Masters in Business — Dec 6, 2025

Guest: Paul Zumo, Chief Investment Officer, JPMorgan Alternative Asset Management
Host: Barry Ritholtz, Bloomberg

Episode Overview

This episode features a deep-dive conversation between Barry Ritholtz and Paul Zumo, CIO and co-founder of JPMorgan's Alternative Asset Management group. They discuss the evolution of alternative investments and the hedge fund industry from the early 1990s to today, Paul’s “30 pearls of wisdom,” the art and science of manager selection, current industry trends, and the challenges and opportunities in alternatives for institutional and high net worth investors. The conversation is rich with insights from Zumo’s 30+ years in the industry, including leadership lessons, risk management, and sector observations.

Key Discussion Points & Insights

1. Paul Zumo’s Career Path and Building JPMorgan’s Alternatives Platform

• Early Interests & Career Shift (02:43–03:39)
  • Started interested in both investments and technology; ultimately pursued investment side but leveraged their tech skills to build out group infrastructure.
• Early Roles at Chase and Interpublic Group (03:46–05:21)
  • Involvement in pension fund consulting informed understanding of styles, asset classes.
  • At Interpublic Group, oversaw a major plan overhaul and had early exposure to hedge funds, gaining key due diligence experience from avoiding problematic managers.
• Founding the Alternatives Group at JPMorgan (07:15–09:38)
  • Built the group inside Chase with just $7.4 million.
  • Early challenges included market skepticism of hedge funds; emphasis was placed on education, transparency, and building internal tech to support research and analysis.
  • Quote: “We launched with a whopping $7.4 million, which is... pocket change.” — Paul Zumo (08:59)

2. The Rise and Mainstreaming of Alternative Investments

• Democratization & Growth of Alternatives (11:22–13:09)
  • Alternatives have moved from niche to mainstream, accelerated by rising bond-equity correlations and 2022 market volatility.
  • Innovations like interval and tender offer funds are extending access to retail/individual investors.
  • “You need to build a more resilient portfolio rather than just look at these things in isolation.” — Paul Zumo (13:09)
• JP Morgan's Growth & Future Outlook (13:09–14:00)
  • Now over $35 billion AUM, still significant headroom for alternatives in portfolios.
  • Plan is to continue expanding globally and across client types.

3. 30 Pearls of Wisdom for 30 Years

• Culture is King (14:23–15:12)
  • Good culture is key differentiator and a major success factor for hedge funds (“the road to failure is paved with poor cultures”).
  • Staying at JPMorgan for 30 years attributable to strong culture, exceptional team, and continuous learning.
• “Don’t Buy the Portfolio, Buy the Process” (16:15–17:36)
  • Robust investment process is critical – stories and positions are fleeting.
  • Especially crucial in discretionary macro strategies prone to narrative over process discipline.
• Have the Courage to Make Mistakes & Take Calculated Risks (17:36–18:39)
  • Embracing mistakes and calculated risk-taking is necessary for growth; perfectionism and over-conservatism can be limiting.
• Run into Fires: Crisis Investing & Behavioral Finance (20:50–22:52)
  • Some of the best opportunities arise in dislocations—draws on behavioral finance, overcoming pain-avoidance bias.
  • “If you’re playing appropriate defense, you should afford yourself the opportunity to really lean into dislocation.” — Paul Zumo (22:08)

4. Nuanced Views on Manager Selection, Shorting, and Portfolio Construction

• Complacency and Success (23:03–25:09)
  • Firms and managers risk plateauing as complexity grows and principal portfolio managers shift to managing people or lose focus due to excessive success.
  • Notable quip: “When your fund manager buys the third yacht, it’s time to leave.” — Barry Ritholtz (24:08)
• Short Selling: A Different Skillset (25:09–29:21)
  • Shorting is fundamentally different from going long; demands superior risk management, and the majority of great short sellers do not mirror their success on the long side.
  • Interesting stat: Of pre-2008 dedicated short sellers, a sizeable portion were women, potentially pointing to differences in risk management and ego.
• Market Timing and Process Discipline (29:21–32:00)
  • Most managers are good stock pickers but bad at market timing or portfolio-level decisions—timing often subtracts from value.
  • “Very few managers add value over time through timing the market, even if it sometimes looks like it.” — Barry Ritholtz quoting Zumo’s pearls of wisdom (29:41)
• Necessity of Innovation (32:00–34:04)
  • Constant innovation is crucial; yesterday’s alpha quickly becomes tomorrow’s beta.
  • Across strategies, staying still leads to commoditization and irrelevance.

5. Perspectives on Current Markets and Structuring for Alpha

• Alpha Cycles: Volatility, Dispersion, and Rates (34:43–37:55)
  • Three drivers of hedge fund excess return: volatility, dispersion, interest rates >2%.
  • The “alpha winter” (2010–2017) was unusual; last five years have favored alpha due to resurgence in these three drivers.
  • “Elevated volatility, dispersion, and rates... when you have those three elements, excess return is really strong.” — Paul Zumo (36:40)
• Geographic Flows: Japan & Middle East (39:40–43:17)
  • Japan’s corporate governance revolution is a key area of excitement, even as flows lag.
  • Significant growth of alternative investing in Middle East—sovereign wealth, family offices, and hedge funds setting up shop in Dubai/Abu Dhabi.

6. Trends in Hedge Fund Strategies and Industry Shifts (2025 Edition)

• Strong Year for Most Strategies, CTA Exception (47:32–49:28)
  • Most sub-strategies are performing well except for CTAs, which faced challenges in April.
  • Healthy alpha generation (~5%+) in long-short.
• Rise of Multi-strategy (Multi-strat) Managers (49:28–51:00)
  • Increasing assets going to large multi-strat platforms, but level of internal collaboration varies by culture and setup.
• Risk Management & Lessons Learned (51:00–52:51)
  • Recent volatility episodes (“Liberation Day,” “deep seek” event) reinforce primacy of risk controls, position sizing, and adapting to new sources of risk (like AI).
• AI, Valuations & Thematic Bubbles (52:53–54:16)
  • AI disruption is real but pockets of excess are likely; comes down to disciplined thematic risk and position sizing.
  • “Is it a bubble? I don’t know… but it certainly is real and will revolutionize and change our lives.” — Paul Zumo (54:13)

7. Big Picture Thoughts

• Hedge Funds Are Not An Asset Class (55:19–57:25)
  • Zumo argues the term “the hedge fund industry” is a misnomer; in reality, it is a collection of uncorrelated or loosely correlated strategies, not a homogenous asset class.
  • The “top 200” managers generate real alpha; average returns reflect blending countless strategies of widely varying quality.
• Importance of Due Diligence & Selectivity (57:25–59:11)
  • Echoing Jim Chanos and Sturgeon’s Law: a small number of managers generate most of the value; deep due diligence can find them.

Notable Quotes & Memorable Moments

• “Don’t buy the portfolio, buy the process. Stories change, positions are fleeting, but a robust investment process should endure.”
  — Paul Zumo (16:39)

• “Have the courage to make mistakes, mitigate unnecessary risks, but take calculated bets.”
  — Paul Zumo (17:36)

• “Some of the greatest investment opportunities and manager access are sourced during dislocation. Don’t be afraid to run into fires.”
  — Paul Zumo (21:27)

• “The opposite of a long is not a short. Great short sellers are wired differently.”
  — Paul Zumo (25:09)

• “Dinosaurs go extinct. Innovation must be constant.”
  — Paul Zumo (32:16)

• “Alpha’s decay, yesterday’s alpha is tomorrow’s beta.”
  — Paul Zumo (33:43)

• “If you're just looking at the aggregate industry, you’re missing the point. There are strategies and managers adding enormous value.”
  — Paul Zumo (57:10)

• On manager lifestyle creep: “When your fund manager buys the third yacht, it’s time to leave.”
  — Barry Ritholtz (24:08)

Timestamps for Key Segments

• 02:26 — Introduction: Zumo’s background, education, early roles
• 07:15 — Founding Chase/JPMorgan’s Alternative Asset Group
• 11:22 — Democratization, mainstreaming, and retail access to alternatives
• 14:23 — 30 pearls of wisdom: Culture, process, and risk-taking
• 20:50 — Running into fires: Behavioral finance in crises
• 25:09 — Short selling as a distinct skillset
• 34:43 — Alpha’s drivers: volatility, dispersion, and rates
• 39:40 — Geographic focus: Japan & Middle East
• 47:32 — 2025 hedge fund strategies: who’s doing well
• 49:28 — Effects of multi-strategy managers
• 51:00 — Risk management & April 2025 lessons
• 55:19 — Hedge funds are not a homogenous asset class
• 59:38 — Closing “favorite questions” (mentors, books, career advice)

Lightning Round & Personal Insights (59:38–end)

Mentors

• Zumo credits a high school economics teacher/wrestling coach who encouraged his investment interests, and Joel Katzman, his early career mentor at Chase/JPM.

Reading Recommendations

• Most reading is hedge fund letters and research; calls out Michael Semblist’s work (“Guide to the Markets”).
• For non-finance, recommends “Speak Like Churchill, Stand Like Lincoln” as a public speaking resource.
• Recommends the “Wine with Jimmy” podcast for wine aficionados.

Entertainment & Wine Talk

• Jokes about family Netflix usage (K Pop Demon Hunters).
• Enjoys Barolo and value Italian reds; swapping value wine tips with Barry.

Advice to Young Professionals

• “Do what you love,” but first “find what you love” through curiosity and following your instincts.
• “Be a student of history. … Mistakes and opportunities often rhyme with each other.” (68:51)

Key Lesson in Retrospect

• If starting over, would have wished for a deeper knowledge of financing and prime broker agreements—core to navigating industry risks.

Episode Tone & Takeaways

The discussion balances granular, practical career and investing wisdom (risk management, manager selection, the pitfalls of success) with big-picture industry analysis. Zumo’s tone is thoughtful, skeptical, and clear-eyed, laced with humility and a focus on ongoing innovation and learning. The pearls of wisdom serve as succinct summaries of hard-earned experience.

For listeners:

• This episode is a masterclass in how to think skeptically and constructively about alternatives, know what really matters in manager selection, and why process trumps story in investing.
• It is especially useful for institutional allocators, investment professionals considering alternatives, and students of hedge fund history and trends.

Listen Further

• Full episode available via Bloomberg Masters in Business.
• Related episodes on hedge funds, alternative assets, and institutional investing.

(Summary by AI: content segmented, timestamps referenced, quotes attributed, and language/tone faithful to the original episode)