Last month BAM celebrated its 20-year Anniversary
In 2001, Taylor, Scott, and I, along with a small, dedicated team and $40 million of capital set out to build a leading asset manager platform. We were too young to appreciate the difficulty of the challenge when we started out. We were Midwesterners, none of us having Wall Street backgrounds. In fact, our first sales coverage relationship came from opening Yellow Pages, cold calling the Chicago Goldman office, and then showing up in shorts for the first meeting (Chicago summers get awfully hot). While we had conviction in our trading strategies and ability to adapt to markets, we had no idea how to scale a business and compete with industry giants who were already managing billions.
We did have a few insights that were different. At that time, the asset management industry was dominated by single manager, single strategy funds. Having watched many traders and funds come and go, we were confident that a return stream made up of many teams and strategies would be more consistent over time. This was a very contentious view at the time, and we spent significant portions of investor meetings debating that this was a better way to attract top talent and generate uncorrelated returns over the long term. Striving to create a meritocracy culture built on collaboration, transparency, and development – akin to Silicon Valley versus traditional finance. Simply put, we thought that combining a multi-strategy platform business model with a single manager’s collaborative culture would give us a shot to compete. And we believed firmly that being the best place to work and the best place to invest is intrinsically linked in the long run.
The special culture that we have created has had tangible benefits for our investors. The decision to go to virtually all cash in the third quarter of 2008 came from an open, inclusive debate in a partners meeting and resulted in positive performance for the year. Competing with much larger firms for top talent is made significantly easier by over a third of new portfolio managers being internally referred every year.
Thanks to your support, and the dedication of all our team members, today BAM is an institutional, multi-strategy global platform with 1,000 team members, 120 investment teams and 14 partners managing more than $12 billion.
Like all reviews, it’s most useful to assess lessons learned from our mistakes over the years. Most of our strategic errors were due to not being sufficiently offensive. Asset Management is an unusual business. Building them to scale takes enormous self-confidence and investment while capital, until very recently, could flee on a quarterly basis. This same confidence needed to create a business typically leads to overconfidence in the markets, resulting in large drawdowns and terminal business risk. Hence the paradox of humble managers never building a sustainable business and overconfident ones blowing up.
We have always erred on the conservative side while maintaining significant long-term ambitions. On our list of top strategic errors over the past two decades, most begin with “we were slow to…:
- Commit to building world-class strategies outside of equities
- Institutionalize our investor base
- Invest significantly in technology
- Broaden our management team
- Sufficiently scale and diversify our equities business
For the next 20 years, we aim to use the foundation we have built to more consistently and strategically play offense. We will develop all of our strategies to world class levels, start new businesses, grow our partnership, expand our Atlas Scholars program bringing driven under-resourced kids into finance, and, most importantly, continue delivering strong performance for our investors.
Currently, we have three main priorities. First, we will continue to innovate and expand our leading equities franchise. With the recent increase in new listings and retail participation in the market, the alpha pie in equities continues to grow. We are encouraging our teams to expand their capacity, coverage, and analyst talent while we add new talent attracted to our platform. The collaboration, management, infrastructure, and people in the business is second to none and we will win a larger share of a growing equity alpha pie.
Second, we aim for all of our strategies to achieve the same level of excellence as our equities business has historically. Our macro business has made significant improvements and is in a similar place to the equities business a few years ago. We are laser focused on developing a leading macro business characterized by strong, uncorrelated returns across all strategies.
In our smaller allocations, we are committed to commodities, credit, equities arbitrage, growth equity, and quant strategies as core areas. Many firms make the mistake of dabbling in these areas when they are hot and retreating when they are out of favor. We view them all as businesses we will consistently build to capture opportunities and intelligence across markets. The only way to succeed in the long-run is to be committed, iterate, and constantly push forward. As we all know, one reason for Apple’s continued dominance today is that it did not cut R&D during the financial crisis unlike its competitors.
Third, build industry leading infrastructure and business support across all functions. Technology, data, trading, finance, risk, and business development will go from supporting to enabling new strategies. We are very focused on making investments which leverage our breadth to generate additional returns.
Most importantly, all of these initiatives will be enhanced by our unique BAM culture as we continue to grow across strategies and geographies. In today’s world, professionals are more and more attracted to working in a collaborative, non-political environment. It is not only more enjoyable, but also more productive allowing specialist teams to see the forest from the trees. We will continue to show that there is no reason for people to have to choose between the collaborative culture of a team-oriented firm and the resources and economics of a platform. You can have both and they reinforce each other.
We are proud of the exceptional 1,000 person team we have built across the firm; All pulling together to make BAM the best workplace in finance and the most transparent and investors focused platform. There will undoubtedly be many ups and downs in the years to come, but you can be sure that we are in it for the long haul, will figure it out, and emerge stronger.
We are looking forward to the next 20 years of working hard, staying humble, innovating, growing smartly, and persevering to make BAM the best firm in the industry.
Thank you for all your support over the years - we wouldn’t be here without you.
May 2022 bring peace and health to the world.
Happy New Year.