Andy Redleaf – Evolution of Markets (EP.46)

Andy Redleaf – Evolution of Markets (EP.46)

 

Andy Redleaf is the Founding Partner of Whitebox Advisors, a $5.5 billion multi-strategy hedge fund launched in 1999 with primary offices in the metropolitan hubs of Minneapolis, Austin, and Sydney, Australia. Before founding Whitebox, Andy spent twenty years trading options, for two years at Gruntal & Company alongside Stevie Cohen, fourteen on the CBOE, and five as a Founding Partner at Deephaven Capital Management. He has an irrepressibly creative mind and, alongside his partners, writes one of my favorite manager letters.

Our conversation covers Andy’s nuanced view of the evolution of trading markets and financial instruments over his forty year career, including arbitrage trading in the 1970s and 80s, unintended consequences of the deregulation of trading commissions, segmentation of market participants, importance of liability management, growth of orphaned securities, and the pending shift from decentralized to centralized market systems over the coming years.

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Show Notes  

1:52 – Andy’s background and the founding of Whitebox 

5:34 – The math of options in the late 70’s, early 80s   

11:44 – The decentralization of markets 

14:34 –  Andy’s transition into trading other strategies 

16:31 – The launch of Whitebox 

18:08 – The meaning of the firm name Whitebox 

21:38 – An example of a transitioning security from one group of investors to another  

26:31 – Has it gotten harder to find arbitrage opportunities 

30:29 – The driver of the financial crisis  

30:54 – Gary Gorton, Misunderstanding Financial Crises: Why Don’t We See Them Coming 

33:38 – His purchase of a bank  

36:27 – How he got involved in the structured credit markets  

40:49 – What is that Whitebox does differently from others  

45:24 – Principles that guide the investment activities he likes to take part in  

48:29 – How will the financial system evolve over the next 10 years 

53:55 – Closing questions