And welcome everyone to another Smart Money Circle episode.
I'm Adam Sarhan. With me today is David Kang,
who's the Chairman and CEO of At the Center Squared, which
manages approximately $4 billion in AUM or assets under
management. David, thank you so much for
taking the time and welcome to the Smart Money Circle.
Yes, thank you, Adam. Definitely a pleasure.
So David, I always like to begin.
Can you please tell us your story and how you got to where
you are today? You know, I have to say I
started my financial career with boring insurance, Northwest
Mutual Life. I was a college agent and I
guess that's, you know, I like things simple.
You know, I sold annuities, I sold life insurance policies and
it was great because I put all my money into annuities and I
got a coupon. So as a young kid in college,
it's always nice to think about passive income.
So I started really, really early, then kind of transferred
over to Morgan Stanley Dean Witter.
I was a private wealth and portfolio manager out there.
Kind of did a little stint with her family business dealing with
apparel, women's apparel, manufacturing, distribution,
wholesale and got went back and got my MBA from UC Irvine Mirage
School of Business. And from there, it was one of
the situations where colleagues, friends that I knew very well
from the days of Morgan Stanley, you know, we've been keeping in
touch for decades, right? And we decided if we don't try
to do something and do something up on our own at this age, we're
going to get too old. So tip the risk and lo, lo and
behold. It worked out.
Yes, yes, yes, absolutely.
Love it. All right, David, let's ask
about your business. How do you tell us about the
Santa? Tell us about your investment
strategy? Anything you want to share there
please? Yeah.
I mean, again, traditionally it's fixed income.
We've got a core, core plus high yield IG Gov cred, you know, all
US fixed income securities our our strategies.
So I bought Dusenta from Bradford Marzek.
They started in 1984. They sold to Tortoise Torto
credit strategies And you know, I took over in 2020 with the
mindset of, OK, there needs to be another fixed income
management firm. The timing seems right.
During that time it was COVID, so it was very risky, you know,
from overall personnel, staffing, being able to keep
compliant, obviously the most important, but that you know,
the firm that we acquired had a nice 40 year track record and
those opportunities really don't come that often, right?
So with regards to the strategies, you know, since
2020, it's really been all about rebuilding, rebuilding,
rebuilding, maintaining maintenance of the portfolios,
reposition of the portfolios. And I think the most important
thing is really restaffing the main people at the firm for the
next 10/15/20 years. Makes sense.
Yeah, makes perfect sense. So from a fixed income
standpoint, for the audience, for them to understand there's
equities and there's fixed income.
Can you please elaborate a little bit, let people know
you're generating income, how it works, What are some type of
fixed income investment you look at?
So on and so forth. Yes.
I mean, I think everyone has the equities account mutual fund,
everyone is somewhat familiar with that.
You know, people assume fixed income is extremely easy or
boring to say the least, but when you look at fixed amount,
you got to look at debt, you know, hence fixed income.
What you're doing is buying either government debt, you're
buying corporate debt or buying pools of debt that consumers
will borrow, whether from banks, from origination shops ranging
from mortgages all the way down to your car loans, etcetera.
The when you look at fixed income, I think, you know, going
back to when I was in college, the passive income element is
what's that always attracted me to it.
It's consistent, it's manageable.
And you know, I'm not a big stock picker, right?
You know, sometimes, you know, picking stocks, it gets pretty
nerve wracking from time to time.
I like consistency. I like steady, I like, you know,
our, our idea of a home run is outperforming the benchmark by
5200 bits. Makes sense.
Yeah, got it. So let's talk about risk.
You mentioned risk and it could be nerve wracking.
Was a nice way of saying it. I like your your nerve wracking
approach. That's be you're being nice.
So how do you handle risk and what are some mistakes you see
people make with respect to risk management?
I think you know to address that question, the biggest driver and
or contributor in our ability to manage risk is technology.
And you know when I first started Morgan Stanley it was
really about, OK, let's buy a mini bond for an ultra high net
worth individual and let him take care of the tax benefits
that it offers. Then you deal with sovereign
debt, whether it's AUS, Europe, Asia, Japan, etcetera, it's
you're really buying sovereign, meaning, you know countries
around the world that that, that they issue.
And in fixed income the common terminology is are we getting
paid for the risk, right, right. So now going to risk, you know,
I think the most important thing is really about what kind of
risk analytic reports does, what does or what the common investor
really do, you know, generate. You've got multiple drivers
here, you've got macro drivers, you've got micro drivers.
You know, you kind of have to go through the list in terms of the
process of assessing risk, OK, what's a geopolitical risk in
terms of the debt? It's, you know, bonds are
relatively simple in terms of directional returns.
When interest rates go down, bond prices go up.
When interest rates go up, bond prices go down.
Prices meaning the value of the bond at that time of that
interest rate. But Morrison turned to risk, you
know, because we live in a very global debt market as well as
equity market. The ability to assess risk,
utilizing technology, utilizing AI, utilizing and imploring
people that understand the technology and the data that's
out there, and then get to a point of simple simplifying what
directional positioning needs to be right.
So I'll give an example from a staffing resource.
Before we would hire research analysts.
Now we develop desk analysts and furthermore we hire data
scientists in conjunction with our PMS to assess risk going
forward. You know, we live in the age of,
of enormous amount of data and if you don't have an embrace of
technology, then your risk assessment, your risk management
as well as understanding, like I said, we're trying to outperform
by 50 bits or 100 bits and, and those risk reports are, are
extremely crucial, especially more so in the age of technology
data and so forth more than ever.
Yeah, I love that. So I love what you're saying
here. And this is the first time we
meet, first time we speak, but I built something called
marketterminal.com, which is my version of a Wall Street
terminal for that exact reason to help people simplify the data
so it's not overwhelming. And the big conclusions that,
you know, use terminals. So why not have everyone else?
But I, I love what you're saying here.
So use the technology as a tool to quantify the risk and make
sure the risk versus return the reward and all that fun stuff to
instead of it just being overwhelming or TMI or whatever
it is with data, right? You can just draw data.
I love that. OK, moving on to my favorite
part of the show, which is timeless advice.
So let me ask you some questions about first question is timeless
lessons you've learned along the way that you'd like to share
with the audience, about business, about relationships,
anywhere you want to go. I think you know, more so than
ever, I think with regards to timeless lessons where the
business is ultimately it comes down to we're still in the
people business, right, right. I think we if we embrace
technology and use technology appropriately, it gives us more
time to interact with our friends, colleagues, you know,
people that we care about and you know, ultimately helps us do
our job efficiently and with less, I want to say stress,
right. So, and given that, I think, you
know, the lessons I've learned overall from Northwest Mutual
Life, Morgan Stanley, Dean Witter, you know, a little stint
with entrepreneurship, with apparel business and, you know,
developing a financial company has always been have a goal,
always position, always assess that position and always don't
be afraid to reposition it. Don't be afraid to be wrong, but
learn from why you were wrong. And it fundamentally comes down
to is mindset and always kind of considering not only your
perspective, but also with regards to drivers, people,
markets. You know, it's really about one
thing that I've learned over these years is it's really not
about me anymore, right? Yeah, right.
Me too. I couldn't with you more.
Once you get to a certain level, yeah, for sure you want to get
back, you want to help others and all that see their success.
Exactly. So, you know, at this stage, you
know, I've got a handful of really strong staffers that are
really committed, right. They're in the office 3/4 in the
morning, they're in the office till 345 in in the evening.
So it's really about OK, great. I've I've got a solid staff,
committed staff. How can I help them develop
their wealth, right? And hence it's the perspective.
It's not about me anymore. It's about how can I help the
guys that are committed, the guys that are have spent the
time the the guys that have sacrificed their lifestyle and
really committed to the choice of them being a very high grade,
high standard type of portfolio manager.
And you know, like I said, it's it's with success comes, I think
definitely requires success. Shun.
I love that. I love that.
Right. So, you know, and a large point,
I think, in terms of my overall success really stems from being
a single parent. So I raised my daughter.
Actually, let me rephrase that. I was your chauffeur.
I was reclaiming. I was the counselor.
You know, it really helped me multitask.
It really helped me develop high management.
It really helped me focus on what is important in life.
And and you know, I have a very, very learning mindset.
You know, I'm going to be the first one.
I tell you, I'm going to get most of most of everything
wrong. But whatever I get wrong, I will
make sure I get it right or learn from it.
Yeah. So, so and we basically take
that approach to our overall portfolio management, right?
Yeah, we're not going to be perfect.
We're going to position on the tail end, position on the front
end. We're going to basically pick
industries. We're going to pick the wrong
industries. But at the same time, if you're
understanding why the performance was a little subpar
this month or this quarter, you learn from it and you learn from
it and you reposition it. Yeah, I, I love that a lot of
similarities. Again, it's how I want to help
my team, how I help them get put the a a players on the field and
give them every possible thing I can do to help them be
successful. I, I love that the the child
part. I have children too and, and
taking care of them. It's it's endless giving opposed
to taking and it's not about me anymore.
I love what you're saying here. All right, let's ask you the
flip side of this, David. What are some timeless mistakes
either you've made, you've seen other people make, and how do
you learn from them so you don't repeat them?
I think #1 is hubris above all. Yeah, you know, and the the
hubris element of, of finance and or entrepreneurship and or
success, you definitely need people around you that's going
to keep you grounded. Definitely.
And it helps having a teenage daughter.
By the way, A. 100% I. Mean 100.
Percent, yeah. She's going to reject, she's
going to basically tell me how it is.
And I'm going to tell you right now she's going to be always
right. And I think that the the hubris
element of success is the most detrimental to sustaining
success. And I think that's why, you
know, starting, you know, when we did the acquisition in 2020,
it was really about OK, success, success, success, performance,
performance, performance. Eventually in 2023-2024 we got
to a point of being able to integrate, you know, successive
staffing, technology implementation.
You know, we don't want to toot our own horn, but 2024 we're in
the top this out in terms of performance of one of our
strategy. So I think it's really about the
hubris element, understanding, respecting each other, really
saying that yeah, it's not about me, it's about the team, it's
about the company. I want everyone to succeed to
within their wheelhouse, right, within what they envision
successes and, and people are all different, you know, I'm
sure, you know, with with all the different companies that
you're doing and the people you meet and the people that you
interview, you're seeing such a jambalaya of different people,
right? You're seeing people from this
background, that background understanding there's other
people from the hedge fund industry, there's people from,
you know, portfolio management, private equity.
So you know, understanding who are you dealing with?
Understanding, you know, the position of the staffing to
support sustainable performance success and, and keeping it
interesting, right. I think, you know, overall
that's kind of what I try to maintain and and that goes the
same for myself. I like to keep it interesting.
I like to keep, I really care about the people that, that I
work with, understanding their position, but trying to help
them balance out their lifestyles and, or career
pursuits. And, and you know, one of the
things that we actually do a lot here is really about culture,
right? You know, we have a theory.
Depending on where you stand in terms of your sibling and or
only child, there are certain character tendencies people
have. So with that in mind, you know,
sometimes the last child is somewhat of a diva.
So you take the diva and put him in a position of sustainable
performance. You've got the oldest child,
he's the go to guy. He's the guy that's always going
to be there. Put him in a position of
dependency, the the other staffing, other people, they're
going to look to him day in and day out, week in, week out.
So understanding people's cult, you know, behavioral in line
with cultural as well as their situation lifestyle, I think is
our primary focus and and that helps alleviate any buying or
thinking of hubris and continue to engage people, right.
Yeah, that makes perfect sense. I love that.
So let's talk about leadership as a leader.
What makes a great leader? What are some lessons you've
learned about leadership that you'd like to share with the
audience? Definition of leadership, if you
really think about it, if you're a one man shop, you're not going
to be a leader, right, right. Fundamentally, you know, I
always tell my guys kind of spinning off in terms of overall
mindset with regards to financial success, right?
It's easier to earn an extra $10,000 than to save it, right?
So these are the little quotes I say little kind of, you know,
reminders to my staff. And I think it's, it's a leader
is spending the time every day, every week, every month to
ranging from having someone on the back, ranging from, you
know, critiquing his performance, ranging from, you
know, complimenting him or her or, and, or critiquing or, or,
you know them. And fundamentally, I think, you
know, like I said earlier, you can't be the leader by yourself.
So you have to genuinely. I think care, I think you have
to genuinely, really listen and genuinely carry a conversation.
And I think it goes back to me raising my daughter.
I love that no it. Was so powerful.
Right. So if you don't genuinely care
and don't listen to your daughter, trust me, they're
going to know. Yeah, in maintaining the
attention span, maintaining, you know, their point of view and,
you know, kind of circles back to the initial is, yeah, it's
not about me. And you know, and I think being
a leader has changed so much. You know, I mean, when I was
working at Northwest Mutual, Morgan Stanley, being leader was
all about, OK, I'm the boss, you do what I need done and you're
my team member. No, I think leadership's kind of
evolved where it's about, OK, when we're working together, I'm
part of a team, but it's really about positioning, guiding and
always kind of creating a little momentum with regards to
people's in a perspective, mindset, a little attitude as I
think the forceful leadership is really dissipated now.
Yeah. They create 100%.
Yeah. OK.
Thank you for that. Final question for you today,
David, is what is the best piece of advice you want to give the
audience or? Your. 30 year old self.
Wow, that's a toughie. Start with a 30 year old self.
I would say wake up earlier. Love it right?
You don't know everything. I I think it's really because of
technology nowadays you have to listen to everyone.
You have to actually spend time listening to, you know, your
grandparents, your parents, you have to listen to your your 10
year old niece. You got to listen, you know,
really kind of think about and digest from their perspective,
right. And I think from a given that I
think it really helps develop or round out a personal personality
number one. And I think it's really about no
matter, you know, before doing this interview, I kind of looked
at my old resume CV and you kind of think about, OK, wow, I've
done a lot of work here. I think people need to actually
be able to critique themselves as rational people more so and
kind of understand, OK, when I look at this first name, what
did I get out of this shop, right?
What did I learn from this shop? And, and seeing that development
is a thing is very productive. And you got to really take the
time to kind of take, take some time, look at the experiences
that you went through either at Northwest Mutual, Morgan
Stanley, you know, in college and really think about, OK, my
position correctly, you know, does my resume entail
progression to the goal? I think more people, more and
more people I think need to really assess their resume from
the perspective of their goal and be able to rationally kind
of assess the different risks that they're exposed to, right?
And whether it's portfolio management, whether it's raising
a daughter, whether even doing this interview.
I'm not perfect and I'm OK with that.
But at the same time, there's a lot of things I'm proud of.
Yep, makes. Perfect.
Yep, makes perfect. So I think success is different
for different people in, in in financial industry, it's really
about competitive performance. It's about you know, fee
generation, P&L generation, absolute return.
I think you know, and going back to the resume you want to assess
whether or not is my professional standards getting
that much better with every job and what is that standard,
right. So I think for in in, you know,
there's a lot of younger people from, you know, my undergrad and
so forth that, you know, they would ask me for advice.
They would ask me how do I get to the point you're at?
And I would say, you know, I'm not even sure where I'm at.
I'm just enjoying the people that surround me making the most
of it. And as a byproduct, I got
successful. That's right.
Yeah, super powerful. Well, David, thank you so much
for taking the time. Congrats on your success and
this was absolutely fantastic. Thank you.
Thank you, Adam. Definitely a pleasure.