Ask hedge fund manager Dmitry Balyasny what keeps him up at night, and the answer isn’t a long list of worries about fund concentration, market contagion, monetary policy, or geopolitics. It’s one word: People.
“People issues tend to be a lot more difficult and time-consuming to solve than market issues,” he says. “Market issues? You could just exit a position.”
That focus on “people issues” has made Balyasny the rare hedge fund leader who has the ability to merge his trading acumen as a former day trader with the people skills that have made him one of the most effective and popular leaders in an industry known for ruthlessness.
Given the surge of interest in multistrategy funds in recent years, Balyasny Asset Management, the $27 billion multistrat firm that the 53-year-old co-founded, has become a brand name in hedge fund circles. It’s also punching above its weight. Launched in 2001, BAM, as it is called, is going toe-to-toe with bigger and older firms such as Israel Englander’s $72 billion Millennium, Ken Griffin’s $65 billion Citadel, and Steve Cohen’s $37 billion Point72.
The secret sauce?
“Dmitry leads first and foremost through positive reinforcement, which means that the firm’s culture is really characterized by encouragement and support, not fear,” says chief risk officer and partner Alex Lurye, who previously spent 16 years at Citadel. Lurye isn’t the only top BAM executive who also worked for a competitor. In the talent wars among multistrategy hedge funds, Balyasny has drawn a number of stars away from his rivals. Five of the eight members of BAM’s current investment committee previously worked at Millennium, Citadel, or Point72.
“It’s a far more familial culture he is trying to build,” says David Holmgren, who is the former CIO of Hartford Healthcare and was a longtime investor in BAM’s hedge fund. “You go into Dmitry’s office, and it’s like they’ve got a person there to do yoga lessons. There’s a recommended book. You pick up books on the front desk while you’re waiting. Everybody’s out to earn return, but he definitely takes a little bit of a calmer path to get there.”
For his part, the hedge fund manager says his style is part philosophical and part competitive calculation. “We’ve always just tried to treat people in the way that we would want to be treated,” Balyasny says in a Zoom interview from his office in Jackson Hole, Wyoming, where he now lives. The hedge fund executive splits his time between there and New York, where BAM has its largest office, along with visits to its 16 other offices around the world, including Chicago, its original home.
“When we started out, we had a very small amount of capital,” he says, noting that his top-three competitors were ten years older and each running $1 billion or more. “Having a culture where I would say it was a bit more supportive, a bit more team-oriented, more collaborative, more of a partnership type of environment, was very helpful in attracting and retaining talent. We certainly couldn’t give people more capital or pay them more.”
And now, he says, “we regularly win recruiting situations with less money,” particularly in terms of the up-front pay and guarantees. “I think culture is a big part of that, and the runway, the opportunity to really build a business together where incoming people feel like they have an opportunity to really build something jointly and eventually be a partner here.” And unlike some other hedge fund owners, he means partner in the literal sense: Nineteen partners own equity in BAM today.
Balyasny’s path to the top tier of the hedge fund world had an unlikely beginning. Arriving in Chicago from the USSR at the age of seven, Balyasny could not speak English (nor could his parents), and he had no idea what to expect in America. The young immigrant was mesmerized by grocery stores that in his memory were “half a block long, with everything that you wanted to buy and things you didn’t know existed.”
He soon decided to try his hand at becoming a capitalist, but it was a rough start. Beginning at age 12, every Saturday morning Balyasny and a friend would go door-to-door selling household products. “You get the door slammed in your face 50 times a day,” he recalls. But for the young Balyasny, failure simply wasn’t an option. His parents had been professionals in Kiev, Ukraine — an engineer and a professor — and had sold all their belongings to come to the U.S., where they were forced into low-paying menial jobs.
Balyasny was undeterred. “I was confident that if I really love something and I stuck with it that eventually I’d figure it out,” he says. His love turned out to be the markets. A stock-picking contest sponsored by his junior high school economics class piqued his interest. To his surprise, he won the contest by randomly picking a penny stock that doubled in price — despite being in bankruptcy. (“It wasn’t a good investment,” he admits, somewhat sheepishly.)
By the time Balyasny was in high school, he was devouring books and articles about Fortune 500 executives. Although he didn’t have a number in mind in terms of how much wealth he wanted to accumulate, he says, “I certainly wanted to be successful and make money, and I always wanted to build a business.” He now attributes his accomplishments to a combination of “learning, perseverance, and resilience” honed by his “immigrant saga,” as well as his hard-luck experiences as a young salesman.
While studying finance at Loyola University in Chicago, Balyasny started advising clients and managing a team of a half-dozen people, making money on commissions. “But I was losing it trading for myself because I didn’t have any idea what I was doing trading-wise. And in fact, I wound up losing more than I was making and went broke at the time,” he recalls.
The young entrepreneur knew he needed some serious training. Fortunately, Schonfeld Securities, then an upstart trading firm based in New York City, was hiring for a Chicago office. “I applied for every proprietary trading and hedge fund job I could find. There weren’t that many in Chicago, but I got lucky.” He answered a newspaper advertisement for Schonfeld, which he says was “looking for people who didn’t have a ton of trading experience but had a passion for the markets.”
Schonfeld wanted to teach new hires its own trading methods, which was perfect for the aspiring financier. “You got a very small amount of capital, a very small amount of risk that you could run, a limited number of things you could trade, limited time you could hold the positions for. It was a very tight, small box,” he explains. “And then once you showed proficiency within that box, you could slowly layer on additional risk.”
The downside? Balyasny had no salary and no draw. “You just got lunch and a little bit of capital,” he says. “It took about a year before I started making any money there. And then after that, I started making money pretty consistently.” In fact, he became the firm’s top trader before hiring a team that became the nucleus of his own multimanager hedge fund firm, launched in 2001 with $40 million. Half of the money was his, and the rest came from Steve Schonfeld, his boss and founder of the eponymous firm.
The hedge fund venture was inspired, in part, by Balyasny’s stint as the fund of funds analyst at Schonfeld, which had invested in about 50 different hedge funds. He says he noted that the “multi-PM businesses [that] did a good job at managing people and managing risk tended to pass the test of time. That part of the portfolio didn’t turn over that much.” Schonfeld was invested in a number of funds that BAM competes with today. Among them were Millennium and Citadel, back when they were small shops running only hundreds of millions of dollars. Of the single managers in the group, Balyasny says, “the vast majority have come and gone.”
While Balyasny was scoping out hedge funds, across town Scott Schroeder was telling his best friend from law school that he was tired of working on M&A transactions at a law firm. The friend, who was at Schonfeld, suggested Schroeder meet his boss, who was looking to launch a hedge fund. Says Schroeder, “The truth is I really had no idea what a hedge fund was like, zero idea. But I was very intrigued by Dmitry personally. He was very forward-thinking and had a great presence.”
Although Balyasny was a day trader, “he was very clear that day trading had a role in the markets at this time and place, but his vision was much larger,” Schroeder explains. “He had a clear vision of building a multistrategy fund at a time when few existed.” Balyasny laid out his plan, and within the first hour, “I was comparing him to Fortune 500 CEOs that I was doing M&A work with,” Schroeder says. Another selling point: “He listened. You can tell that he’s listening and taking in a lot of information. He has an ability to assimilate massive amounts of information and discern those parts that are truly important. That sets him apart from others on Wall Street I have met or worked with.”
And so, at the age of 29, Balyasny, along with Schroeder and Taylor O’Malley (who would serve as president), went on to launch BAM. They named the flagship hedge fund Atlas Enhanced, after the famous book Atlas Shrugged by Ayn Rand, the Russian-born writer whose anticommunist, pro-capitalist philosophy is catnip to many titans of the hedge fund world. Given that he and Rand had both experienced life in the Soviet Union, Balyasny was a particularly enthusiastic fan.
“I read Atlas Shrugged and then the rest of her books in college, and I really related to them,” he says. “She did a much more articulate job than I could ever do in really explaining why capitalism is a positive thing — not just economically, but from a moral standpoint, and why living for the things that you want to achieve long-term works not just for that individual, but also for their companies and society at large. So it really meshed with what I felt.”
Balyasny explains that Rand’s outlook is difficult to understand for the many Americans who see the negatives in the capitalist society we live in. They may think that “the grass is greener somewhere else. But the people who stand in line for two hours for a jug of milk — they don’t have any illusions that [communism is] a better system. It just creates this awful environment,” he says. (Balyasny’s most vivid memory of his childhood in Kiev is his mother waiting in exactly that line.)
The collective spirit Balyasny has created at his firm may not fit the stereotype associated with Rand’s brand of laissez-faire capitalism. But by all accounts, the collaboration is real. “I think I’ve always wanted to work at a place and run a type of business where I would want to be a trader,” Balyasny explains.
Lurye says the key to Balyasny’s management style is an emphasis on positive reinforcement. Finance is “a pretty cutthroat environment” that is “based on fear. So that is a huge differentiating point — how to encourage with a carrot instead of a stick,” he says, adding, “There’s really no stigma around getting something wrong from time to time. If you’re pushing yourself, if you are learning, if you’re growing, Dmitry sees learning from mistakes as a natural part of innovation and reinvention. And I think it just drives people harder.”
Some multistrats, with their armies of so-called pods, are known for quickly firing people if they lose more than a certain amount. Balyasny has a different view. “We’ve certainly had situations where a PM hasn’t made money, probably hasn’t lost much, but they haven’t made much for two or three years,” he says.
He takes the environment into account. For example, a directional macro trader hired when rates were at zero and volatility was 2 percent might not make any money for the first 18 months, Balyasny points out. “And you’re wondering what happened to that great track record. Or you could bring that same person in in 2022 when all of a sudden, the rate market really starts to move and they look like a genius their first year.” Alternatively, “maybe the PM is great but his team isn’t doing so well. That’s something we can help with. If they’re open to it, we can help upgrade an analyst or upgrade some other role and see if we can get the team going.”
But his patience is not unlimited. “On the other hand, if after 18 months we look at it and it’s like, well, all these things are a disaster and they’re not taking feedback and they’re really stubborn, we will make a change,” Balyasny says. To that point, the firm cut 20 percent of its staff after a bruising loss in 2018.
Collaboration is an essential element. “We don’t really want folks who are just going to sit in the corner and do their thing. Depending on the strategy, that might be helping on the investment process side, or it might be helping on more thematic and macro views and sharing those. If you’re on the quant side, it’s not sharing your IP, but maybe you can help share some ideas on how to improve infrastructure,” he says. “We want people [who] are constantly trying to make the business better and the people around them better.”
BAM operates with about 170 teams. Some may overlap on trades as more than one team covers certain areas, such as technology. People aren’t expected to share specific trade ideas, but creating a culture where people share their best-practices insights, Balyasny says, has “really sped up the learning curve.”
Lurye is Exhibit A. He joined BAM just as the firm was facing its first annual loss, and Balyasny was open to the risk manager’s ideas on how to improve the firm. “Dmitry deserves enormous credit for recognizing the need to evolve and internalizing the new ideas,” says Lurye. “He was patiently listening, he was asking questions, he was processing.”
The risk manager proposed what he calls “far-reaching” changes to how the firm approaches such matters as risk and portfolio construction. “Not every founder, whether it’s a tech founder or financial founder, is willing to change the course and accept dramatically new ways of thinking,” he says. “Dmitry’s openness to new perspectives and his willingness to let others lead have been very critical to Balyasny’s continuous growth.”
One issue, Lurye notes, was that the firm was actually underrisked relative to its capital base. By diversifying the portfolio, the hedge fund was able to take on more risk.
For years, BAM was seen primarily as a multimanager equity shop. Some 85 percent of its risk capital was tied up in that strategy by the time of its first annual loss, which was largely attributed to rapid growth and an overemphasis on equities. Balyasny says the firm “did a lot of postmortems that year because that was a very frustrating period for us. We had never had a down year. The big takeaway was diversification, and it was at every level of the business.”
Balyasny started building out five strategies. In addition to equities, he says, “we’ve built a significant macro business, a significant commodities business, and now we’re in the process of building a significant arbitrage business where we group all the equity-linked strategies.” (It includes convertibles, merger arbitrage, long-short credit, and other businesses.) The other area Balyasny is focused on is quant and systematic strategies, which he thinks is where most competition will lie in the future. “We’re trying to disintermediate ourselves and use AI as much as possible, use quantitative and systematic resources and strategies because that’s where the world is going,” he says.
If the firm can successfully establish these five strategies, Balyasny says, it can run more leverage “because you have more uncorrelated [profit and loss] streams and you can allocate capital when there are opportunities.”
Since embarking on this plan, BAM’s capital has grown from about $6 billion in 2018 — when the fund lost 7 percent for the year and redemptions followed — to $27 billion today. It now has more than 2,000 employees, compared with 600 at the beginning of 2018. And it has been able to handle that growth without sacrificing long-term returns. Since inception, the flagship Atlas Enhanced fund has annualized at 12 percent. And this year, it has successfully managed the volatile markets under President Trump, rising 8.6 percent through August — and outdoing its main rivals.
The top multistrategy funds — called pod shops for the large number of discrete teams at work — have all had significant success in recent years, proving their mettle during the 2022 stock market rout. That has led to a bumper crop of new competitors and what many have argued is now an overcrowded, overleveraged part of the hedge fund world. Risk manager Lurye says what worries him most is the contagion potential cascading from one party’s derisking. The “proliferation and irrational behavior of some market participants in the industry” is “constantly” on his mind, he adds.
Balyasny appears unperturbed by such challenges. He says any investment strategy that has scale has the potential of being crowded. Leverage adds risk, of course, but Balyasny notes that in periods of great market reversals, like 2022, even the traditional long-short funds without significant leverage had double-digit drawdowns. (Atlas was up 11.2 percent net that year after passing its costs through to investors.) In another example, the fund ended the year virtually flat in 2008.
BAM markets Atlas as a low-beta, low-volatility strategy — which has run between 6 and 7 percent annualized — with liquidity terms that can help keep capital from fleeing during market turbulence. Those terms have tightened in recent years. Depending on the share class, the capital is tied up for between two and three years, with quarterly redemptions.
And during Trump’s tariff-induced market turmoil in March, BAM’s diversification held up. “During that period, you had a big unwind in equities and our equity business got hurt, but then we made money in macro and commodities and systematic. Then the next month was the opposite and the fixed income business got hurt, but equities was doing okay. Commodities and arb were doing okay,” Balyasny explains. “And so when you look at the monthly returns, they were pretty steady.” (The fund’s worst performance this year was in March, when it lost less than 1 percent.)
Although such turmoil is not easy to handle, Balyasny says, “I enjoy volatile periods because I think that’s when you can really add value. And so you might stay up at night because you’re still hyped up and enthused and thinking about markets.”
It is Balyasny’s worrying about “people issues” that has won him praise — from his investors as well as his employees.
“There are a lot of great CIOs and portfolio managers who frankly struggle when it comes to managing an enterprise, managing people and an organization. And so to accomplish that is pretty incredible,” says Clinton Huff, the senior investment officer overseeing hedge fund investments at the Texas Tech University System. The $4 billion system has invested $100 million with BAM, its largest hedge fund allocation.
Balyasny’s personal touch extends to the fund’s investors, the majority of which are now sovereign wealth funds.
Two years ago, after Texas Tech’s endowment won at Institutional Investor’s Hedge Fund Industry Awards, Huff says the team received a personal email from Balyasny congratulating them. He was the only manager out of the 25 hedge funds Texas Tech invests in who reached out. “I’ve been on Wall Street for 15 years, and some folks are transactional to a fault,” Huff says. He also mentions a visit from the firm’s global head of quant research, Gappy Paleologo, who recently spent hours with Texas Tech interns in Austin talking about the industry.
Says Holmgren, “You don’t get that level of mutual respect, mutual transparency” from other large managers. He thinks that hardscrabble background may be one reason why Balyasny is such an unassuming hedge fund manager. “On the personal front, Dmitry is quiet and reflective, making him more humble than his loud-spoken peers,” he says. “But do not let his calm mannerisms fool you. He is tough as nails.”
BAM investors also laud a college scholarship called Atlas Fellows, started five years ago by Balyasny and his wife, Rebecca, a Wall Street veteran whom he met online. (The couple married ten years ago and have two children, ages seven and ten, who have their own stock trading portfolios. Balyasny has four other children from his first marriage. The eldest, a former teacher, just started working at BAM in the internship recruiting and management group.)
The fellowship program, which has helped 130 students so far, includes both internships and merit-based college scholarships of up to $20,000 per year for students interested in finance. Sixty percent of the fellows are the first in their families to attend college.
“There wasn’t a program like this when we started it. And today we have over a hundred kids in this program [who] are getting college scholarships at a variety of schools around the country,” Balyasny says. The students typically do an internship at BAM for the first year, then the team helps place them with other partnering firms for the next three years — hedge funds, banks, venture capital funds, or proprietary trading firms. “We’d love to really dramatically grow that over time.”
Balyasny has time to do that, and much more. “Dmitry is probably one of the youngest founders out there. And so there’s certainly a long road ahead,” Schroeder says.
Notes Balyasny: “We’ve built a very good platform base on which to grow. We have a great investor base now. We have great partners. We have an amazing team of 2,000-plus people. We have a lot of outstanding specialists in a variety of strategies.”
He adds: “I feel like we’re just starting to hit our stride.”
