In Showtimes financial drama Billions, Wendy Rhoades, a psychiatrist and trading coach played by Maggie Siff, tells a hedge fund manager, Cut bait on your losers and You are a winner while pounding her chest as well as his. Her character is modeled after so-called mojo mentors, Wall Streets trading psychologists. Although some might swear by such methods, Stephen Duneier, former hedge fund manager and founder of decision analysis firm Bija Advisors, calls them absurd and ridiculous.
Duneier, 49, was a portfolio manager at ill-fated U.K. hedge fund firm Peloton Partners from 2006 to 2008 and co-founded his own outfit, Grant Capital Partners. At Santa Barbara, Californiabased Bija, he earns a living by helping investors to make better calls. But he isnt a trading psychologist, he says hes a decision architect.
Duneier, who also teaches decision analysis and behavioral investing at the College of Engineering at the University of California, Santa Barbara, emphasizes what he calls proactive thinking. Its a basic principle of cognitive science that he has spent years studying and trying to impress on peers and colleagues since his college days, when he developed a cognitive behavioral method to help him concentrate while studying.
Everything done in the investment industry is reactive, Duneier says. Speed bumps, stop-losses all risk management and decision making is reactive. My approach is flipped the exact opposite way.
What that means in practice for Duneier, his students and the investors he coaches: When it comes to investing, make as many decisions as possible up front, before emotions take over.
The Brooklyn native, who has an MBA from New York University, worked in investment banking and hedge funds for several years before starting Grant Capital in 2008. The London-based firm had some early struggles, but after the first year Duneier submitted a business plan that incorporated everything hed learned about decision analysis, he recalls. Although it took some convincing, his partners agreed, and Grant Capital beat its benchmark the next year, pushing assets under management from near zero to more than $1 billion.
But the rally didnt last: Grant Capital closed in 2012, and Duneier launched a new firm called Bija Capital Management, named after the Sanksrit word for seed which can also refer to the cause of a later event or action. In decision analysis, one of the fundamental tenets is keep breaking down a problem until you get to the simplest form of it, or the seed, he says.
Soon, however, the business became Bija Advisors when Duneier decided to quit trading and focus on what hed always wanted to do: teach. Besides coaching, he writes a newsletter called Bijas Seeds of Thought; more than 30 investment firms pay $45,000 a year for its mix of macroeconomic insight, trading ideas and proactive risk management techniques.
In his off-hours, Duneier has shown a knack for making decisions and sticking to them. Since 2012 hes kept 24 New Years resolutions, from donating bone marrow to learning to knit. Where others might be content to stitch a few pairs of socks, Duneier quickly built an art world following as the Yarnbomber for draping swaths of the mountains near Santa Barbara with colorful material knitted by himself and contributors from around the world. Represented by local art gallery Sullivan Goss, he recently set the Guinness world record for the largest crocheted granny square, a 1,311-square-foot creation that used more than 30 miles of yarn. From trading to knitting is there a pattern here?