Kenneth C. Griffin’s speech from the 8th annual CNBC and Institutional Investor run Delivering Alpha Conference. – See more of our coverage here.
Q2 hedge fund letters, conference, scoops etc
I think it’s really important to understand it’s how we develop talent, it’s a bit driver of our large success because there’s no bureaucracy or decision making process. It’s very quick, it’s very reactive on the news and it’s good judgments made by the really talented people on our team.
So what I’m working on with my senior leadership team is what are the big risks that we face as a firm? For example there was a material setback in European Union just a few weeks ago with the drama in Italy. We’ve been very focused on what happens if the EU hits a major speedbump and Italy in a year may be much more than a speed bump, it could be catastrophic. So my senior team is focused on the big catastrophic risk that we face in the portfolio and how to manage those risks.
[00:02:38] Male 1: Strategically take the EU right now how do you handicap the situation you’ve just laid out? [00:02:42] Male 2: So I think that the European Union is a huge issue. Italy is heading towards a set of policies that would increase the deficit in direct contradiction to the EU’s mandate of fiscal discipline. It’s unclear to me as Merkel’s power wanes how this is going to be done. She has been such a tremendous leader of the EU vision that with her having to deal with issues on immigration and using her political capital on immigration issues. Her distraction or entanglement on those issues is going to take Germany away from the table to grapple with Italy’s willingness to engage in a set of monetary fiscal policies that is irresponsible. [00:03:26] Male 1: So walk through the downsides then. What happens and what are you doing about it? [00:03:30] Male 2: So for us we very carefully control our exposure to Italy and southern Europe, that’s what we think about how much exposure do we have in Italy directly and then not have [inaudible 00:03:40] in Europe. How to maintain our positions in the most liquid assets so we can navigate quickly and change the market positions.How to reduce the amount open [inaudible 00:03:53] that we have so we don’t want a complex derivatives portfolio in an environment where Europe is just unstable. So we’re thinking about counterparty risk and complexity of the portfolio without reducing our exposures to southern peripheral Europe maintaining those pastures while these events unfold.
Read the full article here.