Nancy Zimmerman – People, Process, and Fixed Income Arbitrage at Bracebridge

Nancy Zimmerman (0:00)

You learn a few things during crises. You want to have liquidity, flexibility to be able to lean into dislocations, especially things where you know them well. You feel like you are positioned to take advantage of it, maybe make it go away.

Every crisis teaches and reinforces that you want to stress test. You want to think carefully about what factors could cause a drawdown in your portfolio. You want to think hard about what's the difference between a drawdown and a capital impairment, because those are different things. Also thinking about what doesn't work, what are you relying on in terms of institutions, courts, banks, counterparties. These kinds of things, you learn them in your first crisis and you never forget them.

Stuff begins to rhyme for you. The most important thing that we learn is good people who are curious and have thought through things and can maintain their curiosity, their bearings and have a real sense of rigor and purpose, are vital to those moments.

Ted Seides (1:13)

I'm Ted Seides and this is Capital Allocators.

My guest on today's show is Nancy Zimmerman, the co-founder and managing partner of Bracebridge Capital. A $13 billion alternative asset manager specializing in fixed-income arbitrage that she founded over 30 years ago in 1994, alongside Gabe Sunshine with Capital from David Swensen at Yale. Our conversation traces Nancy's evolution from pricing securities to investing, and the enduring sources of inefficiency in fixed-income markets. We discussed the nature of arbitrage opportunities and their persistence over time, and then turned to hunting for mispricings today across developed market rates, structured credit, corporates, and emerging markets.

Along the way, we cover Bracebridge's process for sourcing ideas, assessing relative value, determining position sizes, constructing a portfolio, and managing risk. We close with building a team, aligning the organization and its clients, investing in today's exciting and unusual environment, and transferring investment knowledge to work on the Investment Committee and Brand Science Research at Nancy's alma mater, Brown University. Nancy is among the sharpest, most curious, funny, and deeply experienced investors in the hedge fund world.

SPEAKER_3 (2:38)

Before we get to the interview, we spend a lot of time on this podcast asking other people questions. This time, we're turning the tables on you.

We just launched our latest audience survey. We want to learn more about who's listening, how you listen, and what we can do to make Capital Allocators even better. Links in the show notes. Thanks as always for listening and helping us compound knowledge and relationships.

Ted Seides (2:58)

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