Special Episode: Bobby Jain on Why He Chose Millennium Again

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One partner powering how business gets done for companies around the globe. When you add it all up, no one does business like Comcast Business. When you own your own business, you own every decision. Catch the red eye or take the 6am. Make a new hire or promote internally. Celebrate a win with the toast at the gate or unwind at the lounge. Big props to this team. Some decisions are a win-win. Like earning 8 times points on Chase Travel. Chase Sapphire Reserve for Business. The business card that gives back all you put in. Visit chase.com/reservebusiness to learn more. Cards issued by JPMorgan Chase Bank and a member of DIC, subject to credit approval terms apply. Hello and welcome. I'm Nishant Kumar and I write about hedge funds for Bloomberg. Today I'm joined by Bobby Jan, CEO and CIO of multi-strategy hedge fund Jan Global. Bobby has been at the centre of some of the biggest shift in modern finance from credit Swiss to millennium and then to building Jan Global from scratch. He recently struck a partnership with millennium management, one of the biggest hedge funds around. Today we will talk about that deal, what it means for Jan Global and where the industry is heading. We will also get to know Bobby a little bit better. The reason it took me 30 years to watch a hedge fund is I can never convince myself that the world need another hedge fund. And at 55, I could spend my time CIO not CEOing and that's what I want to do. In that 40 years we've generated 8,000 hedge funds or some number like this. You know, in the next 40 years, does that number go to 80,800? What I want to be known for in the next 10 years is developing that next generation talent. And I want to make the partnership with millennium be a standard for the industry. Bobby, great to have you here. Thanks very much. Before we get into more serious stuff, your deal, your strategy, I want to go right back to the start. You grew up in Queens, studied government at Cornell and started your trading career in options. None of that feels to me like a straight line. So tell us about your beginning. So my parents were in the first generation after the immigration act to 65. They were considered themselves pioneers. We were completely grown up integrated American names. I grew up in Queens and a working class neighborhood, all cops and firemen. You had to really integrate. And that was the mission. My dad was very conservative, not a borrowing family. Earn some cash then buy something. My mom was a big reader. That's what I got my lover for reading. So a great, you know, a great American story in a way. And we means you and your brother and my brother and my brothers in the business too. We were Bobby, Vinnie, Sal and Sue, great American family in the middle of Queens. Your parents had no finance background? No, not really. My mom was an accountant. Yeah. My dad was an engineer. My dad, you know, back then people wanted you to become a doctor, lawyer, engineer. That was the normal thing. My parents didn't think that way. My dad said go be an entrepreneur. He said, you know, he said you're here, you're in America. This is the land of opportunity to start your own business. And so that was it. You know, I went, uh, unusually, I went into liberal arts. You know, I did politics, history and English. I was, I mean, I was a numbers guy, but I did that, which was unusual for an Indian family at the time. I don't think it was any brilliance. I think the most driven kids back then were going into finance. I was a good student. I was big in student organizations. I ran a big business in college and the most competitive field in a way was actually interestingly, the prop trading shops and I ended up at a firm called O'Connor, which was the original prop trading shop in a way. And that's how I started. It was just campus. So out of college and somewhere along the way, uh, markets clearly became the thing that grabbed you before you tell us what pulled you towards finance. Describe yourself as this 20 year old something, uh, living the American dream. I was in sports, you know, I played basketball, soccer, football, high school, you know, all the American sports. I, um, and, you know, when I was 17, I went to Hunter High School in the city. They had a program where a senior year, instead of taking classes, you could work at a stockbroker. And that was, uh, you could work. And I worked at a stockbroker and that was during the 87 crash. And so, uh, I really learned there, uh, obviously interest in finance. I must have had it already. But when you see people lose their savings in a day, yeah, you really realize you're managing people's money. You know, this is, this is actual people's money. This isn't the video game. Yeah. And that was, that was attractive. And then, yeah, at the time, as I said, you know, the choices were go to the Big Bank investment banking programs. Yeah. You know, which that was the thing. You work 100 hours a week and you do and you grind. Do I have them? That was a great career. And then the trade in guys, O'Connor was, you walk in the room and they're like, what's 49 times 28? And I'm like 1372. You know, Metz play the Yankees in the world series. What are the chances of Metz winning four? They say, you say one out of 16. And suddenly, they start asking you a bunch more questions. You know, what would you do if you bought a straddle or a strangle? And I, uh, I didn't know what a straddle or strangle was. But you figured it out. And that's how I ended up on the, on the floor of the American Stock Exchange. Take us through your career from banking to hedge fund. Yeah. How did it evolve? Well, so I got to Credit Suisse, really was Credit Suisse Financial Products in 1996, which is sort of a hot derivatives shop at the time. And, uh, and I was the guy doing index arbitrage. Yeah. And they called it the white paint division. And they said, I don't know how you make money selling white paint, but go ahead and try it. And so we started, I started. The first arbitrage was taking technologists and paying them like traders. The second was collecting lots of data. And the third was using the data. And so we went from buying stocks, selling futures to maybe we can buy stocks and sell 50, you know, but by, like, not buy all 500 stocks, but buy 50 stocks. And then can we do stocks versus stocks? And next thing, you know, started doing all over the world. And it became a, you know, a giant business. Really a multi-hundred million dollar business in a few years. And that was a great time. I mean, that was a great time in the markets. You know, young people, you know, I think it happens now too, by the way. But young people got a lot of opportunity back then. The markets were a little easier. Decimalization came about, right then. And then, and then the vocal rule came. You know, in the vocal rule came, I mean, there's much later now. You know, 20 years later, we were running a big thriving business. The vocal rule came and vocal rule kicked in 15. And you have to make a decision. You know, you're going to start your own or, uh, and I joined millennium. And, uh, you know, I was thrilled to do it. I'm thrilled I did it. Yeah. How did that happen? I think, um, I think, uh, I'd known of millennium, obviously. I'd known Izzy for a long time. And when the vocal rule came, it was a natural transition for the people from the banks to move to the hedge funds. And I think, uh, it was a time, uh, when the hedge fund industry really took, this multi-strategy hedge fund industry really took off. Because the bank competitors were disappearing. Yeah. Do you see multi-strategy as like a version of the prop shop to work that? Yeah, I think so. I think the prop shop, the unique characteristic was you were in the talent development business. That's the business. So you, you, you have 50,000 reviews of all the people in the bank. If the bank is structured that way, and, uh, you have bank analysts that want to become PMs, you have bank traders that want to become PMs. And so you're trying to figure out how to take these people that are doing something similar and adapt them to this business. And the business is, you know, I remember, um, a lot of firms at the time, even were saying, uh, come here. And if you don't, if you don't make money, I'll fire you. And I would say to people, if you don't make money, I'll fire me. Because my literal job is to figure out if there's a market opportunity. I think everyone in the prop test enjoyed those cultures, enjoyed that time. But obviously the rule. changed and the markets changed and moved over to the hedge funds. Yeah. Although it became a little difficult for raw traders to transition into buy side or hedge fund. I didn't feel that. I mean, you know, Credit Suisse actually generated a lot of big proprietary trading desks and businesses. And I think actually probably two of the top 15, maybe three of the top 15, 20 hedge funds came out of C.S. I agree with the point that if you were a bank that had a highly integrated capital stack, if had abundance of capital, let's say, maybe you had to do it. Credit Suisse, we didn't have an abundance of capital. The fact that you can trade when you want to add prop desks, but at hedge funds like, you have the capital and you have to deploy. I agree with that point. And I think the multi-manager business has tried to solve that very acutely in a way that at the PM level, at a multi-manager, you have the ability to arrange your capital up or down. And that's a very, I agree with your point. The variable capital is a very important asset in a business. And if somebody gives you a billion dollars and they want 12%, you owe them $120 million. That's it. There's no place to hide from that. If there's a time when there's literally nothing going on in the world, then you have to tell your investors, there's literally nothing going on in the world. But the variable capital in a multi-strategy hedge fund with enough scale, that is actually a major portion of the game. I agree 100%. And a lot of the strategies don't work in a constant capital arena. But the prop desk was harder in one way in that the banks were 20X leverage. You know, the hedge funds are 678 times leverage. 20X leverage means you have to manage your risk. You know, there's no way you can say, hey, maybe I'll hold it, maybe I'll buy more. You had to get into this, as we call it, trading negative gamut of your PNL. You had to deal with risk because the banks were leveraged. And so I think the banks taught risk management well. But in fairness, every bank might have been different. Yeah. You spent two decades at Grid Swiss and then seven years at Millennium. What stuck with you, some of the learning points that, you know, you have with you today, which helps you in your day? I mean, the first learning I had was actually being on the floor of these change. You realize there's someone staring at you who's selling what you're buying. And you realize everyone has different constraints. And there are a lot of people that are using the markets for different reasons, for insurance, for liquidity, they need capital. And so that was, so I learned the same thing at the beginning of the, when I started trading at Grid Swiss, you realize that there's all kinds of non-economic players. And so trying to figure out if you could provide a service to help those people achieve their goals, you can get paid for that service. And that service is generally risk-capital. Second thing is clearly the value of data and technology. And I think, you know, probably when I was in my 20s and started trading, you know, three people and a Bloomberg, you know, could make you some, you know, good, good work. I think in the last 10, 15 years, that's not a thing. You know, you need the person, you need the team, and you need the capital, and you need the platform around you to make money. And that's been a big advent of these businesses. So the second thing is technology and platform. And the third is, this is a life-long learning business. You know, there are not that many things that we do today that we could make money the same way five years ago. And so you have to be keep pushing, and this isn't a fun-to-funz allocator business. This is, you have to be in the markets all the time. You have to see what's going on. You have to make the connections. And you know, a big part of what I did, certainly at the beginning of my career, was find the seams between market, you know, convertible bond market was a, was a, between the credit market, the ball market and the equity market. The index R market was between the stock market and the futures market. And so if you could find those seams where you have different people with different strengths, there's, there's lots of money there. So yeah, I think, and then last thing I'll say is, scale, you know, one thing I learned over the years, which I wouldn't have guessed at the beginning is quantity has its own quality. You know, there's a scale, I call it emergent properties of scale. Things start to happen and, and that's something that you won't know until you get up to that level. And so, I think you can't underestimate scale. At some point, you went from inside working for large firms to build one for yourself. And the launch was very unusual, even by H1 standards. Some compared it to landing on the moon. Normally people start, when they start H1, they start with like Toyota's. You started with Rolls-Royce, what did you want to build? So first of all, in my opinion, I start with the premise that making money is hard. And these durable, long term financial institutions, not that many. If you can count them in our business on two hands, that would be a lot. You know, and, and, you know, let's say we can get the two hands. When I say this, there are plenty of great financials, you know, investing organizations. I'm talking about market neutral, you know, coal mining, blocking in tackling every day, day and day out. And to do that, it's just not that easy. You have to build it properly. You have to build it from scratch with, and so I had the chance to build it with a modern infrastructure, a modern culture, a modern business mix. And so I started saying, if I'm going to do this and build an enduring institution, I have one chance to get this right, which actually, to your point, that's never really happened before. Even the Great Hedge Funds, they started small, took years to get the bigger, and that's great. It's a different dream. But you make some compromises along the way. And fine, in the 90s and 2000s, maybe you could do it. It is very, very hard to start with one product, and then go on and start many products. And I just want to walk you through it, because the, what happens is, and everyone who does this knows it, is you start one product, and three, four years later, you start another product. Fine. You start an equity and then you say, hey, I'm going to do quant. Okay. Now, your whole machinery isn't set up for that. Yeah. You're optimized for the certain problems. It's not easy enough to even do that. If you happen to land on heads a few times in a row because that thing works, now you go into quant, the people you're hiring are diversifiers. They're not there to do it. It takes you a long time to do it and if it, if it, if it doesn't work, your investors say, what are you doing? Right. And even if your own product doesn't work, they say, why are you focused? And so the instability of that to get from one product to two and two products to three and three products to four is very difficult. And forever, you're a core satellite business. People say, well, this is your core and that's satellite and it's hard to shake that. So I wanted to shake that a modern, I had a modern business mix 30 years ago when a lot of the great hedge funds started 30, 40 years ago. You wouldn't have commodities in the middle of your business. You wouldn't have credit in the middle of your business. You wouldn't have Asian in the middle of your business. For me, those businesses are roughly half or pms and a third of our capital. And so that, that gives you a diversification that's hard to get. You know, in our first two years, we had one month where we've down more than 1%, a lot of funds had, I mean, that partly because I had to play defense, you know, as your new fund. And partly because we had the diversification, most funds had four or five months where they lost, you know, it wasn't the easiest time in the last two years. So I built it this way, everything, all at once, because you have one chance of building a home with all the bathrooms and the kitchens in it. And if you don't take that chance, you're starting to build afterwards. And by the way, it worked. You know, I remember we started the firm July 1, 2024, and you flip a switch. And you're like, suddenly you're trading in 50 markets, you know, and you're like, whoa, you know, and then you're like, waiting at the end of the day, did all those trades book, then they booked. And then, and so, but yeah, I did it that way because I felt like you have to go for optimal to have any chance of competing in the long run. And I think if you don't do that, you can, you can leave it to luck. And maybe it happens, and maybe you land on heads and thousands of hedge fund starts. But if you're starting a hedge fund, you're saying, I want this to work. This is the way to do it. Yeah. Describe like the day one or first week where you had to take care of even switching on the light versus you used to work at a firm where this was someone else's problem. What was it like? You know, it's interesting. One of the biggest people in the industry said to me, you're going to underestimate the benefit in starting from scratch. And they say legacy people and legacy infrastructure and legacy processes and legacy technology. I was fortunate to have great partners with me that helped build the business. So day one, day one, see, what you have to do to make this enduring is you have to create sharp ratio. That's the business you're in. Now, I wish I had spun out of a business with 200 people in 20 years of IP or something like that. And then you have that. I didn't have that. I had me and, you know, some people that I knew that would join. And so I, to generate the sharp ratio, you have to create diversity. That's the way to do it. That's the mechanism into which to do it. So then we said, let's do it all at once. I had to bring on a bunch of entrepreneurs with me. You know, I had, so I had someone who had built a billion, multi-billion dollar hedge fund before to help me build it. I had the chief risk of so I work with the 25 years. And then I brought six entrepreneurs with me. So we're doing it. And you're in autopilot mode. You know, you're doing it. You're doing it. And so now you have to put together the talent. You have to put together the capital. And you have to put together the processes. And you're doing it. And you have a deadline. And we're launching July 1st, 2025, 2024. And just like everything else, you will it into existence and it comes together, you know, it comes together. And then when you flip the switch, what goes through your mind is that thing about, is all this going to work? How did you convince your investors to back you because it was an unique experiment? Yeah. I think that, I think from the investor lens, and, you know, I sit on the boards of some of the big investors in the world, they feel acutely the amount of options that they have. And one option is that they put, you know, they construct their own multi strategy firm. I'm going to take one equity firm and one, you know, quant firm and one and that's, you know, that's great. And it's good. And I applaud everyone trying to do that, but you lose a whole thing of moving the capital around. And so they're saying, if I can get it all in one place and get that option as well, I'd love to do it. There's not that many vehicles to do it. And those vehicles are not always open. And so, so having the ambition to do it, having the experience to do it, importantly having the capital to do it, you know, one of the questions that comes up to me is the chicken and the egg, you know, what comes first? Do you raise the capital first or do you raise or do you build everything first? And I can assure you, there's no chicken in it. There's only a chicken. You have to build everything first. You have to hire, you know, you have to hire 200 people. You know, before anyone even starts the operational delusions process, they have to see that you can hit the button. They want to read your prime brokerage agreements. They want to do the whole thing and then you can go raise the money. Why did I have the confidence in it? I've known many of the investors for a long time. I know this industry and I think, I think people realize this is the way to do it. If there's a high-barad entry to do it, you know, I'm not sure how many more of these funds are going to be able to launch again. Maybe with AI, maybe it lowers the barrier entry. So we started an institutional size, institutional quality that allowed the talent to come in. The partners I had were people that I'd known for a long time, again, the ambition, the experience. And then the capital, you know, we raised a substantial sum of money, but a reasonable sum in the context of the industry in a way. And, you remember, we, like I said, we had one month where we lost more than 1%. And that was 1.2% or something like that. Let's go to your analogy on building a house with all the bathrooms from day one. In England, people start with a flat and then they upgrade to bedroom house, then a bigger house, and then they dive in. That's the life cycle. It seems like most of the hedge fund industry, like players are like that, so you did not believe in that. So this path dependency is what you're describing. And so let's say you started 1,000 hedge funds 10 years from now, after, if everything was just 50/50, after one year, you'd have 500, after two years, you'd have 250, after three years, you'd have 125, so 125 hedge funds are going to have a three year track record. That's good. Like I build this one flat into two flats and four flats and eight flats, that's a thing, but that's not predetermined. If you're 52 years old and you're saying, "Hey, I've been doing this thing for 30 years. I know how this is supposed to be built. I know the people, I know the investors. I know what the business is. I know where the money, at least, can be generated, where there's service to be brought, where there's capital supply and balances, and then do it that way. If I had to do it again, I would only do it that way. Because I see single-manager funds trying to become multi-manager funds. That's very difficult. I don't mind. If a firm wants to be a single-manager fund forever, that's okay, but a big part of our business is when there's more opportunity somewhere else, you have to move the capital. That's the thing. That's a big part of it. If you're in a single-manager fund, not only you have nowhere to move the capital to, but if your product isn't that well, you're tempted, as you alluded to earlier, you're tempted to keep the capital in that asset class because you're saying my investor is asked me to invest this thing, whether it's good. That's a very dangerous game and that's why the single strategy, I'm talking about the market neutral world, the single-strategy market neutral world has not endured as long as the multi-strategy world. When you see the firms that have done it, they've gone to multi-strategy, they got there pretty early, and I think you have to do it that way. So you prove your model, I reported you generated about $1.8 billion in P&O during two years, roughly two years, was I close in my reporting, I'm joking, I know you can't talk about it, but what does it take to generate that level of profit in today's ferociously competitive world? It's interesting, so what was interesting about the reporting to me was that the first month we started, we'd only called about 20% of the capital, and suddenly we thought we're doing a good job, we got everything, we earned 50 markets, we're trading, we made a 40% gross return in those two years, and yet someone's saying, hey, their net return is smaller than someone who's been 37 years in the business, and I'm like, wow, how does anyone think that you're going to generate net returns, you have to understand the, there is a ramp period to this, ramp on the capital, ramp on the people, ramp on, the biggest thing and we'll talk about it as a non-compete, so we started these businesses, we were able to attract very competitive people, I mean, very people that really saw, and think about it, the people that joined us were people that had some vision that are saying, hey, I'm going to grow with this firm, and so we were able to do it across all these markets, and yeah, when we started, we were hoping to generate roughly the numbers you're talking about in the first couple of years, and we actually did it, is that a surprise, not really, but it's a little bit of a surprise, you know, you don't always say you're going to do something and then it actually happens, what did work during two years, really proud about, you know, okay, this first thing is you flip the machines and it all works, second thing is we created a core competency in getting people up and running, you know, we, there are lots of people that started on a Monday and started trading on a Monday afternoon, so you have a purpose built system, and I must say that it was, it was powerful to be able to do things, to have a whole organization that's purpose built, and everyone started the same time, you know, so everyone's on the same, you don't have everyone in different years, I think we moved capital around well, and I think we managed the risk well, I think we, I would say it was not an easy time through a liberation day, through the Iran War, there was lots of things, and so I would say I'm probably proudest on the risk management, you know, this business is not about only like results, it's about the path, I feel like we built, we built a machine that had the ability to actually get to that next stage of being one of the top financial, you know, hedge funds, let's call it in the world. Yeah. What was the hardest part? Well, the hardest part was, was two things, well, I would say, the hardest part was clearly having to fund everything off your own balance sheet before you started. The, the second hardest part, I mean, it's not hard, but, you know, there, I was talking to someone yesterday, who we, I started talking to before we started trading, and he still hasn't started. You know, so these, these non-compete, you know, two-year non-compete, that's hard for a starting business. It's fine. It's it, you figured out, you get through it, you know, we were able to start early enough that we were able to get 45 p.m.s to start day one. But the, the non-compete, you know, it's interesting. Some industries don't have non-compete, you know, some, some, some cities, some states don't have non-compete, our industry has non-compete, and, and it's a, it's a feature of the industry. I'm not complaining about it. So I would say, that was, I would say building it was hard, of course, raising the money's hard, of course. And then, and then the deployment, you know, the deployment just takes time. You know, the biggest, the biggest challenge that people don't know is that when you start, let's say you start everyone equal weighted. So now, the business over time, you, you're going to give more capital to the people that are successful and you have higher conviction in the, the, the two years is not a long time. You've never, so what we have is we have, like our first year, our, we had 20% of our p.m.s make 53% of our revenues. And most firms at 20% of the p.m.s make 80% of the revenues. And so that, in a way, that's a very good thing. And another way, it's just because I didn't have the conviction to give the best people more capital. Okay. So then this year, it's higher as 2060, something I think 62, 64 and, and it will go higher. And another way to look at it is our median sharp ratio across our p.m.s and our average sharp ratio. You actually want that number to be as high as possible. That shows you that you're doing a good job of capital allocation. Mine's actually not that wide because again, it takes time to forget the data to say, and to get through through the cycles, you know, you start a strategy, you really want to live three years before you can live through enough cycles to say, I have the conviction. It just takes that long to start one of these strategies and, and to go through it. And when people say they want a three-year track record, it literally. really takes three years. And so that's been the biggest challenge is just time. Now, frankly, I think it took us about 20 months to get mature. After about 20 months, I felt like actually I got through most of that. And so that's on the cost side. But it's really on the deployment side. The deployment side is the biggest challenge in launching these businesses. And there's no good way around it. There's no good way, if you're starting a hedge fund, how are you going to get through that deployment cycle? You could just wing it, you know, and start, raise a bunch of money, and then just put it to work. But if you're going to do it properly, and you're doing it for duration, you have to phase it in over time. And that's difficult. Still ahead, we continue my conversation with Bobby Jan, founder of Jane Global on the evolving hedge fund industry. I'm Nishant Kumar. This is Blomberg. This holiday season, don't miss your chance to turn just looking into just spotted. PayPal checkout is a trusted conversion engine filled by 400 million active PayPal and Venmo accounts. With Jatchee BT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions. Jatchee BT can help you prepare. Connect your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and Jatchee BT can help you do it with confidence. Get started at www.jatcheebt.com. I'm Nishant Kumar and you are listening to a special conversation with Jan Global Founder, Bobby Jan. Let's get back to that conversation now. Let's talk about investors a little bit. Zooming out, obviously, the multi-strand model has generated enormous profits. Investors want them. We can see in the growth of the assets of multi-strats. But the cost is too high for investors. Is there a better way somehow to structure this model so that investors could get a little bit more? My view is in the alpha-generating industry, let's say the sharp ratio greater than three industries, something like that. The very scarce industry and that industry is more private than public. The biggest players in that industry are trading with their own money. If your sharp ratio is high enough and your scale is high enough, eventually you're going to generate more money than you can possibly open up to outside investors. So that's the backdrop of this. I think it just is what it is that it's an expensive industry that water finds its level. I would say that the investors in this industry tend to be made up of the most sophisticated investors. The dream on the planet earth is to generate equity-like returns and bond-like volatility. If you can at least have a track record of bond-like volatility and a business strategy, bond-like volatility. Bond's also moved, by the way. It's not like you've legislated that. But if I call it, you're using the leverage to hedge, not using the leverage to amplify. If you're doing that, then the bond-like volatility, whether you can make equity-like returns or semi-equity-like returns, that's a very powerful investment proposition. Let's get back to the core of this discussion, turn to millennium partnership and which caught a lot of people's attention. How did the deal come about? What was the catalyst? Yeah, so I left millennium now, probably a little over three years ago. I was in the trenches with a lot of the people of millennium for a long period of time. I know them for many years, friends, colleagues, and I stayed in touch with many of them. One day at dinner, I think it's fair to say, millennium didn't realize that the breadth of activities we had and really the returns on deployed capital that we had. Again, if you read the press, maybe you'd look focused on the net return, but actually the return on deployed capital. Like I said, after about 20 months, the cost equalized and deployment equalized, and we were on offense in a way. I mentioned that I was going to go out and start raising money for the second phase of our development after we got to the 20 months and we started talking and said, maybe there's an ability to do this together and to work together and I hadn't been thinking about it. I'm not sure they'd been thinking about it. Obviously, there was a question. The first question in my mind was, why maybe I'll just take an SMA or whatever you call it on top of the capital and then I just realized how much more efficient it was to do it all at once and do it properly from the beginning. To me and to a lot of people outside, it feels like a circle bag. Can you take us through your thinking that why you did that? What are you trying to get? Let's say you're trying to get capital. I'm not just trying to get capital. I'm trying to figure out, how do I put myself in the best position to win? When I looked at millennium, actually even over the last three years, I see how important AI has been to their business. Suddenly, I say, "Geez, if I could have access to that data, that technology, their resources, their expertise, suddenly I'm going to catapult my business not only for the capital, but for all that building that I would have to do." People say three to five years. I think it's five years plus. What I started realizing is that I was at $56 billion. When getting to the next stage or even the next stage, next stage, I'm still sub-scale. This is a scale business. People say AI, maybe it somehow democratizes something. I don't see it. You see it in these big and throttpicks and all that. The amount of money they're spending. You see it in the big trading companies. I don't see the democratization. I see this as a big investment game. I think that's changed in the last three years. For me, this accelerates not only the time, but the probability of success in trading terms. My CDS went from x to 0.4x. That was very powerful in the scope of a minute. In the scope of doing this deal, and by the way, I see it now. We've only been together a short while, and it's powerful. It's powerful. The heft of Millennium and the capital side, but the resources, the AI tools, I'm quite excited by it. For me, personally, now I'm not 50, I'm 55. At 55, I could spend my time, CIO-ing, not CEO-ing. That's what I want to do for the next 20 years of my time. I would say another point is one thing I learned is if you have a diversified strategy, we generated about a three and a half sharp in our period. If you have a diversified strategy, having a diversified investor base is not as important. There's, I grew up in the prop desk for 20 years. In the prop desk, you had one highly intelligent, highly sophisticated, highly aligned investor. You clearly understood the optimization function. That actually has a lot of benefits to it. Having a diversified investor base is great, and these are great investors, but having dozens of investors, having different goals, different time horizons, and having one sophisticated investor has many advantages. I realized that once you're running it high enough sharp, having that diversified investor base doesn't, isn't as important. This is exactly the positive of what we are always told, that having more is better than one. Even in your portfolio, diversify your team, your diversify, but this is a completely different. Yeah, now, so if you think about one notch deeper, Millennium has a diversified investor base. Millennium is in a position to grow. We're aligned on that. They have their model clearly worked for a long period of time. They've just raised a lot of money, and I'm thinking the overhead that it's costing me to spend going out and raising all this money. The The reason it took me 30 years to launch a hedge fund is I could never convince myself that the world need another hedge fund. I don't feel the negatives for having one investor, especially when that investor has an incredible capital base, an incredible capital structure. But I agree with your point. But the industry is changing too. I think I do think that this industry, the hedge fund industry, is round numbers 40 years old, 1986 barely would have known a hedge fund. In that 40 years, we've generated 8,000 hedge funds or some number like this. The next 40 years, does that number go to 80,000 or 800? I don't know. Me going 800. Yeah. Right? It's like that. Going in that direction because there are having two heads of marketing doesn't really make sense, having two groups of people flying around the world doing pitches doesn't make sense for anybody. If you sit at any of the big allocators, they would rather consolidate their partnerships. They would rather have fewer, more substantial relationships. This is the trend of the business. Having said that, if you could start a business from scratch with seven businesses at once, with the talent, and now you're just having someone else put in gas in your tank, I think it's a pretty good business. Would you advise anyone to follow your parts? Yes. Yes, I think that I think in a couple of years, people are going to look back at this and say this is the evolution of the industry. Just like every other industry, this is a young industry. The reason this industry doesn't feel as young is because we live it and we mark the minute. So every day is not a day, it's however many minutes it is. I think what people are going to realize is that their expertise often is in the CIO. If you can consolidate the CIO and get more people into CIO, I think that's better for everybody in the industry. This deal also changes the kind of, first of all, how should one think about Jane Global now? Part of millennium, unit of millennium. No, so this is a new structure and I would say that millennium has been an innovator in structures. I think it's probably the only firm that can pull off a deal like this. I think it has the ability to manage complexity like this. So we are a separate business, we have our own 13Fs, we have our own wallet, we have our own trading. So I view it as we're a separate business with a common investor base. We have information barriers actually between the two firms and so that's the way it is. And frankly, I feel broadly the same as I did before except some of those 30 minute meetings I was doing, my day was broken to 30 minute blocks. Now it's broken up into hour blocks, hour and a half blocks because, and that's what it takes to make money. In a now I'm starting to feel like, hey, let's try to go actually figure out how this AI thing is, is not filtering through the stock market, everyone can figure that out. How's it filtering through the credit markets, how it's figuring to the rates markets, and how it's figuring, how it's falling through the world. There are going to be data is going to provide different types of information and leveraging that data is going to be a topic and you need, you need people on top of these big institutions thinking that way. How has your day to day like time table has changed in this new structure versus, I think it's this point. I think it's, now I would say that we've, we've, you know, we had a big talent pipeline that prior to the deal that this gave us the capital to execute on. And so we've hired, we've hired, you know, more than 20 pms since the deal inception, which is multiple higher than we had been hiring prior to that because we didn't have the capital behind us. And, and so I'm spending a lot of time on growing that platform and, and the, the message of small town feel, big town resources is resonating, you know, and, and the, and, you know, we, we, we have a very collaborative environment. And so, and that's resonating. A lot of the people that were hiring, a coming from collaborative environments, and what do they want? They want to get paid transparently, fairly and competitively, but they want to be an environment where they feel like one plus one equals three. You know, that's, and this is, that's a topic. But so, so the hiring is, hiring is probably taking up more of my time. The investor side is obviously taking up less of my time. The building the business is taking up less of my time. And, and then working with the portfolio managers and working on where the next opportunities are is, is taking up a lot more of my time. Yeah. Are you personally taking risk or allocating risk at all? I would say, yeah, I would say, you know, this word of allocating risk makes it feel like you're giving the risk to someone and when, and when I say collaborative, I mean a couple of things. I mean, people collaborating with each other, I mean, people collaborating with the risk department, the risk department I view as a portfolio construction department, helping people construct portfolios that they have, that we call it all weather portfolios, conducting pre-mortems. What could go wrong? Let's try to deal with it now. And then collaborating with me and the other CIOs. And so, I view it when we lose money at something, we lost the money. You know, I'm in it with them. And so, I view that as taking risk. I, you know, I view myself as running a hedge fund, you know, not allocating capital. Like, these are all positions that I feel like are my positions in a way and I'm doing it with the PM. So, I feel like I'm taking risk. But me running a book wouldn't, you know, me running one of 90 books doesn't do anyone in your good. Yeah. The deal also changes the kind of talent you attract. What type of PMs are looking to be hired by you or you are looking to have? Yeah. So, I think our sweetest spot is in this talent acceleration game. That's where, you know, people that want, now obviously we have all levels and that could be any age, but people that want a more collaborative environment is a thing. And I'm not commenting on any other forums, but at least that's part of our routine. People that want to feel like they're partners, they're bosses in a way or in the trenches with them and people that can see the benefit and leveraging all the resources is actually the type of person. I would say there are a lot of talent creators in this business, you know, a lot of people that are hiring 21-year-olds in the community. And there are a lot of talent acquires in this business. And the talent accelerators and call it talent development, that's a, that's a harder skill. You know, it's a hard, you have to do things for that. You need people around that can actually do that. I call it at the minimum, a personal board of directors for all these people and try to figure out how to get them to the next day, but and it's not a trivial topic. Like this, you know, you said earlier, are there enough people being developed in this business? I think there are enough people getting to the point where they're good traders, getting to the point where they're good capital allocators where they know how to build good teams. There's a whole process around that, whether they can manage risk, how do they trade when they start losing money, how do they trade in a stop loss environment. Those are all skills that take, that are not particularly intuitive and that's the difference between people being, you know, eight ex producers and two ex producers. And so some firms, the product is autonomy. It's a great product. And so if you people want autonomy, then they, you know, they can live wherever they want they could do. And we can offer autonomy, autonomy is actually not that difficult a product to offer, but if you want to give collaboration, you have to then make sure that all the people, that all the people there interact with each other, you have to think about the negative externalities or positive externalities of every person, every strategy. So I view it as, let's say a PM starts with a sharp ratio, I'm just going to use one, I'm just using one. So my job is to make that 20% higher. That's my job, you know, that's, and so how do I do it? You know, give them a risk framework that matters, give them the rules, tools, give them advice, give them, and be in, and if, you know, I get invited to so many things a month, you know, and so when we're involved in a new trade or a new trade is coming, I just point myself to all those events, all those dinners, all those conferences to try to figure out if I can learn and give these guys, bring information back to them, give them a perspective on what's going on in the market. And so that's what, that's what the job of, now not everyone looks at that way. People are saying, hey, that person's lying on messy. My job is to get them on the field, you know, maybe get them a good pair of sneakers and let them go. I don't really, I think the market is too hard and I just don't think that that's the game anymore of, hey, this individual is somehow, so, you know, of course you need that too, but that plus the extra 20% is the difference, and this is a business around that last five, 10, 20%. Yeah. You know, that business, that's the difference between staying in a trade and staying out of a trade. It's always that last few percent is what keeps you as earned you the right to stay in the trade, that you can make back the money when it comes back, yeah, yeah. Still ahead, we continue my conversation with Bobby Jan, founder of Jane Global, on the evolving hedge fund industry. I'm Nishant Kumar, this is Bloomberg. With Chatchee BT, you can do more than get answers. Chatchee BT can help you prepare. Get your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. Growing a business is ambitious, and Chatchee BT can help you do it with confidence. Get started at chatcheebt.com. The world of business is constantly evolving. Every day new challenges, new opportunities, new ways of working. Comcast business keeps you totally in step with secure AI back, networking built to power the way modern business gets things done today in more than 100 countries around the world. That's some serious muscle. And get this, Comcast business powers over 90 percent of the Fortune 500 and millions of small businesses. Digital network engineers, cyber security specialists, support teams, thousands of experts answering your call at 2 a.m., like its 2 p.m., always on, always ready, that's a lot of coffee. One partner powering how business gets done for companies of every size, all around the globe. I'm Nishant Kumar, and you are listening to a special conversation with Jan Global Founder Bobby Jan. What signals tell you that someone can become that exceptional trader, like starting with a $500 million dollar, but seeing that potential that this person can scale up to $2 billion. By the way, in my opinion, there are some many strategies that can't necessarily scale to that size. The business unit there have, can't do that, and that's fine. It doesn't need to, you know, in a strategy like ours, diversification has its own benefits too, so not everyone, it's not a, hey, I'm going to hire a hundred and hopefully three of them are like pulling the whole thing. It's more like everyone's in this together and everyone's pulling the same. Of course you'll have some normal distribution of results. How do you know ahead of time? What's easy to know is how people think about risk. It's easy to know, and what's easy to figure out is how they think about the why. Why they're doing this, why they're in the industry, why the money exists, and the people that understand, let's say, our role in the financial system, you know, I had someone who comes to me and says, you know, I kind of like the buy micron and buy hynex. You know, and you're asking me to buy micron and sell hynex, and I said, I don't disagree with you. I think that's a great idea. It's just that our investors are giving that money to buy micron and buy hynex to someone else, right? And they're asking us to buy micron and sell hynex. That's our business, right? And so the, you know, as I describe, we run stop losses and people say, well, why do you run stop losses? Is that a good idea? I say, in our business, we're passing the netting risk on to the investors. The investor says, how do you want me to manage the netting risk? You know, so if you want me to manage the netting risk, you have to put stop losses into control that the netting risk doesn't get out of hand. So the people that understand that, and some people think, hey, what a great idea. That's the way I think about the world anyways, they're going to thrive in this model. The people are saying, jeez, I can't believe you do it that way, you know, I wouldn't do it that way. They're not going to thrive in that model. That's actually pretty easy to figure out. It's also easy to figure out, I'm easy, I'm not saying easy, even some weird way. It's also possible to figure out, is there an opportunity in that market? You know, is there an opportunity, an opportunity tends to be that there's some edge that's being attributed to the marketplace. If you can do that, then you can figure out the people if they're aligned with you, then you can do it. How often, you know, I wish I was 100% successful, I'm not 100% successful, but I try to get as close as possible. Describe your ideal trader, like someone who you would have. Yeah, I would say, you know, ideal is all the normal stuff. But the biggest thing is an understanding of risk. I think that's really the topic. You know, finding people that can tell you that this stock is better than this stock or cheaper or more, that's an easier skill set than saying I can construct that in a portfolio and whether all the storms that come at that stock and try to hedge out all the things. So portfolio construction, risk management, people that think in those terms are very powerful. Very powerful. I don't want to say they're rare, but they're rare. It is fun. The fun part of the job is, hey, I went to that investor day and I like this company or I like this strategy or look, I found this piece of research that's really interesting and I want to put it in the model. The harder part, the hard part of the business is risk. As he likes to say, everyone can buy and not everyone can sell. And so that's it, and risk management is about the pre-mortem, constructing a portfolio. That's even moderately fun. The hard part is in the mortem, you actually have to do something. You have to deal with it. Not everyone wants to do that and not everyone likes to sell things that they like. And sometimes the markets have gotten crowded, they've gotten lumpy and you have to deal with the problems. So that's the ideal thing. I think there are more people than you think. There's switch gears here and obviously you are a big thinker and you have lots of interesting ideas on the industry and you have a career tracking, a lot of these changes in the industry. If we zoom out, where is the hedge fund industry heading, you think? So I think there's two topics. One is the identity that I was talking about. People are going to have to say, you come to hear if this, my son just went through the college process and you see, you would think, you go visit these colleges, it's all the same thing. It really is not the same thing. These colleges actually have distinct identities. Even though they all have thousands of kids running around, these hedge funds, it is such a young industry that some of them have distinctiveness and some of them kind of blend into like me too. And I don't think that me too is going to work because it's a game where the largest win. The second thing is the consolidation, I think that it's going to feel harder and harder. What is the shape of this consolidation? Because when I look at you starting and having 65 portfolio managers, that's one form of consolidation. I mean, all these 65 minutes may have gone out and launched 65 hands for money, like Millennium having more than 340, that's like 340 hedge funds. That's already a consolidation in a way. But are you saying that maybe one form buying another, like a typical MNS situation? Yeah, I think so. I think one of the reasons that hedge funds have not been able to coalesce culture, let's say, and I think I wouldn't be surprised if an equity fund merges with the quant fund merges with a, like the benefits of synergy are so big that I could see that happening. I don't, I'm, you know, I sort of alluded to earlier that I don't think that that many firms are set up to be the consolidated, so I think those firms may continue to do it. I agree with your point that there has been a big consolidation already in a way in these multi-manager firms have become that, so that's already part of it. I do think that the hedge fund industry, by the way, has a very, everything we're talking about is sort of the market neutrally type hedge fund world. There is a whole other world of, of not market neutral, you know, high conviction, highly concentrated, highly structured sometimes. That's a perfectly viable business and that will continue. I, it's a good question as to how it's going to evolve, are there going to be some consolidators that are doing it, are people going to consolidate, or are people just going to die off? Yeah. You know, it's going to be one of those, I think you're going to get all of those, in fact, I think you're going to get more of the, what exactly is the competitive advantage you have. Yeah, yeah. And deals like yours, do you think it will happen more often? Because this is not hiring someone or absorbing like a 500 million dollar hedge fund. It's like a sizable running business, profitable business, at least on the P&L site. Are you expecting more deals like this? You know, talking from, not like I'm not doing it, but you know, talking about, yes, I do think that. I think that. Because in your case, it's easier. Yeah. Millenium Neu, right? Yeah. You're a part of millions. That's right, that's right. So it makes it so. I agree with you. I agree with you. The cultural issues. I do think, yeah, I do think those are overcomable. I think for sophisticated institutions, they can actually do it. Let's discuss a little bit this multi-strat versus other hedge funds. What are the areas where multi-strats are doing a far, far better job, which is not obvious. Obviously, better risk management, higher shop, blah, blah, blah. versus the single managers that people should pay attention which is sustainable. - So businesses that are episodic do much better in multi-stretch funds. So let's say you're a commodity business and you make all your trading inside the, the weather changing cycle or the hurricane season or that's when the capital is necessary. And there's plenty of capital for the commodity market and normal markets, but if suddenly there's giant hurricanes, you need a lot more capital. So let's say you're doing that. And so 80% of the year you're doing barely nothing and then those 20% of the year you're doing 4x what you normally would normally even do. That works in a multi-stretch. It's hard to be in a single manager fund doing that. So any business where you have a variability capital is a good thing. Any business where you need a large investment, that's a business that works in a multi-stretch. And then finally, what works better in a single strategy is highly concentrated positions. Why is that? Because the founder of the firm is the one taking the position. It's not the founder of the firm saying some other person's taking the position that's highly concentrated, highly liquid. That's hard. So if you're gonna do highly concentrated, highly liquid, you know, being in a single manager fund is much better. But if you're gonna do something that's relatively diversified, the quant guys, there's a 50% chance today the quant guys are long Apple. There's a 50% chance, the fundamental guys are short Apple. That netting, in a regular hedge fund, the quant manager is holding capital against Apple and the fundamental manager is holding capital against short Apple. So the investor is holding two units of capital. When in a multi-stretch, there's no unit of capital. That's a big difference. That's a giant difference. And so anything that's diversified, you're already starting with a cost of capital. That's way higher. And I learned business. Whoever has the lowest cost of capital wins. So I think that. - That's what I'm talking about, the benefits of scale. - What is the way for the smaller hedge funds to. - I think it's great as concentration, but there's so many equity-long-shot macro hedge funds in the world. Is it over for them? So the SMA market is where these smaller people are managing money. And that's become. We've done a couple of SMAs over the years for niche managers that we think could do something that we can't. So there is a whole marketplace of these managers. If we give them an SMA, we actually get that netting benefit. So that is the way that those smaller managers can exist. That is a way to do it. I think there are exceptional people. There are people in niche fields. There are people that don't like, can't conform to the risk model. Nor do they think it's a good idea. And they want to mix in a little more concentration and a little more illiquidity. And they don't fit into this model. But we're talking about the scale business. The scale business. If you think about the large hedge funds 20 years ago, 30 years ago, 40 years ago. They're actually changed. They're actually a lot of hedge funds that were big hedge funds. That their business model didn't really. A lot of them were single manager hedge funds that also had other supporting characters. But the core satellite model was a very difficult model to persist over time. You know, there were models that were mixing sort of multi-strat and equity beta in one package. It's hard. So you have some great hedge funds now that are very highly unlevered. So fine, you can run that play too. That's a good play. Some people say, "Hey, I'm nervous about leverage." We think about leverage as hedging. You know, we think about it. If someone has one share of Amazon, the beauty is they have no leverage. The bad news is they're not hedged. - Leverage is an interesting point. You have lived through 97, 97, 2000, 2008. - Yeah. - Behind every crisis, there is leverage. So why investors should not be concerned about that? - No, no. I think leverage is clearly a concern in this business. And I think that if you had to use leverage, these firms are the most responsible users. They have created very robust capital structures. - Yeah. - Which is, by the way, good for market stability. The more stable the capital structure, the more important for market stability. They have incredibly sophisticated relationships with their prime brokers. They have incredibly sophisticated capital structures beyond the prime brokers. And so I think from the point of view of, are they over-levered? I don't think you would have seen it in the last 25, 30 years in these great hedge funds now that they would have felt it. And I don't think you've really felt it. I think people have learned. Certainly people learned in '98. That was the advent of the prime brokerage business becoming much more sophisticated. I think people definitely learned in a way. Liquidity plus concentration, plus size in a way, are things that you can't put all together. You know, liquidity concentration leverage are things you can't put together. And yeah, are we gonna hit speed bumps every so often? Where there's too much leverage, trying to leave at the same time? Sure, I do think that as firms are differentiating, one of the ways they're differentiating is on their risk philosophy. You know, some firms are, when things start widening, let's buy more. You know, right? Some of the capital providers are saying, call me within 48 hours. I'll get you capital to put in more capital so that you could be the beneficiary of that. Yeah. Other people are saying, ask things go wrong. We want you to cut the position. So actually the pretty healthy diversity in the markets now, that I think is more healthy. It's a healthy. And it happened in 2020. Like a lot of hedge funds raised billions of dollars within 24 hours. Exactly, right. And that happened. And you know, by the way, in 2020 in March, you could see the difference in performance was striking. You know, some funds didn't lose much at all and some lost a lot. And you could also see the difference in behavior if you look at the 13 F filings in Q1 2020. Some firms cut nearly nothing at all and some firms cut a tremendous amount of risk. So, you know, people, these firms have different behavior tendencies, behavioral tendencies. I think it's gonna start playing out in the identities. Yeah. Do you think this longer locked up capital is helping that? Helping in a good way. Yeah. Yeah. If everyone had, let's say everyone had one month capital, suddenly the investors might say, hey, I'm nervous and start leaving and then you get these, you know, like the 87 portfolio insurance, this thing. If people at least have the capital, right? So at least the capital is stable. Right now, that's a big stability point for the market. Yeah. I think the market's a much more stable in the last 10 years because of this capital stability. Yeah. And interview cannot be complete these days without talking about AI. Obviously, we don't want to spend too much time on it. But a little bit, can technology somehow shift this balance between the large and not so large? And how do you expect AI to change the way hedge funds operate over time? Yeah, I'll say three points. So first of all, we hit it very well. Lucky that when we started, the AI coding revolution started. So we required many fewer coders to start our hedge fund. And that was a huge, that was a big enablement and how the hedge fund actually worked so well is that we could hire fewer people, have less overhead, less overhead in terms of management and communication and more doing with the AI agents. Second thing is the question is, over time, does it therefore lower the barriers to entry or increase the barriers to entry? I'm at least for the foreseeable future. I think it's going to increase the barriers to entry. The amount of compute power, the amount, you know, right now, there are, I'm not saying we're struggling, but it's hard to even get compute power. You know what I mean? Like there's a line up the block and the anthropics and all that are going to pay more for compute than you can pay in a way. And so it's very competitive. And obviously the big providers want to go to their best clients or the biggest clients. And so I think it's a major barrier entry that's evolving, that the skill and usage of AI is going to increase. I also, I mentioned earlier, but just repeated that the ability for the AI to parse through complex systems and to get answers out of them. I think the, you know, volunteers built a gigantic company on that logic and that same happening in the AI for regular companies going into regular products and so I think that it's just like everything else in the world, scales become the benefit and AI is going to accelerate that benefit. You know, dealing with the regulatory issues is going to be another topic that is a high overhead that people are going to have to figure out. You know, having real strategic partnerships with these AI vendors, I guess. That's another topic. And so it's, so I think AI is going to fuel consolidation. What does it do to alpha then? If The top firms have this sophisticated tools and the same tool is available to everyone does it decay alpha? I don't know, you know the the thing that we I would say of all the lessons. I've learned in the markets We have our own jebans paradox that the narrower the spreads get and the more participants the more the volumes get and the more the volumes get You know you dig them but for a for a viable functioning market you want volatility You want volumes and you want a diversity of players. You have that now and so this is going to make more of those things happen Could it be that in some time everybody agrees that IBM is worth 84 dollars and 26 cents today? Yeah, and then the volatility diminishes the zero and everyone's like, okay, that's like the price of you know So you be in a price of coffee or something or whatever the price of a Starbucks coffee is just set and then that's enough I don't think so. I don't think so. There's so many There's so much variability in the the assumptions made. Another big change is the rise of External allocation and cement that you turn stuff on Let's spend some time on this. You know why has this trend taken a hold in such a strong way It seems that the only way to raise significant amount of capital these days is through SMS. Yeah, so I think that the There's two so first of all one reason is that everyone has their own Optimization function people want To have their own business they want their own culture some people want to run a product side by side I want to run a long-only product next to this some people are an inish product So so that's what I call the supply side issues the demand side issues are that I would say three one is that You have large capital providers that have excellent Both on the what we call the allocator side and on the the hedge fund side that have That the ability to do the SMS, you know, like the technology's making that easier Secondly is the bearer to sending money to You know an offshore fund location and then when you want it back you have to redeem and go through that whole process Or have the money in your control over time Which in SMA does is is for the capital provider is a very comfortable topic and third is the topic I mentioned earlier which is the cost of capital is much lower the cost cables much lower if if if this managers long IBM And I'm sure IBM and I can net them and I'd have to hold two units of capital. Yeah, that's a very powerful thing for everybody Yeah, and so so I think I think that's come about recently and And it's a viable. It's a viable structure. I think investing in existing hedge funds without that without the capital efficiency Makes no sense certainly for the hedge funds and I think the allocators are saying The allocator saying it's How many relationships do I really want you know this business of I'm gonna have you know a whole bunch of small hedge funds And maybe they get bigger but that that's a difficult game And so they're saying we'll leave that to you guys. You know, I do think that You know, Millennium's been one of the most sophisticated players in this market for a while and And and I think this industry like just like the rest of it will industrialize as there's it's another source of talent and capital and And we'll reach its own equilibrium. Yeah, and you have also hired someone. Yes Yes, and we're gonna get into that business for the same reasons. Yeah. Yeah. Yeah. How big is the ambition on that side? I think that this industry is a bit Mom and pop in a way, and I think I want to figure out a way that that we could actually somehow add value to these managers beyond capital And so if we can do that and I can convince myself that the managers were investing and we're actually Providing a service and making it better. Then I could think it could be pretty industrial size. Yeah At the same time investors are being asked for longer lockers sometimes very complex fee structures If you are and by you means the industry not you yourself Asking investors to give more what should they expect in yeah? I think it's I think if you if the investor is investing in someone that's in the IP Business then it just is that way that IP is longer than a capital structure that could leave Any year or two so these these funds need capital structures You know, maybe over time they evolve into much more complex capital structures a corporate capital structures You know like they go on going concerns, but right now we're in this LPGP structure and to create the LPGP structure And you want to create you know these firms these big ones have thousands of people, you know in lots and lots of IP and multi-year commitments to the data centers and processing and and it just really doesn't make sense for anybody Including by the way the regulators to have this on short capital structures for new firms I also think that if they want to compete They don't need to be at the high end of it, but they have to be you know at normal ends of lockups So that the talent is saying hey, you can only get your investors to date you you couldn't get them to marry you You know, I'm not going to do that and so suddenly your talent quotient goes down The talent wants to see that there that you're actually in business. So I think this is a feature of this business I there are there are there's a hedge fund market in Brazil for example Where the bulk of it is monthly liquidity and I don't think that's a good idea for For that industry. I think it's better for everybody to encourage the funds to think longer term to actually build IP I think it's better for the society really Finally you sit on the boats of two leading academic institutions Which gives you a very unique perspective I guess from that angle What have you learned about how eloquators think about hedge funds? What is the current thing? Yeah The question in the planet earth is how do I get an alternative to fixed income? That's the hard part see alternative to equities we figured out private equity venture capital growth equity You know, and then within equities international equity. So that whole world and let's say Let's say the broad If if you've been managing money for the last 45 years and been successful your strategy has been put as much as I can in the equities But don't put too much into equities because when the drawdowns happen you can't jeopardize your your institution and And especially if the institution is dependent on those assets you have to be very careful So so that that comes into some variety of 60s 65% equities and 35 40% fixed income. Now fixed income It's not that safe either You know as we can all see now and so if you can create an alternative to fixed income Which means broadly sharp ratio vol control then that business has a huge addressable market And and you know what is happened in that business to get that alternative fixed income you have two basic industries are formed you have the private credit industry which Which is a great industry A little bit characterized by it's a younger industry even you know 15-20 years a lot of growth in lending And not full growth yet and getting the money back So so we'll see how that all works you we're getting to that stage of it now And then you have the multi-manager industry or the hedge fund is the market neutral hedge fund industry Which really isn't that gigantic a market when you think about the amount of money in pension funds and endowments and foundations and sovereign wealth funds But that's those are the big alternatives to fixed income um The last round of alternatives to fixed income was real estate infrastructure funds So but people have liquidity budgets. Yeah, so now they have liquidity budgets You have liquidity budgets do you use it on the alternative fixed income or what I rather use it on the alternative equity And by venture and growth equity A lot of people want to do it there So then they don't have the liquidity budget to use in the alternative fixed income And so then the you know the multi-stress and private credit yeah a little bit um yeah Do you think uh do you get a sense that capacity is becoming the biggest challenge For investors and especially More of it is kept by hedge funds for themselves and for partners and employees um What's your thoughts on that? Yeah, I think capacity is the issue You know, I think if you took the alpha pool and you said how much of it Is effectively privatized you know in the prop shops um and plus the the share of the main funds that are you know employees and principles Um the actual amount available to investors in that alpha pool Uh is not growing that fast You know not maybe not growing at all and so that uh that is the constraint Let's step away from market's a little bit and Philanthropy and education yeah two of your passions yeah Uh and passions for many other hedge fund titans uh talk about your efforts in those areas yeah, so I um I Been working on trying to use financial techniques into the market into into into the sorry social social causes Uh, we spend a lot of effort and have thousands of kids Uh trying to turn the student loan market into student equity You know by income sharing agreements. That was a big project. We spent a lot of effort on Social wealth funds citizen dividends. How we set up a big program in Brazil We set up lots of pilots around the world around uh how to create um ownership societies. You know, and you hear outposts of it, which wasn't many baby bonds, Trump accounts. You know, trying to get everyone into an ownership culture society, given the benefits of citizenship, bias, I'm kind of different, and that's been a big project. You know, one of the projects that I haven't had time to do, I was heavily involved in the charter school movement, and I helped co-founded charter school 23 years ago, and I've been on the board of charter school organizations, and I want to start charter prisons, you know, private, not-for-profit prisons, and do the same thing, and get private money, and private energy, and private philanthropy, into the prison system. And I think people having access to the prison system will give them a new form, just like education did. You know, when you got a lot of big people to look at how we were educating people, I think we made somewhat of a difference, it's still early. Now, my wife is involved in the arts, and we are working on how the arts are going to change, in, you know, partly because of AI, you know, when the camera came up in 1850, you know, the whole arts world changed, you know, and now AI could be one of those moments, how we're going to change, we're helping try and fund that with younger artists, and so, so that's philanthropy been a big part of my life. Yeah, and on education, anything else that you're trying, or you want to try? Yeah, I think in education, my view is it's great that we've done this STEM focus for the last many years, and also, I think the universities have done a pre-professional focus, lots of business schools, lots of people, you know, like I said, when I was growing up, it was like becoming a doctor, and now it's, you know, getting to business, or some other thing. I think we've missed the liberal arts, you know, I think the technology behind driverless cars is going to prove to be easier than the sociology behind driverless cars. You know, I think the AI, how it integrates in society, what the trade-offs are, those are real deep questions that you can get better answers from books written thousands of years ago, then, so, I think you need both, I think we've de-emphasized, I think we've de-emphasized the liberal arts, but I do think the American education system is an excellent, incredible system. I think that there are multiple ways to win. I think there are people that are working on getting their 1600s in the SATs and studying 14 hours a day, and some people that are learning leadership and EQ by playing sports, and other people are doing lots of extracurriculars or music or philanthropy, and I think it's plenty of ways to win. I see it in the education system at the younger, I see it at the college system, and I think a lot of countries have, for all the right reasons, maybe over-focused, you know, in my opinion, on STEM, and a little bit, I think these other skill sets are equally valuable. In this world dominated by AI and people not hiding younger people, what's your advice to students? That's right there. It sounds trite now, but you're trying to learn flexibility. You know, if you're trying to learn how to think, to me, it's about reading the great books, it's understanding what is, because underneath all this, we're still going to have humans, and there's a lot of, I say it by children, try to see the world in color TV, not black and white. Try to see it with the more you experience, the more you watch, the more you read, you're going to learn more. I know I'm skating the wrong way here, and maybe my kids are going to listen to this someday, but reading is a very helpful topic. I do think that STEM is critically important. I think we're producing a lot of people for that, and it's a whole topic, and I think I see it. It's harder to get people to go into the liberal arts. Yeah, this is a very good spot to move to our rapid fires. Of course, you are known as a big reader, you pick that skill or the love for reading from your mother. What are the few things that you have read recently that impressed you? I've been on the hunt for the Great American novel, and clearly the Great American novel is, to me, is Moby Dick, but the Great American novel is really, neither a novel, nor American, is actually, in my opinion, Democracy in America by Tocqueville, which is written by a 30-year-old French aristocrat, and I just finished it, and it's an incredibly modern view of America, written 200 years ago. When you are not running your firm, how do you relax? I would say, I have three teenagers, so you could take that relaxation anyway you want, but I know I play plenty of sports, and I can easily spend 15, 20 hours a weekend reading. I mean, work reading as well as fun reading, but I would say, my kids, maybe I'll give a little, my kids we had a new game, I guess, you get on the internet where they do this. My kids probably think I'm going to count, you know, I go to work, not the thing is wrong with the count, but you know, go to work every day, and suddenly there's this game where they say, you know, how many haircuts were made in America last year, and you know, you can do the math, and I'm pretty good at it. You know, and so they're like the first time in my life I've impressed my kids, but in the other hand, we do the crossword, somehow these kids now can do the crossword in some absurd amount of time. Yeah. So yeah, anyways, we play some games too. Yeah. So let's end with the longest time horizon. 10 years from now, what would have to be true for you to say we got this exactly right? Yeah. So first, I'm proud of where we got through today, you know, in three years we got to 450 people, you know, very good sharp ratios, returns on capital, and you know, operating in all the markets around the world. I, what I want to be known for in the next 10 years is developing that next generation talent. You know, this is that talent accelerator is a function I think I've been known for it in the past, and I want to keep doing that. I think we're set up to do that. I'm thrilled with people that we have. I thrilled with people we're adding, and I want to make the partnership with Millennium be a standard for the industry. Bobby, that's a great place to end. We have covered a lot from Queens through predispos and millennium to building Jan Global and this next chapter. Thank you for being so open with us, the partnership where the industry is going. Thanks for all your thoughts, and thanks to everyone for listening. I'm Nishant Kumar for Bloomberg. This is Lavar Errington from two pros in a cup of Joe. Let me tell you about zero. That's XERO. Zero is a financial management platform that loves giving small business owners the clarity to have the confidence in their numbers. It puts accounting payments, payroll, and analytics all in one place. So you always have one clear picture of your business. With visual dashboards, zero makes it easy to understand your cash flow. You know exactly what's coming in and what's going out. So you can make smarter decisions that can help grow your business. Zero's AI can even offer insights to help you make your best move. It's powerful enough for an accountant and simple enough for you. Zero is the all in one to get business done. Learn more at zero dot com. Morning, Carmen. Morning. Quick questions. One second. Sorry. Carmen's worked at this office for 20 years. 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