From Hedge Fund Roots to Alternative Credit Leadership: Soraya Chabarek, President & CEO, MCQS

0:00Soraya Chabarek:They don't really see impossible. They see possible. This is absolutely possible. How can I get it done? You know, without sort of pushing the boundaries out too far. But if you're always in pursuit of the possible, you are evolving, you're getting better and you are creating new revenue streams, new opportunities, etc. The majority of what we do, though, in the private world is very much what we call self-liquidating private assets. So those are assets that are private in nature. They're three to five year lockup. But because they throw off quite a large amount of income on a quarterly basis, they self-amortize.

0:36Soraya Chabarek:I find it quite difficult to say or know how a portfolio manager will look into a crystal ball and be able to work out what company will survive the next 10 years and come good. I think liquidity is paramount right now. You know, some people give you advice. You need to be more well-rounded. You need to know a lot more. I actually believe the opposite. Of course, it would be wonderful to be more well-rounded. I wish I was a lot more clever than I am. I wish I had many more skills than I have. But the reality is, is having a skill and homing that in and being the best at that, focusing on that, I think is a formula to success.

1:14If female leaders in finance are gradually becoming more usual, that cannot be said of most of the alternatives industry. But as the private markets and alternative firms combine and cooperate with the more traditional investment organizations, so their leaders, styles and backgrounds reflect a changing topography. If you've worked alongside some of the most well-known hedge fund owners, helped build their businesses and managed the associated turbulence and egos, and then become the CEO of a hedge fund that combines with a major financial institution, it's highly probable you've navigated those businesses with skill, dexterity and success.

1:53to understand why, how, and to look into the future combinations and direction of investment management, we welcome Soraya Chabrek, CEO of Manulife CQS Investment Management. Soraya, welcome on this wet November afternoon to our studios in Malibu.

2:08Soraya Chabarek:Thank you so much, Simon. Thanks for having me. I think we should stop the interview now because after that introduction, I think I'm done. I'll leave. Thank you. You were caught in a cab from Trafalgar Square, so I know it took you longer than you otherwise would have liked, but now we're just going to enjoy the setting here because we've got lots to talk about. And you have a very intriguing British-Syrian background. And I wonder when you look back at those very early years, what stays with you? So I arrived in the UK at the age of about seven. My parents brought us over here. I'm one of three girls.

2:44Soraya Chabarek:I'm the eldest. And I have a young brother. I mean, he's young to me. He was 30-something, but there was 16 years between us. So arriving in the UK from Syria was a big deal, you know, even back then. And, you know, my early memories really are of, you know, a brilliant opportunity to be in this very, very exciting capital of one of the best countries that I'd only ever read about. I spoke English because I went to an American school in Syria. so that was easier to integrate but the reality is you know I think some of my early memories are of my own family who really shaped you know where I am today I think and gave me a fantastic start my parents came here for our education and for you know Syrians had a very very forward-thinking attitude about educating their daughters my mother who had never worked in a day you know ever in her life was always honored us you know you must work you must have your own independence regardless of what your husband does etc I think those early sort of signals and and motivations definitely help we were all taught you know you have to work hard regardless I think you know now we all have conversations with our children you know what life choices do you want to make do you think you want to go to university where would you like to go to university etc etc in my family it was very much you're going to university um you know how are you going to get the grades and how can we help you but that was the extent of the conversation I think so it was real sort of um a new beginning in a new uh country where I I loved my school I was never the top student but worked really hard I loved, you know, doing economics and public administration at university.

4:42Soraya Chabarek:And then I loved running towards the city. And one of the things as I've done my research that people have said about you, an adjective that I like and you don't always hear is grit. And we might come back to some of the reasons behind that. So from London University, you go into finance. Now, you know, obviously you moved from, I think, HSBC through to a number of firms that will be dubbed as hedge funds. what was the lure other than potentially the money? To be fair, I mean, the lure was you graduated in the UK back then. And if you think about my generation, you know, we were seeing Margaret Thatcher on TV, you know, for a woman, a young lady, seeing the art of possibility on TV, you know, right in front of you, a woman who was leading, who was saying to the country, It is possible if you try.

5:32Soraya Chabarek:You know, all of those things I think are very, very important. And I think women of her generation have probably done even more than women of our generation are doing. We can come back to that. But I graduated. And at the time, you know, you sort of went into a profession. You either looked at becoming an accountant, a lawyer in advertising, or you go to the city. And I was lucky enough that during university I'd had a few internships at HSBC, which is why even now at Manulife CQS, we really, really value the internships that we give out. And that naturally just led me to get onto the graduate scheme at HSBC.

6:09Soraya Chabarek:And that's really, so it's a really long way of saying it wasn't like I graduated and thought, right, I'm going to go into hedge funds. I didn't even know what hedge funds were. I basically knew that I'd taken a few internships. I'd loved the experiences I'd had. Really what was important about that was very quickly at HSBC, I think I made quite great connections. That ethos of working hard, trying to understand your landscape and how you can do better in it, led me actually to somebody who's still my very good friend. I saw him last night, a gentleman called Omar Khudmani, who was at the time at a hedge fund of funds called Permal, which is today known as Entrust.

6:52Soraya Chabarek:and he and I used to basically help them at HSBC identify the best funds to sell onto our client base and he basically approached me one day and said you know would you like to come and join us I joined Permal so that was really my sliding door moment into the hedge fund world we're talking about some good 25 27 years ago so 27 years ago nobody really knew what a hedge fund was and that was really my best learning ground you know they kept it very simple at permal it was all about education education education to the end client what do we do how do we do it and how can it benefit you and I spent I think a couple of years there absolutely happy feeling very cocooned in this almost family-like environment very driven environment very entrepreneurial environment but it was a hedge fund of funds.

7:46Soraya Chabarek:And one day I get a call. So these are all stories that will tell you about the, you know, I've worked really, really hard, but I've also been very lucky with the sliding door moments that have happened in my career. So I get a call from a headhunter who says, Noam Gotsman wants to speak to you. And Noam Gotsman back then was the G of GLG. You know, everybody knew that. And I went in, you know, I was probably 24 years old. And I went in to speak to Noam Gotsman, who was charming. And I just remember, I saw him recently, I sort of recounted this to him, me saying, you know, why would I leave a wonderful family and come and join here?

8:24Soraya Chabarek:And he said to me, Saraya, the sky's your limit here. And it was impressions like that, that really sort of drew you as a young, you know, person to incredible platforms, which if I look back today to what GLG was, it was really the beginnings of what you see in multi-strat hedge funds today you know obviously not as large or you know as as as developed as places like millennium and citadel etc but we are talking a long time ago now to cut a long story short i went back and i spoke to omar and i said this has happened what shall i do and this is why i hold him very close to my heart he said to me look it's a tremendous opportunity it's where the industry is going you know um join and if it doesn't work out come back that's always stayed with me, you know, and I sometimes use that with great people who sometimes choose to leave Manulife CQS, you know, if they've had a fantastic career with us, and they feel like they need to expand their wings and go on elsewhere, there's no there's no hard feelings.

9:24Soraya Chabarek:And some have come back as a result. I didn't go back, I didn't look back. And I had a fantastic time at GLG. But I'll always be grateful to Noam Gotsman because I think in this industry you have to stop and think, okay, I'm quite good at what I do and I'm getting better and through the experiences I'm having, I'm getting even better. But somebody had to have given me that chance and seen that in me in the first place. And I think tribute to him, he's one of the best, if I say talent spotters, it looks like I'm calling myself a talent, but he was very good at creating an ecosystem, hiring good and passionate and ambitious people.

10:05So before we continue this conversation, we're going to take a short break to have a note from our sponsors. I'm thrilled to share that the Money Maze podcast is sponsored by the World Gold Council. They champion the role gold plays as a strategic asset through expert research, commentary and insights. And it's not just your portfolio that may benefit from gold. Learn how gold mining is supporting female economic empowerment and small businesses via their new documentary series called Gold, The Journey Continues. Tap the link in the show notes to start watching. IFM Investors is a global asset manager, founded and owned by pension funds with capabilities in infrastructure equity and debt, private equity, private credit, and listed equities.

10:49They believe healthy returns depend on healthy economic, environmental, and social systems, and these are evolving on a scale never experienced before. To find opportunity, build value and meet the needs of future generations, you need scale, skill and expertise. That's what IFM Investors has built up over 30 years. One of those skills that was recognised in you, and I'm intrigued about when you recognised it in yourself, was the skill of distribution.

11:19Soraya Chabarek:Selling by another word. You clearly were able to make progress there. And when you became partner, I think, you know, at More Capital, it was, you know, around your responsibility. was around selling and distribution. I wondered kind of, was this just something that came naturally to you or you suddenly became more and more aware that you were able to persuade? I think it's a really good question. I think you have to have some natural ability to understand people and to connect with people. But I also don't think it stops there. I mean, I'll give you a real life example. Again, going back to the Noam story, when he offered me the job, it was to cover the Middle East.

11:57Soraya Chabarek:and it was basically because I spoke Arabic. To be clear, I came here at seven. I'd never really been back to the Middle East in any meaningful way. I understood the culture. I understood the ways, et cetera. But for all intents and purposes, I'd been brought up in the UK. And I was very honest. I said, I have covered the Middle East per mile, but always through intermediaries, you know, the likes of Merrill Lynch and so on that take you to the Middle East. And he said, oh, don't worry, you'll be fine. And I remember picking up the phone, to get appointments. And keep in mind, this was 25 years ago.

12:32Soraya Chabarek:I'm a young woman. I'm going out into the Middle East, which is not the Dubai or Abu Dhabi or Qatar and so on that you see today. Still very progressive and still with lots of ambition, but not where it is today. Picking up the phone saying, hello, I'm calling from GLG Partners. And I think there was at the time a shampoo called GLC. And people would say, sorry, shampoo? This is, you know, to cut a long story short, I learned that if you basically build those relationships I kept going back to them at least for two years often for like three weeks at a go and just really building those partnerships building those dialogues really understanding what their dynamics were and what they were trying to solve for I saw no business for for the for the for two years but then after you basically develop those relationships and the trust it's a fantastic region to do business in they really value people who basically come back, understand their dynamics and have that partnership mentality.

13:29Soraya Chabarek:And so that was the first sort of real thing that I learned. And, you know, to be fair, by the time I left GLG, as you said, you know, I was a tiny junior partner when they went public. So again, amazing to be on a platform in the New York Stock Exchange sort of ringing the bell. And I think you had Manny Roman on the show recently. You know, he was very, very pivotal in what happened there. Again, you know, and who would have known? You know, we rang the bell, I think, a quarter before 2008. So when I had moved on with a gentleman called Greg Coffey onto More Capital, you know, this was the beginnings of what unfolded in 2008.

14:14Soraya Chabarek:so actually rebuilding Greg Coffey's business on More Capital's platform was a real exciting but I would call it a challenge you know if you remember we had sort of Bernie Madoff on on TV the face of distribution was really beginning to change clients were very much demanding transparency you know understanding of exactly what it is that hedge funds are doing and how they're doing it. Why do I tell you the story? Because it ends quite well. You know, we did set up his business within more capital. We were successful in pivoting to different parts of the world, including the US and Europe and kept some of our Middle Eastern clients.

14:57Soraya Chabarek:But it was a real, you know, lesson again in sort of staying the course, you know, making sure that you're always is just educating clients and creating partnerships and dialogue. So it's a really long way of answering your question. Yes, you have to have some natural flair to understand how you can make relationships with people, but you also need to understand your environment, what people are trying to solve for, what clients' needs are versus what you just want their needs to be. So you are close to some of these really celebrated hedge fund managers as they were. I remember when I left Mulmsland and I went to Vantage, I was with such a principal for 14 years.

15:44And the flip side of the unusual investment talent is often extreme awkwardness, brittleness, low on EQ if high on IQ, intolerant, uncompromising, exacting, infuriating. I mean, I had a long list of these. But do you think that those are almost requirements to be the alpha generators that many of those individuals are?

16:06Soraya Chabarek:I think that the list you just mentioned is stereotypical, certainly. And I do think, you know, they think differently to most of us. You know, if you take, you know, who is now Lord Michael Hintze, you know, he's a polymath in terms of his mind. You know, Greg Coffey was the nicest person you could ever, most charming person you could ever meet and genuinely, you know, still a good friend now, but a very aggressive trader and really understood his markets and what moved his markets and the cross correlation between markets. Now you could take advantage of that. the thing I will say is that whilst you see those attributes in them that the best attribute that I used to see and what kept me going and partnering with them and actually doing quite well partnering with them is is the excitement of say that they all have one thing I would say in common they would probably hate that I say they have anything in common but the one thing they have in common is this pursuit of the possible.

17:08Soraya Chabarek:They don't really see impossible. They see possible. This is absolutely possible. How can I get it done? Now, obviously, if you walk back from possible, sometimes you find a situation where actually it isn't possible. But a lot of people start at the impossible to try and solve for the possible. And I think all of the gentlemen that you've mentioned really have this sort of belief in meritocracy. if you're good, then you have a seat at the table. And, you know, is it possible to do this? And, you know, without sort of pushing the boundaries out too far, but if you're always in pursuit of the possible, you are evolving, you're getting better and you are creating new revenue streams, new opportunities, et cetera.

17:52Soraya Chabarek:And that's what I think they all had in common that was very, very exciting for me. Just the art of the possible. And yet the common denominator in all of this and if you just step back and look at the industry and we're going to come to the firm you're leading in a minute but but you know the list from uh george soros uh scott best and stan drunkenmiller lord hints chris hone they're all men and i guess the question is why do you why have there not been enough you know top female leaders to this point do you know it's it's it's a good question. I think it's just, it's obvious for me to say, you know, in alternatives, the majority of the people that I came across have been men and the people that I worked with have been men.

18:39Soraya Chabarek:So on many of these platforms that I've talked to you about, you know, I was one of the few senior women on the platform with the exception of More Capital, to be fair, Elaine Crocker is the CEO of More Capital and has been for many years managing, you know, Lewis Bacon, who is another incredible, you know, gentleman, you know, one of the market wizards of the hedge fund industry. But I think, you know, it's really on us to try and change that. I don't think it's by design in hedge funds or alternative or the alternative industry. I think it's really to do with how we attract women. And I think it's also to do with what I said earlier, you know, So a lot of the gents that you just mentioned, I never felt that they saw gender, if you like.

19:27Soraya Chabarek:It was very much about, you know, are you going to be good at the job? Can you deliver results? So it was very much driven through meritocracy. And I just don't think that we brought in enough, you know, women into the industry. I will make an exception to that. She may not have led her own firm in the end. But, you know, for me, a quiet, unsung, great money manager is Gerald E. Sandstrom, who was at Brevin for many years in emerging markets. You know, having been through, you know, what I just described to you in the hedge fund industry, one thing really stuck with me always. And that was the star culture that the hedge fund industry can create.

20:05Soraya Chabarek:And that's great if you want to build a, you know, a boutique firm, but it's not scalable and it's not repeatable. and that really really stuck with me through that journey that I just described to you so when I arrived at CQS I had you know a meeting of minds with with Michael you know on that at the time he was very much I want to institutionalize my platform I you know I hear from consultants and institutional clients I have to solve for ownership and succession and so on and you know first of all you get quite excited by, well, let me try and solve for succession. But very quickly, you know, my sort of principle came back to, well, I don't think you can find another Michael.

20:46Soraya Chabarek:And even if I thought you could find someone who trades like you, who can have the attributes that you have, that you just described, Simon, et cetera, et cetera. And I found that holy grail. I'm not sure, even if I convinced them to come and sit next to you, that they'd last very long, right? Nobody, it's very difficult to replace a person. So it was very much sort of built on that principle of how can we transform ourselves from one person to people, many people, a platform that works and is institutionally robust and process that's repeatable, that you can go to clients and show them a process that's dependable.

21:26Soraya Chabarek:And to be fair, again, another sliding moment, right? That was the strategy, but we were very, very lucky. Mercer, a global consultant name, approached us and we had very good discussions about how we could basically take our hedge fund DNA and investing in credit. So everything that comes with that, thinking outside the box, not benchmark hugging, really going deeper into the underwriting of credits and being highly selective in what you put in your portfolios. but doing it in an institutional format that was diversified through people and designed for the institutional world. So that was really the birth, if you like, of what you see the platform to be today.

22:10Soraya Chabarek:We created a product called the Multi-Asset Credit Fund, which did all of those things. And it was really, again, answering a client problem. And what was the problem back then for most institutional clients? Rates were at zero and people were hungry for return. So, you know, for us, we created a product at the time that was going to pay cash plus four to five for pension funds. And why do I say the story ends well? You know, today we're managing, you know, of our 18 and a half billion dollars, we're managing 10 billion dollars in multi-asset credit solutions. Right. Which are basically managed by a team of about 40, 50, you know, strong men and women across different asset classes within credit.

22:56Soraya Chabarek:so liquid to semi-liquid credit predominantly in developed markets US, Europe and we then further diversified our platform in areas like issuing our own CLOs, investing in third-party CLOs, you know our structured credit business is very robust and a big part of what we do. Why do I give you all this ramble? Because I'm describing a situation where we went from a founder-led organization with permission from the founder to actually one that is diversified through people, product, and platform that I described. So last April, we did do a transaction with Manulife. Michael, you know, got spun out of the business as part of the transaction.

23:43Soraya Chabarek:And it's really given CQS sort of that next chapter of what a boutique credit specialist could look like on an insurance platform. So before we continue this conversation, we're going to take a short break to have a note from our sponsors. I'm excited to announce that the Money Maze podcast is sponsored by the London Stock Exchange Group, known as LSEG. At the heart of the global economy, LSEG provides data, analytics, and infrastructure that connects investors, businesses, and economies. LSEG is where ideas meet capital, enabling sustainable growth and opportunity, tap the link in the show notes to learn more.

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25:39Soraya Chabarek:you know what i have i still have a great relationship christy feinberg she's called She was the CFO of Manulife at the time that we did the transaction. I'd been CEO at CQS for five years up to that point. And it was brilliant, actually, I have to say. You know, sometimes when we would get stuck, I mean, let me just tell you, we had these conversations for a good 17, 18 months. So I think fondly of that time, but it's not something I would readily repeat, you know, dealing with lawyers, bankers, all the rest of it. And it was a process that wasn't just run, you know, with Man U Life. It was a real process of trying to find that sort of perfect suitor, that perfect marriage, which doesn't exist, by the way.

26:22Soraya Chabarek:That's what you find out. You find out that you can find the best marriage that you can find for both sides. But dealing with Christy was brilliant because every time we did get into a situation where, you know, it can sometimes be a bit jarring or, you know, people can see a few shadows, etc. It was so easy to just pick up the phone or even fly over. I remember a wonderful evening together where we just sat as women and sort of hashed out things to move things forward. And I will say, having said, you know, in the alternatives business, you have less women. I've now found quite a deep bench of women who are very senior at Man U Life.

27:05Soraya Chabarek:And it changes your everyday style and working conditions, if you like. Like, you know, our head of retirement is a senior female woman, you know, running some 5 ,000 people across the platform. Christy Feinberg herself went on to become the head of the John Hancock platform that Manulife own, which is a huge retail platform in the US. You know, our head of marketing, our head of privates, et cetera, all women. So it's exactly the comment you started with, Simon, which is, I think alternatives, we still have a bit more to do. but it's definitely more prevalent and much more celebrated and in existence in the corporate world.

27:46And how do you approach that really demanding challenge, which is there are people at CQS who might have joined having left a large organisation. They're then being told they're rejoining or joining another organisation, which culturally may not be what they wanted. So you've got a challenge. It's not just a challenge of integration. It's that cultural fusion. how did you how did you think about how to get that right do you know i think it just goes back

28:12Soraya Chabarek:to exactly you know the same way as you know when you deal with clients really understanding what people's worries are and and how you can solve for them and also being quite transparent about why we were doing this you know we'd we'd we had got to you know a juncture where if you look at what's happening in the industry the larger are getting larger and there was a fear of being sort of stuck in the middle, if you like. And also, although, you know, what was brilliant about this transaction for us and Manulife is that we filled a gap for an asset class they didn't have. And for us, we got to stay true to what we do, which is be, you know, credit investors, specialists in credit.

28:55Soraya Chabarek:So we have absolute autonomy in terms of our investment management, which was really important for me. I didn't want to have to go back out to clients and say, by the way, you used to invest with CQS that looked like this and now it looks like this. So it was being very conscious of the things that Manulife recognized in CQS and keeping those true to themselves. But then also really having dialogue with the next generation of CQS. This is your next, you are the next generation of what will happen to CQS over the next 10, 20 years. I think that was one factor. so being very very very transparent I think is is uh is important I think also um what was important for me is as part of a transaction people do well and you know down to even if you like the receptionist at the front desk we made sure that everyone felt part of this transaction which I think is important and then as you get onto the platform with Manulife it was really about sort of making the right connections with Manulife to make sure that their people are comfortable with our people joining and vice versa.