Episode Details

Welcome back to the Alt Goes Mainstream podcast.

Today’s podcast takes us to the heart of New York City to talk with James Li, the President and Partner of Davidson Kempner, a firm that was an early participant in the merger arbitrage, distressed debt, and opportunistic credit industries.

Davidson Kempner’s heritage lies in cutting through complexity to find value.

Founded in 1983, Davidson Kempner’s origins began in merger arbitrage, distressed debt, and opportunistic credit. The firm, which now has around 1,800 clients, began accepting outside capital in 1987 and has since built out its investment platform to include convertible arbitrage, long / short equities, asset-based lending, and real estate strategies.

Davidson Kempner has since grown to almost $40B in AUM across public and private markets strategies.

The firm has a penchant for navigating complex situations across public and private markets to opportunistically uncover value, noting that “no situation is too complex for [them].” 

James unpacked how the firm’s family office DNA has evolved across three generations of leadership into a scaled investment platform across public and private markets to inform the firm’s relative value investing perspective.

James and I had a fascinating conversation on a number of pressing topics at the intersection of public and private markets. We covered:

• How do public market feedback loops inform private market investments?
• How post-GFC growth in private equity has created “indigestion” in the system.
• What the current state of private equity means for capital solutions opportunities.
• Why distressed and opportunistic credit can be countercyclical.
• What it means to be a relative value investor and how Davidson Kempner navigates different sectors, markets, geographies, and asset classes.
• What deglobalization means for investing in private markets.
• Why are allocators shifting toward absolute return strategies?
• How Davidson Kempner’s family office DNA has informed how they approach working with the wealth channel.

Bio

James Li is the President and a Partner at Davidson Kempner. Mr. Li also co-manages the Client Partnerships & Business Development department and oversees the Firm’s Capital Markets, Strategy and Treasury Teams. He joined the Firm in 2018 and is based in the New York office.

Before joining Davidson Kempner, Mr. Li was a Managing Director in the Client Relationship Management and Strategy Group at Goldman, Sachs & Co. Mr. Li received a B.S. from Columbia University.

Thanks, James, for sharing your wisdom, expertise, and passion about public and private markets and your approach to investing in complex situations.

Show Notes

00:00 Live From Davidson Kempner’s Office in NYC

01:36 A Message from Ultimus Fund Solutions

02:37 Introduction to James Li

03:36 Career Roots At Goldman

05:16 Discovering Davidson Kempner

06:13 Three Generations Of Leadership

06:42 Family Office DNA

08:23 Investing In Complexity

10:44 Where Complexity Pays

12:20 Liquid Versus Private Feedback

13:37 Macro Shifts And Deglobalization

16:01 Finding Edge In Less Crowded Markets

17:28 Private Capital Indigestion

18:47 Capital Solutions Playbook

20:48 Building Operating Capabilities

25:59 Allocator Shift In Credit

31:26 Hedge Funds Return

32:12 Post GFC Lessons

32:48 Fees Volatility Gating

33:13 Evergreen Vehicle Design

34:04 Liquidity Over Leverage

34:15 Leverage Risk Explained

35:14 Semi Liquid Marking Issues

35:36 Flows Back To Hedge Funds

36:26 Wealth Channel Educ