Aug 26, 2021 · 43m · capital-allocators
Rick Rieder – BlackRock (Manager Meetings, EP.08)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this edition of Manager Meetings, NEPC Chief Investment Officer Tim McCusker interviews BlackRock's CIO of Global Fixed Income Rick Rieder to explore unconstrained fixed income investing, risk management, and macro strategy. Rieder details how he combines quantitative tools, multi-asset collaboration, and probabilistic portfolio construction to compound durable alpha across changing market regimes.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 15.1% of the talking time here. How this is scored →
Ted as informed peer 4.1 Guest teaching 4.8 Guest disagreement 1.0 Ted pushing back 0.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 36:05 Rieder's forceful pushback on Fed bond-buying policy
Rieder explicitly rejects the Federal Reserve's ongoing quantitative easing and mortgage purchases, labeling them crazy and warning they force excessive leverage across the financial system.
Hardest push from Ted ▶ 38:24 Tim McCusker questioning 2022 fiscal withdrawal headwindsMcCusker directly challenges the prevailing economic optimism by pressing Rieder on the imminent threat of fiscal tightening and withdrawal of pandemic-era stimulus.
Biggest teaching moment ▶ 17:50 The asymmetric mechanics of fixed income vs equity riskRieder educates listeners on the structural math of bond investing, explaining why downside convexity dictates making small incremental profits across hundreds of trades rather than outsized concentrated wagers.
Ted holds their own ▶ 8:07 Tim McCusker breaking down institutional tracking error and portfolio fitMcCusker demonstrates allocator sophistication by analyzing how an unconstrained fixed income strategy functions as a high-tracking-error alpha diversifier within total institutional asset allocations.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Manager Meetings Show Overview and Format | 7 | 1 | 0 | 2 | Ted Seides and guest host Tim McCusker discuss NEPC's institutional diligence process, demonstrating deep allocator expertise regarding position sizing, tracking error, and fixed income portfolio construction. | |
| Rick Rieder's Early Life and Trading Career Beginnings | 3 | 3 | 0 | 0 | Tim McCusker asks conversational biographical questions while Rick Rieder shares his unconventional path into trading and finance via early career milestones. | |
| Mentorship and Leadership Lessons from Bart McDade | 3 | 3 | 0 | 0 | Rieder reflects on mentorship from Bart McDade at Lehman Brothers, emphasizing risk discipline, downside containment, and empowering team members. | |
| Overview of Global Fixed Income Role and Investment Council | 4 | 6 | 1 | 0 | Rieder breaks down his core investment philosophy shaped by fixed income asymmetry, contrasting negative downside convexity with equity investing and advocating for diversified relative-value bets. | |
| Integrating Quantitative Analytics with Fundamental Macro Analysis | 4 | 6 | 2 | 0 | Rieder delivers a clear critique of pure quantitative investing, asserting that systematic tools fail across regime shifts without qualitative macro assessment. | |
| Sponsor Message: Ridgeline Unified Investment Management Platform | 3 | 4 | 0 | 0 | Following the mid-roll ad, Rieder describes his intense monthly macro synthesis process and how legendary macro investors David Tepper and Stan Druckenmiller separate signal from market noise. | |
| Developing Team Culture and Cross-Asset Perspective | 4 | 5 | 0 | 0 | Rieder discusses team culture, requiring specialized traders across agency mortgages or European credit to maintain multi-asset perspectives and cross-market fluency. | |
| Scale Dynamics: Information Advantages and Allocation Challenges | 4 | 5 | 1 | 1 | McCusker probes the dual nature of BlackRock's massive platform scale, prompting Rieder to detail internal information advantages alongside the frustration of constrained hot-issue allocations. | |
| Private Credit Expansion and Bespoke Structured Alpha | 5 | 6 | 0 | 0 | McCusker asks about the structural migration into private credit, leading Rieder to explain bespoke structuring, liquidity balancing, and capital stack positioning in CLOs. | |
| Portfolio Construction, Daily Risk Dashboards, and Modeling Tail Risks | 4 | 6 | 1 | 0 | Rieder details daily portfolio construction dashboards and emphasizes the danger of relying blindly on backward-looking volatility half-life models in credit. | |
| Federal Reserve Critique and Systemic Volatility Risks | 4 | 7 | 5 | 0 | Rieder offers sharp, passionate criticism of Federal Reserve monetary policy, arguing that continued agency mortgage purchases and compressed risk premiums force institutions into excessive leverage. | |
| Macro Outlook: Economic Growth Drivers and Global Recovery | 4 | 6 | 2 | 1 | When asked about fiscal withdrawal risks, Rieder counters with strong bullish macro data, outlining multi-trillion excess savings, inventory rebuilds, and European recovery drivers. |
Statements from this episode (21)
McCusker: BlackRock's Strategic Income Opportunities is NEPC's most notable BlackRock allocation
“So we do think highly of them and we use them in a lot of different ways, but Rick's strategic income opportunity strategy is probably the most notable one that we use.”
McCusker: BlackRock's SIO fund runs high tracking error for fixed income
“Within a fixed income allocation, It's a pretty high tracking error strategy when you think about what most fixed income strategies deliver for tracking error.”
Rieder left Lehman in May 2008 before merging his fund into BlackRock
“Then I went to Lehman, went out of Lehman to run a hedge fund, and unfortunately I did a Mayo eight, wasn't exactly perfect timing. Good timing to leave Lehman, but it wasn't a perfect time to set up a credit hedge fund. And then we had a tough oh eight. And t…”
Rieder: Lehman Brothers would have survived if Bart McDade became president earlier
“I'd say this to this study and people who were at Lehman Brothers would tell you this, if he became president two years earlier, Lehman would still be around.”
Rieder: Leaders should let team members execute sub-optimal ideas with limited downside
“One of the things you learn over the years, it's like somebody on your team could have an idea and investment or what have you. And you actually think it's not the right idea. And then at times, if it's, obviously it's not going to hurt significantly, you let …”
Rieder: BlackRock's global fixed income platform manages $2.6 trillion in assets
“I'm the CIO of global fixed income. So I guess our total size of that is 2.6 trillion. We've got obviously huge I shares business, a big passive business.”
Rieder: In trading, being right does not matter if the market moves against you
“One thing you learn in in trading is it's not about being right. It's about making money. You could be right. And if everybody thinks you're wrong or everybody thinks you own them all, you're going to lose.”
Rieder: Fixed income strategy requires high trade volume and avoiding concentrated duration bets
“My philosophy and fixed income Is diversify, do a lot of trades, get regime right, get the asset allocation right, and then do a lot of relative value trades. Don't make a huge bet on duration. Don't make a huge bet that's going to overwhelm the whole portfoli…”
Rieder: Factor investing fails without fundamental and qualitative analysis
“Like, I think factor investing is a great way to invest. However, there are environmental conditions that can really shift, and if you're not doing the qualitative analysis, the fundamental analysis, then I don't think it'll work.”
Rieder: Stan Druckenmiller and David Tepper are the best investors I've seen
“And you have to say the two best investors I've ever seen, Stan Druckenmiller and David Tepper, both are friends of mine. They have an ability in a much more efficient way than I do of separating out. That's not important. That's not important. This is importa…”
Rieder: BlackRock lets European credit traders run equity positions when spreads tighten
“If we have somebody in Europe that's trading credit, I'll let them run a piece of equity in their position because there are times where like credit spreads are too tight. And I don't want them to be sitting there doing nothing.”
Rieder: BlackRock's sheer scale provides a major information advantage over macro funds
“The information flow within the four walls of this organization around how many walls there are in this organization is unbelievable. And I always think like, how can they make masks? Do you think Japan will be a buyer or seller of bonds and manage a lot of mo…”
Rieder: Real alpha in fixed income will come from bespoke structured originations
“I think where a lot of the real alpha is going to be going forward. It's bespoke investments where you functionally create the investment, whether it's in the commercial real estate or resi or a European asset finance. The term loan to an aircraft producer. Th…”
Rieder: BlackRock prefers owning junior tranches in CLOs to control structures
“Oftentimes today, for example, the CLO market, We like to own the lower parts of the debt stock because we'd like to own the structure.”
Rieder: BlackRock is paring back US high yield for IG and securitized debt
“We think a lot of the U S high yield markets got rich. So we've been pairing that back on more up into up an IG, running up more of a barbell with some securitized assets, learning a little bit of EM and then just letting the teams go.”
Rieder: The Federal Reserve is making a mistake by delaying its taper
“I'm pretty wigged out, but I think the Fed's waiting too long, and I think they're making a mistake.”
Rieder: Subprime auto ABS spreads dropped from 800 bps to 15 bps
“Triple A subprime auto was at 800 spread a year ago. It's now at 15. Single A subprime auto, I think, is at 45.”
Rieder: US inflation will normalize to around 2% once reopening fades
“But if you normalize airfare, lodging, growth of used cars, et cetera, you're going to run at two-ish percent, maybe a little higher. But I think they're right on the transitory thing generally.”
Rieder: Overheating Wage Growth and Input Costs Promotes Automation Over Hiring
“In fact, I think it's going the other way because when you overheat input costs or you overheat wage acceleration too fast, it promotes technology and fewer jobs longer term. And companies always look at the return on invested capital versus their weighted ave…”