Blackstone's King of Hedge Funds on Alt Investing Right Now
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Bloomberg Audio Studios. Podcasts. Radio. News. Hello and welcome to another episode of the All Thoughts Podcast. I'm Traci Allaway. And I'm Joe Weisenthal. 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. 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 multistrats, we've already seen a lot of

A lot of talk about pain at the pod shops, given all the recent market volatility. So everything is feeling a little different right now.

Well, we are recording this on April 22nd 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 the real money come in from? Right. And they're like wealthy families and wealthy. But the real big money is in these huge pots of money. Whether we're talking about teachers, which if those in the know, the Ontario Teachers Association.

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 multistrats 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 Swenson over at Yale. And since then, 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 guest 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.

Okay, so first off, I'm going to have to be very careful in how I address each Joe, respectively. But other than that,

OK, 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 are 650 U.S. endowments with a combined assets of $875 billion. That's from NACUBO. I'm using NACUBO data. But the average endowment is only $1.3 billion in assets under management, and the median is $235 billion.

Million. I appreciate that you came prepared with numbers. When you see a headline, Yale considering a private equity stake amid its funding turmoil, some reports have said it's up to $6 billion. How big of a deal is this? Like how much of an earthquake is that this entity which we associate with long-term willingness to hold on to illiquid 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 $6 billion 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 Swenson, 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 1.4%, being considered to go to up

up to 20%. So 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 2017, they introduced the first endowment tax, and it was a 1.4% 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 $500,000, then you were subject to that tax.

And now what's been proposed is an increase from 1.4% to 21%. Now, what that would result in is $70 billion of extra revenue over 10 years. And I'm assuming there the average endowment return is 7.5% to get to those figures. Right.

So call it $7 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. So talk to us about how important was that special tax status to returns over the years? Because

Also, if I look at returns recently over the past three years or so, 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 60-40 portfolio has outperformed U.S. endowments. The average U.S. endowment return, okay, underperformed the global 60-40 by 6.8% or 340 basis points per annum. The top quartile endowment returns underperformed by 250 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 8.3% and has outperformed a global 60/40 by 170 basis points. And the top quartile has outperformed by 250 basis points.

Over 10 years, the numbers are even more consistent with those figures. So over the past 10 years, the top quartile has outperformed the global 60-40 by 160 basis points. And even, ready for this, the bottom quartile has outperformed a 60-40 portfolio by 30 basis points annually. Okay. Let's translate that though. Okay. So let's say you have a billion dollar portfolio.

If you have top quartile performance versus a global 60-40 over the 10-year period, that's a $288 million difference. Wow. 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-

In theory, this is why they have the capacity to make these long-term, relatively illiquid, alpha-generating investments, strictly because there's just none of that sort of 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 forced 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

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 is 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 10, 20, and 30 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 those numbers to come out. And here we have a specimen from the early 2000s, a legacy investing platform.

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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, cause an endowment manager can get- A hundred percent. 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

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 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? Yeah.

I didn't think David Swenson was going to call me up and give me his best man. That just is not going to happen. Since you brought up Swenson, talk to us. 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 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 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, that the endowments invest in. So the average high-performing endowment has 55% of their assets in alternatives. Wow. The top quartile and the Ivy Leagues all have over 65% 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 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 endowment?

Not client. Manager. 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 ponds. So let me give you a specific example, biotechnology. So what I would say to the team is, wow, biotech stocks, 25% 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 one of the nice things about endowments 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 there. 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 U.S. There's obviously the market decline itself. So.

So are we in a moment where there is some like inability or some constraints on the endowment to be, I don't know, buyers of last resort, but the opportunistic investors of the moment? Like, is this actually a moment where that's under threat and the endowment tax, as you mentioned? Well, I think it's endowment tax. I think it's fair.

a lot of the NIH funding at these schools combined with a 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, where is my liquidity? I just take a step back on private equity because that's what 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 to just talk about this. I don't work in private equity at Blackstone, so I 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

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

And then we calculate an 8% preferred return before the manager makes any money. And if you think about it, 8% to 10% is about what the stock market has done over the last 50 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.

That structure in itself protects investors. And even in the fourth quartile, and I'm quoting Cambridge and Associates data now, even in the fourth quartile of buyout managers, and the Cambridge database changes every month, but call it over 1,200 managers, even the fourth quartile is positive over a rolling 10-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. Nope. Or it's hard to deploy capital. Or 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. 10 years ago, there was no deep secondary market. The thought that you could sell, okay, $6 billion 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, you know, 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 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 directly

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. Well, you did make real money. I mean, while you were at Brown, even without the Blackstone platform. Let's talk about hedge funds. Real big picture. How would you describe the...

The reasons for the rise of the multi-strategy model, why has that model even more than the single managed? 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-strat world, I think about a tiering of talent. And it's clear to me that Millennium, Citadel, and the top players have really distinguished themselves in

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 2022 when stocks and bonds were both down high teens, and they

the millenniums and citadels of the world earned their standard returns, which are, call it 12% plus. That

is what you want in your portfolio as a true diversifier and something that provides a ballast. So they have unlimited demand. So the 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. Yeah.

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 20 days since Liberation Day on April 2nd. But what's

What's your impression of what it was like at the multi-strats over the past month or so? Yeah, it's interesting. Obviously, it's in the headlines that they're down, but they're really not down that much. If being down 1% 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 multi-strat universe has been growing 16% year over year, and their data is pretty good. It matches ours pretty closely. But what's happened is that there have 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 300 teams at Millennium Trading. That is a very hard thing to recreate. Mm-hmm.

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 multi-strat? Because, OK, 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 very elites. It's been just extremely impressive. And then you can point to, OK,

Okay, even in 2022, 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 multi-strat 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 the average S&P company that reports, the analysts all focus on quality of earnings. We focus on quality of return. How diversified is that return? What subsectors 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. And here we have a specimen from the early two thousands, a legacy investing platform. Please don't touch the exhibit folks. It could crash.

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When you're doing the due diligence, can you talk to pod managers? How deep into the system is an outside investor able to get? 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. Yeah. Yeah.

It sounds like you're trying to build a diversified portfolio of multi-strat 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 how really, how different they are fundamentally. And I think you can see that as an outsider if you examine 13Fs 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 2020, you get a pretty good insight into who's doing what. Can you say a little bit more? What are those differences look like? So for the more trading-oriented managers, they're shrinking their balance sheet, 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 vol. So some of the multi-strat managers are very tight in their vol calculations and they stay around 4%. Others that are more intrinsic value oriented are up as high as 8%. It's just two different ways of getting at the same thing. Some people hedge from the top of the house and

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 300, you know, a team of 300 quality pods. It's really hard to recreate that tech approach.

But, you know, some might do it and some might try trying to think of like the science equivalent, a concert, a law of the conservation of alpha. Somehow that the structure of these multistrat 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 additions and subtractions, where a lot of capital gets thrown at the area and they don't make 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...

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're 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 many of them have 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 nebulous in many ways. But what are you seeing that is actually innovative or what has struck you as particularly original and creative recently? Okay.

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 Swenson 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 is absolutely unbelievable. And there are firms out there that...

while they're capacity constrained, they make money every day. We're invested in some managers that make money every single day and it always blows my mind. What does 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. What does quant mean? Joe's being very modest. He knows what all these things are. No, I don't. But you choose the terms that actually don't have a good definition, right? What does quant mean? I think it's the application of quantification

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 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. I'm going 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 60 to 80 times. So,

The ability to rapidly identify those alphas, some people call them alphas, you can call them anomalies 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 at Brown, you didn't follow the Swenson 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. What 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

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 one day we'll do a proper interview with the head of UTIMCO. 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 you can't hit a home run. And so it sounds like that 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, it seems like that's a huge part of the game. Just waiting for that fastball down the middle until you see it. A hundred percent. And you know, each asset class has so many nuances and

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, there are risks associated with that also. So saying no became an art. Yeah.

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 co-head 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. Right.

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 in Atomic Habits, I don't know if either of you have read that book. Haven't read it yet. 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 really our group embraces that principle of

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 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 CIO of Utimco. I couldn't remember his name for a second, but putting it out there, if anyone at Utimco is listening to this episode, he is a standing invite to come on the podcast. Rich would be a great guest. I know him personally. He's super smart. We should call him out. Joe has...

I'll come and join. I'll come and join. That'd be fun. That'd be such a blast. All right. The call has been put out, Rich. Let's make this happen. I just have one last question. 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're thinking 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 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

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 2021, 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 10 out of 10 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 have more depth of knowledge in 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. I love to use that phrase. I think I've said it about all of our good guys. Depth of knowledge, depth of knowledge, depth of knowledge. There is 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...

Yeah. I think going from an organization where you had a small team, where you presented

presented to your investment committee to then going to, you know, we have our division is 88 billion over 300 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 on everything that we do, but also not getting in the backswing of

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 credit. So it's a good environment. I would say that I haven't seen volatility like this since like 2008. I mean, and it's the market doesn't like uncertainty. Our products like uncertainty and volatility. Yeah.

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 20 straight quarters in a row and 24 months in a row.

And I think that's a function of that rebalancing and really robust portfolio construction. All right, Joe Dowling, thank you so much for coming on. Thanks for having me. Joe, 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 huge. And then you can monetize that like a liquidity premium as Joe D was saying. You know, individuals can do that too, which is you just invest in a range of things and then never look at your 401k forever. That's right. We're just really bad at it as humans. It's particularly difficult at the 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 multistrat 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 some, like all of these are episodes within themselves, but I thought that was a great overview. Absolutely. And the alumni network point was 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 at 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 50s.

Well, I personally enjoyed my university. I don't think it's as intense as it is in the U.S. Americans really build their identity. By the way. Like, oh, 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. Oh, that's true. Did you guys have one? So I think this might be one of the reasons why people aren't wearing like LSE sweatshirts for the rest of their lives. But our mascot was the beaver. That's a good 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 Traci Allaway. You can follow me at Traci Allaway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett at Dashbutt, and Kale Brooks

at Kale Brooks. For more Odd Lots content, go to bloomberg.com slash oddlots 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 24-7 in our Discord, discord.gg slash oddlots.

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