The World According to Boyar brings top investors, best selling authors, and market newsmakers to show you the smartest ways to uncover value in the stock market.
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Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?
In Episode 3, we interview Steve Einhorn, the Vice Chairman of Omega Advisors.
Transcript:
[00:09] Our guest today is Steve Einhorn, vice chairman of Omega Advisors, one of Wall Street’s most successful and best-known hedge funds. Steve joined Omega in 1999. Prior to Omega, Steve had worked at Goldman Sachs since 1977 and eventually became a partner. He led the Global Investment Research Department and was chairman of the Investment Policy Committee.
Steve, welcome to the show. Thank you Jon. So Omega is obviously very well known in the investment community, but can you just briefly discuss the general strategy and how it’s evolved over time?
[01:01] Sure. Omega is principally a long short equity hedge fund. The bulk of the equity assets are in the US, though we do have exposure at times it can be significant, but typically average exposure in developed economy markets in the euro area and Japan. But again, as I said, it is principally in the equity area, a US focused portfolio. Omega is a firm that would prefer, as an example to generate a 15 percent or so lumpy return than a eight to 10 percent non lumpy straight line return. That is we are willing to take equity like risks for equity like returns and will undertake a bit more volatility in pursuit of those equity like returns. Our interest is in exceeding returns on the S&P500 by several hundred basis points which we have done since inception with lower than market volatility and then finally a hallmark of Omega since inception and to this day is that the general partners have a large share of the assets under management, so our interests are perfectly aligned with those of our investment partners.
[02:30] One of the things that really intrigues me about Omega is that you are fundamental investors, but you clearly, I mean your background’s in economics, spend a lot of time on the macro and there’s someone fundamentally opposed, you know, being a bottoms up investors and taking a top down approach. How do you marry the two?
[02:52] That’s a terrific question because it is unusual in the hedge fund community to have an organization that devotes its resources and intellect to both top down macro exercise and a bottoms up stock picking exercise and the blend for us has worked well. The macro work that we do on economies in the US and in developed economies and the work that we do on equity markets and risk markets in the US and in economies outside of the US, sets an investment landscape for us. It allows us to have a view, for example, of where the aggregate equity market should trade in a given year or so and that that view will depend as you would expect, on our assessment of economic activity in the US and outside of the US. Our assessment of earnings growth, our assessment of monetary and fiscal policies, our assessment of valuation, supply and demand for the equities within the US and those building blocks.and complete a brief survey that’s
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