The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Jain: Had Jain Global not launched, he wanted to create charter prisons
“If I hadn't started the hedge fund I would have run with that I've done nothing on is I was heavily involved in the charter school movement earlier in my life. I wanted to start charter prisons, basically private, not-for-profit prisons. Charter, the right win…”
Bobby Jain: Multi-manager hedge funds are effectively bank prop desks
“The multi-managed industry was the prop desks. It's not that different. The culture shock of moving from CS to Millennium was not that high at all. It was the same thing. A lot of it was the same people, as there was a transfer of people from the prop desks to…”
Jain: Alpha is privatizing as multi-strategy firms favor employee capital
“The biggest trend in our business is the privatization of alpha. Where the alpha is residing on the prop shops, as well as the multi-strategy firms, the multi-strategy firms over time have more and more employee money. And less and less available to investors.…”
Jain: Next-Gen Portfolio Managers Seek Compensation Autonomy, Not Operational Isolation
“The view of a PM in this industry is, they want autonomy. Especially the people in the next generation don't necessarily want autonomy. They want autonomy of compensation, but they don't necessarily want autonomy of lifestyle. So they want to say, if I make mo…”
Jain: Building a Multi-Strategy Fund Sequentially Creates Severe Infrastructure Problems
“The whole system wants you to create sequentially. They say, Bobby, why don't you start in one area? Start a billion and a half dollar fundamental equities business or quant equities. When that works, go do the next thing. Normal. The problem is now you starte…”
Jain: O'Connor's edge was arbitraging index and single stock options mispricings
“The second thing I learned was, at O'Connor, the core of the business was,
Index options trade rich.
People want to buy index options for protection.
And single stock options trade cheap, because people long stocks and they sell call options against those stoc…”
Jain: Factor-Hedging Fundamental Equities Began in 2004 but Industrialized by 2015
“Overlay the statistical arbitrage risk management systems, where you were doing factor hedging and all that type of stuff, and try to overlay that into the fundamental equities business, and that was the root of it in the industry. That happened in about, oh, …”
Jain: Post-crisis Credit Suisse employee assets were undermarked, not toxic
“People remember, we gave the employees a lot of what was considered back then the toxic assets, but they were not toxic assets, they were under marked assets.”
Bobby Jain: Multi-manager funds achieve 10% net returns at 5% volatility
“There's more math than that, but let's just say, simply speaking, in a multi-strategy firm, if you have enough diversification, You can run, as most of these multi-managers have done, a five vol to make a 10% net return.”
Bobby Jain: Many multi-manager funds operate as lead-actor core-satellite models
“A lot of these firms are effectively core satellite. It was a great PM that started a business, then learned that they could raise more money, and they started diversifying. But at the end of the day, the whole ecosystem is a lead actor and supporting actors.”
Jain: Liquid uncorrelated hedge funds total only $1.5T amid massive institutional demand
“If you think of the investment universe as a giant, 150 trillion dollars, 35, 40% of that's 50, 60 trillion dollars you need of diversifying assets. The multi-strategy industry is one of those, there are other ones. You could do infrastructure, real estate, bu…”
Bobby Jain: Multi-Strat Founders Must Fund Infrastructure Before Capital Arrives
“Actually, there's no chicken and egg. It's just a chicken. You have to build it all off your own balance sheet, and then the money comes in. That's a barrier to entry that you have to get through.”
Bobby Jain: Jain Global Needed Fewer Programmers to Launch Because of AI
“We got the launch in about a year, which was a reasonable time to build something from scratch, especially with the advent of AI. You didn't have to hire as many programmers.”
Jain: Multi-Strat PMs Earn 20% Fees Because Stop-Loss Execution Is Difficult
“Why are you paying people even that much? You're paying them for a sharp ratio, and you're paying them to manage money in a stop-loss context. In a stop-loss context, it's harder. If you're losing money in something, it's easier. If you could buy more, you buy…”
Jain: Running Asian trading strategies from the US is ineffective
“Because I'm sick of people trying to run Asia from seven in the morning when they're busy or seven at night when they're tired. I said, Asia is going to be a more finessed market with the very Korea, China, onshore, offshore China, Japan, India, Southeast Asia…”
Jain: The public hates UBI but supports earned income and child tax credits
“Generally, people hate the concept of universal basic income. It feels something for nothing. People like earned income tax credits. People like child tax credits. There's a framing element to it.”
Jain: Inefficient market structures persist far longer than participants expect
“Turns out the trading floors lasted for a long, long time after that.
And so what I realized is that things can last a lot longer than you think they can.”
Jain: CSFP Traded Off Natural Language Processing In Late 1990s
“We were doing natural language processing back in the late nineties. We were taking in the news feeds and trading things off of it.”
Jain: Pre-2008 Bank Prop Desks Were Bigger Than Hedge Funds
“Those prop desks, especially at Credit Suisse, that's where things were happening back then. It was much bigger than the hedge fund business, especially on the arbitrage and the harvesting side until the financial crisis.”
Bobby Jain: Multi-Strat Funds Must Balance Mean-Reversion and Momentum Archetypes
“You have market-making strategies and market-taking strategies. And you want to balance across those things, because the market-making strategies tend to be reversionish, and the market-taking strategies tend to be momentum-y. You have momentum versus reversio…”
Jain: Post-GFC risk migrated from banks to private credit, prop shops, and multi-strats
“There's two clear industries that have moved from the banks to the private sector. One is the private credit industry is effectively taking what the banks are doing and doing that off asset manager balance sheets. One is the market making industry, taking what…”
Jain: Global financialization is accelerating while few intermediaries can service it
“The second big trend in the world is the financialization of everything. Everything's becoming a tradable asset. The amount of people that are in the middle of that, whether it's the prop shops, the multi-strategy firms, the banks, There's not that many interm…”
Jain: Multi-manager hedge fund sector was tiny in 2016-2017 led only by Millennium and Citadel
“There was a big talent war in 2017 to 2022. Interest rates were zero. The whole multi-manager industry was tiny in 2016, 17, when Millennium and Citadel were really the two big ones that were managing third party capital.”
Bobby Jain: Traders use active tense for wins and passive tense for losses
“Some people, when they lost money, they start using the passive tense. So when they talk about making money, they use the active tense. When they start talking about the winning trades, they talk about clever they were. When they talk about losing trades, they…”
Bobby Jain: The hedge fund sector will become a talent development industry
“It's going to become A talent development industry. Whether it's talent development, talent acceleration, the people are going to start molding people into the way that they think of the world, and those worlds will be different.”
Bobby Jain: Multi-manager capital allocation is more static than perceived
“The capital allocation model is a lot more static than you'd think. If you look at most of these multi-manager firms, it doesn't change all that much over a period. In certain market environments, you're moving capital to one place or another, but that's not t…”
Bobby Jain: Skeptical of empirical models, favors factor-aware over factor-obsessed approach
“I'm generally skeptical of models, especially empirical models. So I'm more in the factor aware than factor obsessed model.”
Jain: Multi-strategy funds make money in high vol, lose during transition
“Generally speaking, in these models, you make more money in a high-vol environment, but you lose money in the move from a low-vol environment to a high-vol environment.”
Jain: Cutting risk during stress lets funds trade on offense post-crisis
“I view it as the reason you're cutting risk in a time of stress is it might get worse. So you're trying to hedge. The bad news is you're locking in a bunch of losses. And you're paying a bunch of transaction costs. The good news is, when things settle down, wh…”
Bobby Jain: Early on, pushing PMs to take risk is harder than stopping them
“In the beginning, it's harder to push people to take risk than it is to stop people from taking risk.”
Bobby Jain: Private Credit Boom Leaves Opportunities in Liquid Credit Markets
“The private credit business has been the biggest growing business in the world in the last few years. That leaves some opportunities in the credit markets.”
Jain: Fixed income liquidity disappears much faster than exchange equities in downturns
“People who grew up in the equity markets are used to exchange traded markets. You go into fixed income markets, suddenly liquidity disappears very quickly when things go wrong.”
Jain: 2009 and late 2020 were the greatest times for hedge funds
“Generally, that next period is a very good period, despite however anyone did in March of 20, or in the last quarter of oh eight, oh nine, and April to December of 20, were by far the two greatest times in this market.”
Jain: Institutional boards divide into diversification-focused risk managers versus concentrated investors
“As you get into these large organizations, there are two different ways of thinking. Some people are like risk managers. Let's diversify. And some people are concentration. Let's figure out where things are going to go and let's go there. It's no different tha…”
Jain: CSFP Index Arb Desk Made $50M In First Year
“The guy before me made ten million dollars in P&L, making 40, 50 grand a day. My first year, we made fifty million dollars in P&L.”
Jain: Arbitrage Trading Desks First Encountered Significant Crowding in 2004–2005
“What was happening in oh four, oh five is the first time you had to start dealing with crowdedness. Some of these banks were risk arb desks, we were stat arb desks, Citadel was convert arb desks, some guys were fixed income arb desks, and suddenly the arb star…”
Jain: Millennium evaluated portfolio risk minute by minute
“One of the things that you also learn in the banking sector is we're heavily marked to market. Millennium was one notch further, marked a minute. Why did we lose money last minute? Let's see if we could do something better about that.”
Jain: 10-day volatility spiked from 7 to 118 during February 2020
“10 day vol in February of 2020 was seven. 10 day vol two weeks later was 118.”
Bobby Jain never borrowed money until age 50
“I didn't borrow a penny in my life till I was 50 years old, and interest rates got to two and a quarter, and I said I have to.”