Disclosure
Brosens: Taconic has an 'anti-Goldman clause' diverting 30% to charity if sold
“So we put in a clause which has been Referred to by one of our investors as the anti-Goldman clause, where if the firm ends up either going public or selling at some point down the road, 30% of the economics effectively gets carved out and goes to Ken's and my…”
Insight
Brosens: Eat-what-you-kill compensation incentivizes undermining colleagues
“If you were sitting next to someone and you were getting paid purely as an eat what you kill system, you not only have no interest in whether or not the guy sitting next to you makes money, you actually want them to do poorly because if they do poorly, you get…”
Disclosure
Brosens: Taconic founders capped equity below 20% and zero out upon retirement
“Neither Ken nor I really right from the start took as much as 20% of the economics. There was a large percentage of economics available for the people that really drove the profitability. In addition, they knew that when Ken and I eventually retired, our econo…”
Prediction Not checkable as stated
Brosens: Markets will not return to excess Fed liquidity after inflation subsides
“I personally don't think that we're going to be heading into a period of excess liquidity for quite some time. I think the expectations that once inflation's under control, we're going to go back to the Fed as it was before, I think is less likely to be the ca…”
Assertion Not checkable as stated
Brosens: Goldman Sachs was considered a 'middling firm' early in his career
“It was viewed as kind of a middling firm at the time. The big firms at the time were First Boston, Morgan Stanley. The banks really weren't players in the space. JP Morgan wasn't really considered a competitor. There were other smaller firms, Bear Stearns, et …”
Insight
Brosens: Managing partner capital drives tighter risk discipline than upside-only fees
“The second aspect of it, and I think this was really important and something that we tried to Bring to Taconic was the fact that at Goldman, it was the partner's capital. It wasn't other people's money. And that drove a very different philosophy with respect t…”
Assertion Supported
Brosens: Mark Winkelman left Goldman Sachs in 1994 after political leadership battle
“Unfortunately, at the end of 94, he ended up Effectively losing a political battle to run the firm and left at the end of that year.”
Insight
Brosens: Mid-career family sabbaticals operate as a 'career in reverse'
“I thought of it effectively as a career in reverse. Retiring and spending time with your family when they wanted to spend time with you with a view that I'd eventually go back into work and potentially try and find something that I would do forever.”
Insight
Brosens: Broad economic distribution among partners attracts superior talent
“If we create a firm where we distribute the economics pretty broadly, Amongst all the partners, we'll be able to attract and retain a level of talent that we won't be able to do in a firm where we take most of the economics.”
Insight
Brosens: High-volatility risk arbitrage requires dollar hedging over share hedging
“If you hedged share for share, you were frequently vulnerable to the dollar spreads widening because both companies would double. So both companies double, the percentage spread stays the same, the dollar spread doubles. So you needed to be more closely dollar…”
Insight
Brosens: Investors rarely buy aggressively when assets reach their target entry price
“People frequently say, if the price were ever to get to this, I'd load up the truck. What happens when the price gets to that is they have no interest in loading up the truck”
Disclosure
Brosens: Taconic has 15% in risk arb, with 5% in one deal
“Right now, it's 15% of our book, and five percent is in one deal. You couldn't conceivably have that kind of exposure if you had a merger or a book on its own.”
Assertion Not checkable as stated
Brosens: Risk arb drove the lion's share of Goldman's risk in the 1980s
“Most of the risk at the time at Goldman Sachs was taken in the arbitrage area. There was very little risk being taken elsewhere in the firm. Jay Aaron had not yet been bought. They really didn't take an awful lot of risk in the fixed income side. The lion's sh…”
Assertion Not checkable as stated
Brosens: Goldman risk arb grew to nearly $1B in capital by 1987
“I think we had a couple hundred million dollars worth of risk at the time when we started. It grew so that by the time I started running the area in early 87, we were running close to a billion dollars worth of capital.”
Insight
Brosens: Robert Rubin's investment philosophy centered on managing uncertainty and downside risk
“Bob's philosophy was one of uncertainty. He wrote a book on it where you couldn't know things for sure. You had to know what could go wrong. You had to estimate the probability of that thing going wrong and effectively being humble about your confidence level …”
Assertion Not checkable as stated
Brosens: Goldman risk arb lost 4% ($40M) in 1987 crash with 70% cash
“We came into about 70% cash. We were down four. We had a number of hedges in place. So Not unreasonable, but four percent of a billion dollars was 40,000,040 million to the partners was a very large loss.”
Disclosure
Brosens: Taconic bought 25% of all CMBS trust default-rights securities
“And so we ended up aggressively buying literally 25% of the entire market in those securities and built a real estate business around that opportunity set.”
Disclosure
Brosens: Taconic targets single-digit losses in crashes via monthly stress tests
“The philosophy of the firm from the inception has been to, in a big dislocation, keep losses to single digits, and we literally have a stress test that goes through the equivalent of an 87 crash and assure ourselves every month by going name by name, portfolio…”
