🎙️Episode 25: Andrew Herenstein, Vice Chairman of Monarch Alternative Capital

Andrew Harrenstein is a giant in the investment field. But what most people don't know is that a big part of his success was when he borrowed someone's phone on a plane. And well, the rest is history. Find out more this week on Jewish Grit. Andrew, welcome to Jewish Grit. >> Thank you very much. Nice to be here. >> Thanks for making the uh difficult commute from Midtown to downtown. So, Andrew, thank God Hashem has blessed you with success. I hope personal and professional. And you run a fund today already for a lot of yours. Just 30 seconds about that where you're at. >> So, in 2002, I co-founded an investment fund called Monach Alternative Capital. We started with a few hundred million. Today, we have 16 billion of assets under management. Uh and the firm is growing and vibrant. I'm sure it wasn't a bowl of peaches from 2000 when the you know the early 2000s until today or even in your career. If I push you and ask you to share with me just one moment where you needed Jewish grit to kind of keep pushing through. Is there a particular moment that jumps out at you? >> Maybe the most difficult point in my career. Uh I went to business school went to Columbia. I got a job at Bash Sterns. Some people will remember but most won't. At the end of 87, the stock market crashed, the big crash and whatever I was doing after Bass Sterns, I had a job at a small boutique called Bream Murray Foster Securities. That job just sort of ended and I really didn't know what I was going to do, where I was going to go and it was actually my father I turned to and you know, we just got together and spent a couple hours talking and he just, you know, pushed me through and said, you know, there's there's always bumps. There's always hills. You just got to push through and you'll figure it out. And I got a job at a small firm called Delaware Bay, which was a startup firm. And I was the first analyst they hired. And they did distress debt investing. I couldn't even spell distress debt at the time. I was the first analyst they hired. They trained me and the rest is sort of history. I worked at Delaware Bay for five years. Then I was recruited away in actually a really fascinating story um by two different firms uh and I ended up going to work at Lazard and I met my future partners at Lazard. We were there for 10 years and then the three of us went and founded Monarch in 2002. >> So what do you think is that ingredient in the recipe when a first person does find themselves like a lot of our viewership are people just similar to you. they're starting their career, maybe they thought their job their job would be a dream come true and it's a nightmare. What what do they need to push through? >> You know, at to some degree, um obviously not everything's in our hands. >> Um you know, you know, we say that Hashem at the at the beginning of the year tells us, you know, lays out what's going to be for us. Uh but you know there's there's also belief in yourself and you know just making the effort and fighting through and working through and um yeah I I just think you know people have to really have that own self-confidence. >> So you you and your partners you open up a shop what are you personally doing? >> I have always loved doing the research. I've always loved digging in, asking questions, trying to find answers, trying to find interesting, fascinating um investment opportunities. >> Do you find that that skill helps you when you study Torah? >> I I would say yes, but probably the opposite too. Studying Torah sort of helps you be be a good analyst. Um in the sense that you're constantly asking questions. You're constantly trying to figure out, you know, what's missing here? What what doesn't make sense? what is he trying to say? Why doesn't he agree? And it's that thought process which is sort of similar to what we do in our business. Our job is to sort of figure out every single aspect of a company. Um and you know the the investments we make are not just you we we invest in distress debt and distress debt investing means you have to be an expert in equity and understanding value of company. You have to be an expert in debt because the instrument we're buying is a debt-like instrument. And you have to be an an expert in legal processes and processes in general. Uh which means you have to be an expert in psychology because we're getting around in a room with other creditors and other investors, banks, bonds, management, unions, trade claims, shareholders. And we're trying to figure out how do we get from point A to point B? How do we resolve this disagreement, this problem that this company has where it doesn't have enough capital, it has too much debt, it has to reconfigure, it has to restructure, and there's so many moving people. There are so many moving pieces and so many people around the table that it's really, you know, really hard psychologically to get to an end place. And it's just a combination of all of those skills that we need to bring to the table to get the job done. So you have three partners and you guys have been together for I don't know almost 30 years. How do you how do a bunch of different people with different skill sets like you're saying different ways of getting keep the peace? >> Well, the way the way we did it was we worked on a consensual basis that whatever we did whether it was building the firm, starting the firm, making investments, hiring people, starting new businesses, we try to do on a consensual basis. And if the three of us um didn't have an agreement, we just didn't do it or we wouldn't do it as aggressively or in size. And the truth is that I'm not sure it's the most brilliant strategy to start a firm to where you do where you do everything by consensus. And maybe we were lucky in that the three of us found a path. The three of us found a way to work together uh and make these decisions. But I I think the evidence would be that most firms end up with some kind of breakup, some kind of divorce, some kind of separation, some kind of fight. Um, and you know, we were lucky in a certain sense that for whatever reason, we had a certain chemistry that worked and allowed us to do this together for 30 years. >> Can you share with us a little bit about your investing strategy in eternity? Uh, Saddaka, um, the religious part of your life. I guess we heard a little bit about the profession. I'm going to come back to it, but like talk to us a little bit about who you are as as a Jew. >> Um, so I'll talk about two things. Um, first let's talk about learning. For many many years, and this sort of ended a little sadly for me with the advent of COVID, but probably for 15 to 20 years before COVID, I would go to a Shia every morning. >> That's a Torah class, right? >> Yes. A Torah class every morning in Manhattan that started at um six o'clock or 10 to 6. I was and I'm coming from Long Island. So I would leave the house at 5. >> Wow. >> Get to the city at 6:00 and I went to a Shia by Rabbi Katzki. >> Sure. >> And we would learn from 6 to 7:30. We would do Kish, we would do Mishna, we would do um Rambam, we would do hashkafa, and we would do Talmud and Gumra. And we would do that until 7:30. And then we would do then I would dive in at 7:30 and then I would go to work. And it was really just a core part of my life. And I waking up every morning and sort of doing your learning and and engaging in Torah I found was just an extraordinarily good way to um start your day. And it's actually funny because it it impacted me in so many ways. Um, I had been recruited uh at one point by uh a major firm that was on Wall Street and it was a really attractive job and really interesting compensation. But at the end of the day, I didn't want to give up the shear because the shear was in Midtown right next to my office and and staying where I was in in retrospect turned out to be the best thing that I did. I I'll give you another story on that front. When I was at Delaware Bay, this is so this is sort of the job after I had after I got had get gotten laid off and I couldn't find a job. I took a job at Delaware Bay where they taught me distress that. I was there for a couple of years and my wife's family is from Chicago and her grandfather was having his 80th birthday party in Chicago on Mo Shabbat Saturday night. So the the party um was Shabas was very late because it was little it was August. It was the middle of the summer and so my wife had gone early. Uh but I decided I was going to fly on Friday, go to work a little bit and then fly Friday afternoon and you know I get on the plane and the plane takes off a little bit late and then we start circling Chicago and circling Chicago and circling Chicago and at one point the pilot says, "We've been cleared to land in Chicago, but we don't have enough fuel. So we're going to land in Detroit. We're going to refuel. We're going to head right back to Chicago." So, we land in Detroit and everything takes time and by the time we're getting ready to take off, I probably have, you know, two hours until Chabas and it's more it's a very short flight. I have enough time, but as luck would have it, we take off. By the time we get take off and by the time we land, I'm literally within my 18 minutes. In other words, Chabas is starting. I don't have any time. And this was 1988, 1989. So before cell phones for the for the most part. And I see a guy in the front of the plane after we land with a cell phone that looked like the size of a shoe box, one of those huge cell phones. And I walk to the front and I said, "Excuse me, but I have to ask a favor. Can I borrow your phone?" And it's not like borrowing a little cell phone. This is like a big deal. I have I have to make an emergency call. He says, "Sure." So I called my wife and I said, "Look, I just landed. I'm stuck here. I'm going to find a hotel at the airport and I'll meet you at the party Saturday night after Shabas. So the guy turns to me and says, "You're going to tell me that you're not going to be with your wife and your family because of Shabas?" I said, "That's right. I I I have no choice." He says, "Come with me." And he brings me to the Hilton. And he gets me a first floor suite at the Hilton and kosher food for the entire Shabas. Turns out he was a personal friend to Conrad Hilton. He was a a very big banker and he set me up for Shabas. It was the longest shabas of my life. Shabas didn't end till like 10:00 at night. But I had and I had and so I just went to Kumish the entire either I was sleeping or I was I was reading Kumish over Shabas. I made the party Saturday night and it was great. My wife said, "Make sure you stay in touch with this guy. Thank him." And so his name was Ira Harris. He passed away a few years ago. Um and he worked at a firm called Lazard Frera. About two years later, I'm getting recruited by head hunters and there are two firms that want to hire me. One is Lazard and the other is Lehman Brothers and I go through the whole process and I decide I'm going to go work at Lehman. And my wife says, you know, you really should call Ira and just tell him what's going on. So I called him. 10 minutes later, the guy I was interviewing with at Lazard calls me and said, "We need to talk to you again." So I go back in and they lock the door and they said Iris said you can't leave until you sign here that you're coming to work at Lazard. Said I'm not working at Lazard. I already took a job at Leman and you know he says you have to here's the phone. You have to call Leman and tell them that you're not working there. And we had a whole back and forth. I ended up doing that and I got this job at Lazard which really was the the pivot point of my entire career because I worked at Lazard for 10 years. I became a partner there and then the partners that I met at Lazard, the three of us broke off 10 years later and founded Monarch and the rest is history. Yeah. >> So your dedication and commitment to Shabbat ultimately set your career in the right that's fantastic. >> You know it's funny because that's a story when I hear a story like that I often roll my eyes you know you hear you hear people so but this is a true story happened to me and so it's uh I I I take it a little bit more seriously. >> I love it. That's such a great story. talk to us a little bit about giving because I know that that's one of the things that you're an expert at. I >> I don't know if I'm an expert. In fact, I would say my wife is more of an expert than I am. Uh we do all of our stuck, all of our giving together. We discuss every we we treat them like investments. We discuss every investment. We do research. We want to understand the different uh charities, different organizations, the people that run them. But it's a little bit less natural to me than it is to Terry, who's my wife. She's always driving to find new organizations to to give more. You know, we'll often when we find an organization that we like and we do diligence and we come up with we'll each come up with a separate number as to how much we want to give. And I almost always use her number because she's usually got the right instinct on it. uh and we have we spend a lot of time thinking about what's important to us. We give our money to a lot of different organizations but we spent a lot of time on education uh educating the next generation uh is just critically important to us and you know we we've given both uh significantly to yeshiva university we've given to Shalame College we've given to a number of yeshivot uh both in the US and Israel uh and I would say it's probably the largest single category um of of where we've given Honey, >> if you could go back and have a conversation with yourself 25, 30 years ago and uh talk to yourself and give yourself a little bit of advice, what would you tell yourself maybe to do or not to do? >> Um I I would say a few things. One, I would probably take more risk. I'm I'm by nature not as of the partners. I'm not the most risk uh I'm I'm the most riskaverse in a certain sense. I would probably take more risks career-wise. I had a chance for example to go to London for at some point in my career. Um and I you know looking back you know I probably would have done that for for for a period of time but you know from an investing perspective from a changing jobs perspective I I think when you're young and you can take risks it makes sense to do it later in life it's it's harder when you have a family when you have kids when you're more settled sometimes it can be harder to take risk. Um, the second is not to be ashamed of who you are or embarrassed by who you are as a Jew. I I think especially today in in in society, it's more accepted. It's more open. When I went to when I first went to work, I did not wear a kipah uh every day. Um, and most people, it was hard to find people that really would do it on a regular basis. I actually started my brother, my younger brother started before me. Um he he started he was a a partner at Sanford Bernstein. He became he was becoming more religious. He started to wear yarmaka and then at some point um it's got to be at least 20 years ago. Uh I just decided that I was going to do the same thing and I started wearing yamaka to work and nobody ever said a thing to me and you know what's crazy is I travel all around the world. I travel to Europe. I travel to Asia and I just always wear my yamaka and I've never seen I've never had an experience where it affected me negatively and it led to some very interesting conversations and discussions over the years. >> Talk to us a little bit about what makes you proud to be a Jew. I'm assuming that you are >> Jewish or proud. There's there's a lot of things that make me proud. Um you know I heard Rabbi Hersel Shaka say something a while ago. >> He's a rabbi at university. Exactly. that he was a link between the previous generation, his parents and his grandparents and his kids. And he continued the tradition. He was just one link in that tradition. And I think that's what we all are. We're all a link. We've we've gone from Sinai 3,500 years ago, I think it was, you know, to today being passing on Jewishness and and the Torah from generation to generation. And just being one link in that extremely long chain is something that I'm extraordinarily proud of. >> It's amazing. I remember when we learned American history and I asked this to my teacher in high school and I'm like, you know, American history is a sneeze in our lineage, in our history. He's like, well, you're going to focus on that sneeze, young man. That's that's wonderful. Um, has your definition of success just in general evolved? Has it changed from when you were a young person starting your career, when you started your company until today? >> Um, I don't know if it's changed, but success can be defined in a number of different ways and and I'll I'll talk about two. Um, the first is really nothing to do with business. It's building a family and having kids and transmitting values to to another generation is something that is to me, you know, satisfying and a sign of great success. And in fact, I would argue that the same thing is true in business. While it's great that we've um created this valuable company and uh we've raised all this capital and we do this great job for investors, one of the things I'm most proud of at work is the fact that I trained a generation of investors who then trained another generation of investors who trained another generation. And I feel like I have um great great grandkids in the in the business because each time another generation is trained by someone that I trained, who was trained by someone that I trained, etc. It's just immensely satisfying. >> It's beautiful. It's the gift that keep on keeps on giving. >> Yeah. >> Can you can you talk about your brother who is a partner at Sanford Bernstein? Is he still there? >> Uh no, he left Sanford Bernstein 20 years ago, I'm guessing. and he he was the head trader at Sanford Bernstein. He covered I always remember he covered the government of Singapore was his was his biggest client and at some point he decided that he wanted to sit and study Torah and he and his family made aliyah. He had four girls and they all did it together. >> Moved to Israel. >> They all moved to Israel. They moved to Bamesh. And sometimes you hear horror stories or or challenges and difficulties when families move when their kids are older. Not everybody buys in uh and you know there's challenges and such and they did an extraordinarily good job. They moved to Bamesh. He was very close to Rabbi Weinberger who you and I talked about earlier and Rabbi Weinberger was very influential in in his life. Uh, and he went and sat and went to yeshiva in um, Betari Lit called Birkat Morai which was which is run by a Rabbi Yako Freeman who originally from Denver, an amazing amazing um, rebi and amazing man. And he just sat and learned for 15 years day and night. And he studied Torah like it was a job. like he would get up early in the morning, you know, he'd have a little bit of lunch and he would learn until night and he'd come home and he'd have dinner and he'd sit down and learn again. In the way when you when you have a job and you're serious about it and you work hard and you drive yourself, he did the same thing in this new job of his. Um I I used to joke with him that he had a great pension plan in this job, >> at least an eternal pension plan. Ex >> Exactly. Um, and I think he was there for 15 or so years. And then Rabbi Friedman said to him, it's time for you to leave the yeshiva. And what he meant by that was, it's time for you to give back. You've learned for a long time. You've developed all these skills and all this knowledge and it's time to give back. And he ended up working uh as a rebi at Orsame where he is today. And he's, I'm told, one of the most popular rebum there. These are a lot of these kids have very little background. And for them to spend time with someone that's not only extraordinarily knowledgeable in gam and and Yiddishkite and Torah, but also knows the secular world and was a trader at Sanford Bernstein and was, you know, extremely successful is something for them to really look up to and to emulate and learn from. And he's he's really had amazing success in both of his careers. >> This has been beyond fascinating. I feel like we're just starting. Um I am so grateful for you for giving us the time. So many multi multiaceted points in the conversation. Wish you loads of success and I think we got to get you back to do episode two. >> Happy to come back. >> Thank you so much. 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