Aoifinn Devitt: Why is it important to play the long game in investments, in business, and in life? And what’s more important, the position or the supervisor? Let’s hear what our next guest has to say. I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people and their stories. I’m joined today by Tom Majewski, Managing Partner of Eagle Point Credit Management, which focuses on investments in CLOs or collateralized loan obligations and CLO equity. Prior to founding Eagle Point, he held a variety of roles on Wall Street, mainly in the fixed income area. Welcome, Tom. Thank you for joining me today.
Tom Majewski: Good morning, Eifin. Thank you very much for having me.
Aoifinn Devitt: Let’s start with your journey into a career in investing. How did it start and did it take any unusual turns along the way?
Tom Majewski: Indeed, I think most careers will take a number of unusual turns along the way. As I’ve looked at my career, I’ve made a conscious point to kind of look at things in 5-year increments. Here’s where I am today. Here’s where I’d like to be every 5 years and kind of revisiting that every 5 or so years to set the next objective and look around me. My career actually started in accounting where I was for about 5 years at a now former major accounting firm. And I got to see a lot of different things. I got to see the numbers behind transactions and I got to see the differences in transactions, which I’ll come back to in a bit. But a few things began to pique my attention even in my youngest But pretty quickly at the end of that first 5-year batch, it became clear to me that I wanted to get closer to the transactions, to be creating them versus reporting on them. And that began a transition into banking and eventually into investment management. Probably the biggest twist and turn, which a lot of people of my generation would have faced and of the past few years with the tumult of 2008 and ’09 in the financial markets, markets where essentially everything had a chance to be rewritten. But at a high level, starting with those 5-year increments, I think was the most important decision I had made as I looked through the future of my career.
Aoifinn Devitt: And was it always your intention or aim to launch your own firm?
Tom Majewski: At the end of the second 5-year batch, so 10 years into my career, I set that as a goal. That was about 2005. It took more than a few years to get everything together. Together, not for lack of trying, but as I reached that second milestone in my career, looking around and seeing the people who I thought were creating the most value for those around them, who enjoyed themselves the most, and frankly, who had positions which offered the most ability for flexibility and creativity, it became pretty clear that being in the boutique investment management business was the next step that I wanted to get to.
Aoifinn Devitt: And in terms of CLOs, CLOs are a member of what would sometimes be termed the alphabet soup of credit products, and certainly it entered the popular lexicon, not always for the right reasons, after the GFC. How did you begin to focus on that area?
Tom Majewski: It actually goes back to a random assignment in 1995 at my first job, where out of 100 new starters at Arthur Andersen’s New York office, I was the only person who Got assigned to the securitization group. I’m not entirely clear why, but that was where I ended up right out of my first day of work. I had a bit of an edge in that I’ve always been a bit of a spreadsheet geek, so I could use old Lotus 1-2-3, which was prevalent back in the day, perhaps better than average. And I was fascinated with the financial ins and outs of all different types of securitizations. Back then, the CLO market or securitized corporate loan market was quite nascent, but there were many other forms of securitization which are still common today, be it auto loans or equipment leases and whatnot that are commonly used, commonly put into securitization asset, securitization transactions. The thing that piqued my attention about CLOs, which was different than substantially any other form of securitization, is that the assets keep changing. Whereas a mortgage or auto transaction are gonna be a static pool in the United States, the CLO market has something that’s called a reinvestment period typically, where for the first 3 to 6 years, depending on the transaction, old assets can go away, they can pay off, they could be sold, they could default, but new assets can come into the transaction. And that’s different than any other form of securitization perhaps other than credit cards. And that intrigued me. And I said, this is something different. And I think something that’s underappreciated by the market.
Aoifinn Devitt: And that said, they still may be perceived as being somewhat complex. And how well do you think in general the investment management industry dismantles complexity for investors? And how could it do better?
Tom Majewski: So, so I think the investment management industry does a good job, but perhaps not the best possible job of dismantling complexity. There is a two-edged conflict. Investors will typically only invest with you if they have a reasonable understanding of what it is you do, what the risks are, how you make money, and how you can lose money. That’s an important thing for, for any institutional or even high net worth investor to get their heads around when getting into an alternative asset class. At the same time, many investment managers don’t want to give away all the secrets, lest they disintermediate themselves from the market as well. So there’s a bit of a natural conflict. We have a hedge to that latter risk in that the investments we make— to invest effectively in the market, you need to spend millions of dollars on data and systems. You couldn’t do it without that. We have enough barrier to keep armchair investors out of our market. But broadly, the management industry, I think, is doing a good job at communicating and peeling back the onion. However, I think we can continue to do better. One of the things we pride ourselves on at Eagle Point is investor education and investor transparency. Invariably, whenever we dive into the details with someone, they call us back a few days later with a few more questions and say, I was thinking about what you said, and now I’d like to ask further. And that’s great. That means we’ve gotten investor mindshare. They’re thinking about us. They’re thinking about our market. And obviously, hopefully, they’ll invest with us eventually.
Aoifinn Devitt: And I mean, you’re not just an investor now. You’re also a business owner, a manager, a leader. In looking back at the paths you took in education, perhaps besides accounting, what did you find most useful in terms of developing your current career, or where did you pick up some of those skills along the way?
Tom Majewski: A lot of being a business owner, particularly in the investment management business, comes down to what I’ll call emotional intelligence. You need a steady hand and a cool head for investing. You certainly can’t let passion or vigor or anger get in the way of making sound investment decisions. The flip side, a lot of what my role ends up being is making sure the systems work right and the people are doing their part right. And that’s both internal people, people on our team, and we have just an extraordinary team here at Eagle Point, as well as outside parties, both our investors, collateral managers we work with, and other service providers, be it underwriting banks, accountants, trustees, lawyers. And I spend more and more of my time thinking about the emotional aspect and the interpersonal aspect of lots of things that we do. While our first and foremost job is to put up very good numbers every single month, an important part of our business, and I think the success of our business and the success of our team, is making sure the softer side of the investment process is nearly as robust as the the American side of the investment process. And to that end, I probably— I don’t think I took a psychology class in university ever. Perhaps I should have. I do find myself reading 1 or 2 books a year in that general area, which I find to be quite fascinating. I find I’m still a student of that and continue to want to learn more. The best testament that I can give to myself and our business here is a very low employee turnover rate. We’ve had very, very few departures in nearly 8 years we’ve been in business, and that’s attributable both to a good recruitment process and having the place be a good place to work. When we look at business counterparties, that’s one of the things we look at. Is it a revolving door of staff, or is it a very sticky team? And that, I think, tells you a lot about the culture of the firm and the overall management of any given firm.
Aoifinn Devitt: And just on that point, I don’t think I’ve ever said this to you, but I was very impressed at how you connected with the board of trustees of a public fund when you presented to them. I think there was a profoundly empathetic angle to your presentation, and that is rare, actually. Most PMs do not know how to connect with the end investor. Is that something you think about when you mentioned the human connection, who you were ultimately running money for?
Tom Majewski: Absolutely. Every investor invests with us for one of two reasons. Either they have a lot of money and they’d like to get even more, or they’re filling an important need, be it a public pension, be it an insurance company, be it a university endowment. Every investor wants to do better. They want to make more money. Some have more specific causes that obviously they’re investing for if they have beneficiaries that they need to pay every single month. But we realize Essentially every investment decision is both a combination of the merits of the investment and the credibility of the team and the people. And part of our job, and in any, any business frankly, is to understand what your counterparties need and want and what they’re doing for. And if you can understand all of that, that’s something that I think that gives you an advantage both in the investment management business and in nearly any business. One of my senior partners here at Eagle Point actually used to work at a Taft-Hartley or a union pension fund before joining Eagle Point. And it was obviously a very unusual move to come from a staff investment person at a Taft-Hartley pension to a boutique money manager. He brought a very good investor first and foremost, but also brought us a lot of different perspectives that I think many people in the investment management business, certainly newer firms, often lack. So that was certainly something that was a competitive advantage both early on, but I think it’s infiltrated the culture of our firm over the longer term.
Aoifinn Devitt: And is that something you actively seek to do, is to have cognitive diversity within your team?
Tom Majewski: Absolutely. One of the things I’m very proud of is of our senior team, and throughout the team, but particularly the senior team, Many people have been focused on either our market or some very close derivative of our market over their career, but have come at it from a different perspective. One of my partners is a very deep-in-the-weeds person and knows the provision you’d expect to see on page 163 of an offering document. And another has probably looked at a few offering documents in detail over the years, but has a much more big-picture outlook on things. Putting the combination of skills and backgrounds both from a functional task perspective, things that they’ve done over time, is very important, as well as having diversity of backgrounds of where people are from, where did they grow up, what language did they speak as a child in their houses. We seek to have a broad set of folks both with business diversity and really all forms of diversity in that if a group or a team is substantially dominated by folks with one particular set of background, if everyone happened to go to a particular Ivy League school or something like that, invariably things get lost in the wash. And that’s, I think, a big business risk we’ve sought to avoid.
Aoifinn Devitt: And looking back at your career, despite having it quite well planned out in 5-year blocks, perhaps, I’m sure there were some setbacks and challenges or even investment mistakes. Can you share some of those and what you learned from them?
Tom Majewski: Certainly. For the benefit of our clients, most of those mistakes were from my own account, which is good. I’ve had some personal wins and successes and other personal losses and less successes. One of the things that has been a hallmark of our firm is let’s invest our own money first before bringing the product to others. And I don’t think we took— we outside money probably for the first 18 months of our firm, just investing some of our own house money as we began our process. And frankly, it was the numbers that people saw that people started asking, hey, I would like to invest as well, which then we figured out how to— it was always the plan, but it came a little quicker than we would have liked there. But over the years, looking at investments that I’ve made personally in equities and fixed income investments, in real estate. I learned a lot of the ups and downs and actually in other private businesses, each of which I can point to both successes and either failures or mediocre outcomes. And learning with my own capital, albeit was quite modest at the beginning, I think was a very good way to learn the hard way and see my own numbers first before bringing it to others. Important with that, both that investment A turned out good, investment B turned out bad, Why those happened, what the facts and circumstances were, was it the structure of the investment? Was it the people? Was it the raw thesis? Getting your head around all of those things very early on, very important. And then critically looking back at the conclusion of an investment, be it picking a specific stock or investing in a multifamily property for a 5 to 10-year trajectory, when it’s all said and done, looking back at the pluses and minuses of the investment, realizing that you probably weren’t a brilliant person, but what were the attributes of that investment that made it go so well or miss the expectations? And understanding those helps shape what you do tomorrow. And doing that critical review after the fact, I think, is absolutely essential. We do that today at Eagle Point just as well as I’ve done that personally.
Aoifinn Devitt: And you, in your career, have navigated through multiple market crises, some of which may have been particularly tumultuous for CLOs and specialists credit, I would imagine a strong stomach is in order. How have you held your nerve through some of these times and what has helped you navigate through?
Tom Majewski: We’ve certainly had the twists and turns a number of times, as I think back to the to 2000 ’02 tech telecom cycle, augmented by, unfortunately, by terrorism in the US back in ’08, 2001, ’09, ’15, ’16, and even what we’re going through right now and where we were in March and April of this year. Our asset class and many asset classes, but it certainly feels like CLOs get picked on more than the historic performance would suggest is warranted. It’s important to see through the hyperbole. I could write a scathing article about our asset class quite easily, and I know a lot of the buzzwords to use, and I often joke with people in the media of make sure you use this word in your headline. At the same time, I find comfort in the data in that it’s Ultimately, the numbers that prevail, we can say lots of different things and think loans are good and loans are bad. And CLO sounds like CDO, but CLOs pretty much all worked out through the financial crisis. Looking at the data helps me see through the hyperbole in the market. And certainly in the depths of 2008 and ’09, there were lots of talk of CLOs are going to blow up or liquidate. That was a common, commonly heard phrase. We heard that to a lesser degree in 2015, and we even heard it again in March and April of this year. With no exception that I’m aware of, no cash flow CLO was forcibly liquidated during any of those periods. And as we think about that, the number of articles foreshadowing doom for our investments were great. The number of actual doom events, doomsday events that played out, as best we’re aware, is zero. And reconciling the two and focusing on the numbers. And you can’t ignore the headlines, but you need to put them into perspective, in my opinion, when you’re evaluating a particular investment. And if your numbers are right, you’ll see through the other side of the hyperbole. Your numbers darn well have to be right, however.
Aoifinn Devitt: And it certainly seems hyperbole. The count is high, certainly at the moment, from many different directions. But I think we’re all aware of the need to see through the headlines perhaps and look at the underlying data more than ever. Just when you look back at your career too, in terms of key people or key pieces of advice that you received, can you share any of those?
Tom Majewski: Sure. Probably the thing that was— I didn’t appreciate this at the time. I only appreciated it in hindsight. For years 5 through 10 of my career, I had a direct supervisor who was 20 years my senior. One of the things that happens in Wall you Street, have people in many firms, people kind of move up in classes or batches. In many cases, you might have a supervisor who’s 1, 2, 3 years more senior than you. As you move up in your career, frankly, it’s possible you have someone who’s supervising you who’s younger than you. I’ve seen a few leapfrogs even over the years. But what I was very lucky, and I would seek this out if I could do it all over again, is to have a caring and thoughtful and wise and stable-handed supervisor who was 20 years my senior. This individual wasn’t threatened about his job or anything like that. I wasn’t going to try and take his position. What I found was someone who gave me rope but wouldn’t let me hang myself. And as I look at the most pronounced development in my career, it was that years 5 through 10 where I developed, I think, and matured the most on a relative basis. I try to keep improving every year, but that period of time was particularly pronounced for me. If I could do it again, I would focus on a job that if I had to make a trade-off of maybe a less attractive job but with a highly skilled supervisor, it’s something I would give significant weight to today. There is a saying we hear from time to time in business management of people don’t quit companies, they quit bosses. And while there’s a few exceptions to that rule, I’m sure, in general, if you have a supervisor who who you’re— you know has your back, I think you’re going to be in a pretty good situation as a company evolves and markets evolve. So I would probably give more weight to supervisor selection than many other aspects of position selection if I could do it all over again.
Aoifinn Devitt: And is there any creed or motto that you live by, whether in your business or your personal life, that you feel has been instrumental?
Tom Majewski: Always focus on the long game. To be critical of myself, have I left a dollar on the table in any number of transactions or relationships I’ve been involved in? Absolutely. What I’ve been very proud of is the same people I do business with today, in many cases, are the same people I did business with 20 years ago. I might have a different business card, they might have a different business card, but we always do as we say and say as we do. We want to make money. I know they want to make money. Making sure relationships are where everyone makes a fair amount of money, hopefully a little more for us, but everyone leaving happy without taking the last dollar out of every trade, in my experience, has been very, very valuable in that the aggregate amount of dollars we’ve been able to make for our investors, I think, is much greater than had we been a mercenary and tried to rip out every last dollar on any individual trade. So thinking over the long term is something that’s very, very important. Your average career on Wall Street might last between 15 and 35 years. If in a particular market, those same people are going to be around you for a lot of that time, and your reputation takes a long time to build but can evaporate very quickly, and looking at the long term of where do you want to be in relation to these people And is this someone I want to keep doing business with 10, 20 years from now? Giving focus to that is, I think, something that most people don’t do enough of and something I’ve made a conscious effort to do.
Aoifinn Devitt: And just my final question is, what is it that you like most about the world of investing?
Tom Majewski: There’s always something new to learn. In all of my career, I’ve never said to myself, well, I think I know everything. And the day you do that is the day you’d better retire, frankly. There’s always some new impact. There’s always some new twist and turn that’s going to be coming. Looking very recently, a virus breaking out in a country 7,000 miles away from here last November has changed the world that we know it here. In October of last year, no one was focused on that even as a concept, and think about how much our world has changed over that time frame. Different extraneous exogenous inputs to life, to business, will continue to come. You can’t run an investment portfolio worrying about nuclear war, or it certainly would be very difficult to do that at a minimum, but thinking about where the next input is going to be, what the next twist and turn is going to be. It’s not probably something that’s in any of your models. It’s something that— labor unrest, it could be social unrest, it could be a hurricane, any, any number of things that, that you need to keep gathering as much information, even in— I’ll use a concept of electronic trading, whereas in the Investment-grade markets, certainly the equity market, it’s largely an electronic market. In investment-grade corporates, it’s an electronic market. In the world that we deal in, you still pick up the phone and chit-chat with someone before you buy or sell a security. Are markets going to go that way eventually? Very likely, but there’s a few facts that might slow that natural evolution. But there’s always something changing. There’s never the same as yesterday in our world, and that’s something that I think keeps me excited to come into the office every single day. Um, and frankly keeps a lot of um, others, some are really excited.
Aoifinn Devitt: Well, thank you, Tom. I think you’ve done a tremendous job of dismantling some of the complexity. Um, getting back to the question I asked earlier, it’s been a real pleasure speaking with you and thank you for sharing your story.
Tom Majewski: Great. Thank you very much for having me.
Aoifinn Devitt: I’m Aoifinn Devitt. Thank you for listening to the 50 Faces Podcast. If you liked what you heard and would like to tune in to hear more inspiring investors and their personal journeys, Please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice, and all views are personal and should not be attributed to the organizations and affiliations of the host or any guest.
Aoifinn Devitt: Why is it important to play the long game in investments, in business, and in life? And what’s more important, the position or the supervisor? Let’s hear what our next guest has to say. I’m Aoifinn Devitt, and welcome to the 50 Faces Podcast, a podcast committed to revealing the richness and diversity of the world of investment by focusing on its people and their stories. I’m joined today by Tom Majewski, Managing Partner of Eagle Point Credit Management, which focuses on investments in CLOs or collateralized loan obligations and CLO equity. Prior to founding Eagle Point, he held a variety of roles on Wall Street, mainly in the fixed income area. Welcome, Tom. Thank you for joining me today.
Tom Majewski: Good morning, Eifin. Thank you very much for having me.
Aoifinn Devitt: Let’s start with your journey into a career in investing. How did it start and did it take any unusual turns along the way?
Tom Majewski: Indeed, I think most careers will take a number of unusual turns along the way. As I’ve looked at my career, I’ve made a conscious point to kind of look at things in 5-year increments. Here’s where I am today. Here’s where I’d like to be every 5 years and kind of revisiting that every 5 or so years to set the next objective and look around me. My career actually started in accounting where I was for about 5 years at a now former major accounting firm. And I got to see a lot of different things. I got to see the numbers behind transactions and I got to see the differences in transactions, which I’ll come back to in a bit. But a few things began to pique my attention even in my youngest But pretty quickly at the end of that first 5-year batch, it became clear to me that I wanted to get closer to the transactions, to be creating them versus reporting on them. And that began a transition into banking and eventually into investment management. Probably the biggest twist and turn, which a lot of people of my generation would have faced and of the past few years with the tumult of 2008 and ’09 in the financial markets, markets where essentially everything had a chance to be rewritten. But at a high level, starting with those 5-year increments, I think was the most important decision I had made as I looked through the future of my career.
Aoifinn Devitt: And was it always your intention or aim to launch your own firm?
Tom Majewski: At the end of the second 5-year batch, so 10 years into my career, I set that as a goal. That was about 2005. It took more than a few years to get everything together. Together, not for lack of trying, but as I reached that second milestone in my career, looking around and seeing the people who I thought were creating the most value for those around them, who enjoyed themselves the most, and frankly, who had positions which offered the most ability for flexibility and creativity, it became pretty clear that being in the boutique investment management business was the next step that I wanted to get to.
Aoifinn Devitt: And in terms of CLOs, CLOs are a member of what would sometimes be termed the alphabet soup of credit products, and certainly it entered the popular lexicon, not always for the right reasons, after the GFC. How did you begin to focus on that area?
Tom Majewski: It actually goes back to a random assignment in 1995 at my first job, where out of 100 new starters at Arthur Andersen’s New York office, I was the only person who Got assigned to the securitization group. I’m not entirely clear why, but that was where I ended up right out of my first day of work. I had a bit of an edge in that I’ve always been a bit of a spreadsheet geek, so I could use old Lotus 1-2-3, which was prevalent back in the day, perhaps better than average. And I was fascinated with the financial ins and outs of all different types of securitizations. Back then, the CLO market or securitized corporate loan market was quite nascent, but there were many other forms of securitization which are still common today, be it auto loans or equipment leases and whatnot that are commonly used, commonly put into securitization asset, securitization transactions. The thing that piqued my attention about CLOs, which was different than substantially any other form of securitization, is that the assets keep changing. Whereas a mortgage or auto transaction are gonna be a static pool in the United States, the CLO market has something that’s called a reinvestment period typically, where for the first 3 to 6 years, depending on the transaction, old assets can go away, they can pay off, they could be sold, they could default, but new assets can come into the transaction. And that’s different than any other form of securitization perhaps other than credit cards. And that intrigued me. And I said, this is something different. And I think something that’s underappreciated by the market.
Aoifinn Devitt: And that said, they still may be perceived as being somewhat complex. And how well do you think in general the investment management industry dismantles complexity for investors? And how could it do better?
Tom Majewski: So, so I think the investment management industry does a good job, but perhaps not the best possible job of dismantling complexity. There is a two-edged conflict. Investors will typically only invest with you if they have a reasonable understanding of what it is you do, what the risks are, how you make money, and how you can lose money. That’s an important thing for, for any institutional or even high net worth investor to get their heads around when getting into an alternative asset class. At the same time, many investment managers don’t want to give away all the secrets, lest they disintermediate themselves from the market as well. So there’s a bit of a natural conflict. We have a hedge to that latter risk in that the investments we make— to invest effectively in the market, you need to spend millions of dollars on data and systems. You couldn’t do it without that. We have enough barrier to keep armchair investors out of our market. But broadly, the management industry, I think, is doing a good job at communicating and peeling back the onion. However, I think we can continue to do better. One of the things we pride ourselves on at Eagle Point is investor education and investor transparency. Invariably, whenever we dive into the details with someone, they call us back a few days later with a few more questions and say, I was thinking about what you said, and now I’d like to ask further. And that’s great. That means we’ve gotten investor mindshare. They’re thinking about us. They’re thinking about our market. And obviously, hopefully, they’ll invest with us eventually.
Aoifinn Devitt: And I mean, you’re not just an investor now. You’re also a business owner, a manager, a leader. In looking back at the paths you took in education, perhaps besides accounting, what did you find most useful in terms of developing your current career, or where did you pick up some of those skills along the way?
Tom Majewski: A lot of being a business owner, particularly in the investment management business, comes down to what I’ll call emotional intelligence. You need a steady hand and a cool head for investing. You certainly can’t let passion or vigor or anger get in the way of making sound investment decisions. The flip side, a lot of what my role ends up being is making sure the systems work right and the people are doing their part right. And that’s both internal people, people on our team, and we have just an extraordinary team here at Eagle Point, as well as outside parties, both our investors, collateral managers we work with, and other service providers, be it underwriting banks, accountants, trustees, lawyers. And I spend more and more of my time thinking about the emotional aspect and the interpersonal aspect of lots of things that we do. While our first and foremost job is to put up very good numbers every single month, an important part of our business, and I think the success of our business and the success of our team, is making sure the softer side of the investment process is nearly as robust as the the American side of the investment process. And to that end, I probably— I don’t think I took a psychology class in university ever. Perhaps I should have. I do find myself reading 1 or 2 books a year in that general area, which I find to be quite fascinating. I find I’m still a student of that and continue to want to learn more. The best testament that I can give to myself and our business here is a very low employee turnover rate. We’ve had very, very few departures in nearly 8 years we’ve been in business, and that’s attributable both to a good recruitment process and having the place be a good place to work. When we look at business counterparties, that’s one of the things we look at. Is it a revolving door of staff, or is it a very sticky team? And that, I think, tells you a lot about the culture of the firm and the overall management of any given firm.
Aoifinn Devitt: And just on that point, I don’t think I’ve ever said this to you, but I was very impressed at how you connected with the board of trustees of a public fund when you presented to them. I think there was a profoundly empathetic angle to your presentation, and that is rare, actually. Most PMs do not know how to connect with the end investor. Is that something you think about when you mentioned the human connection, who you were ultimately running money for?
Tom Majewski: Absolutely. Every investor invests with us for one of two reasons. Either they have a lot of money and they’d like to get even more, or they’re filling an important need, be it a public pension, be it an insurance company, be it a university endowment. Every investor wants to do better. They want to make more money. Some have more specific causes that obviously they’re investing for if they have beneficiaries that they need to pay every single month. But we realize Essentially every investment decision is both a combination of the merits of the investment and the credibility of the team and the people. And part of our job, and in any, any business frankly, is to understand what your counterparties need and want and what they’re doing for. And if you can understand all of that, that’s something that I think that gives you an advantage both in the investment management business and in nearly any business. One of my senior partners here at Eagle Point actually used to work at a Taft-Hartley or a union pension fund before joining Eagle Point. And it was obviously a very unusual move to come from a staff investment person at a Taft-Hartley pension to a boutique money manager. He brought a very good investor first and foremost, but also brought us a lot of different perspectives that I think many people in the investment management business, certainly newer firms, often lack. So that was certainly something that was a competitive advantage both early on, but I think it’s infiltrated the culture of our firm over the longer term.
Aoifinn Devitt: And is that something you actively seek to do, is to have cognitive diversity within your team?
Tom Majewski: Absolutely. One of the things I’m very proud of is of our senior team, and throughout the team, but particularly the senior team, Many people have been focused on either our market or some very close derivative of our market over their career, but have come at it from a different perspective. One of my partners is a very deep-in-the-weeds person and knows the provision you’d expect to see on page 163 of an offering document. And another has probably looked at a few offering documents in detail over the years, but has a much more big-picture outlook on things. Putting the combination of skills and backgrounds both from a functional task perspective, things that they’ve done over time, is very important, as well as having diversity of backgrounds of where people are from, where did they grow up, what language did they speak as a child in their houses. We seek to have a broad set of folks both with business diversity and really all forms of diversity in that if a group or a team is substantially dominated by folks with one particular set of background, if everyone happened to go to a particular Ivy League school or something like that, invariably things get lost in the wash. And that’s, I think, a big business risk we’ve sought to avoid.
Aoifinn Devitt: And looking back at your career, despite having it quite well planned out in 5-year blocks, perhaps, I’m sure there were some setbacks and challenges or even investment mistakes. Can you share some of those and what you learned from them?
Tom Majewski: Certainly. For the benefit of our clients, most of those mistakes were from my own account, which is good. I’ve had some personal wins and successes and other personal losses and less successes. One of the things that has been a hallmark of our firm is let’s invest our own money first before bringing the product to others. And I don’t think we took— we outside money probably for the first 18 months of our firm, just investing some of our own house money as we began our process. And frankly, it was the numbers that people saw that people started asking, hey, I would like to invest as well, which then we figured out how to— it was always the plan, but it came a little quicker than we would have liked there. But over the years, looking at investments that I’ve made personally in equities and fixed income investments, in real estate. I learned a lot of the ups and downs and actually in other private businesses, each of which I can point to both successes and either failures or mediocre outcomes. And learning with my own capital, albeit was quite modest at the beginning, I think was a very good way to learn the hard way and see my own numbers first before bringing it to others. Important with that, both that investment A turned out good, investment B turned out bad, Why those happened, what the facts and circumstances were, was it the structure of the investment? Was it the people? Was it the raw thesis? Getting your head around all of those things very early on, very important. And then critically looking back at the conclusion of an investment, be it picking a specific stock or investing in a multifamily property for a 5 to 10-year trajectory, when it’s all said and done, looking back at the pluses and minuses of the investment, realizing that you probably weren’t a brilliant person, but what were the attributes of that investment that made it go so well or miss the expectations? And understanding those helps shape what you do tomorrow. And doing that critical review after the fact, I think, is absolutely essential. We do that today at Eagle Point just as well as I’ve done that personally.
Aoifinn Devitt: And you, in your career, have navigated through multiple market crises, some of which may have been particularly tumultuous for CLOs and specialists credit, I would imagine a strong stomach is in order. How have you held your nerve through some of these times and what has helped you navigate through?
Tom Majewski: We’ve certainly had the twists and turns a number of times, as I think back to the to 2000 ’02 tech telecom cycle, augmented by, unfortunately, by terrorism in the US back in ’08, 2001, ’09, ’15, ’16, and even what we’re going through right now and where we were in March and April of this year. Our asset class and many asset classes, but it certainly feels like CLOs get picked on more than the historic performance would suggest is warranted. It’s important to see through the hyperbole. I could write a scathing article about our asset class quite easily, and I know a lot of the buzzwords to use, and I often joke with people in the media of make sure you use this word in your headline. At the same time, I find comfort in the data in that it’s Ultimately, the numbers that prevail, we can say lots of different things and think loans are good and loans are bad. And CLO sounds like CDO, but CLOs pretty much all worked out through the financial crisis. Looking at the data helps me see through the hyperbole in the market. And certainly in the depths of 2008 and ’09, there were lots of talk of CLOs are going to blow up or liquidate. That was a common, commonly heard phrase. We heard that to a lesser degree in 2015, and we even heard it again in March and April of this year. With no exception that I’m aware of, no cash flow CLO was forcibly liquidated during any of those periods. And as we think about that, the number of articles foreshadowing doom for our investments were great. The number of actual doom events, doomsday events that played out, as best we’re aware, is zero. And reconciling the two and focusing on the numbers. And you can’t ignore the headlines, but you need to put them into perspective, in my opinion, when you’re evaluating a particular investment. And if your numbers are right, you’ll see through the other side of the hyperbole. Your numbers darn well have to be right, however.
Aoifinn Devitt: And it certainly seems hyperbole. The count is high, certainly at the moment, from many different directions. But I think we’re all aware of the need to see through the headlines perhaps and look at the underlying data more than ever. Just when you look back at your career too, in terms of key people or key pieces of advice that you received, can you share any of those?
Tom Majewski: Sure. Probably the thing that was— I didn’t appreciate this at the time. I only appreciated it in hindsight. For years 5 through 10 of my career, I had a direct supervisor who was 20 years my senior. One of the things that happens in Wall you Street, have people in many firms, people kind of move up in classes or batches. In many cases, you might have a supervisor who’s 1, 2, 3 years more senior than you. As you move up in your career, frankly, it’s possible you have someone who’s supervising you who’s younger than you. I’ve seen a few leapfrogs even over the years. But what I was very lucky, and I would seek this out if I could do it all over again, is to have a caring and thoughtful and wise and stable-handed supervisor who was 20 years my senior. This individual wasn’t threatened about his job or anything like that. I wasn’t going to try and take his position. What I found was someone who gave me rope but wouldn’t let me hang myself. And as I look at the most pronounced development in my career, it was that years 5 through 10 where I developed, I think, and matured the most on a relative basis. I try to keep improving every year, but that period of time was particularly pronounced for me. If I could do it again, I would focus on a job that if I had to make a trade-off of maybe a less attractive job but with a highly skilled supervisor, it’s something I would give significant weight to today. There is a saying we hear from time to time in business management of people don’t quit companies, they quit bosses. And while there’s a few exceptions to that rule, I’m sure, in general, if you have a supervisor who who you’re— you know has your back, I think you’re going to be in a pretty good situation as a company evolves and markets evolve. So I would probably give more weight to supervisor selection than many other aspects of position selection if I could do it all over again.
Aoifinn Devitt: And is there any creed or motto that you live by, whether in your business or your personal life, that you feel has been instrumental?
Tom Majewski: Always focus on the long game. To be critical of myself, have I left a dollar on the table in any number of transactions or relationships I’ve been involved in? Absolutely. What I’ve been very proud of is the same people I do business with today, in many cases, are the same people I did business with 20 years ago. I might have a different business card, they might have a different business card, but we always do as we say and say as we do. We want to make money. I know they want to make money. Making sure relationships are where everyone makes a fair amount of money, hopefully a little more for us, but everyone leaving happy without taking the last dollar out of every trade, in my experience, has been very, very valuable in that the aggregate amount of dollars we’ve been able to make for our investors, I think, is much greater than had we been a mercenary and tried to rip out every last dollar on any individual trade. So thinking over the long term is something that’s very, very important. Your average career on Wall Street might last between 15 and 35 years. If in a particular market, those same people are going to be around you for a lot of that time, and your reputation takes a long time to build but can evaporate very quickly, and looking at the long term of where do you want to be in relation to these people And is this someone I want to keep doing business with 10, 20 years from now? Giving focus to that is, I think, something that most people don’t do enough of and something I’ve made a conscious effort to do.
Aoifinn Devitt: And just my final question is, what is it that you like most about the world of investing?
Tom Majewski: There’s always something new to learn. In all of my career, I’ve never said to myself, well, I think I know everything. And the day you do that is the day you’d better retire, frankly. There’s always some new impact. There’s always some new twist and turn that’s going to be coming. Looking very recently, a virus breaking out in a country 7,000 miles away from here last November has changed the world that we know it here. In October of last year, no one was focused on that even as a concept, and think about how much our world has changed over that time frame. Different extraneous exogenous inputs to life, to business, will continue to come. You can’t run an investment portfolio worrying about nuclear war, or it certainly would be very difficult to do that at a minimum, but thinking about where the next input is going to be, what the next twist and turn is going to be. It’s not probably something that’s in any of your models. It’s something that— labor unrest, it could be social unrest, it could be a hurricane, any, any number of things that, that you need to keep gathering as much information, even in— I’ll use a concept of electronic trading, whereas in the Investment-grade markets, certainly the equity market, it’s largely an electronic market. In investment-grade corporates, it’s an electronic market. In the world that we deal in, you still pick up the phone and chit-chat with someone before you buy or sell a security. Are markets going to go that way eventually? Very likely, but there’s a few facts that might slow that natural evolution. But there’s always something changing. There’s never the same as yesterday in our world, and that’s something that I think keeps me excited to come into the office every single day. Um, and frankly keeps a lot of um, others, some are really excited.
Aoifinn Devitt: Well, thank you, Tom. I think you’ve done a tremendous job of dismantling some of the complexity. Um, getting back to the question I asked earlier, it’s been a real pleasure speaking with you and thank you for sharing your story.
Tom Majewski: Great. Thank you very much for having me.
Aoifinn Devitt: I’m Aoifinn Devitt. Thank you for listening to the 50 Faces Podcast. If you liked what you heard and would like to tune in to hear more inspiring investors and their personal journeys, Please subscribe on Apple Podcasts or wherever you get your podcasts. This podcast is for informational purposes only and should not be construed as investment advice, and all views are personal and should not be attributed to the organizations and affiliations of the host or any guest.
