Hedge Fund Intelligence Sir Michael Hintze interview | 页面 2

interview

Q

 CQS has proven to be an outstanding success in the world
of hedge fund investing. But what inspired you to leave
previously successful careers with investment banks, such
as Goldman Sachs and Credit Suisse First Boston, to launch
your own firm – never a risk-free venture?

Michael Hintze Firstly, I wanted to do my own thing. I was also
drawn by the challenge and the desire to make a difference. But as
they say: be careful what you wish for. The point is that when you
start a firm, you give up one set of responsibilities, but then you pick
up an enormous number of other obligations – to investors and
employees – and you take on the responsibility for all the operational
aspects that you wouldn’t have done otherwise.
I was fortunate to also have been supported by Brady Dougan at
Credit Suisse in that journey to launch my own firm. He gave me
$200 million from the equity division’s balance sheet, which of
course was my start-up capital – along with money from family and
friends. Over the next five-year period, I gave them back $500 million
– so everyone was happy.

Q

  hat was your vision when you established the firm in 1999
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and how has that vision evolved compared to CQS today?

MH The vision was that we wanted to pursue excellence in terms of
money management. That is still true today. However, it has evolved
and we also aspire to build a sustainable, first-class asset management
firm centred on absolute returns.
I must admit that you never know all that you need to know
when you start the journey. I think I was pretty fortunate because if
I look back to the engineering, maths and science studies which I
pursued, that gave me the analytical skills to do this. Then the next
important influence was my army career, which gave me the ability
to manage processes and people, and to be respectful up and down
the line of command.
The Harvard Business School provided me with the credibility to
enter the investment banking business. But what it really gave me was
the knowledge of how to run a business.
I derived my real investing acumen from the superb training programme at Salomon Brothers, which covered the bond market and
other investment areas, and it also dealt with operations.

Q

  ou started out dealing in Yankee bonds?
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MH Yes. I then went into convertibles, which was also a valuable
experience, working out how to do the arbitrage and the volatility
trading. Then I ran UK domestic equities at Goldman and thereafter
back to derivatives at Credit Suisse. So by the time I started CQS,
I was pretty much thinking in an integrated way about credit and
equity across corporate balance sheets and capital structures.

Q

  o you feel the way CQS has evolved has turned out to be a big
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surprise compared to what you had been imagining in 2000?

MH One of the ways in which we have evolved is adapting directly
to client needs and market developments. We launched in March
2000 with a convertible arbitrage fund. Since then, we have added

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adjacent strategies such as credit, ABS and equities, and these are
available in commingled funds and as bespoke solutions. We can do
this in traditional Cayman structures, UCITS or QIFs [Qualifying
Investor Funds]. Today, our flagship is the CQS Directional
Opportunities Fund, a high-conviction multi-strategy hedge fund.
We also have an ABS strategy, a credit long/short fund and a longonly credit multi-asset offering, among others. I strongly believe that
this interconnectivity makes us smarter and better able to deliver
performance for clients. We have to adapt to what our investors want
and how they want it. If I look at where we are now, we’re much more
focused on trying to work with clients to help them with solutions.

Q

  urning to the company structure, can you elaborate on how
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the firm’s management and portfolio managem ent structure
functions in terms of making business and investment/
risk decisions within CQS? For example, your portfolio
management and research teams apparently sit together.

MH The portfolio management and research teams do sit together.
One of the biggest issues with the alpha generation is how to manage
knowledge. You start with having noise, or unstructured data. If
you’re not careful, it’s a fire hose coming at you. You then start doing
some work on the data and that becomes information. But the reality
is that to go from information to knowledge, you need to do analysis.
The next challenge is how you go from knowledge to insight, because insight comes from placing that knowledge in the right context.
It is the insight that is at the heart of the alpha-generation process.
You then have the insight, but this is not enough; you also need to
execute it to make money. So with insight you need to have the timing
and the sizing of the position right. And then you need to risk-manage it. That is what we are trying to do across the firm.
Our model is based on a collegial approach. If you look at some
other very successful firms, what they have done is set up a number of
different groups of people who are specifically operating by themselves; it’s a portfolio approach. That model also works.

Q

 Sort of a silo system?


MH Yes. Some have very successful models – Millennium is an example.
Ours works the other way around. We share information and insight
across the firm. That’s why we have analysts close to the traders; that’s
why we have the equity guys talking to the credit guys and the derivative
guys. It’s something we do here automatically because the debt and
equity people sit next door to one another. When we do analysis, we
do analysis on both. That allows us to take a balance-sheet approach.
On top of that, we have a strong understanding of the capital structure
which enables us to hopefully extract more value over time.

Q

  ou have mentioned that your investment process also
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includes mixing quantitative and qualitative models,
fundamental research and strategy-specific leverage.

MH Yes, very much so. We use quantitative filters, analysis and,
importantly, judgement. Models are a great place to begin, but a
terrible place to end. What we try to do is to think holistically about
a company. Not just about the actual company itself, but also the

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