. Okay, let's translate that though. Okay, So let's say you have
a billion dollar portfolio. If you have top quartal performance versus a global sixty forty over the ten year period, that's a two hundred and eighty eight million dollar difference. So we're talking big numbers here.
And this is the nice thing about being an endowment is that you don't have an LP that's going to withdraw. You have one captive LP, and so you know, in theory, this is why they have the capacity to make these long term, relatively ill liquid alpha generating investments strictly because there's just none of that sort of like short term demand for withdrawals.
Absolutely, and I think that's the advantage of the endowment model is that you're able to think really long term about asset allocation and basically to take advantage of force selling and dislocations in the market. And that's really what separates the top quartile from really the median and the bottom quartile.
But when you were at Brown, for instance, did you ever feel some sort of short term pressure maybe, you know, maybe not just because you had to report returns I think on a yearly basis, but maybe because the university needed a bunch of money suddenly for some big project I don't know, a new building or something. I get the point that endowments are investing on a very long time horizon, But on the other hand, I feel like there must be moments where you do have to come up with the money.
You know, you're pointing out something that a lot of people don't think about, which is that there's a fundamental conflict between the administration and then the management of the endowment. Obviously, the administration would like to spend the money to work on projects, and there are a lot of important projects
out there. But as a steward of the endowment, you actually have to work with your investment committee to show them exactly what we were just talking about, which is small differences in compounding over long periods of time add up to huge, huge numbers. So what I did, and with my team, we would constantly show them over ten, twenty and thirty years what taking a higher distribution would cost the endowment, and that really allowed us to sort of do our job long term and think long term.
But the answer to your question is yes, it's the performance derby every year. It's like college sports, and everyone's waiting for that those numbers to come out.
You know so much in finance and these questions, whether we're talking about the university's board having a manager or having an endowment manager, whether we're talking about the endowment manager allocating to multi strategy hedge funds, when we're talking about the hedge funds compensating the pms. It's like principal
agent problems all the way down. And even though you have that captive LP and you don't have to worry about withdrawals, you still have to worry about career risk, right like because an endowment manager can get and so it's like it's really like at every chain, it's like this constant puzzle of trying to get each link in the chain aligned and for some sort of you know, everyone's optimal optimal performance.
But it's interesting in my new seat, I get to meet all of the CIOs across the country, and I will tell you the talent pool is extremely, extremely deep, and so many of them. When I go in and talk to them, I'm actually learning just as much as I hope i'm educating. It's it's really amazing the level of sophistication of these endowments. I've been super impressed. And I didn't get that at Brown because you don't have that much interaction because you're competing with people.
Yeah.
Right, I didn't think David Swinson was going to call me up and give me his best, best manager. That just is not going to happen.
Since you brought up Swinson, talk to us, you know, let's just go back in time in history and talk to us about the rise of all investing at university endowments. Is it really just as simple as you know, endowments have long term investing horizons, and so illiquid assets that need to be held onto for a long time are a really good match. Is that? Is that the story that's.
At the heart of it, which is if you have long term money, you should be able to use the illiquidity premium and you should be able to earn more. And I think that's what David and many of the CIOs realized, and they had the long term capital to do that, and it's worked. And what's also amazing is the percentage of alternatives that these firms own so that the endowments invest in. So the average high performing endowment
has fifty five percent of their assets and alternatives. Wow, the top cortile and the IVY leagues all have over sixty five percent in alternatives. And they've worked. And I think people are trying to call the demise of alternatives and especially even the endowment model, and I don't think we have the evidence yet that it's broken.
One thing I all always wanted to ask someone who actually works at an endowment, and in fact you led the endowment, But do you just have like hedge funds and private equity just knocking at your door and constantly pitching new things to you? How do you make that initial connection between you know, a potential not client or a manager between a potential manager.
That's a great question. So I think that you have a choice when you're an allocator and an investor, which is you can lead or you can be led. And so the answer is we always had people coming and trying to pitch us. But what I always encourage my team to do was to research deeply markets or big deep alpha poonds. So let me give you a specific
example biotechnology. So what I would say to the team is, wow, biotech stocks twenty five percent, some of them are trading under cash right now, Let's go do some research on that segment. And then they would go out and market map biotechnology, giving us all the different types of players
in their approach. And that's how you get context. How you end up being a mediocre investor is just getting the flavor of the day, and usually the flavor of the day is traveling around the country, and as contrarians, what we like to do is to pick things that were sort of off consensus, not loved. One of my favorite expressions I used to say to my team was what would make you really uncomfortable to recommend in front
of an investment committee. If it makes you really uncomfortable, go research it.
One of the things you mentioned is that, you know, one of the nice things about endowment is they can be the ones who buy when everyone is selling. And typically there's true So let's you know this Yale headline that we got and you said, it's a big deal. We're in this sort of confluence of events where universities are they're you know, they're anxious about their money that's coming from the federal government. They're anxious about foreign students
continuing to come to the US. There's obviously the market decline itself. So are we in a moment where there is some like inability or some constraints on the endowments to be I don't have buyers of last resort, but the opportunistic investors of the moment, like, is this actually a moment where that's under a threat? And the endowment taxes you mentioned.
Well, I think it's endowment tax I think it's a lot of the NIH funding at these schools combined with the perfect storm of markets receding, and so these models are being challenged, right, So I think the people who are playing offense and are being proactive, and I would probably put Yale in that category, are going out and testing the market and saying, you know, where is my liquidity.
I just take a step back on private equity because that's what they've They've gone out and are trying to sell. If you look at the asset class, I think it is a fantastic asset class. And I want I want to just talk about this. I don't work in private equity at Blackstone, so I'm have my endowment hat on. But I want you to think about the value proposition.
The value proposition is that I'm investing in the largest universe of companies out there, which are private companies with experts who I'm lending money to in terms of a management fee, because that management fee comes back to me, the investor, and then we calculate an eight percent preferred return before the manager makes any money. And if you think about it, eight to ten percent is about what the stock market has done over the last fifty years.
So the value proposition is I, the manager, until I add value over that public market, will not earn any incentive fees, and I will pay you back. That structure in itself protects investors. And even in the fourth coretile and I'm quoting Cambridge and Associate's data now, even in the fourth coretile of buyout managers, and the Cambridge database changes every you know month, but call it over twelve hundred managers. Even the fourth coretile is positive over a
rolling ten year basis. It's a good asset class. But what I always hear is the doubters and they want to say there's too much dry powder and things, you know things. Capital is not being returned, no pot.
It's hard to deploy, it's hard to deploy.
And the reality is it has been hard to get capital back for the last three years. Public markets are closed, mergers are not accelerating like we thought they were. So the longer this goes on, the more this endowment model, Joe, to your point, is going to be challenged. It is definitely challenging. But I think the smart endowments are already taking action to grab for that liquidity. And think about it,
ten years ago, there was no deep secondary market. The thought that you could sell, okay, six billion dollars of private equity assets, it's pretty amazing.
It's definitely different to how it used to be. But just on the pe point. You described your sort of research process earlier, and you gave an example in the case of biotech. But if you're researching those ideas, your team is trying to find alpha itself. What's the benefit of investing in a third party like private equity or like hedge fund a hedge fund, versus just investing directly.
Yeah, it would be almost impossible to recreate the type of competitive advantage that the managers that we invested in Brown had, and I think that trying to do it direct at an endowment, you have a smaller team, you have less resources, you have one investment committee. At Blackstone, you're constantly iterating, you have multiple investment committees, you have multiple oversight, you have a risk committee, and you have just so much more data, so much more information. That's
why it's such a competitive advantage. The concept of scale is so powerful. So when I transitioned from Brown to Blackstone, I was overwhelmed at the power of the scale, the data, the manager access. If I could have run the Brown endowment portfolio on the Blackstone platform, I would have really made money.
Oh you did make real money. I mean while you were a Brown, even without the Blackstone platform.
Let's talk about hedge funds real big picture. How would you describe the reasons for the rise of the multi strategy model. Why has that model even more than the single manager, How would you characterize it? Why that particular flavor of hedge fund has become so popular.
Sure, I think that when I think about the multi strap world, I think about a tiering of talent, and it's clear to me that that Millennium, Citadel and the
top players have really distinguished themselves. And they've done that by providing a very, very consistent return with a high sharp that is completely uncorrelated to stocks and bonds, which is nirvana for a manager because what people realized and Joe, the wake up call was in twenty twenty two when stocks and bonds were both down high teens and the Millenniums and Citadels of the world earned their you know, standard returns, which are you know, call it twelve percent plus.
That is what you want in your portfolio as a true diversifier and something that provides a ballast. So they have unlimited tomas.
Results have spoke for themselves.
Results have spoke for themselves, and you know, these are not easy things to recreate. If you look at Millennium, it has more employees than Blackstone.
Wow, that's crazy. Okay, then give us some give us some color on the past couple of weeks. I can't believe it's only been twenty days since Liberation Day on April second, But what's your impression of what it was like at the multi strats over the past month or so.
Yeah, it's interesting thing. Obviously it's in the headlines that they're down, but they're really not down that much. If being down one percent is a crime in this environment, I'll take that asset class all day long. But what has happened is it's been the fastest growing asset class among hedge funds. Goldman Sachs quotes that that multistrat universe has been growing sixteen percent year over year, and their
data is pretty good at matches ours pretty closely. But what's happened is that there's been a lot of new entrants. And the new entrants are the area that I worry about because in order to get the type of diversification that you need, you need amazing technology, You need a lot of teams. Okay, let me be specific. There's over three hundred teams at Millennium Trading. That is a very hard thing to recreate. Risk management systems and a culture
of performance and excellence, they're really hard to recreate. So I think if there's a problem, it's going to be in these new emerging managers, it's not going to be with the top tier.
Can you talk a little bit more about the due diligence process on a multistrat because okay, you have the top line returns, and there's a line, and as you said, it's been a really good line, and it's extraordinary. Even outside of the Veria leads, it's been just extremely impressive. And then you could point to okay, even in twenty twenty two when stocks and bonds were both down, they
produced good returns, So again further impressive. Is there a further level where when you're probing a multistret manager that you can look to discover whether the pods themselves are truly uncorrelated and can be expected to deliver uncorrelated returns in the future.
Yes, and that's our job. And I mean, when you think about the quality of earnings of a company, let's say, uh, you know, the the average S and P company that reports. The analysts all focus on quality of earnings. We focus on quality of return. How diversified is that return, what sub sectors is it coming from. How many managers have been on the platform for x period of time, how many of them account for the you know what, what's the breakdown of the of who's making the profit? How
diversified is that across strategies, et cetera. So that's what we spend a lot of time doing.
When you're doing the due diligence, can you talk to pod managers like how much pro how deep into the system are you? Is it an outside investor able to get.
If if you have a good long term relationship and you're a large allocator of capital, we get a lot of information to make a very very good decision. I think if you're just trying to do it on your own, you have no shot.
It sounds like you're trying to build a diversified portfolio of multistrat exposure. How do you get a good sense of what each multi strategy firm, each pod shop is actually good at doing.
Ironically, they have very different approaches, so it's not as hard as you think. The differences between a citadel and a millennium are extensive interesting, and so when you start peeling back all of the different avenues of how they make money, you start to see really how different they are fundamentally. And I think you can see that as an outsider if you examine thirteen f's and you see after periods of volatility, who's adding to positions and who's
subtracting to positions. So if you look at march of twenty twenty, you get a pretty good insight into who's doing.
Can you say a little bit more, what are the different like, what are those differences that look like.
So for the more trading oriented managers, they're shrinking their balance sheet, they're they're cutting their balance sheet. And then there's a group of managers that are calculating intrinsic values, so they're actually as those investments are going down, they're actually adding to them. And if you look at a historical vol you can see it in historical VALL. So some of the multi strap managers are very tight in
their VALL calculations and they stay around four percent. Others that are more intrinsic value oriented are up as high as eight percent. It's just two different ways of getting at the same thing. Some people hedge from the top of the house, some people don't. Again, the styles when you really get down into it, very different methodologies.
So you mentioned that, you know one of your concerns is in the new you know, it's very hard to recreate a three hundred pod. You know, a team of three hundred quality pods. It's really hard to recreate that tech. But you know, some might do it, and some might try. I'm trying to think of like the science equivalent a concert a law of the conservation of alpha. Somehow that the structure of these multi strat hedge funds have been able to deliver superior returns on a range of market environments.
Is there some sort of intrinsic limit to how many entities can try to capture this alpha such that it all degrades, or is it really just a matter of some just won't have the skills to do it.
I think it's a combination of both. But look, there are pockets of alpha in the market that get overcrowded, and we've seen this in the area of index editions and subtractions, where a lot of capital gets thrown at the area and they don't make money money, or they lose a lot of money, but then the capital quickly retreats and goes and finds a new pocket. And one thing about these organizations is they are very innovative. And if you look at senior management, this is some of
the best investment talent that I've seen. They're coming from very high quality firms and they are innovating all of the time, both in technology, in scope of markets, in how they're joint venturing with people. They're very, very innovative, but obviously their capacity is constrained, right, but they have unlimited demand and that's why they've been able to lengthen their terms. So they've many of them gone from quarterly
liquidity to five year liquidity. And that's a testament, Joe, to the fact that the model's working.
Can you give us a concrete example of innovation because I feel like people use that word a lot and it's sort of, you know, nebulous in many ways, but like, what are you saying that is actually innovative or what has struck you as particularly original and creative recently?
I think there's a ton of examples on the quant side, and quant will be something we should return to when we talk about Brown because one of the traditional David Swinson tenants was not to invest in quant, and yet Brown was the largest investor in the Ivy League in quant. And that's one of the big differences when people ask me, where did you differentiate yourself? So what's going on in quant? Just in the systems using AI at these firms would
is absolutely unbelievable. And there are firms out there that while their capacity constrain. They make money every day. We're invested in some managers that make money every single day, and it always blows my mind.
What is quant mean? Tracy knows that sometimes I don't know the basic definitions of words, Like how many times I've asked Tracy to define what fintech means?
Joe's being very modest. He knows what all these things are. You choose like the terms that actually don't have a good definition, right, What does mean?
I think it's it's the application of quantitative methodologies towards markets to analyze large sets of data and come up with patterns or correlations or anomalies of things that happen divergences between say the futures and you know the cash market. So everyone talks about the basis trade, right, So the basis trade is simply I'm going to buy a treasury, I'm going to sell the future, and I'm going to capture that convergence because the future should trade at a
premium to capture that convergence. And I'm allowed to lever that trade because the convergence I'm capturing a very small, like absolute spread. So I'm levering that sixty to eighty times. So the ability to rapidly identify those alphas some people call them alphas, you can call monomalies in the market that can be exploited. Some of them are high frequency beating someone to a trade, serving as a market maker.
So you mentioned that when you were Brown, you didn't follow the Swinson model when it came to quantitative investing.
Why was that, Well, I think to put up really good returns, you have to figure out one what your competitive advantage is, and two you have to be an independent thinker and not follow the herd. And that's what we did at Brown. And I'll tell you how we created our competitive advantage because I owe it to the alumni. We we did a really good job was creating a
network of alumni in each asset class. So we would work with our investment committee, but we would also reach out to some of the best investors on the planet by industry, and I would actually go and present our portfolio in that asset class and say, what do you think where can we do better? Who would you recommend we look at? How would you structure this? And so that was one of the secrets I think of us, which is using that network effect now, Joe, back to
your comment. Most people don't like to do that because they're exposing themselves the same way that they feel pressure. They don't want people opining on what they were doing. But I was willing philosophically to have that kind of open transparency so that I could learn and benefit from the Brown ecosystem. And I always used to have this expression was I would go to people and I would say, what do you have to feed the bear? Because it's the brown bear, So feed the bear. Give us your
best co investments. And I have an unbelievable all star alumni cast, and they carried Brown to greatness. I happened to shepherd the process with an incredible team.
Joe, what was your college mascot? Out of curiosity? The Texas Longhorns, of course.
Which one day if, by the way, if the if, one day, we'll do a proper interview with the head of you, Timco. It does seem like an investing and this includes VC investing too, like you'd probably want you want to see a lot of pitches, don't you, right, like hit a home run, and so it sounds like they had alumni network or whatever it is. It's like you don't have to say. You might just say yes to one out of every thousand or whatever, but you want to see a lot.
It sounds like you want to see it.
Seems like it's a huge part of the game, just waiting for that fastball down the middle and until you see it.
One hundred percent. And you know, each asset class has so many nuances, and you know, to have someone who can help out their endowment as an alumnus, it's rewarding, but you also have to you know, their risks associated that with that also, so saying no became an art.
So you are now head of multi asset investing at Blackstone, as we've mentioned, and I think when you were initially hired, you were head or cohaed maybe of Blackstone Alternative asset management. And my impression of what you were hired to do was basically try to make that group more competitive, which you know, when we're talking about nebulous words, I think competitive is up there with innovation or innovative. Probably what
does that mean exactly? If someone says, I want to make our alternative asset investing business or our hedge fund business more competitive, what do you do?
So I think about it, as going from good to great, and you do that not by making dramatic changes, but like James Clear and atomic habits. I don't know if either of you have read that it's actually worth it, but he talks in his book about how it's the little constant improvements, all stacked on each other that create greatness. And and really our group embraces that principle and that's embedded in our culture. And so what does great mean?
Great means, you know, top quartile returns. Great means top quartile risk statistics, a high sharp consistency, and you know, knock on wood, we're delivering that over you know, since I've been there, and it's it's really the result of the great team that I have. I have an amazing team.
By the way, Tracy Richard Hall is the CEO and the CIO of you, Timco. I couldn't remember his name for a second, but putting it out there. If anyone at you Tim is listening to this episode, he has a standing invite to come on. To come on.
Rich would be a great guest. I know him personally, super smart. You should call him out.
Joe, Joe has and we would join you enjoy that'd be such a blast. The call has been put out, Rich, let's make this happen. I just have one last question. You know, you talk about your team and how important that is, and I like to ask this someone maybe they're in college, maybe they're studying finance, maybe they think about studying finance. What is the path for someone who wants to be on one of these teams, maybe they want to work for their own university's team or whatever
it is. What should someone be studying and try to try to do right now?
Yeah, Joe, it's a great question. I think the number one trait is to be really, really curious. And I know that sounds trite, but I had no idea that I would be at Blackstone. I had no idea that I would be at Brown University. But everything that I did I was fundamentally curious about and wanted to really be good at it. And so when you're curious and you go deep and you learn and you're a practitioner, people will tap you on the shoulder. You know. I
had never met John Gray. I was at Brown University and I got a phone call that John Gray wanted to have dinner with me. And it was after an article had come out in the Wall Street Journal on the success of the Brown team and how we had gone to number one in the Ivy League over every time period. So I wasn't expecting that that wasn't in the game plan. And I had dinner with John and the next thing, you know, in January of twenty twenty one,
I started at Blackstone and it's been incredible. My advice to people is, I tell this to all of our younger people. Try to be a nine or a ten out of ten every day. Don't overly plan out your career. Be really curious because if you're curious and passionate, no one will beat you, no one will outwork you, and no one will. You know, have more depth of knowledge and a topic.
This is the thing, Joe. People sometimes think there's like a shortcut to success, but actually the real secret is just be very good every day.
And knowing a lot.
You know. I love hearing that phrase. I think I've said it about all of our good depth of knowledge, depth of knowledge, depth of knowledge. There's no substitute for actually knowing stuff.
Yeah, okay, so you've been at Blackstone now for four years. What's been the biggest challenge over that time horizon, so four years. And what's your biggest challenge right now in the short term given all the market volatility that we've seen.
Yeah, I think going from an organization where you had a small team where you present it to your investment committee to then going to you know, we have our division as eighty eight billion over three hundred people. So obviously the biggest change for me was becoming a better manager of large groups of people and still having maintaining a high standard of care and everything that we do, but also not getting in the backswing whether you're a
tennis player or a golf player. Of my very talented partners who are helping me drive, and I got some very good advice from John Gray and Brian Gavin, who's our COO, about delegating the importance of delegating the importance of clear communication. So I got a lot of help along the way. This is a great environment right now in the market for us because we're in the absolute return business and we have a lot of volatility. We have a lot of stock dispersion, and that's great for
our strategies. Quant loves that, Macro loves that, our low net equity guys love that, and then our credit is insulated because we're in very, very specialized credits. So it's a good environment. I would say that I haven't seen volatility like this since like two thousand and eight. I mean, and it's the market doesn't like uncertainty. Our products like uncertainty and volatility.
Are you deploying more risk at the moment or taking on more risk?
Absolutely. One of the things that our team is really good at is rebalancing into things that are down and trimming those that have done really well. And it's that rebalancing that leads to a lot of consistency. I know. John Gray on our earnings call said that mentioned that our group had been up twenty straight quarters in a row and twenty four months in a row, and I think that's a function of that rebalancing and really really bust portfolio construction.
All right, Joe Dowling, thank you so much for coming on a laws Yeah, Joe, that was that was an enjoyable conversation. The one thing that really struck me is it is such a It strikes me as like such a competitive advantage if you can just buy and hold for a really, really long time like that seems to maybe this is simplistic, but that seems to be such a key difference.
No, I mean that's that's huge.
And then you can monetize that like liquidity premium, as Joe Dee was saying.
You know, individuals can do that too, which is you just invest in a range of things and then not ever look at your four one K First's right, we're just really bad at it as humans.
It's particularly difficult moment.
I would say, No, that was one of those conversations. I mean I really enjoyed that where each specific question could have obviously been an hour long episode, right, because we could have talked more about what is the value creation of PE, what is the due diligence process for hedge funds to establish that the multi threat is truly uncorrelated? How stressful are these times for university endowments which thought they had really stable environments, and so it's like a
very there's a lot to go on. I really do feel like it's like all of these are episodes within themselves. But I thought that was a great overview.
Absolutely, and the alumni network points really interesting. I hadn't heard that before, but it absolutely makes sense, right because your resource basically all of your resources kind of well, except for government funding, most of your resources come from your alumni, so why not throw in I guess knowledge and expertise in addition to actual donations.
People love their universities, you know, this is I don't know, Tracy. In Europe, is it the same way where like people I mean, I'm sure like an Oxford and Cambridge, but like, yeah, there's that same thing where like people wear sweatshirts to their universities until they're like in their fifties.
Well, I personally enjoyed my university. I don't think it's as intense I feel it is.
In the US, Americans really build their identity, but really, like I went to you know, ut or I went to you know, Eastern Iowa State or whatever it is, and then their entire personality is like, you know, go redbird to whatever the team.
You never asked me what our college mascot was.
Well, this true.
What did did you guys have one?
I think this might be one of the reasons why people aren't wearing like LC sweatshirts for the rest of their lives. But our mascot was the beaver. This one because we're industrious that's a great one. It's admirable for sure. All right, shall we leave it there.
Let's leave it there.
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.
I'm just Joe Wisenthal. You can follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen Arman, Dashel Bennett at Dashbot, and Kilbrooks at Kalebrooks. More Oddlovs content, go to Bloomberg dot com slash odd lots, where we have all of our episodes and a daily newsletter that you should subscribe to, and you can chat about all of these topics twenty four to seven in our discord Discord dot gg slash online.
And if you enjoy Odd Thoughts, if you like it when we talk about how people are actually running these huge pools of capital, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening
The stood in a