How a Former Citadel Trader Builds His Personal Portfolio | Mike Taylor

About this Video

• Video Title: How a Former Citadel Trader Builds His Personal Portfolio | Mike Taylor
• Channel: Excess Returns
• Speakers: Mike Taylor, Jack, Justin
• Duration: 01:05:15

Introduction

This Excess Returns podcast features Mike Taylor, portfolio manager of the Simplify Healthcare ETF (PINK), discussing his personal investment philosophy and strategies. The conversation covers his experiences at Citadel and Millennium, his approach to portfolio management, and his views on various asset classes, including healthcare, bonds, and real estate.

Key Takeaways

• Investment Philosophy: Mike's approach is aggressive ("get rich or die trying"), emphasizing high conviction in select investments and significant position sizing. He prioritizes material outperformance over simply matching benchmarks.
• Importance of Skin in the Game: He highlights the importance of portfolio managers having a significant personal stake in their funds, believing it fosters greater alignment of interests and superior performance. He contrasts this with the lack of skin in the game among many peers.
• Retirement: Mike explicitly rejects the concept of retirement, viewing his work as an ongoing intellectual pursuit and challenge.
• Key Lessons from Citadel and Millennium: He learned the importance of understanding the impact of large trades and the potential for cascading effects when multiple funds unwind positions simultaneously. He also learned that many hedge fund managers are fired for what are statistically rare events, and that there can be opportunities to profit from these events. He describes using risk reversals to mitigate risk.
• High-Conviction Investment Characteristics: Mike identifies five key characteristics he seeks in investments: new product stories, mix shifts, geographic expansion, management turnarounds, and (less favorably) extremely cheap valuations.
• Portfolio Construction: His portfolio significantly differs from a standard 60/40 allocation, prioritizing high-conviction, often large, positions in areas where he possesses unique insight and asymmetric information. His equity exposure varies significantly depending on his market outlook.
• International Investing: Mike generally avoids broad international exposure due to perceived information asymmetries and prefers to focus on idiosyncratic opportunities where he can leverage specific knowledge.
• Other Asset Classes: He holds real estate and some commodities, but has had negative experiences with gold. He also engages in private investments.