An in-depth interview with Ryan Renteria,
former Partner & Managing Director at Karsch Capital
and currently the Analytics Guru of the Indiana Pacers
Introducing Ryan Renteria
As a Mexican-American raised by a single mother in a low-income household in Sacramento, CA, Ryan Renteria has beaten the odds throughout his entire life. Ryan persevered through sheer grit and determination to get to where he is today, officially the basketball analytics specialist of the Indiana Pacers, a once-in-a-lifetime position opened to him following a successful career in the hedge fund business.
After graduating from Stanford University, Ryan set his sights on becoming an investor, and started his Wall Street career as an Equity Research Analyst at Goldman Sachs in New York. That experience opened the way to the buy-side, where he would become a Partner and Managing Director at a multibillion dollar hedge fund at the age of 25.
For the first time, Ryan has agreed to share his story exclusively with us at The Write Resume.
Can you tell me about your background growing up?
I was raised by my mom on a kindergarten teacher’s salary. She only bought the absolute bare necessities so she could save every dollar for my college fund. Most of my clothes were hand-me-downs, we never went out to dinner, and we didn’t even run the A/C during the 110 degree Sacramento summers! I went to a public high school that the School Board eventually shut down; it had some of the worst test scores in California, a dropout rate over 50% and metal detectors at basketball games given all of the violent incidents on campus.
All that being said, I was enormously lucky to have one huge advantage growing up: a rockstar mom who pushed me to destroy all limitations of what I thought was possible for me through a rabid work ethic and attitude. I’ll never forget my first assignment in the first grade: a “report” on Greece. Everyone else brought in a 5×7 note card with a few facts. My mom kept me up most of the night pushing me to complete a 13-page report. She set the tone for my life. I would have been nothing without her.
What was your experience at Stanford like?
The first trimester was a terrifying catastrophe. My skills were light years behind my peers who went to much better high schools. I started writing my first history paper weeks before the deadline, had my stepdad and high school English teacher review it and submitted it after about 7 drafts. Then my TA asked me if I had slopped it out the night before. After that and a D on my first calculus exam, I called my mom bawling that I wasn’t going to make it here. She gave me some stern and inspirational messages about doubling down on the attitude and work ethic that had gotten me to this point. So I spent the next few months nearly living in the offices of my TA’s to get my skills caught up.
The following trimester I walked out of my calculus final devastated, but later found out my score of 32 out of 100 was good enough for a B+ on the curve. After turning things around, the rest of my Stanford experience was amazing. I made life-long friendships through my fraternity, explored Latino culture in greater depth and studied abroad in Barcelona. I feel so fortunate for the tremendous opportunities I had at Stanford.
Walk me through how you ended up starting your career at Goldman Sachs.
I knew at a young age I wanted to go to Wall Street to become an investor. Everyone said it was crucial to land a summer internship, but investment banks would only recruit juniors on campus. So my sophomore year I wrote personalized cover letters to a lot of managing directors at investment banks expressing a passion to gain experience as early as possible. Goldman Sachs gave me a shot to intern in their municipal finance group in San Francisco. The following summer I interned for Goldman Sachs in New York in the asset management group.
During both summers I took a lot of executives out for coffee to ask them, in order to become an investor, what skills I needed to hone, what division I should target for my first job and how I could land the ideal position. Most people suggested I aim for a job in equity research to learn the fundamentals of researching, modeling, and valuing companies. When Goldman Sachs recruited on campus during my senior year, I asked to interview for the equity research division and got the job.
At Goldman, what did you learn and who did you learn from?
I was quite lucky to work for Matt Fassler. He taught me differentiated research techniques including how to assess every aspect of a company’s customer proposition when visiting its retail stores. Matt is a quantitative genius who passed on invaluable methods for analyzing historical financials, translating research findings into modeling future financials and valuing companies in different ways. He is also an eloquent communicator who showed me how to write and speak about the most crucial points in a language the audience could understand. Not everyone in my analyst class had a boss who cared so much about their development, so I am very thankful for him.
What were the biggest challenges you faced as an Equity Research Analyst?
First of all, they throw you into the fire right away. I graduated in California on a Sunday and started training in New York a few days later. After a week or two of training you join your team in the middle of earnings season. You know very little about your companies yet you’re already furiously writing research notes while being peppered with questions from institutional clients.
The tough transition was a huge blessing in the end because it allowed me to learn more rapidly and take on much greater responsibility. The second challenge was maintaining peak performance while working 75 hours a week from 6:30 a.m. to 9:30 p.m. every day. You had little downtime during the day, limited sleep at night and zero life outside of work, making it hard to ever recharge your batteries. I guess we had it easy compared to our colleagues in the investment banking division (100-120 hours a week!).
What skills did you have that enabled you to move to the Buy Side?
I had developed a proprietary process with three critical skills that work well for challenges in any business. The first skill is research. You must be able to pinpoint the most crucial issues to investigate fanatically, be extremely organized when collecting all of your data points and have the quantitative aptitude and skepticism to analyze numbers in a novel way. The second is execution. You need to have relentless grit, to manage your emotions so they work FOR you and to be able to take a real step back to limit mistakes. The third is differentiation. You’ll be different from the crowd if you can come up with unique ideas, truly consider what others are saying and communicate in a way that your audience will act upon your ideas.
How did you first go about recruiting to enter the hedge fund business?
My situation was unique. One reason I chose equity research is that you effectively get to interview with hedge fund managers every day on the job. A lot of hedge fund clients are regularly calling you for information, advice and data on the companies in your sector so you get ample opportunities to make an impression on them. While I was at Goldman Sachs, a number of clients asked me if I wanted to move to the buy side. Once I felt ready, I accepted an amazing opportunity to work for Greg Margolis at Balyasny Asset Management. Both Greg and Balyasny had strong track records of returns, impressive processes and facilitated a supportive culture of learning.
What are the 3-4 biggest lessons about the hedge fund recruiting process?
There is an ideal strategy for landing a top job in any industry and the principles are the same for getting a hedge fund job. First you need to perfect a highly differentiated resume and cover letter that shows how you are the best candidate to solve their specific needs. Next you need to aggressively seek a lot of informational interviews with industry professionals where you ask very targeted questions and properly network with them. Third, developing an incredibly well researched stock idea pitch is just one of the many things you need to prepare for interview day. Last, you need to do significant due diligence on the boss and company for whom you’re considering working to ensure they’re a good fit for your long-term career development. For every element of the process, extensive preparation is your best shot at gaining an edge.
When you started working at Balyasny, how prepared were you for the job?
I was as prepared as anyone could possibly be with no buy side experience. I was lucky that Matt was a great teacher and had quickly given me a huge amount of responsibility in terms of writing research, advising clients and talking to company management teams. Also, my experience in equity research meant I started Balyasny with in-depth knowledge of many retailers, so I was able to deploy capital in my first month even though Greg expected it would take one year. All that being said, nothing can fully prepare you for being a buy side investor. It is an enormously difficult job with gargantuan pressure and extreme lows. I was not prepared for the fact that I would make many mistakes and have such humbling and painful experiences that would push me to the brink.
Can you describe what your underlying investing philosophy is?
There are a lot of successful investors with completely different philosophies so this is only what worked for me. I invested in a wide variety of situations (growth, value, special situations, etc.) and I had various investing philosophies for each type, so I will pick just one example to highlight. I often sought a “hook of change” to research, something specific that could change a company’s earnings power to be much different than consensus expectations.
One basic example of a hook of change would be finding a company with high quality assets but below average margins due to fixable issues that just hired a new CEO with a track record of taking margins much higher. Ideally the company would operate in an industry with limited structural pressures, benign competitive dynamics and strong margin and return characteristics. I better be early, differentiated from consensus and have good downside protection.
How did you transition to Karsch Capital Management and become a partner at 25 years old?
I was blessed to have worked for Greg, a seasoned investor and excellent teacher who trusted me to invest a lot of capital shortly into my time at Balyasny, and that the market environment was not a bad one. So after two strong years at Balyasny, I received interest from a number of hedge fund principals to become their head of consumer investments. I accepted a dream opportunity to work for Michael Karsch at Karsch Capital Management.
Michael was a brilliant investor with a stellar track record, a generous and caring person and we really connected on a personal level. He offered me the chance to do deep long-term fundamental research, deploy a substantial amount of capital, and benefit from his extensive knowledge. I am grateful Michael gave me a shot to be a part of such a special firm and for the amazing five years that followed.
What are the greatest takeaways from your career in finance?
The first is that exhaustive research and preparation is your greatest asset. It took me years of in-depth work to hone a proprietary 20-step investing process to maximize the odds of investing success. Know every crucial element of a great investing process, your companies and their key investment issues as well as anyone could. The second is to learn the tricks to master the psychological game of investing. You must understand common behavior biases and emotional pitfalls, and develop strong mental fortitude to make the right long-term decisions when stocks go against you. Quite often this skill is what separates great investors. The third is to never let your ego get too big or this humbling business will crush you. The best investors are intellectually honest about their positions up front, seek and truly incorporate others’ viewpoints, and question their positions the most when the stock is working and the risk-reward is becoming less favorable. I made some of these mistakes and had a brutal few months in 2007, but the painful lessons I learned helped me perform well in the bear market that followed in 2008.
When you retired at 30, where did you see your career going at that point?
My plan was to travel, visit family in California more often and spend most of my days volunteering. I envisioned a new schedule where each day of the week I would volunteer at one of five different organizations dedicated to disadvantaged children. I would fill the rest of my time by pursuing bucket list activities like boxing, stand-up comedy and cooking. I thought I would want to live that life indefinitely for many years before needing a change. Since I had no plans to return to work anytime in the near future, it was the first time in my life I was not thinking about my career.