It's a busy Monday — two days before the Federal Reserve's closely watched June 14 interest rate decision. But bond guru Rick Rieder is already three days into his workweek. "My day started on Saturday," said Rieder, chief investment officer of global fixed income at BlackRock, the world's largest asset manager.
Rieder manages $2.7 trillion in fixed-income assets. That vast sum of money is more than the GDP of many of the world's developed economies, including Italy, Canada, South Korea, Australia and Spain. And managing that much of other people's money means Rieder has a lot more at stake than virtually every investor on the planet.
Fund-tracker Morningstar named Rieder the winner of its 2023 Outstanding Portfolio Manager award. The accolade recognizes fund managers not only for outstanding long-term returns but also for developing and sticking to sound investment processes that endure over time.
"Rieder devours research and distills it into a diversified collection of small bets rather than a few larger ones," Morningstar said. "He then monitors risk like a border collie patrolling for strays and wolves. Rieder is known for his insatiable appetite for data and command of the minute details of everything."
Stick To A Plan Like Rick Rieder
Fed Day is a big day on Wall Street, as interest rate decisions by the nation's central bank move markets. But winging it isn't Rieder's style.
He prefers to trade only after he's done his homework. Before instructing his traders on what to buy and sell, he likes to have a good sense of how Fed news or a fresh data point will impact markets. And when it comes to market risk, Rieder likes to stack the odds in his favor.
Just like a real estate investor knows it's all about location, Rieder knows winning on Wall Street is all about preparation. That's why he sets his alarm for 3:45 a.m. seven days a week. He's seeking clues to the market's next move while most people are sleeping.
Listen To Market Data
Data, Rieder says, is his guiding light. Downtime for him is poring through 1,000 market charts and tables on a Saturday morning. Fun is reading big-picture market research published by Wall Street's smart-money crowd.
His goal: get a cohesive view of where the world is going and not get caught up in the story of the day.
"I just keep reading and reading and reading," said Rieder. "It gives you the confidence to make decisions and that you're making the right call."
Rieder: Tie Together Your Passions
The investment bug bit Rieder when he was a kid. He was an avid sports fan. Wins. Losses. Statistics. Scores. Standings. Numbers grabbed his attention. "I like the dynamic nature of it," he said. "I found investing just like following sports." He got his first stock idea watching a ball roll down a bowling alley: bowling ball maker AMF. "I probably bought $50 worth of AMF stock," with money earned from a summer job, Rieder said.
Then at a job interview in college, he learned about the Tylenol tampering scandal. The interviewer mentioned another company that made tamper-free prescription bottle caps. "I found it incredibly interesting," Rieder said.
In the end, though, after earning an MBA from The Wharton School of Business at the University of Pennsylvania, Rieder ultimately ended up trading bonds. His first job as a financial analyst at brokerage E.F. Hutton in 1987 was short-circuited by the Black Monday stock market crash. "I thought my career was over," Rieder said. But he quickly landed a new gig at Lehman Brothers where he got his start trading corporate bonds.
Work Harder Than Everyone Else
You don't end up managing $2.7 trillion by slacking off or thinking you're better than the person sitting at the desk next to you. Hard work plus preparation equals success, Rieder says.
"I've got to work harder," said Rieder. "To this day, I don't think I'm necessarily better than anybody else. I just prepare really hard."
Trading skills aren't necessarily instinctual, says Rieder. So, the strategy of buying and selling bonds must be improved like a baseball pitcher's curveball. Every day is a new day to figure things out in a fast-changing world.
Put Fear To Work For You Like Rick Rieder
And don't underestimate how fear of failure can act as a powerful motivational tool, says Rieder. "Throughout my career, I've always thought I can get fired tomorrow," Rieder said. "So, I just think you have to keep working on it."
One of his role models for work ethic is retired Baltimore Orioles shortstop Cal Ripken Jr., who played 2,632 games in a row. "His jersey is hanging in my office," said Rieder. "He showed up for work every day. I have a huge amount of respect for people like that."
Know Tough Times Can Propel Your Career
Learning from trades gone bad or other work setbacks is part of the process. "In school, if you study really hard you should be able to get a 95 grade," said Rieder. "But all of a sudden you realize that in markets, you're not always going to get a 95."
Rieder learned the hard way earlier in his career. Research on a particular bond gave him conviction to buy a lot of them. He bought too many. "I started losing a bunch of money," Rieder said. "I didn't ever want to go through that again."
All the red ink turned out to be a positive. It taught Rieder not to bet too big a chunk of capital on any single investment or put oneself in a bad trading position. Instead, the secret to success in trading is consistency, as small trading wins over and over add up to big profits.
"What you want to do is use research and analytics to tilt the odds in your favor," said Rieder. "It doesn't mean we'll be the best performer in one month or one year. But if you keep doing that over three years, five years, 10 years, your results will be really good."
Put On A Trade Before Release Of Key Data Points
Rieder earns his living making returns in excess of an asset's benchmark.
To generate returns, he says, he needs to take risk heading into an event. He puts on trades before the Fed decides to hike or cut rates, or before the government releases key data such as the monthly payroll report or the latest read on inflation.
"Today, more than ever, the markets move instantly (in reaction to new information)," said Rieder. "So, all of the return potential is gone the second (news breaks)."
To make prudent trades with good reward-vs.-risk potential, Rieder does his homework. He assesses what a Fed statement might say or a new data point might mean. And then he calculates how his funds' current positioning may be impacted based on different scenarios.
Rieder: Don't Focus On Surveys
In Rieder's line of work, separating real news from the noise is critical to success. One way he does that is to focus on facts, such as an economic data release. He pays less attention to surveys, such as University of Michigan's Consumer Sentiment Index or the Purchasing Managers' Index (PMI), that are forward-looking but based on people's opinion of what they think about the future.
"Markets are all about turns in the data," said Rieder. "I'd much rather read earnings reports."
He also says it makes most sense to glean key insights from people in the know, such as game-changing CEOs like Elon Musk of Tesla, Jeff Bezos of Amazon.com, and Tim Cook of Apple. "I get a sense for how and where things are going from people that I think are visionaries," said Rieder.
And he says books like Malcolm Gladwell's, "The Tipping Point" and "The Second Machine Age" by Andrew McAfee and Erik Brynjolfsson give him a framework about how a business idea catches on and spreads like wildfire and the revolutionary impact of technology on business. "That's incredibly insightful and helpful to me," said Rieder.
Control Your Stress
In today's 24/7 market that never sleeps, stress can build up. Rieder says to stay on your A-game, it's vital to decompress. You must clear your head and get away mentally for a short spell.
Rieder says reading helps him escape. So does a round of golf on Saturday and Sunday and spending time with family.
"It gives you a much-needed break from the constant tension," Rieder said. "It clears my mind."
So does working out at 4:30 a.m. every morning. He exercises at least six days a week, mixing in weightlifting sessions with aerobic workouts. And he takes a walk in the middle of the day when markets are beating up on him. Another escape is listening to classic rock or country music. "It's incredibly liberating," said Rieder. "I need my time to myself."
But Remember Not All Stress Is Bad
Rieder also stresses that some stress is good, though. Just like an athlete has butterflies before a big game, traders and other professionals also can benefit from pressure.
"You have to have that pit in your stomach," said Rieder. "I found that if you feel like there's no risk in your portfolio, or your portfolio looks just like an index, you really can't generate any return."
Rieder says he's learned to deal with the stress of the job. "I thrive on it, really," said Rieder. "On Sunday night when the markets open in Asia, I find it incredibly exciting."
There's no one road to success, says Rieder. But there is a secret to success.
BlackRock's Rieder's Keys
- Manages the $2.7 trillion bond portfolio at BlackRock, the world's largest asset manager.
- Overcame: Short-circuiting of early stock analysis job due to 1987 Black Monday stock market crash.
- Lesson: "You have to find something that motivates you. And once you do, the ball starts to roll down hill and it gets bigger and bigger, and you build speed and a sense of momentum."
