WSO Podcast | E241: A Hedge Fund Investors Path. From JP Morgan to Morgan Stanley to a L/S Hedge Fund
In this episode, PJ shares his winding path from a JP Morgan internship during his time at Princeton, to working on two desks during his 5 years at Morgan Stanley to making a pivot to equities at a L/S hedge fund where he stayed for 7 years. Listen to hear how he started all over again and where he is now.
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WSO Podcast Episode 241 Transcripts:
Patrick (CEO of WSO): [00:00:06] Hello and welcome! I'm Patrick Curtis, your host and chief Monkey and this is the Wall Street Oasis podcast. Join me as I talk to some of the community's most successful and inspirational members to gain valuable insight into different career paths and life in general. Let's get to it. In this episode, PJ shares his winding path from JP Morgan internship during his time at Princeton to working on two desks during his five years at Morgan Stanley to making a pivot to equities at the hedge fund where he stayed for seven years. Listen to hear how he started all over again and where he is now. Enjoy! All right PJ, thanks so much for joining the Wall Street Oasis podcast.
PJ: [00:00:52] Yeah, thanks for having me.
Patrick (CEO of WSO): [00:00:54] So it would be awesome if you could just give the listeners a short summary of your bio.
PJ: [00:00:59] Sure! been in the business now for quite some time. Graduated Princeton in 2008, studied operations research financial engineering. So something that I thought would be good vocational training for finance. I spent five years at Ms in their investment management business focused on fixed income. I did my CFA as decided I wanted to get into equities. I worked seven years at a long oriented but long short event driven or value with a catalyst hedge fund. Learned a lot there, but at the end of my tenure this was really coming up to Covid. Wanted to get some experience in private markets, so I made a pretty big pivot into commercial real estate private equity. Drink from the fire hose did that for a year. Realized I really missed the public market game. I decided though that take a sort of an in-between step and became the CFO of a SPAC. Can't talk too much about the public company, but suffice to say I began self-publishing research and joined the firm I'm at now and I've been there now six and a half months. It's an industrial fund. It's a long, short fund focused on changes in the industrial economy. So that's that's me.
Patrick (CEO of WSO): [00:02:18] Really super fascinating path here. So let's go back all the way to Princeton. When you were, let's say sophomore, junior was financial engineering and operations kind of always on the radar? Did you have family or friends that were in. I know Princeton is a pretty good feeder into Wall Street. So yeah, What did you have like alum that were telling you. Yeah come join.
PJ: [00:02:42] You know, I think I chose the major based on both what I thought would be practicality in terms of next steps and also based on what I didn't think I was good at. So wasn't really good at reading or writing. I hate to say I'm not good at reading and writing, but I think I'm probably better with numbers and wanted to learn to code and learn all about exotic financial instruments. So you know, for me I kind of knew going in that was the major I wanted to do. I didn't necessarily know the skills that would pick up. And frankly, most of the skills I picked up kind of died with the financial crisis in some respects in terms of credit derivatives, exotic derivatives, but certain things like coding and stuff have remained pretty relevant throughout my career. So I would say the key thing from Princeton was learning how to learn and not be intimidated when you have to absorb new content, which is something you have to do along your career.
Patrick (CEO of WSO): [00:03:37] And tell me about like so freshman summer, sophomore summer. Were you doing internships throughout the year or just only in the summers? What did those look like?
PJ: [00:03:46] So actually I took summer courses first two years just to broaden my horizons, learn a little more. I will say that people who get that internship in the sophomore year, I mean that's, that's beneficial. I mean anytime you have more ammunition when you go out for full time, recruiting is a good thing. I did spend my summer internship junior year working at JPM in their synthetic CDO structuring group which got restructured, I guess you would say after the financial crisis. But that was, that was a good experience for going into a workplace and getting things done and working in kind of a high pressure situation. But definitely the earlier you start thinking about things and networking and considering internships the better. And if you can do an internship during the year, whether it's because you're co-located if you're in a school in a city or something, or you can maybe do it remote it's definitely something to consider.
Patrick (CEO of WSO): [00:04:46] Are you from Jersey area or New York?
PJ: [00:04:49] I'm from Manhattan, so it's a pretty short trip to Princeton.
Patrick (CEO of WSO): [00:04:56] Very cool. So you're kind of coming up you're studying a lot freshman summer. What type of extra courses were you doing?
PJ: [00:05:03] It was different stuff in econ, different stuff in differential equations, math. It was just it was a smattering of things that just kind of round out the skill set.
Patrick (CEO of WSO): [00:05:12] Got it. A little linear algebra, maybe a little.
PJ: [00:05:14] Exactly. All that matrix matrices. That's what all life is about. It's matrices, right?
Patrick (CEO of WSO): [00:05:20] So then you're coming up you're seeing the world fall apart. Well junior year you said you're a JP, right? And you were doing. Tell me about the internship a little bit. So you were on this you said CDO credit derivatives.
PJ: [00:05:34] Yeah, synthetic CDO desk. So as a CDO of CDS’s, So I guess they were a little easier.
Patrick (CEO of WSO): [00:05:39] So you're basically that's like that's literally the central, like central, like what do you call it? Epicenter of the financial crisis was like that group.
PJ: [00:05:48] Yeah I mean
Patrick (CEO of WSO): [00:05:48] Or no?
PJ: [00:05:50] Yeah. No, look I haven't really contextualized it. I mean yes it is a, it's a more liquid instrument. But again it was monoline insurance companies that were buying and selling these things. And certainly I would put stuff in Excel and then they would tell me what the Moody's rating would be. And you know, it was like all right, well we don't want BMW let's put in Mercedes or something like that in terms of different CDS. So you know, I guess I was a monkey at that time. I guess now I'm just an older monkey. But you know, it was get it in, get it out and get the job done. So that's definitely shrank substantially a lot of the people I knew from that desk went on to just do other things after.
Patrick (CEO of WSO): [00:06:30] That's great and so you were there like I think 07, right? Summer 07.
PJ: [00:06:35] That's right Summer 07.
Patrick (CEO of WSO): [00:06:36] So did you start seeing some of the cracks kind of like while you were there over the summer or is it like you were too like your head down and just trying to get the return offer?
PJ: [00:06:45] You know we weren't in the mortgage space. I think credit derivatives CDS were from what I remember not too. Not the market wasn't too shaken up, in that regard it was still pretty much the heyday of that area in terms of jpm's making money trading and originating these types of securities that have to go back to, listen to some of their calls to see if they called it out. But we really didn't see a whole lot of, a whole lot of messiness, or at least not at the time I was there.
Patrick (CEO of WSO): [00:07:14] And how did you even land that? How did you even get in?
PJ: [00:07:17] So that was on campus recruiting. Basically had taken a course, talking about we actually learned about synthetic CDOs and CDOs. And so the fact that I knew some buzzwords and can talk about it a little bit, a little bit made it sound interesting. Had other offers, there was a chance that could have gone to the CIO office where the London Whale was, I guess. Well, he was in London but there were different groups that had exposure to. And this one just kind of seemed to the people on the team kind of clicked and kind of the nature of the work. It was a little bit more market hours oriented. Kind of made sense for me and yeah, just had a little bit of background in the space that kind of gave me a little bit of a bump in terms of them wanting me to be in the group.
Patrick (CEO of WSO): [00:08:07] Cool. So you get the offer for the internship, you take it kind of you get through that summer are they saying, hey, come back? Or at that point were they saying, Yeah, we don't know what's going to happen?
PJ: [00:08:16] Look, I think. I think I didn't have a tremendous interest in it. I think I didn't want to be a market facilitator. I was more interested in being an investor. They also did something wasn't their fault but basically my desk was not in their desk area. And so like, for me like, this is just more inside baseball. Me like, don't see amazingly well. So if I'm looking over someone's shoulder and looking at their screen like I'm probably not really seeing what they're doing. And so it was just a little bit of an awkward situation. But look, broadly, I learned a bit but I think at the end we kind of mutually said that, look this isn't the right home for me. And you know, some of them tried to help me look around, but, yeah, I wouldn't blame it on the market. Just it wasn't a great fit at the time.
Patrick (CEO of WSO): [00:09:05] So how did you kind of approach coming back to senior year? You didn't have an offer yet. Were you nervous about that or were you thinking, Oh man, like this is I thought I'd have offer in hand at this point. And then as you're probably in senior year like the whole economy, like world economies are falling apart. What's going through your head?
PJ: [00:09:22] Yeah. So, look, I think for me and I think for other people. I was looking for the right fit, right? I wasn't looking, I wanted to. Your life or your career is a boat one to position the boat in the right direction before the wind. Before you kind of put your head down and do what you got to do. Look, I could control it. I could control I had good grades and I continue to get good grades. And for In my department. Yes, overall, a little less than that. But I mean, a lot of sacrifices.
Patrick (CEO of WSO): [00:09:53] Slacker three, three, 539.
PJ: [00:09:56] Something in that range. Something in that range. But I was, I felt decently confident that there'd be other companies coming back and they did recruit full time. And that's kind of where I got my gig.
Patrick (CEO of WSO): [00:10:08] What did they ask you about that? How did you, like deal with the questions of like. Why didn't, why aren't you going back to JP and like still make yourself like not look like because I know a lot of people if they come back they don't get the internship offer which is probably going to happen a lot this summer. Like, how do you actually recover for that? For full time recruiting in a recession? Things very, very relevant for the graduates right now. The interns right now, some of them will have offers rescinded with Credit Suisse. Some of them are going to just. The offer rates are going to plummet. So it sounds like you are very confident, like you weren't that concerned going in. You think maybe that came across in the interviews. Like what? Any advice for people listening on that?
PJ: [00:10:46] Well to the level set I was interviewing in fall of 07, where there were certainly cracks and different issues. But not, not full on, you know, collapse in the market. I think the fact that I want to do something else and I had skills to talk about and different interests to talk about I think made it a lot easier. If I didn't get the JPM job and I wanted to go to DB and do the same thing, I would have to explain why it didn't work at JPM which is you're going to say it's either an interpersonal issue, which is not great to share or.. So for me, it was just a chance to say, Hey look, I tried it. It didn't work out. I learned from the situation you were fine more what you're interested in. When you're doing a job that you're interested in you're gonna be effort. Everything is going to flow from that.
Patrick (CEO of WSO): [00:11:39] So you ended up at, So a couple things I want to kind of tease apart here. You ended up at Morgan Stanley, right? How was that interview different or were there any concerns on their end around like you're not going back to JP, How did you deal with that? Or was it, was it like for a group within investment management where it was like they were like, Oh yeah, that's completely different.
PJ: [00:12:02] I think it was a little bit of the latter. I was going into a risk analysis role which was I don't know kind of a middle office role in retrospect. Where a lot of the knowledge I had was highly germane. And so they were happy to have someone who buy their estimations had some talent and could be helpful. Yeah, I think it was just the fact that it was just a different job, you know. Also interviewed at like a PE firm and they seemed to not really as long as you had a story that made sense that you were looking to do something else which was unequivocally the truth and you had interesting things to motivate why you wanted to do what they were doing. Right, I think in a lot of times people want to know what motivates your interest? And so if you can explain that, that's helpful.
Patrick (CEO of WSO): [00:12:54] How did you explain to them that you wanted to be on the investment side? What was your, what was. I know it's like many years ago but you know. What is that? 12, 13, 14, 15 years ago now.
PJ: [00:13:06] Yeah.
Patrick (CEO of WSO): [00:13:07] Yeah.
PJ: [00:13:08] I don't know made something up on the spot. No, I think. Look, I think being an investor is structurally different than being someone who facilitates transactions. It probably also meant that I wasn't interested in being a banker at the time.
Patrick (CEO of WSO): [00:13:22] But was that your answer for the Risk group? Something about being more on the investing side, like in helping?
PJ: [00:13:27] Yeah, I mean I think with the risk group and you do have to tailor your answer to what it is that they do. So they don't just think if I would have just said investment side then they probably would have said, All right he's going to be in our group for two years then he's going to try to move laterally within the firm which I wound up doing. So I mean look, I think there was genuine interest in understanding sort of the risk parameters of fixed income portfolios, right? There's tracking error value at risk. All this stuff that I learned in school, I thought it would be an interesting training ground and an opportunity to do some of the quantitative skills I had so obviously.. was it? So, I joined. One person hired me and I joined. And I had a different boss who came from Countrywide. Obviously that was a very tough situation for him. And by the time my training was done like every major bank, there was summer training and then started in September.
PJ: [00:14:26] I mean, God knows the market did what it did and things were chaotic. I couldn't quite put everything in context in terms of the types of securities we owned and whether or not they really belonged in the portfolio as they were. And how secure were some of these structured instruments that maybe we owned? So it was, we used a software called yield book. You know, some people still use it. Yeah I mean, I think I learned a lot. It was a small group and it was a little isolated and I think sometimes when you, you think about risk management. Honestly, the risk management is really done at the portfolio level by the PM risk management is just more like all right the funds have a board meeting they want to see some stuff. I wouldn't say it was a perfunctory operation not in the slightest. But it wasn't where the sausage was being made. It was more like I don't know. Giving commentary on how the sausage was being made without having all the information.
Patrick (CEO of WSO): [00:15:23] Got it, got it. So you felt like. So you're there for like, let's say it was kind of chaotic that first year. Makes sense and then what a year in 09, 2010? Like you're thinking. Hey, I want to transition internally. You mentioned you transitioned internally. What were you aiming for and how did you make that internal transition? Because that can be one of the most difficult things politically to pull off, especially if it was middle office to front office.
PJ: [00:15:46] Yeah, Yeah. So yeah, I mean it wasn't an operations role but you're right it wasn't really a portfolio or client facing role. look I think I found my job was to look at portfolios across a number of different asset classes or sub asset classes within fixed income. I got to know some of the portfolio managers and took them, I took one guy aside a couple times. He was a Princeton grad, a bit older than me and shared with him. Hey, this is what I'm really good at can code. I'm interested in econometrics and looking at macro data and making sense of it all. And there was a need. Morgan Stanley at that time was consolidating its operations whether it be from Pennsylvania or even some people from London moved to New York. To really make New York kind of the epicenter that in London of what they were doing and so there was a need. I was able to pitch myself as someone who has skills and someone who has a good track record there. And one day one boss talked to the other boss and then that kind of happened. So it's funny, I was thinking about it every day for about a year and the other guy probably thought about it. The three times that I talked to him probably thought about it a little bit. And then he talked to my boss. I mean, it's just funny.
Patrick (CEO of WSO): [00:17:06] In what way? What group? What group was that?
PJ: [00:17:08] So I joined the global fixed income group. I joined sort of government currencies and rates investing. So our mandates could be government bond portfolios. You know, different things like that.
Patrick (CEO of WSO): [00:17:22] But that was an investing role meaning you were like actually actively taking, taking directional bets not market making or both?
PJ: [00:17:29] That's right. Well the team was I mean in fairness to me I was doing more research supporting that. I was gathering data making books about our macro outlook, I was doing different things. I mean, it's a macro job. You know, I wasn't directing trades or I wasn't making..
Patrick (CEO of WSO): [00:17:48] How do you even know how to do that a couple of years out of school? Like get, get that data? Like are there, are there data streams that they would be feeding you and like stuff or would you have to go out and be like. Hey, I need this data stream like it's safe or it's just in Bloomberg What were you like? What were your primary sources? And then how did you. I assume once you had all the primary sources you're able to kind of do your thing but, how did you even like pound?
PJ: [00:18:11] Well I mean. Yeah, so yeah I mean the first step for analysis obviously you have to have good data for macro data, for financial data. Bloomberg’s great for macro data. I would sooner use a data stream or a haver both of which it helps to be at a larger institution where they have licenses. It's not a big deal otherwise, they're not cheap services. And certain things like Haver and data stream can automatically update charts and do all that stuff. And the key is also how easy it is to find the different particular data series. And both programs have different sort of menu driven ways of getting it. So that was the data. You know, in terms of what I did with the data there were some stuff we did historically that I updated. So some firms, they just have legacy models that someone did 20 years ago and they want to see what it looks like now. And so I did that. And then some of it, they gave me some rope. So I would read different papers and see people produce different forecasting models for rates or economic activity. And they gave me a Matlab license and I tried to replicate it. And that's.. So there's some client stuff and then there was some stuff that they kind of said. Hey, you know, we kind of either, we don't want to be bothered to talk to you or you know.
Patrick (CEO of WSO): [00:19:31] Special projects, Special projects.
PJ: [00:19:34] Special project, right? Send me to the basement room or something.
Patrick (CEO of WSO): [00:19:40] So you're there for a good five years. Tell me, kind of as you're approaching kind of the end of your tenure there. What, what was going through your head? What were you looking for in terms of like your next steps? And talk a little bit about pay like the progression obviously from the risk to the more support role and fixed income probably a nice bump there. But can you tell me a little bit more about the progression and then kind of what you were looking for in your next role?
PJ: [00:20:08] Sure could talk progression. Actually, within the first two years of the analyst program. Actually, my analyst program was done when I switched over pretty much. At the associate level, senior associate level. You're not really getting huge bumps in pay. I think the biggest bump in pay would have gotten would have been if I stuck around for VP. I think your salary could have, ballpark at that time got up for maybe like a 120 to a 180. So, I mean, it's definitely a business where I think your comp accelerates as you move up the ranks. It's not a linear thing in the slightest.
Patrick (CEO of WSO): [00:20:50] And what about the, what about the bonus side? I assume for the risk it was pretty minor. But then did it move up when you joined the fixed income? Like would it become a higher percentage of your base?
PJ: [00:21:01] So I would say actually, I think my first year I got one the highest bonuses across my class and I think that was a function of performance. But I think that's because it was the analyst program where they're kind of like you guys are all.. Right, you're all kind of doing it. I imagine if I stuck around it probably would have been, it probably would not have been as good in risk. But honestly I don't. You know, I think the bonuses were 30, 40, 50% of my base. I don't really remember It's kind of funny I don't really remember my bonuses from back then. But I mean for at the time being 23, 24, it was nice to bank some money and but it wasn't. No one was knocking it out of the park at that time.
Patrick (CEO of WSO): [00:21:44] Yeah, it was a pretty rough time as well, so for sure. So, yeah I think just let's, let's go to the end of your time at Morgan. Morgan Stanley just like hear a little bit about how like what, where your brain was at, what you were looking for next and then just that whole recruiting slash interview cycle? Five years is a long time to be for your first job.
PJ: [00:22:04] Yeah. Five you know, I had the benefit of trying two different places and I just had two different roles within the firm. And honestly I think optically it looks better to. That was there for five years and you got the chance to try two different things. So anyone who's looking to consider doing a different role to the degree to which you have good will at the firm you're at. Look to see if you can do it internally. It's not always easy like you said Patrick, It can be a little messy with personalities. In the situation I was dealing with the person who took me in was a lot more senior than the other person who was working for and there were reasons that I didn't telegraph it to the person I was working for. But in any case, look as a practice think it's important to put your head down and work hard but at some point you want to take a step back and say. Hey, is this a direction I want to go in? You know, are the skills that I'm building can I monetize them where they'll be useful somewhere else? And what was kind of finding at MS which probably happens in a lot of large institutions is that you build very certain skills that are relevant for that firm and that team in particular but maybe not become as well-rounded or marketable somewhere else.
PJ: [00:23:11] And, I talked to a few friends. Read some books and was like all right this equity investing special situation investing sounds pretty interesting. Let me do my CFA. Let me, let me learn some skills. Let me not pay a lot of money to go to business school although that's a great way to reposition yourself for a new career. And let me see where it takes me and there was no recruiting process for me honestly that's the funny thing, right? And you come out of a good school and you're working at a good firm but people like square pegs for square holes. I wasn't a square peg in a square hole. And so I had to network a lot through my whether it be my high school, Princeton alum. You know what I found? This is a point I want to make more broadly is like a Venn diagram. It's the people who are in the space that you're interested in and then the people who care about you. And the Venn diagram like where those two things intersect isn't very big but you kind of have to try to find those people.
PJ: [00:24:11] And ours say if I were to pick one circle or the other. I'd pick the people who care more about you because they're more willing to make an intro. Someone could be. If you don't if you have a weak connection and you try to ask for a favor it's just, it’s just not going to be comfortable doing it. It's not to say you shouldn't ask but sometimes that guy who you know, who's great family friend he may know something. It's not who you know, it's who he may know. And then if he can convey that goodwill that works out. So I networked ultimately I found a firm that was willing to talk to me. For they gave me. Said look I'm interested in this. Let me do a side project for you. I'd love to learn a bit more about how this is so I can see if actually really want to do it. And then you can see what I can do and I did that I put together a huge deck on a company called Compuware. I think it split up at some point and then..
Patrick (CEO of WSO): [00:25:06] What was the thesis? What was the. It was a huge deck. Let's be more specific, so like you're talking like 20 pages, 50 pages, 200 Like what?
PJ: [00:25:13] Look, I'm not a I wasn't a great deck creator. I think I put it together as a 30 pages. And the thesis was about splitting up the company. And I really forget most of it.
Patrick (CEO of WSO): [00:25:23] Some of the parts more valuable, undervalued. Yeah. Yeah.
PJ: [00:25:27] Exactly and so look I had no template for doing it so I kind of threw some stuff on the wall and I think and they gave me a second project. And then at which point I asked one of the analysts. Hey, how do you guys like to frame it? And they kind of told me a much more concise memo format that I then kind of gave the data in. But basically that recruiting process worked. Where I had done this one project, hadn't heard from anybody for five months. Then actually the company decided, then an activist investor got involved the stock popped and then lo and behold, the next day heard from the PM saying. Hey, let's talk some more. So it's, it's funny how that works.
Patrick (CEO of WSO): [00:26:07] I should have listened to that guy.
PJ: [00:26:09] Exactly. Exactly.
Patrick (CEO of WSO): [00:26:10] How much did it pop? Like 30%?
PJ: [00:26:14] 15 in 1 day and think it continued to go from there but it was nice to see. And that's the thing with equity markets you can have really big moves. And if you pick a winner it can really make a big difference. You know, versus what I was doing before smaller, smaller movements. But…
Patrick (CEO of WSO): [00:26:35] And so was about a six, it was about a six month wait from when you pitched it to when it popped. And then as soon as it popped, the guy remembered somehow.
PJ: [00:26:43] Yeah, yeah, he remembered. And, you know.
Patrick (CEO of WSO): [00:26:46] Did you reach back out and be like. Hey, remember.
PJ: [00:26:49] You know, I'll be candid with you at the time that didn't hear back from a while. I'm like, You know what? Let me table this I kind of had a new boss who was actually a really great dude at Morgan that kind of I had a chance to be mentored by him and also help him get acquainted because he was a sell side guy. But I still had interest but I wasn't. I was annoyed that I didn't hear back but didn't sweat it too, too much. I figured, well if that didn't work out let me find someone else and I'll pitch them a stock like that was my thought process.
Patrick (CEO of WSO): [00:27:24] You hadn't given up. It was just more like well that, that was the one place. Was there other places you sent that same pitch to that same deck?
PJ: [00:27:33] So actually, so once they did that I went to see their Investor Day. Actually, I got to see them present how they do stuff. I got excited, the guy was excited. They had reached $1 billion in AUM. Give or take at the time and the timing seemed like it would work. And then they said, All right look at this other company. Natus Medical, thinker b-a-by I think it's still around. And that's when I got sort of the color from the analysts this is how you present it. You put it together they gave it to them and then again I didn't hear for a little while. And that was when I got a little like, all right there are other people I know who are interested in MedTech. I want to give them the pitch because frankly all you gave me was a ticker and did this work and someone else should be able to benefit from it. But as it turned out I think it was around Memorial Day weekend literally right before I was going to take level one of the CFA or level two I forget. I took level one in December, I did level two in June. I recommend people do that Just get it out of the way. If that's still how they give the exam. And then I heard back and then it was like met with them very quickly and it got hired, so. You know, that's a one person's story. I mean what's the deal is that sometimes people have a-d-d they'll focus on it when they need to focus on it. And then you just, you just got to be ready. Be ready.
Patrick (CEO of WSO): [00:28:49] You weren't following up every three months or anything like that every six months. You weren't doing any of that, it was more like just they were excited about it but then they drop, drop it. And I've heard this. This is actually very common for the hedge funds space. It's so just so sporadic, the hiring when they hire, when they ghost people all the time. So they get busy and markets move and they get distracted. So when you were joining this fund, were you? You were excited. You said you'd like to kind of work They were doing it was. What type of fun was it? Like Long, long, long short was it.
PJ: [00:29:26] It was a long short fun, but it was value with a catalyst. Focus on undervalued businesses typically corporate actions companies that are doing spin-offs mergers buybacks changes in capital allocation. So there was an inherent bias towards finding companies with management teams we liked. The firm did have a short book it wasn't as extensive or necessarily as focused on single names as the long, as the long book was.
Patrick (CEO of WSO): [00:29:54] Fair and then how was like, what was the offer? Did you know right away? Yeah, I'm definitely taking this job or was it a tough decision at all because you said you had a new boss at Morgan Stanley? Seemed like you were.
PJ: [00:30:05] Yeah, I think when they re-engaged me I got excited. To answer your other question, I think reached out maybe once six weeks or eight weeks. Yeah, I wasn't, I wasn't too persistent. Didn't want to be annoying. I mean they knew, they knew it turned out on their end. They had an analyst they weren't happy with and I guess things accelerated at some point. And so that became my opportunity as much as I'd like to think they liked me I think that was also part of the situation.
Patrick (CEO of WSO): [00:30:36] I had a seat open up. Yeah
PJ: [00:30:37] Yeah.
PJ: [00:30:39] Look the offer. Look, the offer was kind of like. What do you get paid now? Gave him a straight answer from my base and…
Patrick (CEO of WSO): [00:30:47] Which was like 130 at the time or something like that, or?
PJ: [00:30:51] I was a senior associate I was probably up for VP in the following year or so. I don’t think I was making, I don't think I was making more than like 100, honestly. This is a little while ago, so you know.
Patrick (CEO of WSO): [00:31:03] This is 2013 Okay. Yeah. Okay.
PJ: [00:31:05] Yeah. So, you know, they kind of said. Hey, look we can't really give you a lot of visibility into how things will play out but it was a little bit of a trust me story and actually had other mutual connections with this individual that I felt. Hey, look this is a chance to pivot. This is a chance to do something I'm actually more passionate about. Let me get the skills. Let me get going and then the rest will take care of itself.
Patrick (CEO of WSO): [00:31:33] And it has. Right?
PJ: [00:31:35] Well..
Patrick (CEO of WSO): [00:31:37] Let's talk about, let's talk about the mean because then you ended up there for six, seven?
PJ: [00:31:40] Seven years.
Patrick (CEO of WSO): [00:31:42] Seven years. So your first two cents five years and seven years mean really? That's very impressive. But so the second, your second set at this at this mostly long, long fond specialist we'll call it you're there you kind of you show up for day one. What's it like? What are you drinking from a fire hose? Who's any mentoring? Are they just like letting you or is it like, hey here's a here's a desk and good luck? Or what's, what's the kind of day to day like there?
PJ: [00:32:10] Well look I don't know if there are too many of these kinds of funds around anymore. It was a single manager shop focused on the value arena which had a really tough decade. Right? They were a couple of guys on top of me seasoned analysts who'd been there a little longer. They had worked under a previous director of research who was a very talented guy apparently. So I gravitated technically. I could have worked with either analyst. I kind of gravitated towards one who I think is just as disposition was probably better to work with for my tastes. You know, didn't work too closely with the PMS early on. I just it wasn't really their style and different firms have different collaborative ways of doing things. I would say our firm was a little more go to your hole kind of come up with something and bring it to us. You know, there were some things like hey build a model for this. And I kind of had to figure it out on my own and maybe was a little slow at the start and they asked me what was going on. But yeah, I think, kind of look for a mentor. I kind of, I found one and I was able to kind of learn working with him on things and follow the chain of command and eventually would start presenting. The guy was kind of working with my new ideas and then eventually would start presenting ideas directly to the portfolio managers.
Patrick (CEO of WSO): [00:33:32] Talking about that progression because that's over six almost seven years. So like, is it like year one you're fumbling around just trying to like. Find your way like how long did it take to get to each of those kind of stages that you just mentioned?
PJ: [00:33:46] It's a great question because I feel like as a person who likes to do well you're always hard on yourself as to how quickly you're going to get up to speed. And sometimes you just have to take that step back in six months and say Hey, look what I know today. Like craps on what I knew six months ago and you just have to have some patience with yourself in terms of the timeline. I mean, think. I think it probably took me a good 2 to 3 years to really speak their language as they like to say. You know, I think whenever you're working with a portfolio manager. You got to give them ideas that resonate with how they see the world and been books written on this. But you have to understand their schema, right? If you're you're meeting a lactose intolerant person. You shouldn't give them like a extra cheese pizza. They're just not, they're not going to handle it well. They may not throw it at you but they're not going to handle it well. So I think learning their style getting comfortable with how they like to see numbers presented. Right, it's better to do a three statement model. But if the firm doesn't really care about that and they're more interested in their own little dashboard then you have to figure out how to do that. So I think learning stylistically all that before having my own names probably took about 2 to 3 years.
Patrick (CEO of WSO): [00:35:01] What was the hardest part for you specifically to get up to speed? Like was it that? Was it the stylistic kind of delivery that type of stuff or was it more like knowing how to, knowing even where to look for the data streams or for the, you know, whatever type of stuff you guys would look at or just have it coming up with ideas, enough ideas or enough good ideas.
PJ: [00:35:21] I think it was just getting enough at-bats to kind of see this. This is what made sense. These are the things that didn't really work for them and kind of roll it up from there. I mean, I think I was already pitching new ideas to the person that was my mentor. Maybe as soon as a year and a half to two years in. So yeah, I think it was understanding their pattern recognition and I think seeing a few things and realizing hey, you know management teams always do this and you know or you know if a management team is holding guidance but they miss a quarter and they hold the rest of the year well they're probably doing something. Sometimes people like to drip out news slowly and that usually doesn't work out well for them at the end. So I think for me, I had a healthy respect for the fact that this job is about experience and I wanted to kind of take it step by step. And you have credibility and you can't, if you put your name behind an idea that stinks or you could be wrong but your thought process at least has to make some sense. And if your thought process is just like hey, I just pulled this out of my, where credibility to trusting you're being trusted with people's money and the PM's not doing the same kind of work you're doing. So there's interdependence. So you got to build that trust.
Patrick (CEO of WSO): [00:36:36] Yeah, for sure. So tell me a little bit about kind of, you know, obviously you made another move, right? either before Covid or like right before..
PJ: [00:36:45] Yeah, just around Covid. I think look, it was a tough time for that type of strategy and I was 32, not married. And look private equity was having a great decade. Commercial real estate was having a great decade. And it's like all right I want to build more skills. I was still valuing skill building over comp. I mean obviously I wanted to get paid and a good years were decent and bad years whatever. You know, I still have my job.
Patrick (CEO of WSO): [00:37:15] So what was your best year at the fund, would you say?
PJ: [00:37:20] All in, all in comp or?
Patrick (CEO of WSO): [00:37:21] Yeah, it was like 2016, 17, like..
PJ: [00:37:25] I think it was 17, 18. Q4 of 18 was a disaster. I think for a lot of for a lot of people, I think it was a very tough year. So yeah, and best year was, it's not what private jets are made of but it was. I was able to put some money aside and it gave me that flexibility to then. Take a shot at something a little different kind of starting over a little bit. And for me corporate private equity was interesting. And none of the number of the companies we invested in had been bought out by PE. I will say the 30 seconds on that is that PE shops, like most shops, they like the easy solution. I wasn't the easy solution, right? I had these skills. They saw me as being 32. He's probably expensive. He's not going to want to do this crappy work and was like, You know what? Like I really want to I actually really want to see the deal process. I want to, I can do the basic work and I believe in crawl, walk, run. But at the end of the day I'd done some work for this guy did a few things and at the end of the day he kind of was never really going to ever hire me but wanted some free work. So you got, you got to be a little bit aware. Sometimes people may keep asking you for things to see your talents and you just have to know. You got to be just a little mindful. Sometimes people will take advantage of you.
Patrick (CEO of WSO): [00:38:44] Now as a private equity fund, like a partner at a small PE fund or something.
PJ: [00:38:47] It was, it was a fun list sponsor. This was a guy that was doing deal by Deal. I was introduced to him through a friend, not a bad guy. Just I think the messaging across. I think I probably wasted a little bit of time. Albeit I got to learn a lot by even working on some small projects. And then commercial real estate just, I was also interested in real estate. And so commercial real estate is a little more entrepreneurial a little bit more of a hustle business. And so, I managed to make inroads there and someone saw me and said. Hey, look you can help us find distressed deals, right? We're it's, we want to do rescue capital. We want to recapitalize deals bring in preferred capital and save deals so they don't get foreclosed on. And well you have these skills and you're willing to start at the bottom. Let's do it and for me, I said all right more chance to build skills take a pay cut. But it seems like an up and coming firm much earlier in its life cycle and so I took it.
Patrick (CEO of WSO): [00:39:48] Cool and so like your pay cut was what, 50%. So you're making like, what 250, 300 by the time you're leaving? And then you had to go back down to like 100k base or something at the new place is that accurate?
PJ: [00:40:01] I think I probably took a little less than the base and my all in comp was definitely lower. Don't think quite. You know, some of these firms are not quite sure how well they're going to perform and it was a vertically integrated owner operator. So these guys had like a lot of big payroll and a lot of things. But yeah I took, I took easily a 50 to, 50 to 66% falling comp but..
Patrick (CEO of WSO): [00:40:27] So like was it because like you, feel like you had the it was kind of a tough few years at the hedge fund and you felt like it had run its course or was it? And they were like kind of trying to show you the exit or was it more like. You know what, I'm not learning that much anymore and I'm just going to try something new. Like real estate is interesting. Like, how much was it of each or was it like a kind of a mix?
PJ: [00:40:50] No, they weren't really. No, they weren't showing me the door. I mean, I think they would have been happy for me to stay there. You know, look we had some good years. We had some bad years. And I always just put up with it which is fine. I think, I think it was a chance for me maybe to work with a different kind of collaborative team. Stylistically, I think I was looking for a little bit of a different opportunity.
Patrick (CEO of WSO): [00:41:12] Why not stay till like PM because like comp is like exponential at these hedge funds, right? Like, so why not try to.
PJ: [00:41:17] You got to, you got to know sometimes what's the end of the road at some of these places the firm was at. They're only going to be two PM's. No one else was named partner there. Like there are certain things on the wall that you kind of have to see and say. Hey, look I can maybe have an enjoyable existence but maybe I will never get a specific level of carry or all that. So they're good guys. It's just it wasn't the makeup of the fun that you would necessarily become another PM. Certainly the other two people who worked there they didn't have that opportunity yet either. And so if they weren't getting it. Wasn't expecting to leapfrog anybody. So..
Patrick (CEO of WSO): [00:42:01] The people Who were there, long even longer than you, it's a decade. Yeah, Got it. Okay, Fair enough. So that's why you kind of were like. Hey, let's try something new. This is before you knew about the pandemic though.
PJ: [00:42:11] Oh, yeah. Oh, yeah. Well, look, I think look, I like learning new things. I wanted to build another skill set. I had an opportunity just given the fact that I didn't have a lot of financial responsibilities. And I also knew from actually the my attempts to get into PE that if you don't do it by a certain age, you're never going to be able to do it. And so it was a unique opportunity. It was a very stressful opportunity as we'll discuss. But definitely.
Patrick (CEO of WSO): [00:42:39] Like you started in March 2020, had stuff shut down yet had people did people leave the office like before or after you started?
PJ: [00:42:47] So literally in between the time that I went to like have coffee with one of them to when the job started things shut down. I never met anybody I'd worked with for six months. The one person who was on top of me was on maternity leave. So I didn't really get a chance to work with her until June, July. And actually because we're a real estate they were able to say that. Hey, look you guys are like a necessary operation. And so they actually had us come in starting July. So was like the, was like one of five people on the six train going to work.
Patrick (CEO of WSO): [00:43:26] It's crazy. So you were working in the office through Covid?
PJ: [00:43:31] Yeah, yeah that was. That was really a drinking from the firehose, right? I mean when you think about transactions as a whole..
Patrick (CEO of WSO): [00:43:37] Well distressed real estate in this market. So like you were in the ideal like well there was so much deal flow right suddenly.
PJ: [00:43:46] If you would have thought there would have been more. I mean, there was a lot of relief a lot of banks and a lot of..
Patrick (CEO of WSO): [00:43:51] True, okay so there's a lot of like, Yeah a lot of people getting bailed out.
PJ: [00:43:55] Exactly. Given breaks, timing, things like that. You know when they kind of drop me in there just like all right just do whatever we need you to do. And so this was also a fun sponsor. So the lifeblood particularly in real estate as I experienced it was do the deal. Of course, it wants to be a good deal but get that fee, acquisition fee get paid a little bit and then hopefully you'll have enough of these that when you start realizing or crystallizing profits and one you'll be. They've been staggered a little bit. That's kind of how you build up the profitability. It was a very high velocity place. I was trying to get up to speed with purchase and sale agreements, reading leases, reading all this legal stuff, have like a couple legal books at home. It was a lot. It was a particularly coming from something where you have experience and you're competent in it to go into something where you're just, you're talking crap to yourself about how you don't know what you need to know. And it was a lot and it was not. It was a shop where it was like. All right, you don't know how to do this. Figure it out.
Patrick (CEO of WSO): [00:45:01] And so you did? when you lasted, you were there for a little over a year or a year?
PJ: [00:45:05] I was over there for over a year. Look it was a painful year and that's no one's fault. You know it's just how it was mostly just because of transitioning careers like that as dramatically as I did. Not easy and eventually that pay aspect does come up and you're like. Hey, it was my skill set really being valued here or the skills that I had there weren't as germane to what I was doing. But look we helped close our largest deal ever. I help bring in one of our largest capital sources. So in retrospect, I got a lot done. And the people there still liked me would take me back. Sort of casually offered if I ever wanted to come back and that. It wasn't some good people there for sure. And at least I have no regrets. I mean, I have maybe wish I could have had a couple of years in the market making a little more money but at least I'll never have to wonder what it would have been like to go into something like real estate.
Patrick (CEO of WSO): [00:46:06] That's cool. So tell us kind of your last two steps, I guess is what I'm seeing here on your LinkedIn.
PJ: [00:46:13] Yeah.
Patrick (CEO of WSO): [00:46:13] Back CFO like how, where is that coming from?
PJ: [00:46:18] So that. That was interesting.
Patrick (CEO of WSO): [00:46:19] I know, the SPACS were hot for a minute there.
PJ: [00:46:21] SPACS were hot. I mean, look the way I looked at it. This was February of 21. I had a chance to work with five operating executives. Guys who were C-suite guys, guys who really demonstrated talents and running companies and doing M&A at major companies in the transport and logistics space. And basically, it was a chance for me to do a kind of a private equity deal that also leveraged some of my public market experience. Right, because you have to find a private company and do all the data room stuff and learn what you need to learn. And then you got to pitch it to pipe investors. Pitch it to equity investors as being a good transaction. It seemed like, a good call option. The market was very hot if you could do a few of those maybe you can make some good money being an investor in the sponsor. like I said, I thought it was a chance to work with some really interesting people and to be the CFO of a public company. Albeit a shell company I thought was somewhat cool at the time. So look, we went public. We raised $345 million definitely gained an appreciation for how much I didn't want to be a lawyer. Transaction lawyers and M&A lawyers, It's a tough job a lot of respect for those people. But I'm glad if I come back in another life, I won't be a lawyer.
Patrick (CEO of WSO): [00:47:43] Neither am I that's fair.
PJ: [00:47:44] Exactly. So look, did that for a year. I think at some point there was a the executives were great. There were some other elements involved where I just didn't feel comfortable that the risk reward was going to work for me. And as much as I like to be a person that starts when he finishes. I just, there wasn't going to be a future in it, right? Fast forward to March of 22 and you know the market's taking an absolute diarrhea on these things. And for good reason. And being that I was a CFO and I was pretty much on every conversation talking to targets or talking to bankers. I got the pulse of where we were at and companies just. The SPAC was not the most companies. It was an adverse selection. The companies that wanted to merge with the SPAC weren't the companies you wanted to merge with. Kind of like they say with dating the girls you get, you don't want and the girls you want, you don't get.
Patrick (CEO of WSO): [00:48:42] So that's that was your year of SPAC we'll call it.
PJ: [00:48:48] Yeah. So then had to be a little enterprising. I started like, all right. Really want to get back in the public equity game want to work for fun but want to work for a different kind of fun. And what's the beauty of public markets? I can pitch you a stock and you want to see what I can do. I can do a write up. And at first, at first I was like, all right you got to have stock pitches for interview. Everyone knows that, but what happens if I pitch a stock or I do all this work on a stock and then it works out? How will anyone know that? I can't be like, Well I was going to pitch you this stock and then it worked. The guy's like don't give a shit, right? So don't give a crap. Depends how politically correct he is. So I just thought someone said. Hey, why don't you make a sub stack and make a blog and then publish your ideas there? And I'm like, You know what? This is kind of interesting because A, it gave me something to do, right? Yeah, because you can network, but you can't network 24 over seven. I mean, you can't be up people's you know what? So it gave me something where it's like, you know what let me build some models. Let me do a write up, let me make it look all nice and then I'll publish it. And you know what? I'll promote it on Twitter. And people, someone wants to say. Hey, look show me some work you've done. Pitch me a stock. I could be like, Hey, I could pitch it to you but here's a link. You can read about it. You can see my model. And so that was actually psychologically it was good for me to give me something to get back in the game and something tangible to work on every day. And it also saved me some case study time when I had some, some offers.
Patrick (CEO of WSO): [00:50:17] Yeah, you're like, yeah let me, let me dig it. Let me update that model.
PJ: [00:50:21] Exactly.
Patrick (CEO of WSO): [00:50:23] That's awesome. Tell me a little bit about like just how you approach. Well, we'll call it soon but just tell me a little bit about how you approach just when you're writing for your sub stack and you're writing. And do you want to pitch it here? Do you want to tell people where it is, If you still have it, do you still publish stuff?
PJ: [00:50:37] Yeah, we can. I'll send you the link, you can post it in the YouTube. It's not under a pseudonym so everyone will know exactly who I am. But it's fine I'd rather people see it. I even got on someone's podcast to talk about the idea. Shout out to Andrew Walker, who I..
Patrick (CEO of WSO): [00:50:53] I know Andrew. Yeah, we've talked before.
PJ: [00:50:54] Get another value blog, podcast, good stuff. Very good guy and he was willing.
Patrick (CEO of WSO): [00:51:01] Thing is just another value. What was it called again? just another value stock or something.
PJ: [00:51:06] Yeah, you get another value.
Patrick (CEO of WSO): [00:51:08] Yeah, yet another value. Thank you, again another value. No, I was saying it wrong. Yeah, Andrew Walker, he's great. So you got on his podcast?
PJ: [00:51:16] Yeah, we talked Brunswick. We talked spectrum brands. Look some, today a couple of the ideas work spectrum brands hadn't really worked because the deal they were doing with Assa Abloy hit a snag with antitrust and kind of went into some black hole and it's recovering and if they can close the deal it's a good, it's a good story based on what I outlined. Not advocating buying or selling any stocks by the way. Full, full display device. Exactly, just talking about what I did. But yeah, I mean basically I use some of the skills I had to find stocks in the past. You know I look at stocks maybe trading near their 52 week lows maybe stocks that were some insider buying. Maybe some that had interesting comments in the transcript where. Hey, look we think our business is worth more than the sum of the parts and that's why we're selling. It was actually a lot of some of the stuff I used to think about that was kind of what went into it. And you have to be creative. There's a there was a website called Docoh. It's changed names but it was actually a website where you could word search through transcripts absolutely free. There was Finvid, Finvid.com. Great screener free, right? There were a few others Tiker, Tiker. Again not advocating any of these services but that gave you consensus data. You could pay 20 bucks a month to get it. There was also one more that's escaping me. But yeah, there actually are a number of inexpensive data sources out there that you can use.
Patrick (CEO of WSO): [00:52:51] Together enough to be able to put something somewhat, somewhat comprehensive and legitimate.
PJ: [00:52:58] Koyfin, koyfin. That's another popular one that actually also has a transcript search tool. So just because you don't have a Bloomberg or a cap IQ. And by the way, they had a cap IQ in the public library just because you got to be resourceful. And so just because you don't necessarily have all the data today. There are different ways of getting information that you can try to piece together things.
Patrick (CEO of WSO): [00:53:24] Cool, one last question. You kind of have a quantitative engineering background. Ever thought of doing? Kind of you know, Jane Street or Renaissance type role or ever have you ever tried to apply to those or do you think.
PJ: [00:53:38] So Jane Street recruited on campus didn't go for that. I did interview at a large quant fund in Greenwich who was an outspoken founder and It just didn't really go anywhere. And look, I found quant investing really interesting. I used to back test things and do work like that. That's kind of why I went for that interview. But I'm happy with what I do now. It's a nice mix of qualitative and quantitative. The market is about psychology. Yes, it's about the numbers, it's about expectations. It's also about what are the secular trends, what are the, what are the things that are going to get people to rewrite the business. And so I kind of like the qualitative and quantitative mix of being a regular way equity investor.
Patrick (CEO of WSO): [00:54:31] That's great. Any final words, any last words of wisdom kind of looking back at your career so far? And for the younger listeners out there, any final words?
PJ: [00:54:40] Look, I think progressing your career. I wouldn't say cracked the code. I haven't but I think it's important to have times where you put your head down and really try to extract as much as you can from what you're doing both for yourself and for the for the employer because if you know one thing. One of the heads up at Morgan Stanley said is no one's going to manage your career but yourself. So you got to make sure that periodically you kind of poke your head up and say. Hey, look am I going down the right path? And if you're not, you might freak out for a minute but then get out there and talk to people ask questions. And I also found that when I networked sometimes I'd have an idea of what I want, what I was expecting the person to say. And sometimes I'd say the opposite and it'd be a little disconcerting. It's like well, no, you'll never make it in that field. Or Why you looking to do that or something? Maybe not as dramatic as that. And you take it with a grain of salt. Everyone's got an opinion. Everyone can only speak from their own experiences. And so sometimes it's those things that you get in a meeting that you let the burn soothe and then you kind of like one thing, I went for an interview. I used to wear a little Cologne sometimes make it, make it nice. And the guys, the guys like knock off the Cologne. Like it's..
Patrick (CEO of WSO): [00:55:57] Knock off the Cologne.
PJ: [00:55:58] It salesy, I wasn't wearing. It was a nice Cologne wasn't overpowering. But it’s like, it's salesy. And I'm like all right. I guess I won't do that anymore. And I didn't, and I've saved a lot of money not having to work alone to work. And no one ever complained about it before or after. But, you know, it just, you know, kind of..
Patrick (CEO of WSO): [00:56:15] I think the title of this episode should be Knock off the Cologne.
PJ: [00:56:18] Exactly, Exactly, Exactly. Well like everything, everyone has their own idiosyncratic things. But at the end of the day, look. Gather information. Think about things. Don't be afraid to take risks. And the last thing I'll say is, as much as cop is important working with the right people is neck and neck. Because if you're working with the wrong person you're always going to feel on edge. You're always going to feel like an on call doctor that if he emails you and you don't need to mail them back in five minutes because you're in the bathroom that he's going to like loses, loses whatever. You got to work with good people where you feel like there is a chance that you would want to be more like them as you get more senior. And yeah, I think if tracking the right team maybe early on in your career is kind of a hit or miss but when you have the chance to kind of determine what groups, what people you want to work with. Pick the good people and pick people who you think have potential to grow because it's always easier to grow behind someone who themselves is growing.
Patrick (CEO of WSO): [00:57:26] So that's great advice. Yeah, I think doing that research upfront especially on those big transitions like you mentioned like when you were transitioning internally it kind of optically it looked good because you didn't really make. It doesn't look like you made a transition even though you got kind of two experiences kind of along those lines. When you do make that reset and deciding to jump to a different firm. Make sure you're doing a lot of that kind of that research yourself. Don't just jump to something because it's quote, private equity or anything because a fund could be imploding like the one I went to and lost my job within four months. So like just do your research, do your diligence kind of before making those big jumps. Because it can it can kind of set you back if you if you make the wrong move.
PJ: [00:58:04] And if I may say two last things to that I mean, first if you make a jump and then you realize that what you jump to is worse than what you had, it's going to be demoralizing. And B, when you meet with the people who are interviewing you. Take note of how they ask questions, how they do things. If you get a quirky sense about somebody just be careful because people. Your first impression I wouldn't say is always right. But when I look back at some of the people and some of the quirks I saw they turned out to really be reflective of some personalities. And that's not a slight on anybody but it's just to say if it, if you get the sense that someone's personality and how they communicate doesn't really vibe with how you communicate. Just be aware that may pose an issue or it may just pose a challenge that you'll have to deal with.
Patrick (CEO of WSO): [00:58:56] Yeah, I love that. Let's end there. Pj Thanks so much for your time.
PJ: [00:59:00] Thank you, Patrick.
Patrick (CEO of WSO): [00:59:01] And thanks to you my listeners at Wall Street Oasis. If you have any suggestions whatsoever please don't hesitate to send them my way. Patrick@wallstreetoasis.com and till next time.
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