How Balyasny Is Building up Its Talent Pipeline
When Sebastiaan De Boe was weighing leaving his job as a senior analyst at Citadel to make the transition to portfolio manager, he knew he was facing a daunting list of things to tackle.
A new firm and a new role would mean developing a new investment strategy, hiring a team, and building out infrastructure, as well as hitting a break-even point. One firm he was considering stood out to him: Dmitry Balyasny's namesake hedge fund and its program for up-and-coming portfolio managers, Anthem.
"The whole offering got me over the line," De Boe said. "But I think the key thing was this specific pathway, and that BAM would be the smoothest journey to becoming a successful and profitable PM that over time could run a larger book."
Hedge funds are finding that to win the talent wars, it's not enough to have deep pockets to attract portfolio managers. Developing talent has also become a strategic priority for firms looking to stay competitive.
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"You have to definitely do both," Balyasny told an audience at the Capitalize for Kids Investors Conference in Toronto last month. "In any successful business that you look at in this industry or others that have been around for multiple decades, they're building as well as buying."
He said that in the past year, $21 billion Balyasny had hired 40 portfolio managers. It's also spent on its efforts to develop talent. The business development team, responsible for hiring staff for the Chicago-based firm, has grown to more than 50 people. Its team devoted to developing investment talent is up to about 20 people.
"So it's not just hiring the PM but investing around them to build a top-tier team and all the infrastructure and tools they need," he told the conference.
Investors have been plowing money into multistrategy hedge-fund firms like Balyasny, Millennium Management, and Citadel in hopes that their portfolio-manager pods will deliver consistent returns in volatile markets. In turn, these funds have more money to hire top traders, making for a fierce battle over a relatively small pool.
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Originally focused on long-short strategies, Balyasny has been diversifying by building out quantitative strategies and hiring quants, the hedge-fund founder said in a recent podcast. He added that it was also expanding its commodities business. The fund has underperformed its multistrategy peers in 2023. Its global equities head left in October, as did several other portfolio managers.
Balyasny has ramped up its focus on bringing up investors to keep up with the ruthless talent cycle. It began in late 2015 with Anthem, the portfolio-manager development program for senior analysts with seven or eight years on the buy side. It was launched for long-short equity but expanded into quant in 2021 and macro in early 2023.
It's also growing its six-month program to help junior analysts with one to five years of financial experience get training and tools to become senior analysts who get integrated into existing investment teams.
The program, called Bridger, launched in the US in 2022 with four analysts. By 2024 it's aiming to have 50 to 70 analysts globally. It's launching its first class in Europe next year.
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Inside BAM's equity-investor training program
While Balyasny's programs are designed to support its employees, they're still competitive and challenging. The Anthem program has a 50% graduation rate.
The low graduation rate is intentional, said Bill Wappler, Balyasny's director of research and partner, who developed Anthem Equity and runs it in addition to Bridger. Before joining in 2015 to help Balyasny run his book and find ideas, Wappler handled analyst training and development for the billionaire Steve Cohen's Point72.
"We want to keep the program very select and difficult to get into," he said. "This should mark a real milestone in that person's career."
Anthem participants receive a small amount of capital to manage and deploy. (Balyasny declined to disclose figures.) They're coached by Wappler and his team over 18 to 24 months as they hone their portfolios, build their teams, and set up their infrastructure, including building out models and finding the right datasets. They operate within a risk framework that is tighter than that imposed on veteran portfolio managers at the firm.
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"For many of the Anthem participants who don't make it through, it's either because they struggle to navigate the transition successfully or they come to realize that their strengths are more in the analyst role rather than in portfolio management," he said.
Of the 20 people who've graduated from the program, 10 are still at BAM.
BAM's portfolio managers in training get mentorship from the top
De Boe, who's based in London, joined Balyasny in 2017 and is now one of the hedge fund's 19 partners.
He launched his book in March 2018, a pretty rocky time for his sector: healthcare. While De Boe brushed off Wappler's advice to hold off, he took his recommendation to launch with a smaller book.
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The London Business School alum said that alongside helping identify the weak spots in his portfolio early on, Wappler and his team gave him the mentorship and space to sharpen his process.
"Being in the Anthem program, where you get a lot of support and coaching at the onset, helps you more effectively put together a better version of that process that works for you," he added.
He still talks to Wappler almost daily. "Now we discuss different things than when I started, but the dialogue continues," De Boe said.
De Boe also gets involved with mentoring new PMs through a program pairing upstart investors with veterans at the firm to encourage collaboration.
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As Anthem "has grown and produced successful people like Seb, it has been great to see existing legacy PMs asking to be more involved and volunteer to be mentors," Wappler said.
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