Former Goldman Sachs employee built his fortune by buying struggling businesses and collaborating with activists like Nelson Peltz
Gregg Hymowitz is CEO and founder of EnTrust Global , an alternative asset manager with $18.7 billion under management. A native of Long Island, Hymowitz, 58, studied political science at the State University of New York at Binghamton. He then entered Harvard Law School, followed by a brief period working in mergers and acquisitions for the prestigious law firm Skadden. He joined Goldman Sachs in 1992 and helped expand the bank’s ultra-wealthy client wealth management business.
From there, Hymowitz and two Goldman colleagues, Michael Horowitz and Mark Fife, decided to take the plunge in 1997, launching EnTrust Capital with 125 clients and $750 million in assets. In 2008, Hymowitz bought out his partners’ stake, and in 2016 he combined EnTrust with Legg Mason’s hedge fund, selling 65% of his stake for $400 million.
In 2020, Hymowitz reacquired the stake and has since sold 20% of the business to Brunei’s sovereign wealth fund (which is also an investor in EnTrust’s funds). Hymowitz’s estimated fortune is $1.7 billion, including his 80% stake in EnTrust, his personal investments in the company’s funds and other assets.
Hymowitz’s big innovation was event-based investing, in which EnTrust partners with other billionaire activists to fund their campaigns. For example, in 2016, EnTrust invested $650 million in Nestlé, alongside billionaire Dan Loeb’s Third Point LLC, as he bet $3.5 billion, pressuring the food maker to reorganize its business.
EnTrust has also collaborated with Nelson Peltz’s Trian Fund Management and successfully runs a fund business investing in other hedge funds. In recent years, Hymowitz has capitalized on the private credit boom by expanding a niche in marine lending.
Check out the interview with the billionaire investor below:
Forbes: How did you get started as an investor, especially coming out of law school and starting your career as a lawyer?
Gregg Hymowitz: In the late 1980s, my father and grandfather had a sponge-making business. When the base interest rate reached around 20%, they were bringing forward their bills and lost the business. These final years of high school and college were quite difficult from a financial perspective. I decided that I would always have something to lean on.
After law school, I spent 18 months at Skadden and decided that being a lawyer wasn’t really what I wanted to do. I was more interested in the other side of M&A transactions. So I decided to interview on Wall Street and got a job at Goldman Sachs in 1992 that paid me half of what I was making.
The guidance was, ‘Go out and build an asset management business under the Goldman Sachs umbrella,’ and that was very appealing to me. They gave me a really big phone and an even bigger computer and told me to build a business. I started calling clients and also reading and learning from others at Goldman about everything I could. I was very lucky, because I joined a team with two other guys who had been there for over a decade. We quickly became much more experienced in asset management. And we had the ability to leverage all of Goldman’s research.
Forbes: You co-founded EnTrust in 1997 and grew it steadily throughout the 2000s. What were the secrets to your success?
Gregg Hymowitz: This business – the high income and institutional one – is all about trust. We said, and still say to this day, ‘Never ask an asset manager what he likes, ask what he owns.’ I’m kind of traditional in that sense: I only invest my money, my personal capital, in the same investment strategies and products that we offer to our investors. I think it’s very easy for managers to tell people what they like, but telling someone what they like isn’t as important as being aligned.”
Over the years, EnTrust has really evolved. In the 1990s, we began investing in individual stocks and
building municipal bond portfolios for individuals. Then between 2002 and 2017, we started investing in a lot of hedge funds for institutional investors: your traditional fund-of-funds model, and we did that for many years. Additionally, during the 2007-2008 credit crisis, we also started investing in unique idea investments from disruption.
So there was a big evolution in the business, and that’s when we really started doing these co-investments, which no one had really done in the hedge fund world before; they were just a private equity phenomenon. We’ve invested probably around $14 billion of capital in individual disruption-based investment ideas.
Forbes: What was EnTrust’s first co-investment and how did it contribute to the evolution of your company?
Gregg Hymowitz: One of our first co-investments was with Gramercy Partners in Argentina’s defaulted sovereign bonds. At that time, in 2007 and 2008, many of the co-investments were credit related. When credit crashed, there were a lot of interesting opportunities from that disruption. So there was a period where we did a lot of activist investing in stocks, where we partnered with a lot of activist managers and allocated capital to ideas where we partnered with a manager, typically a hedge fund manager, where we took a position in a company and we create an event, be it a change of management, spin-off of a business, restructuring of the business, change of board, etc. We’ve done a decade or more of these types of investments.
Forbes: What’s one investment you’re especially proud of?
Gregg Hymowitz: A typical investment for us is SeaWorld (PRKS). A guy called Scott Ross, who runs a fund called Hill Path Capital, brought the idea to us in 2016. We didn’t invest with Scott in his main fund, but the industry has evolved a lot in the sense that when we started, we mostly dealt with guys where We were already investing in their funds and they were bringing us ideas for which they needed additional capital.
But as our co-investment business grew, we had inbound calls and other ways to find opportunities. We invested about $100 million in the initial position in 2017. The idea was to basically take a position in SeaWorld and really try to fix the business. If you remember, there was that movie about how SeaWorld was behaving towards orcas, and there was a lot of negative publicity at the time. So we thought it was an interesting opportunity to go in there, fix the business, help management or possibly replace management and clean up the business.
What created opportunity for us was Covid – when everything closed. Back then, if you owned any business where more than two people had to come together to conduct business, you had a problem. And obviously SeaWorld is down substantially; all of these actions were hit hard; and then we bought a lot of shares when it got really nasty.
This was a great investment, not just in returns, but because it encapsulates so many of the things we look for: management change, disruption, value protection, focusing on costs, ensuring you have the right capital structure in place, and at the end of the day day, it was necessary to have a little courage and conviction that one day we will come together again.”
Forbes: Are there any other current stocks you own that you’d like to highlight?
Gregg Hymowitz: We have had a very significant position for a long time in Deutsche Bank (DB). We started buying this position about five years ago, and the stock basically went flat. But five years ago, I told the Wall Street Journal, ‘All this company has to do is not be mediocre, and if it can get out of mediocrity, this will be a great business again.’ Five years later, with new management and a new CEO who has done a fantastic job, the business is no longer mediocre. But the market is still not convinced of the story.
No matter how much the metrics have changed, Deutsche Bank still has the reputation of the old Deutsche Bank – you know, the troubled Deutsche Bank. Now, it took literally five years to get this company on a much more stable path. My perception is that in the end this investment will work out very well, but it is taking a long time.
Forbes: If you could go back in time and give yourself advice at the beginning of your investing career, what advice would it be?
Gregg Hymowitz: People always ask me today, ‘Should I go to law school [or] should I go to business school?’ I’m a huge supporter of law school because every day in my business, whether it’s managing EnTrust or doing the investing, everything you touch is always related to reading a contract, reading an agreement, understanding how agreements work. That old expression, ‘thinking like a lawyer’, is vital.
However, one thing I wish I had done earlier in my career is take more accounting classes. I think there is so much about investing today that is driven by accounting. Being able to read financial statements and understand them is crucial. I also would have taken more tax classes. Much of what we do, as a business and as investors, is driven by taxes. So those are two things that I think are super vital for investors who are starting their careers.”
Forbes: Are there any books you would recommend every investor read?
Gregg Hymowitz: There’s a 2004 book called Blue Ocean Strategy. It’s a famous business book and it talks about trying to find investments or businesses that focus on differentiated, value-additive markets, where you’re competing on quality, differentiation or added value rather than competing on price.
So, there are red oceans and blue oceans. Red oceans are commoditized, undifferentiated and competing on price. Blue oceans are differentiated in the market, where you don’t need to compete on price. So I’ve always geared the EnTrust business and the strategies that we like to invest in toward these types of strategies, these blue ocean strategies.
