How to Succeed at Multi-Strategy Hedge Funds

Joe Weisenthal (0:03)

Bloomberg Audio Studios.

Tracy Alloway (0:05)

Podcasts, radio, news.

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:25)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Joe, I know we did one episode on podshops, on multi-strategy hedge funds, but it was primarily focused on their impact on the market. And I have to say, I still came away from that conversation sort of wondering if I worked at a pod shop, what is it exactly that I would be doing all day?

Joe Weisenthal (0:49)

I would love to know the exact same thing. I mean, like, I guess I have this like very vague sense of sort of they have a bunch of people all focused on their specific areas and the sort of average out and they net out a bunch of stuff and it's capital efficient and it's like market neutral in theory and et cetera. But beyond that, like, I still don't really like understand. The only thing I know is like they've done really well and many people are launching more of them.

Tracy Alloway (1:16)

Yes, they seem to be all the rage. They seem to be where everyone kind of wants to go in the quantitative finance space at least. Everyone's sort of aiming for these big names, places like Citadel, Millennium maybe.

But my question is like, why? Is it just that they're minting money? They're expected to continue minting money in the future? Or is there something that's like fundamentally intriguing and attractive about working in that space that means lots of people want to get in?

Joe Weisenthal (1:47)

I mean, I think that could be two ways of saying the same thing. If they're minting money, then that probably is fundamentally attractive to people in that space.

But I do think like backing up the question is like, what we know is that many funds, including apparently even like B-tier or C-tier funds have done like very well. So I'm just like curious, like how and why? And then yeah, to the question of like, what does it take to succeed in them? Or who is the type of person who can succeed in this environment?

Tracy Alloway (2:16)

All right, well, I'm glad you put it that way because today we're going to be speaking with someone who has done exactly that succeeded in this particular environment. We have the perfect guest. We're gonna be speaking with Giuseppe Paleologo, AKA Gappy. He describes himself as a constant gardener, someone who's on gardening leave quite a lot. He is also the author of Advanced Portfolio Management, A Quant's Guide for Fundamental Investors.

And I have to say, it is one of the funniest books that I've read in quant finance. I can't say it's the funniest because I did read My Life as a Quant from Emanuel Derman, but it's definitely up there. And Joe, I know you enjoyed it too.

Joe Weisenthal (2:54)

I did, you know, I like skipped over all the numbers and equations and Greek letters, but it's very breezily written for what it is. And I did actually, I think maybe I learned a little bit even in my sort of basic reading of it, extremely well-written. I'm extremely excited about this conversation. You know, you mentioned that our guest is the King of Gardening, Leave. If you look in his LinkedIn, it really is many different roles.

Tracy Alloway (3:20)

Well, I also have to say he is the only person I know who has both an alpha and a beta tattoo on his shoulder.

Joe Weisenthal (3:27)

Oh, wow.

Tracy Alloway (3:28)

You know, some people do get the alpha symbol, but he has both. So, you know, a well-balanced portfolio of tattoos all around.

Joe Weisenthal (3:36)

The yin and yang.

Tracy Alloway (3:36)

Yeah, so Gappy, thank you so much for coming on Odd Lots.

Giuseppe Paleologo (3:40)

Hi, Tracy. Hi, Joe.

Tracy Alloway (3:42)

So, maybe to begin with, I'm gonna let you explain your previous job history because there is quite a lot. What is it that you've been doing in this industry?

Giuseppe Paleologo (3:52)

Yeah, I'm not sure.

Okay, good question. Well, I got into this industry almost accidentally. I was, for a few years, a researcher in the math department at IBM Research, and then I got a little bit bored. So the only place that you can, the only industry you can work in New York other than IBM or tech is finance. So I got into finance almost accidentally. And then again, there is no major plan to my career choices.

When I was getting bored, for some reason, somebody called me and offered me a more interesting job. And so I have been working mostly on the so-called buy side of the industry. So the part of the industry that actively invests and takes risks. So I've worked for Citadel twice, for a small hedge fund as a portfolio manager, and then Millennium and Hudson River Trading. And I've kind of taken turns between doing quantitative research and risk management. So most recently I was at Hudson River Trading until the beginning of November.