🎥 Davidson Kempner’s James Li - “no situation is too complex”

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 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.

A word from AGM podcast sponsor, Ultimus Fund Solutions

This episode of Alt Goes Mainstream is brought to you by Ultimus, the full-service fund administrator and transfer agent powering asset managers in private and public markets. As alts go mainstream, you need real expertise to handle complex fund structures, connect with key distribution partners, and handle sophisticated compliance, reporting, and transparency demands.

That’s Ultimus: high-tech, high-touch solutions for over 450 clients and 2,500 funds with $775B in assets under administration. Backed by an expert team of over 1,200 employees, they place client service at the core of their business, helping you navigate complexity during your fund structuring or launch and then supporting you through every stage of growth. Whether you’re already in the market or thinking about entering private wealth, you can trust their team’s deep expertise in retail alternatives to help you reach your goals.

Learn more: ultimusfundsolutions.com or email [email protected].

We thank Ultimus for their support of alts going mainstream.

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

05:21 Why Join Davidson Kempner

06:17 Three Generations Of Leadership

06:46 Family Office DNA

08:28 Principled Investing And Complexity

09:13 Finding Returns In Complexity

12:38 Liquid Versus Private Feedback Loops

13:57 Macro Forces And Time Horizons

14:57 Deglobalization And Global Footprint

16:46 Competition And The Marginal Buyer

17:52 Private Capital “Indigestion”

19:12 Capital Solutions Playbook

22:30 Integrated Public Private Edge

32:05 Hedge Funds Return

32:50 Post GFC Lessons

33:01 Incentives And Capacity

33:40 Liquidity Mismatch Risks

34:06 Evergreen Vehicle Design

34:33 Public Private Split

35:00 Avoiding Leverage

36:13 Mark To Market Mechanics

36:37 Flows Back To Hedge Funds

37:28 Educating Wealth Investors

37:46 Strategy Buckets Overview

38:20 Merger Arb Explained

39:43 Global Credit Toolkit

41:02 Portfolio Velocity And Risk

42:13 Investment Led Ownership

45:07 Less Competition In Small Deals

52:16 Opportunistic Credit Case

55:49 Long Term Firm Vision

59:57 Closing Thoughts

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