Dan Ivascyn: Conviction Needs Capital

SPEAKER_1 (0:00)

For Morgan Stanley, this is Hard Lessons, where iconic investors reveal the critical moments that have shaped who they are today.

Dan Ivascyn (0:06)

I was saying, God, the radio agencies are all wrong here. They look at these deals and they see 5% lifetime losses. We said, no way, they're going to be much, much higher than this. They're going to be 10%, even 12%.

They turned out to be 30%.

SPEAKER_1 (0:19)

Today on the show, Dan Ivascyn, Group Chief Investment Officer at Pimco, one of the largest fixed income managers in the world, with $2.33 trillion in assets under management.

Dan Ivascyn (0:30)

You better be resilient in this industry. You got to accept the fact that sometimes timing is going to matter.

SPEAKER_1 (0:36)

Dan guides us through his successes and setbacks during one of the hardest chapters of his career, the global financial crisis and its lead up.

Dan Ivascyn (0:43)

Failed rallies are the worst. When people think you're finally coming out of a situation and you end up hitting new lows, that's quite detrimental from a psychological perspective, and that's exactly what we had at the time.

SPEAKER_1 (0:55)

He sat down with Dan Simkowitz, co-president of Morgan Stanley. They met at the Campbell, inside Grand Central Terminal.

Dan Simkowitz (1:02)

Dan, thanks for joining us.

Dan Ivascyn (1:03)

Thanks for having me, Dan.

SPEAKER_1 (1:04)

Listen in to hear how external pressures can throw the right thesis off track, why systemic forces can obliterate a good hedge, and how conviction plus capital can equal a career-defining opportunity.

Dan Simkowitz (1:19)

30 years almost at Pimco, and I've been at Morgan Stanley almost 35 years. It's so incredible how durable and important the partnership is with Pimco, and it's been exciting last year. We worked on some of the biggest deals in history together in the last 12 months, largely around AI infrastructure.

Dan Ivascyn (1:39)

Yeah, I mean, it's an area of the market where there's a lot of complexity, and it's nice to get paid for complexity as opposed to economic sensitivity or credit risk in a narrow sense. So from that perspective, we're quite excited as, you know, we've worked as a team together on some deals.

Dan Simkowitz (1:54)

Yeah, I think when we worked together on the meta data center and probably the largest deal at the time in the infrastructure space, but also in the sort of gray area of public and private credit, your team and their ability to look at it from multiple angles and be really big was really incredible.

Dan Ivascyn (2:12)

Yeah, to do it right, you need a lot of different perspectives. With that said, of course, as we know, AI is going to be disruptive and increasing economy-wide and productivity is one thing. Companies figuring out how to make money from this technology is another. So there's some risks and you got to be cautious. But what are the better, more scalable opportunities we've seen for clients in quite some time?

Dan Simkowitz (2:34)

It's delivering alpha and it's delivering scaled alpha, which is so important. So, Dan, AI is today, but how did you get from Western Mass, outside Worcester to LA, the pinnacle of fixed income? Tell us about that journey a bit.

Dan Ivascyn (2:50)

I always had a fascination with finance for whatever reason. My family were educators, but I always found it quite interesting. Went to school, studied economics.

After college, worked zero price fidelity, but in more of a client servicing function. And got to a point after many years in the business and excited about fixed income relative to other areas of the market. Hey, I want to get to the next level. And to do that for me, at least with a slightly less technical background than many, it meant going back to business school.

Dan Simkowitz (3:20)

And you went to the pitacle of quant finance at the University of Chicago, right? Is that where you got your degree?

Dan Ivascyn (3:26)

I went there and I focused on analytical finance, derivatives pricing, a lot of the much more targeted courses that would help me run money.

And then ultimately got a great internship with a great mentor over at Bear Stearns. A little different than your typical summer internship in that I ended up spending several months after the summer ended co-authoring what's called the, I think it was the 1997 Home Equity Handbook. Home equity is a better term than subprime. So they used home equity, right? So got me excited about that at the time growing area of the market. Thought I was going back to Bear Stearns, interviewed very, very late in the process over at Pimco and ultimately decided to join Pimco. And that was, I guess, in 1997