Dmitry Balyasny - Building a Better Model

**Patrick O'Shaughnessy** (0:00)
This episode of Invest Like the Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former buy side analyst who encountered friction sourcing, building and updating models, Canalyst is now used by over 400 institutions, including the largest money managers globally and by a number of guests on the show. With detailed company specific models and data on virtually every public company, Canalyst clients are able to ramp up faster, update models instantly and incorporate the highest quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalist.com/patrick. That's canalyst.com/patrick. Stay tuned after the episode for my conversation with Canalyst customer Giuseppe Coco of LK Advisors. We talk about how Giuseppe has built Canalyst into his process as an international investor and much more. If your startup doesn't have the right compliance certifications, you can't close major customers. It's that simple. Vanta is trusted by over 1,500 SaaS companies to automate the time consuming and expensive process of preparing for a SOC 2 or ISO 27001 audit.
With Vanta's continuous monitoring solution, you avoid hosting auditors on site and taking hundreds of screenshots to prove your compliance. Here's how it works. Integrate with your cloud provider and tools, check off items on your customized to-do list and let Vanta continuously monitor your security so you can focus on growing your business.
Listeners can redeem a $1,000 off coupon at vanta.com/patrick. That's vanta.com/patrick.
Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money.
Invest Like the Best is part of the Colossus family of podcasts and you can access all our podcasts including edited transcripts, show notes and other resources to keep learning at joincolossus.com.

**SPEAKER_3** (2:04)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (2:29)
My guest today is Dmitry Balyasny. Dmitry is the managing partner and CIO of Balyasny Asset Management, otherwise known as BAM. BAM runs a multi-strategy, multi-PM model that aims to produce consistent absolute returns.
Since its founding in 2001, it has produced only one negative year and become one of the largest firms of its kind. Please enjoy my conversation with Dmitry Balyasny.
So Dmitry, this is my first opportunity to talk to somebody that runs an investment firm structured and built like yours. There's lots of names for these. I think the original name was sort of the platform model, multi-strat, pod shop, there's all these names that float around the professional investing community and yours is one of the largest. Maybe you can just begin by giving me a little bit of the origin story of the firm. And I always love telling these stories and sort of like chapter headers, like what you view in hindsight as the key phases of the evolution of the firm. Cause I know you focus both not just on investing, but also on building the firm. So give us that origin story with a few of those key waypoints along the way.

**Dmitry Balyasny** (3:30)
First of all, thanks for having me on. Real pleasure. I've enjoyed the podcast over the years. So it's a honor to be here.
Origins go back to my origins as a trader and kind of thinking about how to build out business around trading.
So when I started in the business, I started as a broker while I was going to school, but I really wanted to trade. But I was really got awful at trading and I was losing all the profits that I was generating as a broker and commissions I was generating in my own personal trading to such an extent that I got it one broke when I was 23 and really figured out I needed somebody to show me what I was supposed to be doing. So I applied to lots of trading firms. I was hired into the Schoenfeld Priority Trading Firm training program.
And it was really a good opportunity to kind of learn some structure which was inherently missing in my trading. And so there was a good opportunity to learn from guys who had been successful for a long time. That was kind of an open environment where you could talk to people and just less of a formal program but more where you can pick stuff up and people were open to talking about what they did. And so I learned a little bit about money management, timing, discipline, risk management. And those things are all just as important as the stock selection or investment selection piece. Even after doing that for a while, first year there, total income was zero. Thankfully they bought us lunch. So we didn't starve. I started making money pretty consistently. To kind of go back to your original question, it was foundational for me seeing the way the firm was structured where there were lots of different traders with lots of different methods and specialties and styles. And the time when I started as about a hundred something traders and by the time I spun out to start my own firm, I think it was about seven years later, there were over a thousand traders. I grew up with the mentality of it makes sense to have lots of different types of risk takers because you have less correlation, you could attack different areas of the markets and have special lists in different areas. So it always made sense to me. The other thing I did at the time after having some success trading was I had the opportunity to help manage our internal fund to fund portfolio, which invested in different hedge funds, just with our own personal capital. So that was also really helpful, seeing how different firms were structured and who stood the test of time and who tended to have lots of volatility in both their trading and their businesses. Doing that for a long time, it really further cemented my initial belief because the firms that we were invested with 10 years later, almost in all cases were variations of a multi-manager model, where you have different risk takers, different specialties, different styles within the same firm.