Pod Chats: Turney Duff on The Buy Side

Chat With Traders Episode 106: Turney Duff

Turney Duff is a former hedge fund trader whose 2013 memoirs, The Buy Side, became a New York Times bestseller.

The book chronicalled his excessive lifestyle on the trading floor and as a result of his experiences he has since enjoyed a role as a consultant on the Showtime and Sky Atlantic hit show Billions, starring Damien Lewis as hedge fund boss Bobby Axelrod

In this interview with host Aaron Fifield of Chat With Traders episode 106, Duff discusses his intriguing relationship with the sell-side and the perks and privileges thrown his way to win his business, reveals what it was like trading more than one billion dollars at Galleon Group, and his subsequent struggle with his vices...

It’s the 90’s, it’s the wild west. Insider trading was completely the norm.Turney Duff

On his involvement with TV show Billions...

I wrote a book called The Buy Side, which published in 2013. It was auctioned by Sony, they put a team together going into 2014. Apparently there was this show over at Showtime that was about to be bought and Sony kind of dragged their feet a little bit. They were nervous that there was already a Wall Street project out there, and so my book went away from the Hollywood side.

Maybe six months later I got a phone call from the two executive producers and they said ‘Hey, we would love for you to read the pilot, give us your thoughts, we’re shooting in a couple of weeks’. I read it twice in one weekend and went in there, and basically just gave them my opinions. It might have been ‘oh a hedge fund guy would never have said this or, this is how this might go down’, and that’s all I did.

After we had the meeting they said that they would love to hire me as a consultant on the show. So for the last two seasons, basically what I do is they’ll send me drafts of the episodes, I read them, make notes, send it back and then when we’re shooting, I go to set two to three days for each episode, whenever we’re doing Wall Street or hedge fund stuff. I sit there, whether it’s talking to Damien Lewis about what something actually means or any of the other actors or the director, and I’m there basically to try and make it as authentic as possible. I lived the life but I also get to partake in a very creative venture, so it’s a phenomenal job for me.

20 Most Quotable Lines from Sky Atlantic's Brilliant Billions

On getting into Wall Street...

I grew up in a small town in Maine, in a house heated by a wood stove. I had three older sisters, if you can imagine how backwards Maine was in the 80’s, pre-internet, pre-cell phones, it was just a pretty simple way of life. I graduated high school, ended up going to Ohio University and I was a journalism major.

And when I left for New York City in January of 1994 I had no idea what I was getting myself into. When I initially got to New York, I still wasn’t even remotely interested or even aware of Wall Street, I thought I was going to get a job at a magazine or newspaper. This is no lie or exaggeration, when I was driving the U-Haul down to New York City, my buddy and my roommate was telling me about a friend of his who got an interview at Goldman Sachs, he was looking at me like I would be impressed or something. I literally thought Goldman Sachs was like a fancy department store, I had no clue.

The one thing I had over other people was an uncle who worked in the business. I knew he had money, I knew he was successful, I figured he may know some important people. So I called him up looking for him to help me get a job, not a job on Wall Street, but I wasn’t even able to articulate what I wanted and he hung up on me and said ‘I’ll call you back in 10 minutes’. When he called me back I had 10 interviews on Wall Street. I said ‘for what?’ and he said ‘just tell them that you want to get into sales’. So I hung up the phone and I was terrified.

On Lehman Bros and Morgan Stanley...

My first interview was at Lehman Brothers. I’m in the waiting room and all of a sudden this dude comes out, probably late 30s, he’s talking a mile a minute, he’s super intense, and he grabs me and he’s like ‘let’s go’, and we go all the way onto the trading floor. Here I am Lehman Brothers, January 94 and the opening bell rings and it was utter madness. There was something about the intensity and utter grandness about it all, I didn’t know what they were doing but I said ‘I want in’. So that’s when I really caught the bug, was just seeing this trading floor of a few hundred men and women who all seemed like they were smart and successful and made a lot of money. It took many many interviews, because I was a B students from an Ohio university, even in 94 that’s not that appealing, so a lot of the interviews were sort of favours to my uncle and it wasn’t until Morgan Stanley where I got an opportunity.

I was in PCS at the time, Private Client Services, they’ve since changed the name to PWM, Private Wealth Management. I was a sales assistant and my job was to work with team brokers. But the beauty of it was that we were selling almost every product that Morgan Stanley offered, and it was an opportunity for me to get my licences and to learn about all the different products and different departments. It ended up being a lot longer haul than I initially expected, I thought I was going to work there for 6-12 months and be given a great opportunity on the trading floor. It didn’t play out that way, but it ended up being a great job. I ended up working with some of the top brokers on the floor and I was trading for their clients and of course doing all the administrative paper work. I was getting to learn all different sides of Wall Street.

On moving to Galleon Group...

I was there (Morgan Stanley) for five years and was literally at the point where I was ready to give up because I thought five years was way too long. At the time I was 28-years-old and was like ‘shit, if I haven’t made it by now, I’m a loser and I should pack my stuff and ship out’. It wasn’t until I almost completely gave up that I ended up getting a call from the Galleon Group, who was at the time an up-and-coming hedge fund. The only reason I got it (the call), was because I spent a number of years doing happy hour across the street and there were some ex-Morgan Stanley people there and they needed a new assistant. Again, super naïve, and not very aware of the world around me, but I hadn’t been dealing with hedge funds, so when I was offered a job at a hedge fund, I was kind of like ‘what’s a hedge fund?’. I knew, but I had no idea of how big an opportunity it was. And I quickly learned being a client and being on the buy side even at a $300 million hedge fund in '99, it was a big deal. I ended up getting that opportunity literally from being fun and doing happy hour for a number of years whilst I was at Morgan Stanley.

On the insanity of Galleon...

This is no exaggeration, I think my boss said to me once, this is early on, ‘every day expect to be fired and if you’re not, then it was a good day’. I didn’t realise how serious he was and it started every single morning in the shower, I would be getting ready for work and I would start to panic and say, ‘oh my god did I do this wrong, did I send that trade to the wrong prime broker?’. A simple little mistake and me not crossing a T or dotting an I, at a hedge fund like that, could be a million-dollar error. So up until that point I had not been operating on such a high tense level where if you’re not good, then you’re out the door…here we are, it’s the 90’s, it’s the wild west.

Insider trading was completely the norm, this wasn’t me early on because I was still assisting on the desk, but you were calling people up and being like ‘hey I need to know what they’ve going to report tomorrow and I need to know if this acquisition is going through…are you upgrading this tomorrow because I need to know now’. And that was just common. And the numbers were just head-spinning. In the first year we were up triple digits, I didn’t know any different. I was saying to myself ‘oh I got 15 grand in my account here if we’re up 100% for the next 15’. And I’m doing the numbers like on a calculator as if that was a possibility. I would learn quickly that that wasn’t a normal market and those weren’t normal returns. But it was insanity on a daily basis and I loved it and thrived on it.

On the difference between the buy side and sell side

So in the simplest terms the buy side is the client, if you’re sitting there in your underwear trading your e-Trade account, you’re considered buy side. It has nothing to do with buying, it just means you are a client of the sell side. So the sell side is any broker who is in the business of customer facilitation. They execute your orders. If you’re on the buy side, you’re buying, you’re selling, whatever you want to do. And people on the sell side, whether its Goldman Sachs or Morgan Stanley or some tier 4 broker, they are facilitating your orders, they’re providing research. The idea is that the sell side helps the buy side and the buy side pays the sell side commissions.

On sell side wooing tactics...

Some of this has gone away but a lot of it is still so very valid and present. So in say 2003, I’m 32/33 years old and I’m the head trader of a $1.4 billion portfolio and I’m trading in commissions about $50-60 million a year. So every single person on the sell side wants a piece of that $50-60 million. And of course you pay your Goldman Sachs, your Morgan Stanley $2-3 million a year but $50-60 million goes a long way. So basically people would be wanting to give me great information, proprietary information, trading ideas, providing research and just making my job as easy as possible because when I had a million shares to buy they wanted me to call them.

Then on the other side of that they had unlimited expense accounts. I could legitimately go out to dinner every single night of my life for 50 years and it would never would have ended. Any restaurant, any bar, any sporting event, I’ve been flown to Super Bowls on private jets, I’ve been taken to Sundance film festival, I’ve been offered surf camp in Costa Rica, been flown to Cancun. You name it, it was offered to me. And the idea was, and there’s so much truth to this, you take me to dinner, we have a good time, whether that leads into scoring drugs or going to a strip club or getting hookers, or just a good old fashioned ‘get fucked up’ night at the bar. Well during that time you’re bonding and hopefully a friendship or something is developing and they’re hoping that if they spend $10k on you a couple nights a year, that that’s worth a million dollars in commissions.

Obviously if you do the maths, it’s $10k well spent right. A lot of that has changed in terms of just the ability of a buy side guy to pay whoever they want. A lot of funds do have now what is called ‘a list’, so certain brokers need to be on the research list. Back then I could pay a friend of mine who had his own broker dealer on the floor and maybe was trading out of his apartment, I could get away with doing $200k a year with him. These days most places have to get every broker approved. But they kind of came down on expense accounts, and one of the ways they work around it these days is, say you’re at a tier 4 / 5 broker and you want to do a lot of business with an account. You’ll still take them out and spend all that money, you just don’t run it through your credit card and so you take the hit personally. You’ll spend $20k on an account over the year but if they’re paying you $400k in commissions, it’s a huge win. Very often if you’re at a lower tier firm they’ll do a lot of this entertaining off the books, so there’s no paper trail but the commissions are still there.

On his party lifestyle...

It’s interesting, one of my best skillsets that allowed me to be successful was my ability to socialise, to be out at night - when the city lights came on, that’s where I really shined. That’s what helped me get to the top and it also ended up being kind of my biggest detriment also. I was always the party guy and tried to be the life of the party. I never ever thought I would do cocaine, first time it was offered to me I wasn’t even sure what to do with it. I went to the bathroom and was like do I do the whole thing and ‘oh my god, will they know I didn’t do any’, I was freaking out and handed it back and I didn’t touch it.

But six months later I had got a big bonus so my bank account had changed, a new job title, running around with a fast group and it didn’t seem so menacing anymore and it felt like it was part of the culture. So I tried it, the first time I did it I was like ‘oh my god, this is the greatest thing I’ve ever done in my entire life’. On my way back from the bar to the rooftop I said ‘ok this is probably going to be a problem at some point because I feel so good, but I can’t worry it now’. At first it was a slow progression, I was still drinking 4-5 times a week, but cocaine showed up every once in a while and then it kind turned into once a month, shortly thereafter it was once a week.

And as soon as I got the direct phone number of a dealer, that’s kind of when the wheels started to come off. It would take another two years to completely blow myself up. But I kind of look at it like it’s a giant cocktail, it was drugs, it was sex, it was money, it was alcohol, it was power, and it was all kind of mixed into one. I’ve been very careful to say that Wall Street or my job, none of that made me an addict or an alcoholic, I believe I was kind of born this way, but all of that kind of fed into the undying need to be adored and I kind of suffer from the need of more and the bigger the better, and once I got a taste of cocaine it was like I had found this thing I had been looking for, for my entire life.

On Raj Rajaratnam and insider trading...

Ironically it was on the day of my last drink and drug, but Raj (who ran Galleon Group) got arrested on October 16th 2009 and then was sentenced in 2011 and I think he went away in December 2012. I had my own theory (on how he got caught). If you look at all the documents, supposedly the Galleon case was opened in 2006/07, so it doesn’t quite line up with my theory, but I believe that with everything that happened with the financial collapse and then no one going to prison and no one really kind of getting any consequences, I felt like in 2008/09 they said ‘well someone’s got to go down’ and the next best headline is insider trading and hedge fund guys.

Meanwhile hedge funds had nothing to do with the bailout or CDO’s etc, hedge funds didn’t create them and they didn’t get bailed out. So I believe it was part of a desire to get the headlines against Wall Street, so the more scandals and insider trading rings they could bring down would appease the public a bit and make mainstream feel a little bit more comfortable that Wall Street was being policed.

Want to listen to Turney Duff's full interview with Chat With Traders? Listen here to Episode 106