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Dmitry Balyasny's guide to being the perfect hedge fund manager

If you’ve ever wondered what it would like if a legendary hedge fund founder created their ultimate buy-side investor in a feat of bioengineering, look no further.

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Speaking at the Alternative Investment Conference (AIC) hosted by the London School of Economics (LSE), Balyasny Asset Manager Dmitry Balyasny did exactly that – and there were four things he named as crucial traits.

The first is what he calls “the right psychology”. There are two sides to that particular coin. “From a risk-taking standpoint, you need enough confidence to take meaningful risk and tolerate the volatility and tolerate drawdowns and not drive yourself crazy,” Balyasny says. “You have to have a fairly stable, confident personality.”

That doesn’t mean being some sort of chest-bashing barbarian, however. “On the flip side, you need a good amount of humility,” Balyasny says. “Because if you don't have the humility side of it, you might make a lot of money when your strategy is working. But if you lose a lot, it can blow up. So you need a balance between those two things.”

Confidence and humility aren’t just static concepts, however; they are things that need constant work. And that means being “somewhat introspective. Constantly working on your game, constantly working on your process, and trying to figuratively improve it,” according to Balyasny.

All that being said, possibly the most important part is mental resilience. “Trading is a rude awakening,” he says. “It doesn't matter how smart or talented you are, at some point, you're going to have a hard time.” Pushing past setbacks is probably fresh in Balyasny’s head – his fund recently lost $100m via a US credit portfolio manager.

The last thing on his dream investor’s list is passion. “That usually comes through pretty clearly,” Balyasny says. “If you can get somebody who really loves what they're doing, who would do it for free as a hobby, and combine that with a good process and a good psychology of iteratively, constantly improving - that's the ultimate combination.”

High praise - if you can manage it. Balyasny was quite recently touring university campuses in the United States (including MIT, NYU, and Princeton) looking for the “best people”, the kind his firm likes to hire. If you think you fit the bill, get your trigger finger ready – the fund is hiring interns as we speak.

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AUTHORZeno Toulon

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