Transcript: Tina Vandersteel



The transcript from this week’s, MiB: Tina Vandersteel, GMO head of Emerging-Country Debt, is below.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.


VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This weekend on the podcast, I have an extra special guest, Tina Vandersteel. She heads the entire Emerging-Country Debt team over at GMO located in Boston, the venerable investing firm that’s headed by Jeremy Grantham. He’s the G in GMO. Myself and Vandersteel talked about everything from the risks involved in EM investing, how you can hedge, whether or not you should be investing in the local currency or in dollar denominated in debt.

This is really a deep dive into a fascinating and under followed sector of the marketplace. It’s trillions and trillions of dollars and yet, most of us are fairly unfamiliar with what goes on in EM. And really, Tina gives us a master class in what you should be looking for and how you should be thinking about the risks and potential rewards in EM. I really enjoyed the conversation and I think you will also.

So, with no further ado, my interview with GMO’s Tina Vandersteel.

VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My extra special guest this week is Tina Vandersteel. She’s the Head of the Emerging-Country Debt team at GMO where she is also a partner. She joined the firm in 2004 coming from JPMorgan’s Fixed Income Research where she developed quantitative arbitrage strategies for emerging market debt and high-yield bonds. Tina Vandersteel, welcome to Bloomberg.


RITHOLTZ: So, let’s talk a little bit about your background which kind of surprises me. You graduate at Washington and Lee University not only with a BA in Economics but a BA in Journalism. How do you go from journalism to emerging market debt?

VANDERSTEEL: Well, that one is an easy one. My dad set my expectations early in life that he would pay for my existence through undergraduate or 21 years old, whichever came first. So, I graduated at 20 and I figured that a path in economics had higher lifetime earning potential and I wanted to live in New York City. So, I chose that path.

Of course, at that time, if you think about emerging det, this is 1990, so, the fall of communism, we just finished an economic studying macros and famous comparative economic systems and I would hear a chance to really get to know some of the countries that we had been studying. And my economics professor has said, listen, you get kind of a free MBA if you join any of the Wall Street banks and go through their training program and free sounded like a good thing.

So, I applied to a couple of them to Goldman and JPMorgan and landed a job with both. But my dad convinced me I should definitely take the JPMorgan job. The lesser earnings notwithstanding, he said, the culture will — would be more of a fit for somebody like me. And so, that’s how I got there.

RITHOLTZ: Quite interesting. You spent two years working at JPMorgan’s Sao Paulo office in the mid-90s. That had to be a fascinating experience. Tell us a little bit about that. What did you learn from your time in São Paulo?

VANDERSTEEL: Sao Paulo was amazing. I mean, if I had been the kind of journalist that Michael Lewis was, I would have written a whole book just about that experience. I mean, if you think about it from 1995, Plano Real, Fernando Henrique Cardoso was elected president. He introduced his Plano Real which he had devised when he was the finance minister and that hyperinflation introduced the new currency that is still the currency to this day, which is quite an achievement for Brazil.

And as an employee of JPMorgan, they gave you just a crazy amount of power. So, I’m in my mid-20s, my job at that time, my name job was to be a strategist, which I really know what a strategist was. But apparently what it meant was I would take my little Vice President card and I would travel up to Brasilia and I would get to know the congressmen because this is during the whole constitutional reform effort, which is actually still ongoing today, and all of the votes that went on in Congress were super important to the future of the country.

So, I would get to know the congressmen and figure out which way the vote was going to go, fly back to Sao Paulo, get on (inaudible) JPMorgan’s worldwide clients how that was going to go. And at that time, I guess, that was really the origins of sales color, which is something I don’t read these days. But at that time, I guess I was in charge of producing sales color which I think is pretty funny.

RITHOLTZ: That’s really quite interesting. Today, Sao Paulo is something like 12 million people. It’s one of the world’s most populous cities and it’s now Brazil’s vibrant financial center. Was it clear in ’95 that this was going to be a financial powerhouse, this location?

VANDERSTEEL: Well, it’s been several locations actually since then. At that time that I moved there, the center was actually in Centro like the actual center of the city but had already moved to Avenida Paulista and since I moved, it’s now moved to a new section of Sao Paulo called Faria Lima.

And I think it was pretty clear, if you got to know any of the Brazilians at that time, many of them are very famous even today, (inaudible) and a whole bunch of people, they were — they’re very, very smart people. If you think about how crazy hyperinflation is and the uncertainties of investing in hyperinflation, these people worked crack.

I mean, to give you a sense, if I wrote a check in São Paulo, it cleared the next day where back in the U.S., it would be several days and that was because inflation was very high. And some people are probably aware that Brazil has a very unusual interest rate compounding system whereas we here in the U.S., you have simple interest because the inflation and interest rates are low.

In Brazil, they use daily compounded interest because their history of inflation is very high. There’s a very sophisticated financial system there. I’m not surprised at all.

RITHOLTZ: Really interesting. So, how did the experience living abroad, working abroad affects how you view the world of emerging market debt and what were the big takeaways for you?

VANDERSTEEL: Well, one thing I can say, and I’ve only lived in Brazil as an emerging market, is that the locals are the most pessimistic. And I’ve often wondered why is that the case and I have a theory and that theory is part of my journalism background, which is I remember back in journalism school we used to say if it bleeds, it leads.

VANDERSTEEL: Or fire, rape, incest, film at 11, right? So, whatever was the most tragic, the most awful thing, that was what you are going to learn about. Now, this is the 1990s so we don’t have Internet yet but there is a very vibrant press in Brazil. There were five daily newspapers worth reading. There were two weekly magazines that were also worth reading and, of course, they only brought you the most pessimistic version of anything that was happening.

Cardoso, he was going to fail and inflation was going to come back, there’s just this constant parade of bad news that may sound familiar. That’s true everywhere, right? The Internet makes it worse but it’s true everywhere and the only exception that I found to that is briefly, we had a fellow who worked for us who eventually — he was Chinese, he eventually moved back to China unfortunately so we didn’t — and so we had to move on. But he was super optimistic about China and I thought to myself, well, maybe that’s related to the fact that press freedom in China is poor.

RITHOLTZ: Another word of …

VANDERSTEEL: Or maybe folks are pessimistic because of what they read.

RITHOLTZ: Schools don’t really teach us anything about information hygiene or how to evaluate what you see unless you go to law school where they teach you how to cross examine a witness and look at all their motivations and biases, et cetera.

Most people don’t approach media that way. So, that’s really fascinating about not just EM but media in general. So, spending time abroad, has this led you to sort of discount the terrible media stories you might see about be it Argentina or Venezuela or Brazil or not even just South America if you look at Africa and parts of Asia? There’s a constant drumbeat of terrible news coming out of places like that.

VANDERSTEEL: Yes. I definitely discounted. There’s a wonderful article by Michael Crichton called “Why Speculate?” and in it, it talks about this idea, and he’s probably not the only person who’s thought about this or talked about this idea of Gell-Mann amnesia

So, imagine that you’re an expert in your field and you open up today’s newspaper, whatever it is you read something online, and you realize that what’s being written there is completely false, absolutely. You know firsthand that what’s written there is just wrong. And then you turn the paper, you turn the page and you read the next article and you’ve completely forgotten what you just experienced, right? So, the next article is about something you don’t really know anything about and you just trust the source.

So, I took away from that article that you know what, it’s very rare, especially if you think about news, news is happening real time and what’s the old adage, we don’t even know the genesis of the French Revolution, so, how could you expect that anybody in real time has the correct interpretation about anything. So, you’re better off I think just not reading most things.

RITHOLTZ: The first draft of history so to speak.

VANDERSTEEL: The first draft of history. That’s great which is different than financial markets where you get a price and the price has a lot of information content in it. So, you don’t really need to hear about market color or interpretations. You just have to witness the price.

RITHOLTZ: I’m intrigued. So, let’s talk about a place like Venezuela, how do you manage the risks of investing in a space like that when it’s pretty clear you can’t rely on the media? Is it just a matter of boots on the ground and seeing what’s going on firsthand? How do you come up with some sort of investment thesis and then try and verify it?

VANDERSTEEL: Well, I would say the way we invest and the way we approach emerging debt markets, we try to deemphasize needing to know anything about the country. So, my background is in relative value analysis and arbitrage analysis and it’s kind of a widget way of looking at things. It’s independent of whatever the country is or the company is or whatever that is.

And what’s nice about it is imagining that the same risk is priced differently into markets and trying to arbitrage that difference of opinions for that same risk. That’s a lucky thing to be able to do because, otherwise, you would have to have some knowledge or be able to come up with an opinion about places like Venezuela, and I would say that’s very, very, very hard to do

I mean, Venezuela is an interesting case insofar as they did something that no other country has ever done and what I mean by that is we work in default sensitive markets, right? Every year we get a default or two and usually, the way that works out is the classic Hemingway way which is how did you go bankrupt gradually and then suddenly, right?


VANDERSTEEL: People refused to roll over your debt at reasonable prices and then you either go to the IMF or you default or whatever it is. Venezuela ran out of money in 2014 and continued to pull oil out of the ground and starved its population to pay foreign creditors for four more years.


VANDERSTEEL: Crazy. So, could we have predicted that they would have done that? Of course not. I don’t think anyone would have predicted that anyone would do something so insane.

RITHOLTZ: So, let me ask you an obvious question I probably should have asked you earlier and that’s simply what do we mean by emerging market, what makes a particular country an emerging market versus a frontier market or a developed market?

VANDERSTEEL: So, taxonomy. It varies. So, we distinguish between emerging countries and emerging markets. So, classically, the definition of emerging countries, which includes frontier countries, are those countries that are either low or middle income countries and therefore, may run out of money to pay you back or have defaulted in the past and have demonstrated that they are willing to default on you. So, those are what we refer as emerging countries.

Emerging market has much more to do with the accessibility by foreigners into a market. So, can you access the local market, what are the tax implications of being a foreigner in the local market? So, for example, you might have a Guinean bond in dollars, which is from an emerging country but it clears in Euroclear. So, it’s a developed market emerging country bond as opposed to its local currency bonds which are emerging country emerging market bonds. Does that make sense?

RITHOLTZ: Sure. And this is whether or not it’s corporate debt, government debt, they can all be out of an emerging country, there’s no distinction other than the specific corporate risk for any given company if you’re buying in private debt as opposed to EM public debt. Is that a fair statement?

VANDERSTEEL: That is a fair statement. The way we think about corporate debt within EM is that the sovereigns are the very powerful agent. It doesn’t matter if you’re emerging or developed. The sovereigns are the powerful agent.

And so, the corporates are really a compound risk with respect to their sovereign. So, corporate in the U.S. with rule of law and all of that in transparency is not that risky. But a corporate in Ghana where the assets are in Ghana subject to Ghana law, it doesn’t matter if the bond is a U.S. law bond in UK or in the U.S., the assets are still in Ghana. So, we think of them as a compound risk.

RITHOLTZ: So, I want to ask you about a piece you wrote in 2012 titled, “The What, Why, When and How Guide to Owning Emerging Country Debt.” What motivated that piece and how was it received by various investors?

VANDERSTEEL: Sure. I think every asset manager eventually has to produce something along these lines that asked why emerging debt, like what’s the purpose of this thing. And so, this was our shelf piece to describe to a hypothetical allocator what they should be on the lookout for and I would say GMO takes a very, very standard traditional approach to thinking about an allocator’s problem. If for no other reason, then GMO is most famous for its Asset Allocation Division headed by Ben Inker and founded by Jeremy Grantham.


VANDERSTEEL: So, what do they care about? They care about value, diversification and alpha. And so, we described in the paper, well, how do you determine if something represents value, right? How do you think about the spread you earn on the sovereign relative to losses you might experience or on a corporate or how do you think about currency risk in local currency did not made the debt.?

So, that’s the value section. Diversification is how do these subasset classes present with respect to developed markets, thinking about a portfolio optimization, how does this new asset play with respect to your existing asset. And then finally, alpha, which is the most fund space, the alpha in this asset class is very high, the median manager meets the benchmark. So, it’s a super inefficient asset class and that’s one of the reasons that we really like it.

RITHOLTZ: Interesting. So, this leads me to the obvious question, how does GMO approach emerging market debt say U.S. corporate debt or U.S. distressed debt and how does that differ from some of your competitors?

VANDERSTEEL: Well, I would say that GMO takes a very unusual approach and I knew that when I worked at JPMorgan because as I think I said earlier, I did relative value arbitrage. And so, as a strategist, salespeople want to take you around and visit clients and after a while, they realized that the big asset managers weren’t interested in hearing my spiel if for no other reason than they were so big that the 10 x 10 million trade that I proposed was rounding error for them.

So, the only people who are really interested in this were GMO and a small set of hedge funds, among them long-term capital, which is its own interesting and fascinating story.

RITHOLTZ: To say the least.

VANDERSTEEL: And now that I work at GMO, I find how unusual it is because people approach us and say, wow, what you’ve just described is totally different than what other people described. And so, what is it that we do differently, it’s really this emphasis on relative value. So, trying to find cheap securities, thinking about it from a long-short perspective, and emphasizing that rather than emphasizing what most managers emphasize, which is the fun stuff to talk about, right? What do we think about Venezuela to your earlier point or what do we think about Brazil or what do we think about the Fed or any of these other very, very challenging questions to ask and answer?

And it’s not that we don’t try, by the way, we have some extremely experienced people thinking about those questions but we all collectively agree that if you can find an arbitrage, you should put all your alpha chips there first and then worry about the rest later.

RITHOLTZ: Which leads to an obvious question, you spent some time developing strategies using quant arb. Do we really care what someone’s opinion is on something? Like it seems that the work you did on the quant side was pretty empirical versus the, hey, give me your squishy gut reaction to what’s going on there. In other words, when people are asking for that color commentary, what is it — what’s the value of that other than making casual chitchat?

VANDERSTEEL: Well, from an investment perspective, the value is generally low, right? I mean, we can all sit around and have opinions about things.


VANDERSTEEL: But are you going to buy or sell something based on those opinions in the presence of, by the way, very high transaction costs. The weighted average price bid offer of funds in my market is 75 basis points.


VANDERSTEEL: These aren’t treasuries. So, you better have a real sharp view and you better hope that that view obtains for some period of time because, otherwise, you’re going to cross that bid offer twice. So, we really try to avoid that. I think we are not only the lowest turnover manager of any of the active managers. Our are turnover is lower than the ETF.


VANDERSTEEL: So, we buy and hold arbitrage like positions.

RITHOLTZ: Seventy-five bps in and out. That’s some vague just for the spread. Let’s talk about another spread that’s out there. So, you joined GMO in ’04 and then worked on a strategy in ’06 that was the emerging market FX total return strategy. Tell us about that. What are the local currency debt strategies like in — that developed out of that and what are the currency spreads like?

VANDERSTEEL: So, local currency debt investing is a really fascinating one. It’s I’d say the largest bundle of risks that we analyze. So, when we think about positioning, it’s always with respect to what risk are we addressing and it’s any collection of credit risks, right? All of them have sovereign credit risk embedded.

Within that, there’s the question of selective sovereign default. So, a sovereign can choose, OK, I’m in a corner, I’m only going to default on my foreign currency debt, I’m only going to default on my local currency debt or I’m going to default on them all. And we’ve seen examples of both.

In fact, our sovereign analyst just went to a fascinating conference at Georgetown this week about the possibility of selective domestic debt fall. A very interesting topic. On top of that, if it’s a corporate, it can have idiosyncratic corporate risk and if it’s a local currency bond, then it has interest rate risk and up to two types of currency risk.

So, currency volatility risk, that’s the one you see crawl across your Bloomberg screen but currency convertibility risk is a very serious one. What if I take my foreign investor’s dollars or euros or Swiss francs and I convert them into Argentine pesos, to take a recent example, and then Argentina says, I’m sorry, you can’t get them out of the official rate. You have to go to the parallel rate. And that’s 100 percent depreciated from the official rate. These are serious risks and we price each one of them independently and we’d taken hedge the risks that we don’t think are priced appropriately.

RITHOLTZ: How do you hedge a risk like that? Is it just purely currency hedging or are there default hedges and other such insurance or derivative products?

VANDERSTEEL: There is one of each flavor and believe you me, we make sure the documentation or whatever we’re hedging is airtight with respect to whatever we’re trying to hedge. So, to take an interesting example, from the ’90s actually, when Russia defaulted and devalued the ruble, those who had hedged their ruble exposure in Chicago found out that that hedge was worthless because it was a non-deliverable currency and the Russians could just manipulate that market independent of the actual ruble spot exchange rate.

So, we are very careful to make sure whatever asset we own, however the fixing mechanism is for that, lines up with our hedge. We don’t want to have any basis risks.

RITHOLTZ: So, when you say non-deliverable, that entire hedge was just a complete waste of capital and fail to do …


RITHOLTZ: It just did nothing. Was that — I recall the long-term capital management blowup and I always thought of it as a problem that was based on leverage. Did hedging — and I know I’m asking you to settle that field but was hedging a factor in the Russian defaults for an entity like LTCM?

VANDERSTEEL: I don’t know if ruble was part of their problem. Leverage was certainly part of their problem.

RITHOLTZ: Yes. What’s the 101 amongst friends, right?

VANDERSTEEL: Well, here is how I experienced it. So, I’m a 20-something-year-old kid producing these relative value analytics which is a lot of math but not a lot of practical experience, right? I’m just a Wall Street strategist. And the salesperson who covered GMO also covered long-term capital and he would say, I need a trade sheet for this Paris trade that you’re recommending, and I’m like, OK, well, who’s it for?

And the choice there was how it was going to be levered and GMO used very conservative leverage because we cared about — well, they cared, now I care about default risk and long-term capital would use a lot of leverage because they were trying to hedge market risk, right? And that simple choice turned out to be fatal for one and not the other.

And so, that was what led me to be interested in GMO.I thought, wow, gosh, you guys are smarter than those Nobel laureate, the very simplistic 20-year-old view of the thing.

RITHOLTZ: That’s really interesting although I don’t think you need a Nobel Prize to know that 101 leverage probably isn’t a great idea or is probably — the concern about tail risk, if it hedges market risk 99 percent of the time but that one percent you don’t make the curve and smashed into the wall doesn’t really work, does it?

VANDERSTEEL: Apparently, it doesn’t.

RITHOLTZ: Before we get into the details of some of the currency issues, I have to ask, how big is the opportunity in EM bonds, how large is this market, I don’t know, compared to let’s say U.S. corporates or treasuries

VANDERSTEEL: So, round numbers for dollar-denominated bonds, sovereign and quasi-sovereign external debt in the EMBI Global Index is around 1.4 trillion. For the corporate EM index EMBI, it’s also around 1.4 trillion. And for local currency EM debt, it’s around 2.5 trillion. Now, that’s just the index eligible stuff. I think you could safely multiply that by another 50 percent to capture all possible investable debt.

RITHOLTZ: Has this been expanding? Because what we seemed to have seen over the past, I don’t know, decade or two is really a bit of a shortage of high-quality sovereign debt. What’s the growth rate of emerging market debt look like?

VANDERSTEEL: So, from memory, I would say each of these were probably about half again this size or half the size maybe 15 years ago. So, it’s growing. For sure, there’s more interest in and I was looking this morning at the Bloomberg Global Aggregate Index and they produced the sub-index of negative yielding debt that’s about 14 trillion. So, folks are asked to find things with positive yields and I think that’s where EM debt has been coming in.

RITHOLTZ: Quite interesting. So, we started talking a little bit about this spread in the EM debt and some of the currency risk. How do you measure different currencies? Are the — I know about the textbook models. But what’s it like in the real world?

VANDERSTEEL: It’s funny that you say the textbook model. I gave a talk. We have a fall client conference in 2016. I wanted to give a talk about arbitrage and that is an extremely dry topic especially at a firm where plausibly I am following Jeremy Grantham himself on the stage. But now, we have a bunch of people interested in equities and asset allocation. I’m going to try and get them to be really interested on Japanese cross-currency basis in this kind of idea.

And I started off with a quote because at this point, it was just around the time that Japan was entering yield curve control and the quite that struck me was from 2013. I remember going to the IMF meeting so, ostensibly, just to think about EM. But if you think about the time period, the European sovereign debt crisis is sort of coming to dénouement and the Cypriots (ph) had just defaulted on bank debts.

So, there was a lot of interesting stuff going on and the most crowded room at that IMF in 2013 was the Bank of Japan. So, the assistant governor, this fellow Moma (ph) says, stakes are high. If we fail, economics textbooks might be wrong. That’s uncertainty.

And I could never forget that quote so I thought to myself, gosh, it seems like economics textbooks have been wrong for some time now but what I’m interested in is the fact that the finance textbooks are also wrong, right?

RITHOLTZ: That’s hilarious.

VANDERSTEEL: And Olivier Blanchard gave a talk called “How to Teach Intermediate Macroeconomics after the Crisis?” after the great financial crisis and he says, I used to derive movements of exchange rates from uncovered interest rate parity condition, and that was precisely the point of my talk. It used to be that you could look at interest rate differentials and price currency boards in developed markets, right? Not always in emerging markets especially in non-deliverable emerging markets.

But by this point in 2012 and for sure, in 2016, developed markets were no longer following this, right? There were cross-currency bases going on only eventually capped by the growing use of central bank’s swap lines, right, and lately, repo lines in the case of People’s Republic of China.

So, I would say finance and macroeconomic textbooks are actually not all that useful these days because what you would have learned hardly applies anymore.

RITHOLTZ: And there’s an argument to be made that the same is true across all the various chapters in that — those economic books except for the most recent updates that they seem to be catching up a little bit. So, let’s talk about how you hedge in the real world some of the currency risk you’re taking and can you do that at reasonable prices? If you want to invest as a U.S. investor in Brazil or in a place like Thailand, how can you do that without assuming too much currency risk?

VANDERSTEEL: Well, you have a number of choices. You can — if you’re a dollar-based investor, you can simply by dollar Brazilian bonds, right? We don’t have many dollar Thai bonds but you can buy by dollar bonds. You can buy local currency-denominated bonds and hedge the currency risk associated with those bonds.

And to take a recent example, we found this fascinating Brazilian real denominated instrument. It’s actually guaranteed by you and me, the U.S. taxpayer.


VANDERSTEEL: And it was paying local Brazilian treasury so NTN, plus 40 basis points. So, you could hedge out the currency risk and the interest rate risk of that thing and be left with a U.S. guaranteed thing at sort of treasuries plus hundred. That’s a great bond.

RITHOLTZ: So, here’s the question that I’m kind of intrigued by, how do you determine whether to invest in the local currency or dollar-based if you’re here in the U.S.? Are there specific advantages and disadvantages or does all the currency risk essentially wash out at the end?

VANDERSTEEL: So, this is a very, very difficult question. As an arbitrage-focused person, when I think about naked currency risk, it’s so far away from an arbitrage. I, of course, lean on my team who are much smarter than I am in this dimension.

So, we bucket the emerging currencies in two different buckets. One is our floating-rate currencies and the investment thesis there is the broad dollar goes up and down and takes all of them up and down with it, right? So, we’re going to pick relative winners and losers among that pack of floating-rate currencies.

That way, we insulate ourselves from broad dollar moves. So, it’s a relative value program. For the very highly managed and pegged currencies, we have a program that one of the people on my team developed, which tries to answer the question given the ambient fundamentals of this particular country in terms of its balance and payments, its place in the economic cycle and so forth, what’s the likelihood that we’ll get to keep whatever the ex-ante carry of the currency is.

And so, if this is a pegged currency, we’re looking most recently at the Uzbek som and that currency is more managed against the Russian ruble than against the dollar per se but it has very high yield, sort of 10, 12 percent. And so, the question is, that high enough or will we see a devaluation in the film that would wipe out that ex-ante carry. So, that’s how we think about the problem.

RITHOLTZ: So, let’s talk a little bit about the state of EM investing today. So, looking at this from an equity market perspective, I look at what took place in China and the change in the government and the change in attitudes towards companies like Alibaba. It kind of makes me look at the country at least now and say they appear to be frightening from an equity perspective. I’m would be reluctant to put capital at risk there.

What do you make of the geopolitical worlds and the various risks they present? Are there certain countries that, hey, there’s no respect for the rule of law or sanctity of contract or private property for that matter and therefore, regardless of the potential upside in the debt instruments, we just don’t believe that any money is safe there because of that?

VANDERSTEEL: It’s a good question and I would say for the fundamental credit analyst who we have on the team, we rely a lot on precedent frankly. So, I’ll take an example from a few years ago in — well, first, I guess in 2014 in Kazakhstan and then later — a few years later in Azerbaijan where we weren’t involved in Kazakh one.

There is a big bank in Kazakhstan and I actually don’t know the name of it but the ticker was BTA and over the course of a weekend, they rewrote their bankruptcy laws and basically wiped out the bank creditors. And so, you look at that and you say, gosh, that’s a serious risk that we should take into account. I said we weren’t involved because the risk premium that you’re being paid over Kazakhstan wasn’t enough to even contemplate things at that time.

In that case, they went on to have quite a lot of debt relief for the countries, which is 2014 after that oil market collapsed and so in sensitive countries like Kazakhstan, maybe debt relief and so forth.

We fast forward to Azerbaijan and there was a fascinating case that we were involved and we owned some bonds from this bank called the international Bank of Azerbaijan. It was 90 something percent government owned. So, we considered it as state-owned enterprises that followed that same playbook over the weekend. They wrote — rewrote their bankruptcy laws and so forth and they gave a very mild haircut to creditors. It’s actually was more or less MPP neutral.


VANDERSTEEL: So, they got all the reputational hit of doing this but they got none of the debt relief that Kazakhs held at under a head scratcher why on earth would they do this. It’s still in the London courts by the way. I actually wrote to the finance minister of Azerbaijan, I said, this just doesn’t make any sense, conditional law and you’re writing off creditors, you should at least get some debt relief (ph) for doing it.

But to your point, all you can do is file these away and understand what’s happened in the past and make some educated judgment about how likely the current administration or dictator or whatever it is of the country is likely to do that in the future. That’s an art. Like I said, the credit research people on my team have a very hard job.

RITHOLTZ: It sounds like they got some dead counsel at Azerbaijan. That been interesting. Let’s go in the opposite direction. When you look around the world, where is their safe EM debt ? And I’m assuming the safer the debt, perhaps the lower the potential alpha you’re going to see from that. is that a fair way to look at this?

VANDERSTEEL: You’re asking about a cake-and-eating-it-too question.

RITHOLTZ: Yes. Pretty much. Yes.

VANDERSTEEL: So, earlier, we talked about 14 trillion in negative yielding debt.


VANDERSTEEL: So, we ask ourselves the purpose of holding a certain class of government debt, we used to refer to it as the anchor to Winword portfolio, right, or the hell or high water portfolio, is to have balance in your portfolio in the event that there is a severe equity market decline or risk assets have their own decline whatever that is.

The cost of holding that debt right now and many of the major markets, whether it’s bonds or owned or JGBs or support, is holding a negative yielding asset, right? It’s an insurance premium on those. So, the question is can you choose from the group of positive yielding EM local markets on a currency hedged or unhedged basis in the event that you’re willing to take some currency risk and you think it’s well priced.

That has that defensive properties of these developed markets bonds but with positive yields and the answer to that is, yes, there’s a small clutch of these things. They are not EM countries, for the most part, they’re not the poor countries. They are the Taiwans and Koreas of the world.


VANDERSTEEL: But those markets do present as relatively safe. Now, not safe from financial repression, none of us are safe from financial repression, but safe in a – anchored to win where in statistical sense.

RITHOLTZ: Really, really kind of interesting. What parts of the world are you excited about? Any – any countries that you’re looking at and thinking, wow, this is underpriced and there’s a ton of upside here.

VANDERSTEEL: I would say, the thing that’s glaring right now are the stressed and distressed, um, emerging countries. So where the – if you take out the real lives of the pandemic, the difference between the high-yield sub piece of our hard currency benchmark versus the investment grade one, it’s at very, very wide levels, right? So, not pandemic levels but very wide levels, about 500 over investment grade.

Within that subset, there are arbitrage-like positions that can be set up. And by that, what I mean is these are countries whose bond prices indicate a high likelihood of default. So, can you ensure the default case while holding on for the no default case? And in a handful of those – of those countries, the answer to that is yes. And I think those make some of the most interesting opportunities.

RITHOLTZ: You want to name names? What countries present those sort of opportunities?

VANDERSTEEL: I would say Ivory Coast is one. Ghana is one. El Salvador is one. So, there’s some interesting ones.

RITHOLTZ: Really interesting. You mentioned the response to the pandemic. How did various emerging market countries and their governments respond to COVID and the financial crisis were in ’08-’09, was this really developed world issue in terms of the great financial crisis or did it impact EM significantly also?

VANDERSTEEL: Well, both crises really are exogenous shocks from the perspective of the emerging market, right? Unlike 1998 where …


VANDERSTEEL: … we were the epicenter, let’s say. In 2008, emerging markets were run over as bystanders, right? And I would say the whole world was run over as part of COVID. So, whenever you have these external crises that impinge upon the markets, there are some very well established programs out there for the sovereigns in our markets to make sure it doesn’t become a systemic crisis.

So, if you think about 2008, there’s a very standard playbook already in place to help some of the weaker credit who’s debt was sustainable in the medium-term, they just had a rollover problem and the IMF was there to help them rollover their debts until market access is regained. Some of them, of course, their debt was not sustainable in the medium term, and so they elected to default, and so Ecuador default in 2008, for example.

RITHOLTZ: What – what about he early 2010s when we saw a lot of southern Europe running into problems? Do we really think about Greece as a emerging market or is that more of a developed nation with a long history of credit problems?

VANDERSTEEL: It’s a great question. So earlier, when I was trying to lay out the taxonomy of what’s considered an emerging country from an investment perspective, I say it’s lower and middle income countries or countries that have defaulted even if they’re high income. And I would put Greece in that later category.

RITHOLTZ: How did that that Southern European crisis – and I remember 2011, 2012, 2013, it seemed like it was never going to end, how did that affect the rest of the universe? I don’t want to use a dirty word like contains, but was that primarily focused in Europe or did the – the tremors from that radiate outwards to all the various emerging market debt?

VANDERSTEEL: Well, it’s a relative value construct. Of course, it would radiate. I mean, if you’re going to get paid 500 over bonds for BGPs or Spanish government bonds, why on earth would you buy emerging markets debt? Right? So, of course, our spread’s widened in sympathy.

And I used to say that, it’s paying defaults, right? If a major developed market’s government elects to default the signaling for our markets, we’ll be very, very bad, right? Just think about how terrible that would be. Argentina would just default because they would say, well, if the Spanish aren’t gonna pay, we’re not going to pay, even if they could pay, right?

RITHOLTZ: Right. Why bother?

VANDERSTEEL: But I thought, one of the most interesting things in 2010, Mexico issued its first century bond, 100-year bond.


VANDERSTEEL: And the Mexican hacienda, the debt capital markets group there was very, very clever and they figured out which investors would be most likely to dip their toes into this 100-year Mexican bond. And they offered it shockingly cheap to the Mexican curve for those of us brave enough to do it. And by the way, the issue that – at a large original issue discount which meant it have a lot of default protection relative to other Mexican bonds.

It was nirvana of a bond for us. We bought as much of it as we could. We were the largest holder of this bond even …


VANDERSTEEL: … though we weren’t a very large emerging debt asset manager. And we couldn’t figure how or why – why would Mexico give us such a free lunch? It just doesn’t make any sense and our sovereign analyst came up with a theory, which I think is a reasonable one, he said, here’s the thing, U.S. rates are low, interest rates are low, so while the spread is very wide, the yield is one of the lowest that Mexico has ever issued at and that’s politically popular.

On top of that, it’s politically popular to say we, Mexico, can borrow for a hundred years while paying and struggling.

RITHOLTZ: So, a little bit of the political populism and national pride allows them to offer this and it’s relatively inexpensive money for them, isn’t it?

VANDERSTEEL: That’s right. That’s right. And that was our only Mexican holding for years until Brexit came along and a sterling version of that bond became shockingly cheap to it. So we got rid of all of our dollar bonds and bought sterling bonds at just a relative value.

RITHOLTZ: So, from Azerbaijan to the Ivory Coast to Mexico to all around the world, it kind raises an interesting question. So, you mentioned you had an analyst who covered Mexican debt, how do you analyze governments or companies for that matter that are halfway around the world and presents a risk of all sorts of upheaval politics currency crisis, defaults on EM debts, do you have to have boots on the ground in each country or can you do this from afar? What do you lose not participating on the ground?

VANDERSTEEL: In my opinion, this is more of a marketing question then an investing question.

RITHOLTZ: Really interesting. Tell us more.

VANDERSTEEL: So, if think through the process that I’ve just described where you load your chips, you alpha chips on arbitrage like things, where you don’t even really care which country you’re talking about, frankly, right? Then from that perspective, no, you don’t need boots on the ground because you are emphasizing that activity and deemphasizing what you think you know about any particular country.

And so, the country tilts that we remain with are mostly a function of whether or not there are arbitrage-like things to do in that country. Take Papa New Guinea or Tajikistan, there’s nothing to do there. You either buy the one bond they have or you don’t. Pure country selection. So, we just don’t bother, right?

RITHOLTZ: So, you’re saying this is really a quantitative form of analytics and not a squishy or qualitative approach?

VANDERSTEEL: That’s correct. That’s correct. If you’ve marketed yourself ifas boots on the ground and we think we can get more information than other people, which by the way, Regulation FD wasn’t just for equities, it’s for everybody. Everybody gets the same information at the same time, the same road show, the same everything. It’s not like …

RITHOLTZ: That’s true even overseas? I mean, I would think that if you’re issuing a bond in Ecuador, what the hell do you care about the SEC rules?

VANDERSTEEL: These are SEC-registered bonds. These are …

RITHOLTZ: So, it does matter.

VANDERSTEEL: Remember, the market is euro clear, U.S. law, UK law. The country is emerging.

RITHOLTZ: Got you. That’s really – really quite interesting.

VANDERSTEEL: So, this idea of the ’90s where I go and find out to vote and I tell the U.S., the worldwide JPMorgan salesforce what the thing is going to be, that kind of insight, knowledge, that doesn’t exist anymore.

RITHOLTZ: Right. Right. That makes – that makes a lot of sense. Two other questions about what’s going today. So, inflation seems to be the watchword in 2021 along with interest rates that seem to follow, these are popular subjects of at the moment, what do you make of inflation as a risk both to the rate regime we see and – and how does that impacts emerging market debt?

VANDERSTEEL: So, inflation is a form of default where you don’t have to declare it. Right? So, from everything I know about sovereigns when they get their backs against the wall and eventually have to make a political choice to default, it’s a very, it’s generally a very unpopular decision. And if you can, you want it – conditional on being in that position, you want to keep the losses on foreigners, right? That’s why it used to be that countries would default on their foreign currency debt because that’s where the foreigners were, right?

Russia changed that calculus because they defaulted on local currency debt which is where the foreigners were pay dollar debt which is where the Russian oligarchs were. So, once you’re in that position, if you can use financial repression in the form of negative real interest rates partially through higher inflation, right, then you can default slowly without having to make a political decision to say we’re not going to pay. And that’s how – that’s why, in my opinion, you see shadow assets trying to pop up.

So, if all the developed markets are all using financial repression simultaneously, you can’t escape – you can escape by going to emerging markets but they’re going to try and do the same thing. If you’re China, you use to have a closed capital system. So, it’s very hard for people to say, I don’t like negative real interest rates here, I’m going to go by, you know, U.S. dollar bonds or something like that. It’s hard for citizens to change their currency that’s evolved a little bit but it’s still fairly hard.

So, you see people playing hope as a strategy. I would say cryptocurrency is hope as a strategy.


VANDERSTEEL: And I don’t – I know I’m a sitting duck for financial repression, so I’m going to hope that this other thing is better because there’s nowhere else to escape.

RITHOLTZ: Do you want to define financial repression? I hear that phrase constantly and I always get the sense people use it very differently.

VANDERSTEEL: So, what I mean by financial repression is a running down of debts by allowing the earnings. So, whether it’s corporate earnings or personal earnings or government earnings, to be inflated through the inflation process while the debts that are owed, whether it’s M zero (ph) in the form of your no banknote in your wallet or in your bank account, all the way out to your, U.S. 10 year bond, yielding 140 something, if inflation is higher than that, then you’re eroding the real value of those debts which is somebody else’s asset, right?

And that’s how you run down your debt GDP, slowly over time, but you don’t actually default. You don’t – you don’t fail to pay, you just fail to pay in real terms.

RITHOLTZ: Really quite interesting. So, you have decades of experience looking at emerging markets. You’ve lived through economic, financial, credit crises all manner of mayhem in these markets, what have you learned about these type of situations over the course of your career? What’s your big take away here?

VANDERSTEEL: Well, you’ve probably read Tolstoy, so …

RITHOLTZ: College. Sure.

VANDERSTEEL: … you have this idea that every family is unhappy in its own way. Every crisis is unhappy in its own way, right? There are elements that may be the same but each one in – is slightly different and in early book that was given to me when I started one or two books when I started in the emerging debt markets, about the relationship between creditors and debtors and what happens when they get into crisis. One is called “Banks, Borrowers, and the Establishment,” which is a great book.

And the in the other one is called “Debt Games”. And in “Debt Games,” they look through all the crises up until the moment that book was written and they use a game theoretic approach to the strategic game of creditors and debtors as they head into a failure-to-pay moment. And so you can try and conceptualize things that way and say, OK, what are the facts that we have or the known unknowns about this particular situation and how does it lineup with our past experience.

But again, there’s still some unknown unknowns every time you do that. So, you just have to be humble about what is really knowable in any given situation.

RITHOLTZ: So, I see “Debt Games,” that’s a Vinod Aggarwal. “Debt Games Strategic International Interaction and in International Debt Rescheduling.” Is that the book you’re referring to?


RITHOLTZ: And what was the other book? I’m sorry, I missed it.

VANDERSTEEL: It’s called, “Banks, Borrowers, and the Establishment.” It’s – unless I …

RITHOLTZ: I found it. All right. Here it is. Got it. It was – it’s “Bank, Borrowers and the Establishment: A Revisionist Account of the International Debt Crisis,” is that it?


RITHOLTZ: 1993, quite interesting. So, go on. I’m sorry to have interrupted you about that. I just wanted to track these because they sound intriguing.

VANDERSTEEL: Yes, I know. They’re super – it’s mostly about how to take the strategic interactions and map them on to the utility functions of the people involved, right? So, my utility function as an investor on behalf of endowments and pensions and foundations or whatever it is to maximize alpha relative to my benchmark. That’s – I have a very, very transparent utility function.


VANDERSTEEL: The borrower, right, let’s say it’s a government borrower, may not be so transparent and their utility function can shift quickly overtime. And so just thinking about how that evolves and trying to make some guesses – and by the way, this administration might get voted out of office over the term of the debt of the bonds that you own, and so your opinion is only good so long as so and so is in of course, you know a great example of that was Ecuador earlier this year where you vote in the new guy and the new guys were more investor friendly and the bonds go up to 60 percent. So, that’s a pretty change.

RITHOLTZ: So, you’ve seen a lot over the course of your career. I’m going to throw you a curveball now and ask, in 2002, you leave JPMorgan to train for a spot on the U.S. national rowing team to compete at the Olympics in Athens in ’04? Tell us about that, what motivated it, I’m going to assume, you are just going to Athens to check out their debt, what got you involved in crew and rowing?

VANDERSTEEL: Yes. So, after I moved back from Brazil in 1997, I took over a pretty big job at JPMorgan and it was right as the Asian financial crisis came and that was a hellish period for about 18 months through Russia’s default and I just burned out a lot. And one of my clients, who is a prop trader at Bankers Trust said, I think you need to pick up sports. You work all the time.


VANDERSTEEL: I said, well, I live in Manhattan, I live in a village, what do I – like, what sport am I going to take up? He says, why don’t you take up rowing? Nobody needs you at four in the morning. And so, I bought a car, I joined a rowing club, I loved it. I got more serious. I transferred to New York Athletic Club and had a great coach there who watched an evolution that was very subtle and this is partially a story of JPMorgan.

So, JPMorgan had an extremely special culture. It’s hard to describe until it was gone, right? That was the only job I’d ever had.


VANDERSTEEL: But Chase bought JPMorgan in 1999.


VANDERSTEEL: And that culture fell apart. And so, my coach who’s watching me get faster and faster simultaneously saw me not love my job anymore. He’s like you used to be first off the water, jump in your little car, get to your job, be at your desk at seven in the morning. Now, I see you hang out, you have breakfast with the team, what’s going on?

And I said I don’t love my job anymore. And he says you’re so talented, why don’t you quit your job then and try and train for Athens? And so I said, you know what you’re right? And I just did.

RITHOLTZ: And this was the woman’s double event which is really a challenging event, isn’t it?

VANDERSTEEL: Well, this is the women’s lightweight double. Yes. So, Olympic women’s rowing, if you’re an open weight, there’s single, the double, the four, the quad, and the eight. In lightweight rowing, there’s the double. So, you’re either number one and two in the country or you’re not.

RITHOLTZ: Wow. So, and plus, it’s a lot of dieting. You had to weigh a very small amount. It was really intense to do and coach, when I showed up practice the next day and I said I quit my job, Vinny (ph), I’m ready to go. He says, all right, now, you have to move to Boston because that’s where all the lightweight rowers are.

I couldn’t believe it. I was like, what? I thought I was going to row for you? He says, no, you’re rowing for Athens. So, you move to Boston.

RITHOLTZ: Wow. That’s amazing.


RITHOLTZ: So, that’s what led you to Boston, and I guess, ultimately, to GMO?

VANDERSTEEL: Yes. Yes. I mean, I didn’t make the team and I was very despondent about that, but I did meet a guy who is now my wonderful and long-suffering husband. And I said I’m not moving back to New York. So, then and I thought what am I going to do? So, I called up GMO and said, hey, you remember me? They’re like, yes, I remember you. I said I need a job. They said, OK. And that was that.

RITHOLTZ: Did they ask what have you been doing for the past two years since you left JPM?

VANDERSTEEL: They did. And fortunately, the head of the team at the time himself is really big into sports. We still follow each other on Strava now that he’s retired. And so, most of my interview with him about was about my power to weight ratio. I’m not kidding.

RITHOLTZ: That’s amazing. That’s really – that’s really amazing. So, how competitive were you in the woman’s lightweight doubles? Did – how close did you come to actually going to Athens? Because that’s supposed to be an incredibly competitive slot.

VANDERSTEEL: So, in 2003, which is the year leading up where they’re going to decide the likely national team the following year, we came in second at trials.


VANDERSTEEL: And now, interestingly enough, I still row every day and on the weekends, we have a house at Cambridge (ph) and I’ve started rowing down there and one of the guys I now row with is the coach of other women’s double. And I remember the first day that I showed up, I was so nervous, I thought, oh, my God, I’m going meet Jim Dietz and I said hi, Mr. Dietz and he says Vandersteel, you rowed against Stacy (ph), I’m like, yes, he’s like, you could – you did a good job.

RITHOLTZ: That’s nice.

VANDERSTEEL: I was so pleased. And then, this year, at the Head of The Charles, we raced, my partner and I, raced against couple of the open weight women from Athens, Hillary (ph) and Marianne (ph), we just lost. So, it’s fun to still race these women all of these years later. Of course, we have kids and jobs and other stuff going on.

RITHOLTZ: What are you working on at home? Are you using a rowing machine or you’re not in the water every day, certainly not this time of the yer.

VANDERSTEEL: We were out on Saturday and Sunday this morning. I have a group called The Early Birds, it’s all of these fabulous women and at 5:25, the race starts. So, you just hit the FaceTime, whoever shows up today, it was Sam (ph) and Alex (ph), and we had us work out we’d agreed to yesterday. Normally, were would do it at the rowing club on the rowing machines, but right now, of COVID, we just do it over the FaceTime.

RITHOLTZ: And what machine …

VANDERSTEEL: I would get out of bed without these women, by the way. They’re unbelievable.

RITHOLTZ: Is this any particular machine or you – how are you actually doing this? I’m – the reason I ask is I have a Hydrow which I …


RITHOLTZ: I kind of get very lax when the weather’s nice and I’d rather be outside. But around this time a year, it’s like, OK, it’s time to start and I’m just about ready to mid-December, just about ready to say, all right, no more goofing around, let’s hit the machine.

VANDERSTEEL: Well, that looks like very, very spiffy machine. I’ve seen not only have I seen the advertisement for it, but the people who do the videos …

RITHOLTZ: Yes, they’re great.

VANDERSTEEL: They’re out on the Charles all the time.


VANDERSTEEL: So, you’d have to go by.

RITHOLTZ: That’s funny.

VANDERSTEEL: But we were on Concept2s which are just the basic equipment.

RITHOLTZ: Well, you know …

VANDERSTEEL: I’ve learned recently that one of the women from back in the day, this woman, Katrine (ph), is working on an improvement to what we have going which is just literally Facetimes. So, we got video chat going on, but we can’t see each other’s monitors as though we were all there together. So, she’s working on an enhancement where it’ll be FaceTime plus your ability to see other people scores which really gets your juices going, you know?

RITHOLTZ: That’s the secret sauce of Peloton and other competitive machines like Hydrow and I’m sure there’s – NordicTrack has something similar. At a certain point, it just becomes, I just want a little peace and quiet and the videos are very – it’s a relaxing workout even if you work out – work up a sweat. You’re much more competitive in that space. So, I don’t dare, but it sounds like it’s really fascinating that’s amazing you’ve stayed with it all these times.

I know it’s amazing you stayed with it all this time. I know I only – speaking of time, I know I only have you for a few more moments. Let’s jump to our favorite questions that we ask all of our guests starting with, tell us what you streaming these days. Where – what have been keeping you entertained, you and the family entertained, during the lockdown?

VANDERSTEEL: Well, my two teenage daughters glued me and the other day, they said, mom, you haven’t opened your Spotify Wrapped yet. So, I don’t know if you know what that is but that’s where Spotify tells you what you most listen to. So, it’s perfect timing.

So, according to Spotify what I most listened to is Eminem, Jay-Z, and Nas and Rhianna.

RITHOLTZ: So, these are all upbeat workout music?

VANDERSTEEL: Upbeat workout stuff. Yes. I listen to lot of the 180 beat per minute running workout stuff, so that’s my hypothesis, where that comes from.

RITHOLTZ: In terms of watching stuff, the girls have gotten into a show. It’s – I don’t even think it’s on Netflix, I think it’s on YouTube called “The Try Guys.” So, it’s these four hilarious guys who are on a cooking show where they’re not allowed to use any recipes and they just make stuff up. So, it’s very, very funny. We laugh a lot about that.

RITHOLTZ: “The Try Guys.” All right. I see this on YouTube that does look amusing. Tell us about your early mentors. Who helped to shape your career?

VANDERSTEEL: Well, certainly my parents, my older half-brothers and sisters, they’re much, much older than I am and they had interesting careers that I learned about growing up. I’d say my high school math teacher, one of my college journalism professors who’s at my wedding. I’m still very good friends with.

At JPMorgan, my God, there would be too many to mention. There were – the place was just teeming with unbelievable people But one really comes to mind is fellow, Mike Cembalest, who still works there. He taught me all about relative values. He was there. He watched the GMO versus long-term outcomes.

He was the person who suggested I go to Brazil. He said, listen, this relative value work is really interesting and we already like it, but you’re not going to win any II Awars or get paid much for doing it, you need to be one of the strategists. You need to be a person who can talk about the country.

And so, he said, just take a job in Brazil. I didn’t – I couldn’t speak Portuguese, I didn’t know anything about Brazil. He’s, like, you’ll be fine. And it was so fun.

RITHOLTZ: Interesting. Let’s talk about books. You mentioned two. What are some of your favorite, what are you reading currently?

VANDERSTEEL: So, when I thought about what books do I most love, I thought of it more in a desert island books, so you’re stranded on a desert island, you can only bring so many books with you. And if that were the case, the ones that come to mind top are Theroux’s “Pillars of Hercules” or Ondaatje’s “Running in the Family” or the “The English Patient.” I love Ann Patchett. She wrote “Bel Canto” and “Patron Saint of Liars.” And then I think I would always need to have a copy of Hofstadter’s, “Godel, Escher, Bach,” which keeps your mind sharp.

RITHOLTZ: I’m looking at a copy of that right now. That was a college book that I keep swearing I’m going to reread and I have yet to honor that promise.

VANDERSTEEL: It’s a great book, right?

RITHOLTZ: It is. Yes.

VANDERSTEEL: It was written by my – one of my research assistants at JPMorgan’s mom’s boyfriend.

RITHOLTZ: Interesting. Any of other books you want to mention or – I didn’t want to cut you off.

VANDERSTEEL: Yes. No, that’s about like the usual reading stuff. I like to read literature. I love Barnes, McEwan, that kind of stuff.

RITHOLTZ: Sounds like that’s a quite a great list. What sort of advice would you give to a recent college grad who is interested in a career in either fixed income or emerging market?

VANDERSTEEL: Well, definitely try and get yourself job at one of the big banks and go through the training program experience. I mean, you get a free MBA, you get to rotate around and figure out what you like, because I think it’s very hard to imagine what you’re going to like without actually doing it, right? After that, I would say think very, very carefully about cultural fit. I didn’t know that that mattered so much, like I said, until it was gone. So, if you’re not feeling it, move on.

RITHOLTZ: Really interesting. And our final question, what do you know about the world of investing today, be it emerging market debt, hedge funds, large corporate, investing strategies, that you wish you knew 30 years or so ago when you were first getting started?

VANDERSTEEL: Well then, I would say in line with the last question, you got to try stuff. Right? I think it’s hard for me to say what do I wish that I had known. I think you got to try stuff, fail, try again. That’s how you learn. And I can tell you to avoid mistakes. But until you make them yourself, it’s going to be really difficult. I remember, considering going to get a Ph.D. actually, while I was at JPMorgan thinking that would be something useful to have and I went out to Stanford and met with the person who I thought I wanted to study under and I explained the use case, like why do I want to have this Ph.D. and I explained to him what I did for a living, he says you don’t need this Ph.D. to do what you’re doing for living. If that’s your use case, forget it. You are a practitioner already. So, I’m not sure that I would’ve known that without actually practicing it.

RITHOLTZ: That’s really kind of intriguing women.

We’ve been speaking to Tina Vandersteel. She is the head of Emerging Country Debt at GMO where is also a partner.

If you enjoy this conversation, check out any of our previous 377 discussions we’ve had. You can find those that iTunes, Spotify, wherever you buy your favorite podcast. We love your comments feedback and suggestions. Write to us at Sign up for my daily reads at Follow me on Twitter @Ritholtz.

I would be remiss if I did not thank the crack team that helps me put together this conversation each week. Mohammad Rimawi (ph) is my audio engineer. Paris Wald (ph) is my producer. Michael Batnick is my head of research. Atika Valbrun is our project manager. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.




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