LTCM Co-Founder on Risk, Leverage & Simplicity | Victor Haghani
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I decided at a point, maybe it was around 2006 or 'seven, that I wanted primarily to have my family's savings invested in index funds. The only way that I was going to get alpha was either through leverage and or taking concentrated risk. So that was like really the moment for me. I don't want to pay high fees. I don't want to take a lot of idiosyncratic risk, and I want the things to be tax efficient. And when I go through all of those screens, I wind up with broad equity market ETFs. I wind up with some real estate, and that's about it.
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Yeah. Thanks very much, Felix. Good to be on.
Yeah. Yeah. Likewise. For sure. So, yeah, a storied a storied career, and I think it it lends itself really nicely to explore how you got to where you are today and what you do at Elm Wealth by unpacking your career history. I know you got Salmon Brothers and then you're one of the founders of long term capital management. And I would love to just hear a bit about what your career trajectory has been and what were some of those big lessons you learned back in the day that have led to where you are today and your perspective on modern day markets?
So, as you say, I started at Solomon Brothers in research out of university then I was invited to move out to the trading floor from research. And so I was at Solomon from 1984 to 1993, and most of my group went and founded long term capital management with John Merriweather, was the head of our group. And I went to London and ran the London office along with my partner Hans Hoofschmidt until 1998 when the hedge fund lost 90% of its capital and basically sold the whole portfolio to 13 of the biggest counterparties that LTCM had, and then stayed around for a little more than a year to help liqu
Amazing. And yeah, and Chris, as you take some of those personal lessons that you had and you broaden the scope towards just the modern day financial industry that we live in, I think a lot of people, a lot of folks will look at LTCM as bit of a crossing of the Rubicon moment and also a time that really spearheaded these ideas of, you know, just high leverage on generating alpha returns, I. E. Uncorrelated bets to beta and just this huge focus on that. And then you extrapolate that to where we are in the modern day and age, which is we have this proliferation of multi strap pod shops that real
You know, anybody that was around in 1999 or so would have been surprised that, like one of the things that, people at the time were saying, right, was like, oh, LTCM was too big. You know, we had, about $5,000,000,000 of capital at the beginning or, just over $4.04 4 yeah. It goes close to 5,000,000,000 of capital, in, the 1998. And people would have said, you know, that was too much capital to be doing relative value trades, or people would say, oh, you know, their position sizes, the leverage that they ran was too large relative to their capital base. So these ideas of too much capital and
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