Steve Cohen, Cliff Asness & Neil Chriss Talk Hedge Funds at Milken Institute

The Milken Institute just featured a conversation on the evolution of hedge funds and the future of asset management. The talk included Point72's Steve Cohen (formerly SAC Capital), Cliff Asness of AQR, and Neil Chriss of Hutchin Hill.

It's rare to hear directly from Cohen, so it's certainly worth watching the whole chat.  But here's some brief takeaways:

- Steve Cohen: says that there's so many players out there and they're all chasing the same names these days.  He was worried about levered/crowded names and becoming 'collateral damage' and you saw that play out earlier this year. "It's very hard to maximize returns and maximize assets too." He also noted that their data says their team are great stock pickers but not necessarily good at market timing.  In general, Cohen feels that talent is really thin.  He's "blown away" by the lack of true talent.  Later said around 80% of PMs come from inside their firm as they like to provide teaching tools.  "If you're not innovating, you're dying."  He says there's opportunities overseas but their offices there are always going to be smaller than the 'mothership' in the US.  They like to find people who have a strategy, stick to it, and do it over and over again (process).


- Cliff Asness: says that fees in the industry are just too high.  Gotta be more unique ways to structure fees, i.e. based on correlation of returns.  Barriers to entry for newer funds have gone up with increased regulatory environment (compliance, cost, etc).  Moderator says 67% of managers manage less than $250 million.  Asness notes hedge funds haven't performed well since the financial crisis and thinks they should be hedging more and be more uncorrelated to the indexes.  Also says the benchmark hedge funds compare to is simply wrong.  Noted that people overreacted to 3-5 year performance figures.


- Neil Chriss: argues that funds are too much like the indices but also too much like each other.  Says in order to scale in this business you need to be able to handle drawdowns and hire more people, expand into new investments, etc.  Made an interesting point that AUM from the 1990's until present has gone up something like 15-fold, but the talent level has not mirrored that expansion.  Thinks active managers will have more success when monetary policy stops influencing things so much.  On Hutchin Hill's multi-platform, they're looking for good decision makers, as that's ultimately what PMs are.  They want people with track records of good decision making.


Embedded below is the video of their Milken Institute talk:

Point72's Doug Haynes on Wall Street Week

Point72 Asset Management's President Doug Haynes just appeared on Wall Street Week.  Point72, of course, is Steve Cohen's latest investment vehicle after he closed SAC Capital.  While SAC managed outside money, Point72 emerged as a family office to manage internal assets.

Point72's mission statement is threefold: to be the premier asset management firm (generate highest risk adjusted returns), have the highest ethical standards, and offer the best opportunities for the brightest talent.

Haynes said that the proliferation of hedge funds has really ratcheted up competitiveness in the market and has also increased crowding.  He mentioned they looked at the amount of alpha available and over the last 20 years it's down by half.  He notes, "The cost of being excellent in the industry keeps going up."

We previously linked to how Point72 has started an academy for analysts.

Haynes said that they like the healthcare sector and retail/consumer sectors now.  He notes they're looking at the innovation pieces of the economy.

Embedded below is the video of Haynes' interview on Wall Street Week:



Be sure to also check out Donald Drapkin's appearance on Wall Street Week as well as Ricky Sandler's interview.