Podcast Transcript: Raymond Sagayam on the Biggest Overlooked Market Risk, Building World Class Teams, and Lessons from Bodybuilding 

This is an edited transcript of our podcast episode with Raymond Sagayam, published 24 June 2022. Ray is the Chief Investment Officer of Fixed Income at Pictet Asset Management. He joined Pictet in 2010 as Head of Total Return Fixed Income, before becoming CIO in 2017 and an Equity Partner in 2018. He has traded credit across all major geographies and began his career at ING Barings in Emerging Markets in 1997. In the podcast, we discuss, why investing globally gives you an edge, why price matters, when trading, knowing when to cut, and much more. While we have tried to make the transcript as accurate as possible, if you do notice any errors, let me know by email.

Introduction

Welcome to Macro Hive Conversations with Bilal Hafeez. Macro Hive helps educate investors and provide investment insights for all markets from crypto to equities to bonds. For our latest views, visit macrohive.com. Forget inflation, markets are now obsessing about recessions. Our yield curve-based recession model is giving a 55% chance of a US recession in the next 12 months. So, this recession risk is real. Oddly, our work on equities is finding that earnings outlooks are not reflecting this risk at all. And this should really be a cause of concern for equity investors. We also summarise some new academic work which shows how measures like the VIX measure is useful for trading equity bear markets. We’re also continuing our educational series of explainers with one on stablecoins and another on why do central banks use future prices in their forecasts.

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Now onto this episode’s guest, Raymond Sagayam. Ray is the Chief Investment Officer of fixed income at Pictet Asset Management. Ray joined Pictet in 2010 as head of total return fixed income before becoming CIO in 2017 and an equity partner in 2018. Before Pictet, Ray was head of dollar and Euro credit investment at Swiss Re Asset Management. And before that you worked for Bank Brussels Lambert trading US Credit. He’s traded credit across all major geographies and began his career at ING Barings in emerging markets in 1997. Raymond holds a Bachelor’s in Economics from the LSE and a Master’s in Contemporary Theology in the Catholic Tradition from Heythrop College, University of London.

Now onto our conversation. Welcome, Ray, to the podcast. I’ve been looking forward to this conversation for a while now.

Raymond Sagayam (02:37):

Thank you, Bilal. Thanks for having me on your show.

Bilal Hafeez (02:40):

What I always like to ask guests, before we go into the meat our conversation, is something about the origin story. Where did you go to university? What did you study? Was it inevitable you would end up in finance and how did you end up where you are today?

Raymond Sagayam (02:52):

Sure. My grandparents are originally from South India or at least three out of the four of them. One of them is from Sri Lanka. My parents were born in Malaysia, so Malaysia of Indian ancestry. Because my father was a Malaysian diplomat, we had an opportunity to really live all over the world. So pretty much from the get-go, I was in a pretty mobile situation. I consider myself a third culture kid. I’m not sure if you are familiar with that expression. I was born in the states, in D.C. when my parents were we’re living there.

We’ve lived in China, we’ve lived in Singapore, lived in Malaysia, and for most of my formative years in the UK as well. So geographic and cultural extremes were pretty much something which was the norm for me, and I got used to that from a very early age. That’s one dimension. In terms of studies, I was always drawn towards medicine. I loved biology. In my mind until I was around 16, 17, I was dead set on becoming a doctor. We have a few doctors in the family as well. And with pushy Asian parents, that was also an acceptable route at the same time.

But probably around that age, I don’t think I could get away from that entrepreneurial and that trader type DNA. It was always in me. I was always buying and selling stuff when I was in my teens, bomber jackets, mobiles, all sorts of things. I realised that as much as I loved the thought of medicine, finance was probably something closer to my heart, my passion at that time. And so I switched, from wanting to read medicine university, I switched during my A-levels and I decided to go for economics. And in the end, I read economics at the London School of Economics. I actually met my wife there as well.

So economics was my core discipline. At a later stage. once I was well into the world of finance, I also decided to do a Master’s in theology, Catholic theology, but with a focus on other religions and at the same time. So that was a completely different and out of the box course, and that’s something which I did part-time as well.

Bilal Hafeez (04:46):

That’s quite unusual. Most people when they do a mid-career masters in something, it’s usually an MBA or something in finance, but theology that’s quite an orthogonal move educationally.

Raymond Sagayam (04:58):

It was. And I chose that precisely because as you say, it was an orthogonal move, it was different to what I was doing day-to-day. I think I’ve always realised that we are sometimes stronger and have a better perspective in our daily passions and our daily jobs when we inject with a healthy dose of something else and that something else often has to be something completely different. So I wanted to do that. I was well outside my comfort zone. I was attending evening classes in Kensington, working in the city.

So apart from that commute, the other side of London, I was surrounded by priests and other scholars who had already studied theology at an undergraduate level. I really felt out of my depth. I didn’t mind that because that was new for me. Right? And I learned a lot. I learned a lot just by being in a very different environment.

Bilal Hafeez (05:43):

That’s great. And then on the finance career-wise, what’s been your journey there? Which companies did you start with? Were you always on the buy side? Did you ever go on the sell side? What’s been your journey there?

Raymond Sagayam (05:55):

I actually started on the sell side at ING Barings. I was in EM sales. I don’t mean to contradict myself because even though I knew when I was 16, 17 that I wanted to go the trading and the investment route, there was something about emerging markets possibly because of my background, which fascinated me. My sister was also there at the time, my bigger sister and it was a nice thing. I just thought, what the heck, let me give it a go, let me try sales out. I joined in 1997 and of course that was just the Dawn of the Asian financial crisis.

It’s interesting, most people I speak to these days make continual reference to the GFC in 2008. And they’re not even aware of the 1997-98 Asian financial crisis, which actually for that region and for emerging markets was pretty catastrophic, right? And it was felt in a very deep and a meaningful way. That’s where I started. And of course, because of the crisis that tenure was short lived, but it was an amazing starting journey as a graduate, to be not only in emerging markets, but to be exposed to a financial crisis, to be exposed to financial stress at a very early stage in your career.

I think that can either make or break you. You can either just think, oh my gosh, what have I got myself into? I should have really done medicine, right? One year into it and everything is going pear shaped. But I looked at it very quickly, very positively as a learning experience, as a door opener for other things. It actually paved the way for my future investment career.

And it allowed me because it was my first and only stint on the sell side, to really have an, even though it was short, an appreciation of what it was like to be on the other side of the phone, to be the salesperson selling to me in my later years when I was a portfolio manager, to understand their perspective, to understand their challenges, and to have a glimpse of the sell side as well. It was a short but a great experience at the same time.

Bilal Hafeez (07:46):

And then how did you make the move into the buy side?

Raymond Sagayam (07:48):

ING Barings at the time had other teams, proprietary trading teams who were managing the firm’s own capital. I was sitting very close to a team who was really investing in credit, global credit, a very small team. And they approached me not long after I’d left, to see if I’d be interested in joining them in their next stage. They had moved on to Bank Brussels and I’m at BBL. They said, look, do you want an opportunity as a junior analyst/PM investor? And I said, absolutely, let’s give it a go. And that’s where my credit investing career really started.

Bilal Hafeez (08:19):

Okay, great. And right now, you’re at Pictet. I guess some people may just think of Pictet as a Swiss wealth manager, but maybe you can talk a bit more about just how big Pictet is and the different divisions and which division you are in.

Raymond Sagayam (08:32):

Sure. Pictet is maybe historically better known as a wealth manager. It’s 200-year-old history reflects that footprint, but in reality, the Pictet group now is a diverse one. Asset management in terms of size is just as large as wealth management and a very significant player in European asset management. And not only on the long only side, but also as a hedge fund player as well, where we are also pretty large on the asset servicing side.

So those are three large components and there is a smaller but very fast-growing alternatives business as well, which is involved in real estate, increasingly now private equity. And we are also going to be looking at private credit at the same time. So, the Pictet group goes beyond wealth management, but of course it’s DNA and its heritage in wealth management is there and spans over 200 years.

Why investing globally gives you an edge

Bilal Hafeez (09:20):

Okay. That’s great. You’ve obviously been in markets now for a long, long time. And so, have you developed an investment philosophy that you could talk about?

Raymond Sagayam (09:29):

Sure. My role and responsibility is within the Pictet Asset Management side of the business, just to be clear and I’m responsible for the fixed income business. But I’m going to speak for myself. I’m going to answer that question in terms of my own investment philosophy, Bilal, because we are a multi boutique business. We pride ourselves on hiring and retaining entrepreneurs and entrepreneurial teams who can have very often very distinct and very different investment philosophies. Right? I know that sounds a little bit of a carve out a caveat, but it is an important part of our DNA at the same time.

In terms of my own investment philosophy, if I were to distil it based on my experience investing in global credit over the years, I would say that investing globally was something I felt very early on was of paramount importance, for easy to say invest globally. You can’t just invest globally overnight. It usually often comes from starting small, starting in a region, we’re based in Europe, maybe European credit and then expanding to Asia, expanding to US credit. It often starts by focusing on certain sectors and then expanding.

But why do I say that? We are in a world which is inextricably linked. What happens to an oil producer in Mexico has ramifications and is determined by geopolitical influences and energy prices elsewhere in the world. I had an interesting analogy recently in the context of the Russian and Ukrainian war, is this the start of a deglobalization? And I don’t think it is. To use the analogy of that individual, you can’t unscramble an egg, right? I’m very much of that belief.

And as a result, I think with the passage of time, if you can develop that expertise, and if you are able to have a team who can connect those dots, you are going to be superior investors by investing globally. So, philosophy number one for me, invest globally. It doesn’t happen overnight, but could get there, have that as an objective.

The importance of trading across the capital structure of companies and why price matters

Bilal Hafeez (11:22):

And just on that global side of things, often people, especially US credit investors say, look, our market’s really big. I’m a US investor. I want to become global, so I’ll dabble in Europe. Say if you are a US credit expert, what will be the challenge for them to go international?

Raymond Sagayam (11:39):

I think the issue is precisely the word you used, dabble. If you think that this is a free lunch and a lower hanging fruit, you’re going to get a rude awakening pretty quickly. Different regions, we talk about credit, have different underlying buyer bases, different technicals, different support structures in terms of governmental assistance, state-owned influences and otherwise. I think dabbling is precisely an extremely dangerous path, right? I smiled when you mentioned the US example, I think it’ll come as no surprise to you that many US credit players can have a home bias right now.

They obviously invest and know that market inside out, but it can often be difficult for them to transcend into Asian credit, into European credit. I think one of the advantages as well, being based in Europe, is just as simple as the time zone advantage. We’re straddling Asia and US, and that alone lends itself to really overlapping in those different investment hubs as well. And I think that’s an often-overlooked practical point at the same time. If I can continue the answer to your question, because there were two other convictions which are probably equally important for me.

The other one is investing across the capital structure. Again, if you can. What do I mean by that? The more restricted you are to a sector or a sub-asset class, the more trafficked that space is, the fewer arbitrage opportunities there are. If you take a corporate credit, for example, like General Motors and you are able to assess its financial worthiness across its senior secure debt, unsecured debt, loans, equity and so on and so forth, you have a much more holistic picture of where the value is on that particular entity.

I think we as analysts and investors, we overestimate the financial analysis that we put into a particular company, but we miss out two very important points, which is, where is the best value across that capital structure? Very often some parts of that capital structure will be extremely expensive and that doesn’t render the trade as favourable as it should be. I think the ability to look across the capital structure is an extremely important one. Most investors are not endowed and blessed with that mandate, and they don’t have that expertise.

But I would say that’s an expertise which if you hone, you can be rewarded very handsomely, because it lends itself to a more all-weather type of investing. And it leads me to my final point, which is a little bit related to that, which is, be forward looking. So much of the commentary I hear by investors, seasoned investors are backward looking. It’s about the financial analysis which they’ve done. That’s great. That sets you up really for the most important part of the investment journey, which is, what’s in the price?

You can have a great investment call on a company, but if it’s in the price, you’re going to lose money or you’re going to make very little. I think the price you pay is almost more important than the actual standalone fundamental investment decision in itself. Of course they go together, but if I could summarise, invest globally, invest across the capital structure, those are two experiences which you have to develop and you hone, you can’t just dabble in them, but be forward looking. What’s in the price? There’s a price for everything, but what’s in the price?

Making illiquidity your friend

Bilal Hafeez (14:55):

That’s absolutely great points there. On the price, especially if you’re looking across capital structure, do you find that often the liquidity could be poor, so the price is hard to determine or, you aren’t quite sure what the price is telling you, how do you think about liquidity and price?

Raymond Sagayam (15:14):

Illiquidity can be a friend and not a foe. I think if you are managing a strategy which embeds, honestly the underlying liquidity or illiquidity of those sub instruments, then you arrive at a very honest answer as to what the capacity of your strategy is. I think that should be the starting point. Once you have that, illiquidity can work in your favour. A Very tight market, which is quite illiquid can be very gappy and that gap up or down can work very much in your favour depending on how you’re positioned. I don’t look at illiquidity as a bad word. It is just something which has to be factored in into capacity and the decision making, but actually it can augment returns.

Bilal Hafeez (15:58):

You have a background in credit, but also in emerging markets as well and so you are probably very comfortable with illiquidity I imagine as well.

Raymond Sagayam (16:04):

I am, and I’m pretty pragmatic about illiquidity, because a certain asset class doesn’t have a continuum of liquidity. Today as we speak liquidity, perfectly reasonable, even though the markets are a little bit choppy, but you have three down days in a row and suddenly that illiquidity is going to half, right? I think you need to be pretty pragmatic about the fact that there is no single ons on, on liquidity at the same time, there are ranges. And as we’ve seen in March 2020, just to use a fairly recent episode, we moved from full liquidity to no liquidity in most fixed income assets, including even treasuries by the way, in a pretty short space of time. But fortunately, that liquidity returned pretty quickly.

What investors are currently missing – the credit cycle

Bilal Hafeez (16:45):

And in terms of actual investment themes that you are playing right now, are there certain bigger picture themes you’re playing or are you more tactical, week to week? How do you set up your portfolios?

Raymond Sagayam (16:57):

I’ll answer that differently because as I alluded to, our investment teams are multi boutique and they will be very different. Some are long only, some are very benchmark aware, some are extremely opportunistic. I’ll maybe answer it because I think we are in an extremely unique situation following 12 years of easy money and a retreat from that, what’s become almost a paradigm is proving to be very significant. I think it’s taken the markets a few months to realise this, inflation is clearly the most debated subject right now. And of course, the key question is, when will inflation peak?

I’m not going to go over those points because they’re being extremely well debated and talked about right now as we speak, towards the end of June 2022. But one thing I’m surprised which isn’t talked about, I’m always interested in what people are not focused on. Right? I play cricket and I guess some people will play baseball. There’s nothing worse than expecting as a batsman or a batter, expecting a certain delivery, right? Let’s say you’re expecting a curve ball or you’re expecting a bouncer and you’re braced for that, but then you get a regular delivery and then it gets you out. Right?

I think the focus is quite rightly on, when is inflation going to peak? When is rates going to peak? But it’s very little on the second order effects. I see very little commentary right now on, are we on the precipice of a credit cycle? But I think that’s an extremely relevant and important question to be asking in the context of funding costs rising materially and by a very large magnitude. Now, you very often hear the argument that, but rates moving from zero to 3%, that’s still extremely low in a historical context.

But if you think that many companies have had 12 years of rebasing and readjusting the entire budgetary and pricing process to that zero-interest rate environment, I would argue that it is the relative and the delta of that move, which is far more important than the absolute measure. Never get hung up with absolute measures. It’s where we’re going from and to.

I was in a conference in LA recently, and I heard a very interesting statistic, which I haven’t, verified myself, but it wouldn’t surprise me that in the US triple C space, all things remaining equal if funding costs were to rise by 300 basis points from where we were in the beginning of the year, were pretty much halfway there, all things remaining equal that would impact their net income and their bottom line by 90%. And that doesn’t surprise me, they’re triple C rated.

Bilal Hafeez (19:29):

Nine zero. 90 percent.

Raymond Sagayam (19:29):

Nine zero, you heard that right. But that doesn’t surprise me. They’re triple C rated for a reason, they have high leverage, right? That leverage is in the highest single digits rather than the mid-single digits. So, for me, the question of, are we on the precipice of a credit cycle? What is the relative strength of the corporate versus the consumer? Defaults remain very low. And I think that’s allowing people into a full sense of security. I would say that these are questions which I think should be asked right now, but are not being asked right now, and I’m a little bit surprised. But ultimately, I just think that this is a structural theme around credit, the relative strength of the corporate versus the consumer. I think it’s going to become topical in the weeks and the months ahead.

Bilal Hafeez (20:11):

Why do you think people are reluctant to engage with these sorts of themes? I’m from the same page as you, where the big story is that we’ve gone from a very, very low-rate environment to suddenly higher rates. You can argue about how high rates will go, but they are definitely, we’re off the zero mark. But why do you think people are reluctant to look at the second, third order consequences of this all?

Raymond Sagayam (20:36):

I think many investors are trying to, but the reality is that this inflation dimension has caught, has wrong footed many, the interest rate move has wrong footed many. I think there is still a little bit of a hangover effect and a fixation on what has caught a lot of players out.

Bilal Hafeez (20:52):

One thing people do talk about on the credit side is that they say that when you look at corporate balance sheet, they look much healthier than before the global financial crisis. So actually, balance sheet-wise, things aren’t as bad, as they look, so we won’t really have this default cycle.

Raymond Sagayam (21:07):

I buy that argument to a certain point that maybe the cash buffer is higher. I think the average leverage metrics, the median leverage metrics and the investment grade space, whether it’s the US or Europe, probably looks in a reasonably healthy historic position. But again, coming back to my original point, the delta is very important, and companies are rated in a reflection, as a reflection of their leverage, right? And those financing costs. And of course, if those financing costs are moving from zero to 300 and short shrift, that is going to impact and probably impact the lower end of the credit spectrum. I don’t think you’re going to get a raft of defaults and certainly not investment grade, falling angels in the dozen. But I do think the lower end of the credit spectrum is going to be particularly vulnerable. I don’t feel that we’ve experienced a material credit decoupling just yet. Spreads have moved. Rates have moved, but the decoupling, the re-pricing of lower rated corporate credit, I think could be still much more meaningful and probably in middle innings.

How to manage an investment team and nurture vs narcissism

Bilal Hafeez (22:05):

I know that you manage teams, and you manage the portfolio managers and so on. I’m always intrigued about people’s management styles. Do you have a way of managing teams and people? Do you think that managing portfolio managers or people on the buy side is different from managing other teams, other sectors? Do you have some management approach to managing people in particular?

Raymond Sagayam (22:29):

How to distil a two-hour long answer into two minutes? Thanks for that one, Bilal. No, it’s a matter which is close to my heart. I think in the world of finance, whether it’s the sell side or the buy side in my 24 years to date, very often, not always, you see promotions to managerial levels which are a reflection of investment outcomes and performance, but little else. And quite quickly you realise that that can be quite destabilising to a culture and a team. I think there is, the scrutiny quite rightly on management roles on team head roles is stronger than ever. And the expectation on those individuals is stronger than ever.

You may have gotten away with it 15 years ago or 10 years ago. But right now, I think that is rightly viewed as a responsibility and not a right and a privilege. It really depends on the size of the team you’re managing. And I’m going to answer it in the context of my current role. I’m managing a large team of comfortably over 1,015 individuals. You can’t do it alone. Right? I view that as a partnership with my team heads. And it’s so important that the team heads in place really should be exhibiting and adopting, nurturing approaches to managing their team members.

So, nurturing versus narcissism. Right? I know they sound like two very extreme words, but you can get those kinds of behaviours in our industry unfortunately as well. I think realising that you’re not doing it alone, doing it in a collegiate fashion, relying on other team heads who have that nurturing mentality, the willingness to be able to allow that light to shine on their many team heads, is an extremely important starting point. And if it’s not a starting point, you really want to be getting there as quickly as possible.

Bilal Hafeez (24:17):

In terms of one of the challenges, this is not just unique to finance, but this is particularly acute in finance, is that the performance is very measurable and very clear at times, where you have, there might be a trader or portfolio manager delivers excellent returns for a given year. And at the same time, they may not be that collegiate. They may not be the nurturing type. They may have a big ego but they’re delivering the numbers. Often you give them more leeway or they’re allowed to do things which other people can’t do. And at the same time, you as the head of the team, they’re delivering the alpha. So overall there’s a good performance at that level. How do you manage that type of dynamic?

Raymond Sagayam (24:59):

It’s a great point. And that’s far bigger than me, and I think you know that, well, that’s one of the many beautiful things about Pictet. I know this sounds an advertisement, but really it isn’t. Right? Which is, that’s precisely why as a firm you can’t create the culture that unless you’re management, that’s the holy grail and that’s what you should be aspiring to. No, that is just one route if it is suited to a certain disposition. And of course, if you’re a manager of an investment team, you really need to be embodying both of those virtues and those approaches. But having a culture which not only supports, but rewards and gives visibility and prominence to specialists, right? Is extremely important. It should be an equally virtuous or applauded path to go the investment specialist route and to choose actively. I don’t want to manage teams. I want to focus on the purity of the investment and the investment leadership, and maybe managing a smaller team of just investors and so on and so forth. I think having a corporate culture, which not only strengthens but supports that being investment led is extremely important. And I do think we have that here.

What to look for in new hires

Bilal Hafeez (26:05):

In terms of hiring talent so to speak, what do you look for in somebody when you’re looking to hire them? I’m always intrigued about; are there certain things you can find in somebody to give you confidence that they’ll be a good portfolio manager? How do you go about doing that?

Raymond Sagayam (26:21):

The quality of talent is extraordinary these days. When I think about our graduate talent pool right now, I often worry that I may not have stood a chance back in the day, if I was head-to-head with some of these folks. Really, it’s quite extraordinary and they’re pretty well rounded. It’s not just only in academia, but the range of extracurricular pursuits which they’re doing and excelling in as well. I look before for two attributes in that interview process, and really, it’s hard work and humility.

I know it’s difficult to cover that off in maybe two, one-hour interviews, but that’s what I’m testing for. The kind of questions I’ll ask will very often go a little bit off piece because the interview process will be again, very collegiate, and I’m expecting a lot of the homework to be done by some of my other team members in terms of the baseline attributes at the same time. So, for me, I’m looking at hard work and humility. And the other thing which I think is quite telling, another H, is homework. It’s as simple as do your homework on the organisation, go beyond the website, show that you really care about what the Pictet group is by the questions that you ask me about Pictet and Pictet asset management.

I’m going to know very quickly if you’ve had a cursory glance at the website, or if you’ve really gone around, spoken to your peers, looked at different other sites and other resources, and there’s so many different resources right now. I think there’s no excuse for not doing your homework, but ultimately what I’m testing for Bilal is hard work and humility, because I think more people than the jobs available are qualified for the role and could do a pretty sound job, but ultimately, it’s their character, which I think is going to determine success and integration in the culture here.

The importance of managing the exit process well

Bilal Hafeez (28:01):

Now, actually this leads me on nicely to more personal questions I always ask people. One of those questions is, what advice would you give to people graduating university right now? Not necessarily for them to enter finance, but more generally, like somebody, we’ve just come off COVID, they’ve just graduated, they’re entering the job markets, what general advice would you give them?

Raymond Sagayam (28:20):

I would to get to that, but maybe two final points, if you just allow me that indulgence to round off on the last one. And I think that does tie in with the advice to the graduates bit as well. The hiring bit itself is relatively and can be relatively straightforward. The bits around the hiring can again be overlooked. So, the people you say no to, I see throughout our industry, a very black and white approach to hiring. You hire, you spend all of your time at the person you want to hire to woo them, but the knows are done in a very piecemeal, fragmented fashion with very little educated feedback.

I think the no are very important, because ultimately you could realign with those individuals at a later stage. I think that’s very important and it’s not only about the hiring. And the other thing which we forget to talk about is, what about the exits? Right? I’m not talking about firings, I’m talking about exits where good individuals, and it does happen, it’s a reality of our business, leave for other opportunities. And taking the time to understand why they’re exiting.

And this goes far beyond an HR exit interview, which of course is very important, but what’s driving them? What’s motivating them? So just to round off the answer to your hiring question, there are attributes to look for when you are hiring, but it doesn’t just end there. How you say no to the people you’re saying no to is very important and being an ambassador of where you’re saying no from, but also the people leaving the organisation at the same time.

Bilal Hafeez (29:48):

Actually, just on the exit point, I think it’s a really, really good point. I’ve worked for a number of different banks over the years and what I’ve noticed with some institutions, they’re really good with people who leave and the people that leave almost become ambassadors for that company in the future. There’s an alumni type feeling. There’s a loyalty they feel to the organisation that they once worked for. Whereas as other organisations I’ve worked for where when people leave, they hate the organisation. Often the exit experience is so negative that they don’t have any loyalty and they actually have a negative feeling towards the organisation. And they often become like, I know what the opposite of an ambassador is, like a negative ambassador to the organisation.

Raymond Sagayam (30:28):

They’re vilified almost right. They’re vilified. But it’s such a shame, Bilal, that’s the thing, because you need to take a conscious effort to pause, not take that decision personally and realise that there is a wealth of feedback I can gain from that individual, which I can then use to help refine our culture and our organisation better. And you bring in a very interesting point, which is, the role of that individual as an ambassador so quickly to lose 10 years of good work and goodwill with that individual and just ruin it by ill prepared and an ill thought of exit. It doesn’t take much, it could be a lunch together, it could be a coffee, just taking the time to sit with that individual and round it off very nicely. It’s a small step, it’s far reaching, it has huge consequences, and it is a blind spot for many.

Bilal Hafeez (31:15):

Yeah, no, it’s great advice. Actually, I’m thinking a lot now about Macro Hive. We’re a young startup company and we’re establishing our culture. And so, these are some things that we really should think about. I think it’s a great point about who you say no to in the hiring process and not forgetting them and giving them feedback and engaging with them. And you’re right, it’s so easy just to focus on the hiring side, spend a huge amount of time on that and forget about the other parts of the journey as well. No, these are really, really good points.

Advice for graduates

Raymond Sagayam (31:43):

Bilal, I interrupted you because you asked me an extremely important question about younger talent, right? I guess you meant graduates. No?

Bilal Hafeez (31:52):

Yeah, yeah. So, let’s say somebody’s just graduated university. They’re thinking about careers. What general advice would you give them?

Raymond Sagayam (31:59):

Lots. Where do I start? The graduate milk round, I don’t know if that terminology even still used these days, but it can be a very disheartening process, which unfortunately can look a numbers game. I need to get my CV out to as many folks and maximise my probabilities. And most of them are going to say no. And you’re right. Most of them will say no, and they’re going to say no to you even though you are awesome and you’re amazing and you actually deserve the job. Come back to my original point, five people could be deserving of a role. One, person’s going to get it, there’s one role. It’s just a fact of life, just get used to that. But I think in the context of that, I would actually say, be a little bit different, instead of sending 15 CVs out, take a bit of a risk, send five out, focus on the quality, do your homework on those five institutions, know them inside out, so that when you come across and when you are invited to that interview, you really distinguish and differentiate yourself because doing that homework shows. It matters to me. It matters to many of my colleagues, and it is a big differentiator and it’s not just rudimentary. So do your homework. Maybe focus on quality. If it means sacrificing one or two more chain mails, do that and focus on quality as well.

I think once you’re in, if there’s an opportunity to travel with the institution, take it and go as far as possible. If you’re European based, go to Asia, spend some time in Singapore if you have that opportunity and vice versa as well, I think. It’s a golden opportunity from a cultural perspective to understand cognitive diversity even better. There’s a plethora of benefits. Languages, we are sometimes like myself as an English speaker joining an institution where for many, English is our official language at Pictet, so don’t get me wrong. But of course, there are many native French speakers here.

One of my regrets is probably not starting to learn or relearn French at an earlier stage. So, I think if you’re a graduate joining a company which has other languages in its underlying DNA, even if that’s not the official language, don’t waste time, pretty much get out there and start relearning that language pretty quickly. The other thing I would say, which is very important advice is, as a graduate don’t join and assume that everything which is being done is perfect. Go in listening with open eyes, to try and identify where the gaps are.

I’ll give you an example. A company could be very good, but it could be very inward looking. They may not be looking at their peers as much. They may not be spending enough time with industry peers outside their own. And maybe as a graduate you could compensate by doing that and bringing that intel inside. So just because you’re joining a team or an organisation, it doesn’t mean that everything is perfect. Look for the gaps and see how you can fill in those gaps and bring that intel back in, because then you are effectively developing an asset in yourself, which is really complimentary and differentiated and missing in the organisation at the time.

I would say, and I’m sorry this is a long list. Take ownership especially when you’re wrong. So taking ownership for your decisions is very important. But when you’re wrong about something and you will be, right? Whether you are in the early stages or your late stages, put your hand up and say, look, I got that call wrong. You’re going to get a lot of admiration, respect for doing that. Don’t justify, right? Take ownership, but especially when you’re wrong.

And the last thing I would say is, you may be bursting with confidence and many of our graduates are oozing with confidence and that’s a good thing, right? So they have no qualms about asking for things two or three years down the road. But when you ask, be the solution at the same time, don’t ask from a point of entitlement, but also be the possibility of what those solutions could be.

I would this particular role, not because I deserve it, you may deserve it, but because I think I can add value. Here is what I would suggest and what I think I could contribute and how I think it could benefit everyone. Here are two or three different options. So come to the table, not only with a request, but also as a solution at the same time. Those are some of the advice I would give.

When trading, knowing when to cut

Bilal Hafeez (36:00):

That’s great. Great pieces of advice. Actually, not just for graduates, even for actually anyone who’s working. Now, I didn’t ask you this question actually. I often ask or guests, which is, what’s the best investment advice that you’ve ever received personally? Did you have a mentor who told you something or you read something? Is there something that stands out in your mind?

Raymond Sagayam (36:20):

There is. I don’t even have to think too hard about this. It’s cut and cut early. You often hear the other side of that coin, which is you never lose money by taking a profit. That’s fine. It’s a luxurious position to be in when you in the green and in the black, right? So to speak. Your temperament around losses and your relationship with being emotionless about cutting losses when you’ve reached those trigger points. I’m not talking about too early. As professional risk takers you need to have an embedded amount of downside volatility, which is appropriate to that asset class and those trades.

But once you reach those, there’s no reason why you should be hanging about. Sell it, do it emotionless and do it ruthlessly, right? Because then you will live to trade another day. It staggers me how many seasoned and experienced investors are still hugely deficient in this regard. And this is not me coming from a hindsight lens, it’s a simple part of the investment discipline and the process. And that’s why having teams which are not just dominated by a single, so-called strong figure is very important. You need a sparring partner or two who can say, hey, Ray, we’ve hit that minus three. What are we doing? We should be selling this. No, you’re absolutely right. Let’s go for it. How are we going to do this? Right?

So having that sparring partner is important, but I think the concept of cutting, cut early, so you live to trade another day and invest another day, is extremely important. My own evolution of that advice if I could inject my own or rather than the advice which was imparted to me by some of my peers and I’m still in touch with them is, it’s easy to buy and it’s harder to sell. So it’s almost an evolution of that theme which I just described. When you think about the last 11 years, one way bull market, if you were a stock picker on the long side or a credit buyer, I’m sure you made a lot of money, but you were one amongst many.

Where you can really define yourself and define your careers is when there is calamity, when there is stress, when there are exogenous and negative events, perhaps like the one we are in the early innings of, or the mid innings of right now. That’s when you can have a truly golden opportunity to distinguish and differentiate yourself from the rest of the pack. So, don’t always think about what you can buy, but what’s weak? What can you short? What can you underweight?

And it’s harder, I find when I filter the list of investors from ones who are good at buying, as opposed to the ones who are good at buying or selling, and I think you need to have that symmetrical mindset to be a truly good investor. That list becomes much, much more narrow and that’s a truly great opportunity to distinguish yourself. I would say, identify your shorts. And a lot of credibility comes just as much with avoiding the landmines as it is with picking the buys.

Bilal Hafeez (39:07):

Listening to you, another question came up for me, which is that one of the challenges as a portfolio manager or trader always is, what do you do when you’re on a draw down, when you are losing money? Psychologically how do you deal with that? You have a bad run, and everybody of course has that, that’s just the nature of markets. How do you not become despondent and lose all your rationality during those sorts of phases?

Raymond Sagayam (39:32):

It’s the hardest battle. And that’s why the biggest enemy, and I know this is cliche, is yourself. You and many of your viewers will be extremely well versed with behavioural finance and behavioural investing consideration. I’m not going to get into that today, just because of the time we have. But that’s precisely why it takes a rare individual for him or her to have that self-check and to regulate them on their own. I am a believer that you are more effective when you do that in pairs, on smaller groups, where you have that autonomy, and you have that respectful challenge and that non-group think approach. And that’s why it’s essential to create that culture as a self-check, because it’s extremely rare to consistently exhibit that ruthlessness and that coldness. It’s very hard. Not impossible, but it’s hard.

Bilal Hafeez (40:18):

In terms of managing information, we’re overwhelmed with information. I imagine you must be as well; you must get research from everywhere. There’s all the news, feeds just in a large organisation as well. Do you have a system to manage information or research or some productivity hacks or something? How do you cope with the deluge that we have?

Raymond Sagayam (40:40):

The easy answer to that would be, look, it’s time management. Saying no, and all of this stuff. Your listeners know all of that, so I’m not going to go over that. I think the indirect dimension actually is the more profound one, which is, ultimately when you are making decisions from a position of health and mental clarity, you are able to make far more decisions and far more decisions competently at the same time. I think the perception that we have a fixed capacity is probably a flawed one. We’re going to have on a different day, different capacities to handle different amounts of information depending on our state, our mental state and our wellbeing. I would answer that question, the biggest hack, and unfortunately it’s not a hack because it’s not a quick fix, is really one, which is wellbeing focused. So, getting into dimensions of gut health, gut health linked to brain health, meditation, mindfulness, cultivating those, exercise, sleep, diet, nutrition, really, I would approach it more along those axis. Because ultimately, I think that sets you up not only to have the greatest possible capacity for making competent decisions, but ultimately from doing that from a position of strength.

Books that influenced Ray

Brave New World (Huxley), Liar’s Poker (Lewis), The New Encyclopedia of Modern Bodybuilding (Schwarzenegger)

Bilal Hafeez (41:50):

That’s great. It’s really important to actually go back to more fundamental things with this type of thing as well. Now, on books, I love always getting new book recommendations, so I’m going to ask you, are there any books that really influenced you or books that you read recently that you want to recommend?

Raymond Sagayam (42:08):

It’s always a hard one because there are many, but I’m going to jump on the word you used, which is influenced. And probably the books which influenced me were the ones which I read when I was much, much younger, actually in my teens. Particularly for me given this change from medicine to finance as well. Right? One, if I start with a fiction, Aldous Huxley’s, Brave New World. I read in my early teens. Are you familiar with this one?

Bilal Hafeez (42:34):

Yeah. Yeah. It’s a very good classic.

Raymond Sagayam (42:37):

Yes, absolutely. Very famous dystopian novel which was actually written by Huxley in 1932. And it’s interesting because I think George Orwell’s, Nineteen Eighty-Four, which is a similar tone and flavour has far more global prominence, but that actually came 17 years later. I think Aldous Huxley was a real pioneer there and he showed foresight. It’s such a disturbing and dark book. That’s not why I like it, but I it because of its visionary nature, to think it was written in the 30s, 1930s, 90 years ago, and really highlighting a world which is run by technology, right? It’s either utopia the complete opposite, I think has a particular relevance right now.

So, when I first read that, I found that quite disturbing, but with the passage of time and with every passing year, I always went back to that book. It really had an impact, a deep, deep impact on me. I was amazed by the profundity and the visionary nature of his writings. I think anyone reading that book right now, today, would probably be able to make extremely important links with the world we are in today. So that’s a brave new world. On the I guess non-fiction side, and as a bond guy myself, as an 18-year-old entering university, Liar’s Poker was already out by five years at that point.

About the mortgage trading business, Salomon Brothers, was such a great and fun and exciting read. It’s interesting because at the time they were talking about the mortgage trading business, which was a new business for them. These days we’re talking about crypto and other sorts of things. I read the book, I re-read the book again recently whilst on holiday, and it was an extremely different experience compared to when I read it as an 18-year-old. It was a great book. It still remains a great book and a classic. The third book is Arnold Schwarzenegger’s, Encyclopaedia of modern bodybuilding.

Don’t fall off your chair. I know that’s a little bit of a curve ball, but I spent hours going through this 740 pager throughout my teens and beyond. It was written in the late 80s. And it was an encyclopaedia which effectively had every single kind of exercise you could imagine in the gym, in training your body. This book is far more than a book for me. I know it sounds like it. It actually, for me was all about flexibility and adaptability. Right? Very often you can go into a gym in a peak time and all the machines are being used and you need to be able to think on your feet and think, okay, fine. So how can I create the possibility of training what I intended to train with other things which are available at the same time?

And you only know that when you have those foundations and those tools at the same time. I spent hours and hours. It’s a passion of mine. I’ve kept it up. It inspired me to also travel the world and meet other famous bodybuilders and get wisdom on training tips from them. I’ve done that with a few others. And it was interesting to me because training with weights can often come across as a very introverted thing to do. But actually, the most effective way of training with weight is with a training partner at the same time.

So, this Encyclopaedia of modern bodybuilding, written in 1987, which formed a big part of my youth, was an extremely influential book for me. And it taught me a lot about adaptability, about training with others and flexibility at the same time.

Bilal Hafeez (45:45):

I must say, I don’t think I’ve ever had a book recommendation like that before on the podcast, a book about body building. Moreover, I don’t think I’ve had many investors who have an interest in body building on one hand and then also dabble in theology academically as well on the other side. You have quite a unique set of interests here.

Raymond Sagayam (46:05):

But it’s interesting when I train with people, there are very few people who can train to failure. It’s a certain mindset. There’s a certain guy I’ve trained with who can train to failure, that last rep, which is beyond that point of pain, that you’re quivering, most people will already give up beforehand because that’s already pain. It’s enough. No, the real pain is beyond the pain because that’s going to shock your body to changing. Right? And that to me is a mindset. Many of my training partners have been guys I’ve worked with in the city, right? And you learned a lot from them by how they train.

Body building has such negative connotations, but ultimately, it’s about discipline and the ability to handle stressful situations. For me, there’s nothing I love more than a crisis and a financial crisis in the market going pear shaped, because it is the best opportunity for you to be able to distinguish yourself from the pack. It’s been so hard in the last 11 to 12 years, because you’re one of many, one of many who just can buy blindly and look like a hero, right? How you handled Russia and traded around that with a cool head in a team spirited fashion, that’s what defines you. Right? And I really love that.

Bilal Hafeez (47:21):

Great points there. Well, with that, it’s been great having this conversation with you, and I know we could go much longer, but you we to respect your time. If people did want to reach out to you or connect with you or follow you somehow, what’s the best way for them to do that?

Raymond Sagayam (47:34):

They can’t, or they can with ease because I’m intentionally not on a lot of social media. I’m on LinkedIn, but I use it more as an information receiving app if you like. I’m not really active at posting and I’m not really on any other social media, and that’s quite deliberate. I’m a big advocate of in-person connectivity and face to face. But I’m sure they can be creative and there are always ways, I’m not difficult to track down.

Bilal Hafeez (48:00):

Okay. That’s great. It’s good to know that somebody doesn’t have 20 different social media handles that they want to push out. That’s good. Well, with that, I’ve learned a lot speaking to you and it’s been great having this conversation, and all I can say, thank you very much for the conversation and good luck for this interesting time in markets that we’re in.

Raymond Sagayam (48:18):

Thank you very much, Bilal. Thank you for listening to me and for asking me those questions.

Bilal Hafeez (48:22):

Thanks for listening to the episode. Please subscribe to the podcast show on Apple, Spotify or wherever you listen to podcasts, leave a five-star rating, a nice comment and let other people know about the show. We’ll be really grateful. Also sign up for our free newsletter at macrohive.com/free. We’ll be back soon, so tune in then.

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)