Dmitry Balyasny: Seeing All The Angles

Published on
October 2nd, 2020
71 minutes

Dmitry Balyasny: Seeing All The Angles

The Interview ·
Featuring Dmitry Balyasny

Published on: October 2nd, 2020 • Duration: 71 minutes

Dmitry Balyasny, CEO and founder of Balyasny Asset Management, is an elusive legend of the investment business. In this interview with Real Vision CEO Raoul Pal, Balyasny gives an inside glimpse of the hedge fund industry, discussing his full investment philosophy on idea generation, asset allocation, position sizing, and risk management. Balyasny, who runs a multi-strategy book across many different funds, discusses the role of global macro investing within other strategies such as long/short and risk arbitrage. He emphasizes the importance of stress testing and correlation analysis. Balyasny also shares his thoughts on the hallmarks of a great investor as well as his views on the current investment environment and the resurgence of retail trading. Filmed on September 29, 2020.



  • LR
    Lee R. | Contributor
    7 November 2020 @ 14:11
    ended up being very dull. Dmitry evaded the answers or just answered with big picture marketing soundbites. RP kept trying and [his views were more interesting] but DB just refused to give any details
  • KH
    Kjell H.
    29 October 2020 @ 02:22
    Why trade at longer timeframes? 1. We can improve odds by adding more thinking before a position 2. The cost of trading becomes less and less with longer timeframes With long timeframe we only have to be right 52-60% of the time With daytrading we have to be right 66% of the time to manage break even. 66% is for masters.
  • DS
    David S.
    25 October 2020 @ 18:41
    This is a masterclass of who is trading the market with us. The professional competition is really smart, really well funded and really well experienced. Mr. Balyasny is essentially Nadal at the French. It is a pleasure to keep coming back to different parts of the interview. DLS
  • JC
    John C.
    11 October 2020 @ 22:49
    Too weedy in hedge fund minutia for me... and guest was very tight lipped on how he thinks market is going to behave going forward...
  • VS
    Vasil S.
    11 October 2020 @ 01:02
    A masterclass in revealing enough but not too much. I felt Raoul didn't press him too much, perhaps that was part of the agreement in coming on, but a thoroughly enjoyable discussion nevertheless. Key takeaways; like in any industry, you always have to reign in your type A personalities, tough to find those who can operate at a granular AND big picture level and even tougher to find people who can do all of the above AND lead. Surprised by the 26% down votes, though that speaks more to the current RV audience than to the quality of the discussion.
  • KS
    Karl S.
    10 October 2020 @ 19:54
    This is an important discussion for non-investment professionals to hear; because, this is how active management works these days. Baly is one of a handful of shops that employ most of the experienced, educated, market participants on wall street. Risk limits are tight and ideas are harvested quickly. And most importantly the guiding factors are not always fundamentals in the traditional sense, instead vol, crowding, sentiment, etc drive process. Reading Buffett is important for your personal wealth but it isn't what 90% of trained professionals use to guide their allocation of capital. This drives markets.
  • RX
    Robert X.
    10 October 2020 @ 15:23
    Pay attention kids - this is how the real bastion of active money in the equities market is run.
  • KS
    Kamil S.
    9 October 2020 @ 13:28
    Excellent interview. One that I will be revisiting
  • BB
    Broderick B.
    8 October 2020 @ 15:53
    Great interview! I thought his points about focusing on timing and trade size, and also his thoughts on running .2-.3 correlations between strategies were my biggest takeaways
  • JB
    Jim B.
    7 October 2020 @ 18:06
    Dmitry has a sharp mind and high integrity. Great interview!
  • SH
    Silvio H.
    6 October 2020 @ 00:46
    Why you didn't ask him about the debt that is growing exponential at all levels , MMT and fiscal avalanche what will come regardless who is coming in power ? This is the main fuel that is driving the SP 500 , commodities and precious metals to moon? What about devaluation of the US dollars , when will go 50 % down, again ?
  • KO
    Khaled O.
    5 October 2020 @ 11:44
    Question connected to chapter looking forward: What about the bio-tech companies? I missed some comments on these companies that are on the path to developing treatments. Example Prevail Therapeutics that received a rare "fast-track" from FDA. Are they going to melt-up and crushing? What are your thoughts?
  • EG
    Eduardo G.
    5 October 2020 @ 10:46
    This interview sits now at the top together with Stan Druckenmiller's. THANK YOU
  • NS
    Nathan S.
    5 October 2020 @ 09:38
    STFU you’re scaring Raoul Pal!!
  • MD
    Matt D.
    5 October 2020 @ 06:49
    Thanks Raoul and Dmitry. Great interview. The most important thing for a successful trading - psychology. Funny, the greats all say that!
  • JA
    Joseph A.
    2 October 2020 @ 19:51
    An instant classic. Needs to go right at the top of the portfolio management and construction videos on RV. Watching this I’m also giving myself a quiet pat on the back. About 6 months ago after all I have learned about trading over the years (even before joining RV), fundamental and technical, top down / bottom up, long / short equity and macro, medium term and long term time horizons as a preference with the occasional short term if volatility warrants it, trying to identify overly correlated trades, risk management discipline being essential both offensively and defensively speaking, I came to the exact same conclusion as Dmitry intuitively myself for portfolio construction at least. That a long short equity portfolio plus a macro layer was a good way to think about creating a balanced and manageable portfolio as a retail investor but I was also left with the volatility conundrum and then thanks to Real Vision I got more focused on long vol especially in relation to a long term wealth accumulation and protection strategy when I saw Christopher Cole of Artemis Capital talk about his balanced dragon portfolio and the 21% allocation to a long vol strategy. There remains a couple of questions in my head and Raoul I hope you can help guide me and others / think it forward on this after what you also picked up yourself from this interview. Firstly, (and I asked this before and wanted to ask it in your last AMA) now that it’s clear to many that a 60/40 portfolio is dead and given that I am most definitely moving towards something akin to Chris Cole’s allocation especially the long vol aspect and Dmitry’s strategy of long short combined with macro, can you propose some ideas and suggestions for how a retail trader should structure long vol into their portfolio long term in a way that the cost of that insurance premium doesn’t hurt the P&L too much and also can you encourage the RV membership in a future AMA perhaps that it is possible to construct a portfolio that mimick these ideas, still produces some alpha without needing a team of traders to make it work and that could be run by an individual or family? At the end of the day that’s what the average retail trader needs to empower their financial independence. I don’t think they need to be so sophisticated in operation such as what Dmitry describes but I do think there is a way for retail traders to get returns with a watered down version of what I describe above and what Dmitry does. Once again it does seem that longer term time horizons win the day and the one edge retail investors have over institutions like Dmitry’s is we don’t need to trade all the time unlike his operation where his clients need to see a monthly P&L which forces him to construct a higher frequency side to his trading operation which although it has high sharpe ratio it’s also short vol by design so then he uses macro and other strategies to help improve returns long term and reduce P&L volatility by introducing a long vol aspect (to compensate for the short vol but high sharpe ratio higher frequency long short equity trading part of his business). The more RV presents these kinds of videos the higher my conviction that this kind of portfolio construction is the optimal for retail traders to explore constructing just on a smaller, less ambitious scale and while they should not expect the same kind of alpha I think they should take some confidence from this that it is possible to make respectably consistent returns over time.
    • PP
      Patrick P.
      3 October 2020 @ 02:51
      Joe.... Paragraphs make a lot of sense when you want someone to read your comments... A paragraph is a series of sentences that are organized and coherent, and are all related to a single topic. Almost every piece of writing you do that is longer than a few sentences should be organized into paragraphs. ... Paragraphs can contain many different kinds of information.
    • CB
      Clifford B.
      3 October 2020 @ 07:51
      @Joseph A. Agreed to a certain extent. Would be interesting how this could be structured for a retail trader (Dragon Portfolio or similar). However I am not sold on this being needed. I do believe that many funds are releasing overly complex strategies so that they maintain relevance against the ever popular index fund.
    • SN
      Stefan N.
      3 October 2020 @ 08:39
      I joined the pro level thinking there would be more “direction and guidance” regarding the areas you bring up. I have raised this and I hope to see more of this on the program. I love all the information but hope to have Raoul share more from his experience how to construct portfolios for us retailers. At the moment he has shared a portfolio of 20% gold, 20 % crypto and remaining in gold miners equities and now recently short highly leveraged US zombie corporations.
    • JA
      Joseph A.
      3 October 2020 @ 09:19
      Hi Clifford, It’s the principles and insights they give that I am sold on not necessarily the exact construct however I think the holy grail portfolio for a retail trader might lie somewhere along the lines of or a combination of long short plus macro and Dragon style portfolio for an active trader with a passive income stream so they trade for absolute returns not for income.
    • JA
      Joseph A.
      3 October 2020 @ 09:39
      Patrick I know what a paragraph is. Sorry that it bothers you so much that I haven’t laid out my sentences to your satisfaction.
    • JA
      Joseph A.
      3 October 2020 @ 10:46
      Hi Jan, I’m quite certain RV are careful not to propose anything that might constitute giving financial advice and seeing as financial advisors tend to look at client portfolios in terms of percentage slices of a pie, then maybe that’s why they have tended (at least to date) not to make anything more than an observation about different portfolio constructs to prompt subscribers into thinking about it without appearing to give direct advice. I think that this area of knowledge is something even Raoul and other experts grapple with themselves. Everyone is looking for an ideal and consistent way to trade, even the experts who have been doing it for many years. I agree though that it would be beneficial to all if RV talked about this more. We could argue until the cows come home about what’s the best way to trade and what’s the best portfolio construct but at the end of the day a lot has to do with your personality, trading style, trading time horizon, psychology, attitude to risk and whether you’re looking for income, absolute returns, growing and protecting generational wealth etc. Everyone’s different there is no one best way but when I put together titbits of info from different interviews combined with what I have learned about trading, the puzzle has become clearer to me over the years as per my comments. I remember watching Grant Williams’ interviews with Anthony Deden, an investor who stays away from trading the stock market and focuses on protecting long term wealth not by trading markets but by investing in long established well run private family businesses with a very long term investment horizon. There’s no reason why the average person on the street could not choose to invest like that and create their own portfolio of investment in businesses with the same framework if they were willing to do the work to investigate each company of interest in depth instead of trading the markets. Same goes for trading frameworks. I think there are several different ones that work for different time horizons and styles but I also think there are lessons to be learned and warnings that a lot of methodologies come and go. Some work for a while then no longer work. As markets evolve so must traders adapt or know when to stop trading (example Bob Treue) when market opportunities no longer exist to make their methodology viable. Bob for example made it clear that he only trades when he identifies there are opportunities that fit his framework. When they don’t he ceases operations and closes his fund. He doesn’t try to find a new methodology to keep himself in the markets at all times. He has a system and knows when it is likely to work and when it isn’t. He stays out when the trading environment is not optimal for him. This is one of several examples I’ve noted over the years that I think offer profound wisdom to retail traders. Hence my comment about retail traders having the advantage over institutional traders in that area. I think, as Raoul has also suggested, retail traders first need a passive income from some other source and then find a framework and time horizon that suits them and then trade aiming for absolute returns. Trading for income by its very nature hurts returns in the long run and psychologically probably also results in over trading and trying to meet monthly/quarterly/annual targets instead of trading more optimally when you should rather than because of a feeling that you need to or have to trade because the returns need to pay the bills.
    • JA
      Joseph A.
      3 October 2020 @ 11:09
      Clifford, furthermore most funds are at the cutting edge of seeking consistent alpha to attract the most money to their system and they do so using vast resources inaccessible to retail traders, so I don't blame them. The quest for the best alpha in the business fuels this drives for seeking excellence in trading performance. I think it's commendable. They are simply trying to be the best at what they do. Question for retail traders is what can we learn from that and what are the warnings we need to be aware of? I am just saying that given retail traders clearly can't compete with those resources, they have to find an edge a different way. I think it is doable just have to have more modest expectations than trying to match the alpha of the best in the business and I think taking clues from all the things I have learned from RV and before RV, that a repeating pattern of what tends to work and what doesn't has emerged and that was where I was going with my original comment. The role of psychology cannot be over emphasised. Knowing when to pause and not overtrade is a classic stumbling block. Something you hear time and time again is it's hardest to stop trading right after you have locked in a run of good returns because the tendency is hubris takes over and you keep trading without taking a step back and thinking whether it is appropriate to keep trading.
    • VR
      Vidal R.
      3 October 2020 @ 16:01
      I agree Joseph A. Would welcome an educational session to better understand example of long vol, short vol, commodity trend, etc.. Love the content overall, very educational and have recommended it highly.
    • FL
      Fabrizio L.
      4 October 2020 @ 09:00
      To me this was a capital intro event, in which Balyasny pitched what he does, without sharing any interesting macro views. He gave nothing to the community. Of course I managed portfolios of hedge funds for a living, and herd hundreds of these pitches, and way better ones, so I appreciate that this may sound interesting to people that never had this kind of exposure. Hope that at least he paid to get the opportunity to pitch to our comunity.
    • MD
      Matt D.
      5 October 2020 @ 06:47
      Nice paragraphing sub Stefan.
  • NA
    Nicolas A.
    5 October 2020 @ 05:44
    A guest and interview of the highest caliber, many thanks and well done.
  • AS
    Arman S.
    4 October 2020 @ 19:19
    Please guys, bring back the quality you used to provide. Stop expanding too fast at the cost of quality.
    • RP
      Raoul P. | Founder
      4 October 2020 @ 21:51
      What specifically did you not enjoy about this interview? It was essentially a Masterclass of old but interested to hear?
    • CL
      Chetan L.
      4 October 2020 @ 23:37
      Couldn't agree more Raoul - it was an absolutely splendid interview! :)
  • DF
    Daniel F.
    4 October 2020 @ 14:45
    I love RV and will probably continue to subscribe for years to come. The beauty is that in each and every interview you can take something if not more than a few things with you to enhance your perspective and approach to the markets. However with this interview I just didn’t receive any value. It is interesting how he got started and reminds me of the many Craigslist ads where they pitch learning to trade and using the “Firms” money but all other perspectives that were shared could be commonly seen on “The Cartoon Network” as the brilliant Marc Cahodes coins the channel. I left this interview totally unconvinced that Dimitry trades anymore. I also found it a bit odd that they have thousands of micro trades but yet spend enormous time on themes and portfolio construction.. I believe they must have specialists in certain areas but I bet it’s less in terms of analysis and more just about trading specific stocks.. I don’t know.. I’m just unconvinced with this firm.. but maybe that was deliberate! Thank you nonetheless!
  • IJ
    Ian J.
    4 October 2020 @ 02:30
    that was low key awesome
    • Jb
      Joe b.
      4 October 2020 @ 13:08
      Almost as low key as Raoul’s V neck shirt.
  • IJ
    Ian J.
    4 October 2020 @ 02:30
    that was low key awesome
  • DS
    David S.
    2 October 2020 @ 21:33
    Great conversation. One of the calmest hedge fund managers we have seen. There is a third leg to the COVID stool. Therapeutics and vaccines were rightly mentioned here as two legs of the stool. The third leg is rapid testing. I am much more likely to get on a plane if everyone has had a COVID test shortly before takeoff. It greatly reduces the risk. I am also much more likely to accept travelers from some other place onto my island if they were tested before getting on the plane. A stool with three legs is stable as three points define a plane. DLS
    • PB
      PHILLIP B.
      3 October 2020 @ 20:28
      Yes. I have no intention of getting on an airplane until June 2021. And, this depends on the legs of the stool and other factors. Forget it in the meantime. I've been avoiding crowds. Really, only getting out to buy booze.
    • DS
      David S.
      4 October 2020 @ 01:46
      PHILLIP B. - I live mostly like you except for a little outdoor microbrew when we are not locked down. DLS
  • RP
    Raoul P. | Founder
    2 October 2020 @ 13:51
    Getting Dmitry was a very big deal indeed... so much to learn from his journey, how things are changing and the odds are stacked against many, how to think about constructing portfolios, layering on trading strategies, etc
    • JA
      Joseph A.
      3 October 2020 @ 11:21
      There is so much for us all to learn from this interview as there was from the Bob Treue one. I could sense even you were thinking hard about why Dmitry trades the way he does. None of us will know whether our strategies will work in the very long run (life term and generational) until we have lived out the long run. Protecting against that unknown is the main reason why defense and psychology are so important in trading. We all need TIME to stay in the game to find out and protecting capital is paramount to achieve that luxury of time while also letting things like compounding of returns work their magic.
    • JR
      Jake R.
      4 October 2020 @ 01:36
      Very much appreciated the video as a final year finance student. Great to see the greats sharing their stories and highlighting their journeys adds a bit more motivation to smash out the rest of the year! Thanks Raoul and Dimitry from Australia!
  • SS
    Stephen S.
    3 October 2020 @ 16:53
    Can someone explain why relative value strategies are inherently short vol? Not sure why that would have to be the case...
    • IM
      Indranath M.
      3 October 2020 @ 21:19
      As I understand relative value strategies, say for example pairs trading , the whole idea is to make money agnostic of market direction, in order to do that, you take offsetting long and short positions and bet on spread reducing. In effect, you are short volatility. If instead of converging the pairs start to diverge aka become volatile, that’s bad for the strategy....
  • LB
    Lorenzo B.
    3 October 2020 @ 19:18
    build a stream of consisten P&L by managing a market-making-like trading activity (not in the sense that you've got a mandate to provide any liquidity, but rather in the style of performing trades, holding positions, managing risks, dealing with time horizons and so on) in order to allocate a part of it to few potential yield-amplifying bets (convexity-like tickets for istance) and that is basically all uncorrelated to market trends. I love it. I wanna buy in!
  • MM
    Michael M.
    3 October 2020 @ 16:23
    Roaul - "your story's starts as an inspiration for a trader but end up crushing their dreams because the industry is so sophisticated now" so spot on!!! hahaha
    • MM
      Michael M.
      3 October 2020 @ 16:23
  • CS
    Christopher S.
    3 October 2020 @ 12:54
    What is the name of the investor/trader mentioned by Raoul at 43:30 who has "astonishing volatility and astonishing returns"? Nick _____? Would like to look that guy up.
    • AW
      Alexander W.
      3 October 2020 @ 13:25
      Nicholas Roditi
  • JP
    John P.
    2 October 2020 @ 20:10
    I wish to be respectful here, but I have a problem with how he constantly refers to sharpe ratio and how they manage the portfolios to Sharpe. I think the sharpe ratio is a very flawed metric because of the fact that it equates risk to volatility, which are are in no way the same thing. There are many investments that have fundamentally lower risk and higher volatility and other that have higher risk and lower volatility (for a time anyways). Hedge Fund managers managing for high sharpe ratio or smooth returns is a portion of what led us to 'Volmageddon' as they became attracted to strategies that smooth their returns, but are implicitly short vol. For example, I have seen funds that run risk arb portfolios with short equity or index volatility layered on top. This search for sharpe has arguably led to a major mis-allocation of capital in the space, and actually ironically added risk to a lot of portfolios and assets of those who thought they were seeking lower risk returns. He says the right things here about being long vol, but it is not wholly consistent with the other comments.
    • JA
      Joseph A.
      2 October 2020 @ 20:51
      Hi John, the way I understood Dimitry's thoughts on Sharpe I don't think were inconsistent because of what he said at the 57 minute point when talking about traders he has that might have a 7 Sharpe but don't make a lot of money partly because they don't take enough risk on position sizing vs the trader with more hubris and aggressive risk taking style, so what I think he's saying is just that he wanted that more defensive/less risk taking trader with a high Sharpe, to lower their Sharpe, make more dollars and deal with the psychological effect of increasing the volatility swings due to taking more risk.
    • RP
      Raoul P. | Founder
      2 October 2020 @ 20:53
      Agreed. I dont like Sharpe but it seems the Dmitry also factors that in by insisting that the core overall portfolio didnt have short vol as its core structure overall, using macro overlay too. Im more concerned about the focus on lower vol returns because that is what the pension fund investor demand (they want bond vol with a Sharpe of 1.5). It forces anyone out of the industry who cant have massively diverse and sophisticated strategies like BAM, Millennium and Graham.
    • JP
      John P.
      2 October 2020 @ 21:10
      Raoul, agree on citique of sharpe in the industry overall. That was my broader point and how I believe it ironically leads to higher structural risk and a mis-allocation of capital.
    • RP
      Raoul P. | Founder
      2 October 2020 @ 21:17
      The blame there lies with tithe pension funds. One of the key reasons I decided to leave the industry as have most of the greats like Louis, Alan H, Roditi, etc.
    • JA
      Joseph A.
      3 October 2020 @ 10:41
      Raoul I think he also said that he had specific long vol as well. It was a bit of a passing comment but I think it was in there plus macro overlay. So yeah I think although he mentions Sharpe quite a lot it is clear to me he doesn't rely on it totally. It's just one of several metrics he's using to analyse performance. He uses the info from it when he needs it and when other metrics are more important to refine and guide improved P&L performance he knows when to ignore or place less emphasis on the Sharpe.
  • CG
    Chris G.
    3 October 2020 @ 09:54
    I put this at 1.25 speed and as a Bostonian it sounds completely normal.
  • MS
    Martin S.
    2 October 2020 @ 21:30
    Brilliant interview.
  • TS
    Theodoros S.
    2 October 2020 @ 20:08
    Nice man. Humility is a virtue. Now in terms of returns I really can not believe how hedging and constant position taking (trading) produces good results. Maybe it is because we the retail investors we have only one path to follow that of the Value investor and not the one hedge funds use.
  • JL
    Jason L.
    2 October 2020 @ 19:29
    Great insight! Thank you RV for such a worthwhile interview. We have come to expect nothing less. Keep up the great content!
  • SP
    Simon P.
    2 October 2020 @ 18:05
  • SK
    Stephen K.
    2 October 2020 @ 17:55
    Overall a very good interview. Thank you Raol and Dmitry. I am in the investment business and found it interesting and admirable how he built such a successful enterprise. That said, I was most interested in hearing his current market views and positioning which he touched on with about 10 minutes left. So, overall pleased with a touch of disappointment!!
  • MW
    Matthew W.
    2 October 2020 @ 15:35
    Maybe it would have made sense to publish this interview at the Pro tier? I'm never likely to need to know how to manage a hedge fund.
    • GS
      George S.
      2 October 2020 @ 16:25
      I respectfully disagree. Understanding what different frameworks are used in markets (from top hedge funds to retail traders) allows you to understand where you fit in and what your edge might be. Also gives you a perspective of how different participants think, which is useful. I also found this interview very insightful from a business management point of view and how to think about building a team and a business for the long term. Lots in there about psychology too. As well as the What (idea generation), When (timing) and How Much (sizing) and the intersection between them.
  • NR
    Nathan R.
    2 October 2020 @ 13:55
    This is a huge win for RV subscribers. Balyasny is a very solid shop and good operator. Kudos to all involved...and thanks.
  • NF
    Neal F.
    2 October 2020 @ 13:12
    Not sure young professionals will get much from this interview but if you run a fund or RIA it is solid gold. Humble, understated insight into one if the true grown up institutional multi-strat managers in the world. Loved the interview.
  • TJ
    Terry J.
    2 October 2020 @ 12:50
    Fascinating insight into the hedge fund world and how it's changed in the last decade or so. Giving RV members the opportunity to sit in and watch and listen (and learn) to more than an hour of discourse between successful investors and traders like Raoul and Dmitry has from outset defined the unique appeal of Real Vision for me. Long may it continue.
  • Nv
    Nick v.
    2 October 2020 @ 12:49
    I doubt the markets have dealt with this type of election before Greatest division (Pew) + psychopath-in-chief + mail-in ballots + voting fraud, expectations prepping = not the same