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00:00We want to make better returns with lower risks. That's kind of the Holy Grail. I really think we do our best work as a team and when when we have multiple portfolio managers working together you need to have the confidence to bet against the herd and the bravery to put it on in good size. What's it like to manage the money of the man who broke the Bank of England. I literally just got off the phone with him and I really kind of cherish those calls and value his input. And working here is is really a privilege. Gordon Fitzpatrick is the chief executive and chief investment officer for Soros Fund Management. The 28 billion dollar family office of billionaire investor and philanthropist George Soros. I love what I do. Every morning I kind of pop out of bed to come and do this. A distance runner at the University of Pennsylvania Fitzpatrick was built for the high stakes competition on Wall Street. I was a distance runner so I'm kind of Forest Gump. I wasn't fast but I could I could write a really long way. Fitzpatrick spent 25 years at UBS where she most recently served as the head of investment sports. Six hundred and forty five billion dollar asset management business. In 2017 she joined Soros. I'm a really competitive person. I love that I get a score scorecard every day. Fitzpatrick has overseen an annualized return of nineteen point two percent and those returns have helped fuel billions of dollars in grant making. This year the foundation will give away about one point eight billion dollars. So we like to make enough money to fund their good work. What is it like to be the chief investment officer and chief executive officer for Soros Fund Management. He is one of the most legendary investors of the 20th century and I guess maybe the 21st century. Does he call you every day and say do this do that or you basically have the ability to make the decisions you want. Well I literally just got off the phone with him. So while George now spends the majority of his time on the foundation's especially with everything that's going on geopolitically he you know he still watches markets and there things that catch his attention and he'll call and share views with me. And I really kind of cherish those calls and value his input. And working here is is really a privilege. It's we run just shy of 30 billion dollars effectively for a single client which is the foundations that George start started the Open Society Foundations which are the largest private funder of human rights causes around the globe. So especially in times like now and with Ukraine they do a tremendous amount of really important work. So it's it's a privilege to work here. You've previously worked for publicly traded companies. Yes. So is it easier to work for a private company or a private family because you don't to worry about the stock market every hour on the hour. Absolutely. I swear I spent 25 years at UBS before joining Soros fund management and they were great. Twenty five years. But they were very definitive constraints. When you're working for a publicly traded company especially a really highly regulated bank. And when I was there I ran the investment side of the asset management business. We had thousands and thousands of clients and and hundreds of different products that I oversaw. So in that capacity there are real constraints in terms of what any given investment mandate is versus here. We really have a very very wide remit. So how does the process work now at Soros Fund Management. You're the CEO and the CIO. So you tell your team this is what we're going to do. And they say yes we're going to do it. Or they come to you with ideas and you say maybe yes maybe no. How does it work. Yeah. So we have a top down asset allocation. So a general idea on where we want to be overall on our overall global equity exposure our fixed income exposure. But then we have over 100 internal investment team members and they all have investment mandates and they'll come to me. So they have degrees of freedom within that mandate. But very often there'll be an idea they like for their mandate. But instead of buying one hundred million they want to buy 500 million. And that's when we have the conversation about whether it should be upsized. And one of the things at SFM we can do is because we can invest across any asset class in almost any geography we can. We can really connect dots and operate in the spaces in between where the typical asset management industry can go. So George Soros is very famous for among other things saying if you get a really good idea pursue it to the extreme. In other words put a lot of money into something. Famously he did that when he helped break the British pound in 1992. I think it was. So does he influence you in that way. If you have a really good idea. If somebody has a good idea you say we're gonna put a lot of money in or you try to be risk averse and not put too much any one thing. When I came here five years ago George had not been involved day to day for a while. An interesting portfolio I inherited was over diversified. And when you have an over diversified portfolio you would like guaranteed media accuracy. So over the past five years we've really tried to streamline the portfolio and definitively one of the things we spend a lot of time on is making sure our best start ideas are right sized. One of the interesting things that when the investment world is a lot of times and I'm sure you see this the best ideas. There is a limit to how much you can actually buy right there not the capacity of them is not is not infinite. So usually that's the constraining factor is is the sheer amount available. So for the large amount you're managing I'd say it's 30 billion or something like that. You'd have to try to get a certain rate of return every year to have a benchmark. So we want to earn 9 percent 10 percent eleven percent a year or whatever. It might be higher than that perhaps. What is your benchmark. You're trying to earn. So the foundation this year the foundation will give away about one point eight billion dollars. So we'd like to make enough money to fund their good work. But I would say when it comes to to like targeting a return it can be a little bit dangerous because your opportunity set is not always. Well and if you target a fixed return you'll take too little risk when the opportunity sends the best and too much when it's the worst. So we've kind of think of a return over a cycle. And when it comes to measuring how we're doing we look at other endowments and foundations. We compare ourselves versus verse you know a simple 60 40 or 70 30 type portfolio where we want to make better returns with lower risk. That's kind of the Holy Grail. Where do you get your ideas. You read the newspapers. You read journals. Friends call you up. Other people in the same business call you. George Soros calls you. Who calls you up or where do you get your ideas. It's all of the above. So. So I read a lot in the morning. I oh skim through two or three different papers during my days. I'm meeting with a lot of smart investors and smart people running companies. You learn a lot from there. I talked to peers but I think part of the trick of this big business is being able to really aggregate and assimilate information. And one of the other tricks of this industry is is trying to find sources of information that are different than the other people who in the business because you don't want to get crowd thinking. I think that happens a lot in this business. Everyone's talking to the same people and a view becomes consensus that might not be really grounded as well as it should be. In fact the DTI issue in this industry is really important to me. And I do feel an obligation to help get that fixed. Women like Soros Fund Management CIO Dawn Fitzpatrick are the exception in finance not the rule. Morningstar has taken an in-depth look at women in the industry and the numbers are startling. The firm found that in 2020 women made up 14 percent of global fund managers. That's largely unchanged from the year 2000. Morningstar also calculated that while the number of women at the top of the corporate ladder has increased it won't be until 2060 that women will reach parity with men in the C suite. Studies have shown that increasing the number of women managers leads to better decision making and moderates overconfidence. European Central Bank President Christine Legarde insist that male domination of the banking industry made the 2008 collapse of Lehman Brothers more likely. As the guard put it if it had been Lehman Sisters rather Lehman Brothers the world might well look a lot different today. You were the first woman to be the head of Soros fund management. Is it a challenge today as much as it was when you first joined the investment world to be a woman. Or it makes no difference anymore. So in my career I've I've really never thought it's either an advantage or disadvantage. I think there have been points in time when it's been one or the other but in aggregate I think it's been fine. But I'd say the investment industry overall has really not done a good job having women in senior roles especially on first order investment roles. So I guess there's a long way to go. Yes. So. So it's interesting. Obviously this is something you know I'm pretty passionate about changing. When you look at entry level jobs in the industry women come in at over 50 percent. But what. And I know there's a lot of focus both on that hiring and then at kind of board level. But I actually think the problem is in the middle. So it's helping women get over kind of that first second and third level of promotions. And I can give you a little a little story about about myself where my career could have gotten derailed early on. So I began my career at O'Connor and Swiss Bank and bought us an over time Swiss bank made a button. Bunch of other acquisitions. I was a proprietary trader but they wanted to build an investment bank sell side capacity. So they took a bunch of us proprietary traders and said right you're going to build a client facing investment bank sell side business. And I was on the convertible desk and it was myself and a bunch of man. When you build a sell side desk you need traders and you need salespeople. ISE the only female trader. They asked me to be the salesperson and to be candid and convertibles. You know there weren't weren't a ton of great personalities. So the bar might not have been that high. But the bottom line is I might have said yes to that. But I've had someone in my career who along the way even to this day every decision I make I just sanity check with him. And he basically said to me he's like you are a natural investor and you're not that charming. Don't become a salesperson. And without that advice I wouldn't be a salesperson. I'd be a separate salesperson. I hope I'd be a good one. And do you think increasingly you're going to see more women in the industry or you think it's really there's a bar and really you're not going to get women in a higher percentage than they are today. If I have my way we're going to see a lot more women in this industry. And again I think it's an industry that women can excel in. Now in recruiting people here presumably a lot of people want to work here. George Soros is very famous. You're very well-known as well. How do you pick people to come here. They have to have a track record go to a good school be ambitious. What is it that you look for. So first of all I want a team that looks very different so that brings that broad perspective. We obviously want people who are first order good investors. But the other thing is I want individuals who are going to come here and make the other people around them smarter. And believe that they will be smarter poor sitting next to the other people on this team. I really think we do our best work as a team and when when we have multiple portfolio managers working together. And again I think it's something that the traditional asset management industry has a hard time solving for. To the degree we can. So when you're hiring are you trying to deal with diversity issues as well. I mean other things like that. Yes. So my head of trading is a woman and she's awesome. And in our intern program we are purposely leaning in to women black and Latin X. And one of the things is we're not just hiring them to come in and give them internship. We're basically committing to fostering their careers for the next decade because again that's what's not happening. The internships are 50 50 across the industry. We're losing those candidates along the way. And we we you know is as senior people in this industry have to commit to not doing that. Right. So George Soros is pretty famous for being I would say on the left side of the political spectrum. Most people would probably say and therefore presume he cares a lot about things like ESG. But if a deal comes along it's a great opportunity to drill an oil somewhere. Would you not do it even though you can make a lot of money or. Because yes she might not be so wonderful. Or is that a factor when you're making decisions. Now we care about that you know and the foundation for whom we manage money and George care about that. So we actually just put our climate strategy out on our website for the public to see. And we think it's really important that we do that. Our strategy is and we're not just we're not drawing kind of necessarily hard lines. What we really want to promote is the actual transitions. We're trying to be very pragmatic but also continue to hold people to to a really high bar. The other thing I'd say about the asset management industry it's hard for them on climate. You know you have a lot of different factions who have different vested interests. We get to solve for a single client. So we feel like we can speak out on issues that are important for the industry as a whole in ways that maybe others can't. You don't need to have a good idea every day. So there is times to be patient and there's time to press. So to be an investor what are the qualities that one takes at high IQ. Willingness to work hard. What is it that takes what does it take to be a great investor in your view. Yes right. I think you have to be intellectually curious. I think you have to know what you're good at and understand your limitations. I think you have to be able to have the confidence to know when you're right because you make money as an investor. When the market has one thing priced in and you believe that it to be incorrect and you bet on it it proves to be correct. Or it becomes the market's view. So I think you need to have the confidence to bet against the herd and the bravery to put it on in good size and the humility to know when you're wrong. You know you cut your losses and move on to the next trade. Well I guess that's why I wasn't a good trader because when I go the wrong way on something I just say you know I'm going to stick with it forever. I don't like to admit a loss but we are a trader. You're supposed to say OK I made a mistake. I'm going to the next thing and get rid of the position. Yeah. And I think by the way there's two reasons you want to do that. First of all because because you know usually you just compound cost costs when you leave a bad trade on. But also the distraction factor of having a bad trade it takes up too much mind space. Now you have children. I have three great teenagers. And do they want to be investors or you're trying to talk them into not being investors. They absolutely want to be investors. And I love that they do. One of the silver linings of Cobra is that these teenagers became enamored with markets and crypto currencies in a way that I think is durable. These kids are watching markets in a way that I don't think generations have for a while. And I think it's great. So teenagers are not famous for going to their parents for advice. So but do they go to you for investment advice or just parental advice. They they. I'd like to think they come to me for both. But but but they do call me you know when you unmask made his bid for Twitter. My my son and three of his friends had me on the phone asking what was going on. A lot of younger people do seem interested in crypto. And there are a lot of people who are older who say this is going to go away. But now it's unclear whether crypto is really going to take off or the government's going to do something. What is your own view on crypto. It's here to stay. I think it's gone. Mainstream Fidelity just announced. You can put it in your for one CAC. The one caveat I would say is first of all climate impact is going to become increasingly focus. So in that context I think a theorem is likely to gain some more traction over bitcoin. The other thing I would say is that when we look at companies in the kind of block chain crypto space you know it might be a security audit company. They all have have massive Treasury accounts with a lot of coins in them. And to me that creates a little bit of near-term vulnerability. But that said I think I think that block chain technology is going to have some great applications and crypto is here today. What about specs. Less of a fan of specs. I just think they're they're really misaligned with the end buyer. And I think Chairman Gensler kind of taking a hard look at them and kind of pushing through reforms I think is important. It's overdue with the right thing to do. And how do you look at other new areas. Are there other new areas like crypto that you try to figure out to get on the ground floor. Are there any that you can mention now that you're trying to get on the ground floor if anything new. Yeah. So I think kind of democratization of access to alternatives in a way not not like sparks where they're there you layer in kind of asymmetric fees is interesting. So fractional ownership. And again that's things we're like block chain technology can actually accelerate. So if you think about things like insurance and kind of being able to distribute that risk among thousands or hundreds of thousands of people in an industry that otherwise has had a lot of friction I think that's really really exciting. It's been reported that the U.S. economy actually shrank in the first quarter of 2022. Do you think this means we're likely to go into a recession. There's a lot of discussion about a looming recession. And the bottom line is recession is inevitable. It's a matter of when and when you look at what markets are pricing here. They're pricing it fairly soon. So in the 2023 cost context depending on which asset classes you're looking at I actually. Think markets might be wrong. And the reason is is the consumer right here is in extraordinarily good shape. We've just gone through a US earnings season. The credit card companies delinquencies are way below pre pandemic levels. People are paying down their credit cards at at levels that were way way faster than pre pandemic. So it's a long winded way of saying the consumer is in reasonably good good shape. There's no doubt real wages are. Negative. In other words your your real wage growth is negative so wage increases are not keeping up with inflation. But I do think consumers to me feel like they're being measured and they're they're in good shape. Now you and I have served as advisors to a New York Federal Reserve kind of committee where you think the Federal Reserve missed the boat on inflation. And maybe they should have moved more quickly earlier on or you'd think that they did the best they could. In hindsight they should have moved earlier and I think they're doing their best to catch up now and I think you're going to see them move really aggressively. So market already at 50 basis points of the next three meetings is already priced in. So I think you're going to see them rush to get rates up to the two two and a half percent range. And then I think they're going to reassess where the economy is. It's a hard day and a hard job. So what is the best investment advice anybody's ever given you. I'd say the best investment advice anyone's ever given me is you don't need to have a good idea every day. So there's times to be patient and there's time to press. What do you think is the most common mistake that investors make the average investor. Most common mistake. I think it's full mot so by high sell low and the amount of damage that does the average investor is is big. Let's suppose I'm an average person and middle income not a professional investor. And I have some money. I suppose I have an extra one hundred thousand dollars. What would you say that person should do with one hundred thousand to put an index fund or something else like that. Yeah. I mean I think for the average investor buying an index for buying and holding and just letting it compound is really some sensible advice. I think the more trading someone tries to do the more damage they tend to do. And today if you hadn't gone to Wharton do you think you'd been in this business. I think going to Wharton was a game changer for me in terms of what it exposed me to and it definitively led me to this career and the education you get there as an undergrad. It is incredible. The things I came out of that school knowing relative to my peers. You know right out of college I felt really well prepared. And have your parents been able to see your success that they have. I'm actually in the process of building a house where we'll be living right next to each other. And they say well we're responsible for this great success. Or how do they remind you that they raised you in a way that made you possible to have this success. I actually remind them that they're there. They're responsible for all the success. We didn't have a lot of money growing up but I never wanted for anything. And it was they they always pushed us to kind of seize opportunities and be the best we could be. And I really owe.

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Bloomberg Wealth: Soros Fund's Dawn Fitzpatrick

Dawn Fitzpatrick, chief executive and chief investment officer of Soros Fund Management, talks about a recession in the US, the Fed, crypto and what it's like working with George Soros every day. She's on "Bloomberg Wealth with David Rubenstein." This was recorded April 29. (Source: Bloomberg)

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