Dan Loeb on AI, Short Selling & Why Hedge Funds Are Back | Global Alts Miami 2026

Well, first of all, it's the very beginning of the year, so I don't want to jinx it. So far so good, though. But so far so good. It's really been a function of navigating what's going on in markets. I mean, as the Cattrini note pointed out, and by the way, I've known James who writes it, we're a subscriber to the service. If there's maybe one or two people in the room who haven't heard about it or read the note, he basically suggested that not only is AI going to be a transformative, highly impactful force on software, but it's going to spill over to adjacent businesses, to the economy, drive up unemployment and kick the market in the gut. A couple things about that note. First of all, even James himself said, 'Hey, I just put it out there as sort of a scenario that the government should be aware of from a policy standpoint.' Number one, it wasn't a prediction. It was not to say he didn't think that it was a possibility, but it was just something to think about. And I don't think anyone disagrees that AI is incredibly impactful. We've invested. It's really, you know, if we think about our cornerstones of big picture macro analysis being traditionally looking at economic growth and employment rates and inflation and the impact on different sectors, I think you have to put AI up there with everything else and now even more so than these other factors.

I don't think it's a question of like positive or negative about it. I mean, it is, you know, I think we've gone from, you know, it's a fad or it's not really happening to, well, it's going to happen a long time in the future to, you know, holy crap, it's happening now. And it's really caused a rethinking of what some people call terminal value of enterprises. And my friend Chamath more poetically puts it in terms of thinking about the time-bounded value of enterprises, which I kind of like the way that sounds, but that's really the crux of it all. And it's also a very hard thesis to argue against because if you're the CEO of a software company and you report a good quarter or project a good couple of years, that's fine, and then the other side will say, well, you haven't yet experienced the impact of AI. And, you know, if you look at, I think Elon's talked about two different concepts which I think when you put them together can be a helpful framework. One is this idea of human emulation, basically creating clones of ourselves or clones of our employees as individuals. I have friends that are already doing that, creating an agentic version of themselves so that they can look at multiple markets at the same time. We've been playing around with it. And his other thing that he's written about, which is even more impactful, he calls it Macrohard, which is his, Elon's always cheeky with things like 420 and X, Macrohard is a plan to Microsoft. Basically what he's talking about is the ability of xAI and LLMs generally to replicate not just the individual but the enterprise, every person, every interaction, every customer interaction, the governance, the security aspects, all of it. So, you know, this is the same guy who came up with data centers in space, but I think that the idea of this very futuristic concept probably has more credibility now than it did even two or three months ago. And it's just something for you to think about in every investment. And it isn't just AI. You know, we used to say software is eating the world, or Marc Andreessen said that. We definitely see AI eating software. It seems like every time Dario from Anthropic opens his mouth, there's a new sector that gets hammered. You know, info services, but we've also seen alternative asset management, alternative asset distribution, RIAs, brokers, ship broking, I mean anything. So I think some of this is overdone, but you know, not all of it. And so to invest in this market, it's kind of a battle between a few things. One is, you know, fundamentals versus narrative. And then, you know, really thinking about what are the businesses that, no matter what, well first of all, what are the businesses that are really going to be winners indisputably. And you've seen that in, interestingly, you know, the Mag 7's become the Lag 7, and the real winners are even the big potential winners. But if you look at all the picks and shovels, the memory folks in, you know, in Korea and Taiwan. You look at like the Sandisk of the world. I mean, this is where the real action has been.

Look, I can't generalize about hedge funds and I've certainly had, you know, tough times and good times and very humble when we have a stretch like we've had. Things can change really fast and I think, you know, humility is probably the number one most important quality for someone to have. I think, you know, look, there are going to be people who navigate this well and there are going to be people who have adapted and not adapted. And I think in general, because of the move from, you know, large cap, high consensus, highly owned stocks to nichier plays, I think that's an advantage. I do think that the lost art of short selling has come back and it's absolutely critical. The years are young again, I say that with tremendous humility. It can turn on a dime. But I think what people classically looked for in hedge funds, I don't know if hedge funds broadly are back, but the hedge funds that are going to succeed are going to have to do what hedge funds did in the past, which is work 24/7 to generate alpha on the long side and the short side and also be able to invest within an investment framework where you're not just hiding inside of big enterprises that previously we thought had huge moats and edge, but now we're finding more and more in nichier plays and a lot of international. I would say 70% of our top 10 are European, Japanese, and Korean stocks.

I just think there's also a lag and then there is a valuation discrepancy and the fact that the market is moving towards smaller companies and more cyclical. You have these international companies, particularly in Asia, that are providing niche products that are a small percent of the overall cost of an Nvidia GPU but extremely essential and that are in short supply. So they have enormous pricing leverage. So you see like Hanex and SK Square or Inara, which is a capital equipment company, they're able to increase prices and they're running full out capacity.

So, I actually sort of started my career at Warburg Pincus in venture capital and LBOs, but it feels like I bounced around a little bit. I'd never hire someone with my resume. Then I ended up at Jefferies, great firm, in 1991 as a distressed debt analyst at the heyday. I don't think there's ever been and may never again be another time like that. We'll see how some of the private credit situations play out. But certainly that was a heyday in private credit and the firm was actually started as a distressed debt fund. So that's been integral to what we've done for the 30 years that we've been around. Distressed debt, high yield credit. I think through the 2000s, you know, coming out of both the dot-com bubble and the GFC, we leaned heavily into credit. Coming out of COVID, we leaned heavily into IG credit. And then more recently, in addition to corporate credit and structured credit which we started in 2009, we started investing on the IG side for an insurance company that we founded in the P&C market and then more recently for one that we started. So today, in addition to the $9 billion hedge fund, we have an insurance company that we manage all the money for in IG across private credit, structured credit, whole loans, commercial lending, real estate, commercial lending and IG, both private and public. And then we've started, we acquired a CLO business. We have seven billion dollars in CLOs and we have launched a more traditional but with a twist private credit business. The first vehicle was designed for insurance companies, launched in August.

Well, I mean, I wouldn't assume that they're out of control. I think that the private credit markets generally will experience some stress from the exposure to software and maybe some of the adjacent businesses. It's been well flagged. There's somewhere between 150 to 250 billion dollars of private credit that's been issued to software companies. Maybe the higher end of that range includes some healthcare and other related ones. The bad news is that a lot of these loans will be impaired, but they don't make up all of the portfolios that they're invested in. Some hits have been taken, some additional hits will have to be taken, and there's generally a pretty good matchup. You know, unlike what happened with Silicon Valley Bank, there's not a run on the bank scenario because there's a match between assets and liabilities. I also think at this point that the senior debt, most of these funds are operated with leverage. So unless you're talking about a dedicated software fund, the senior debt against them should be okay. But when you look at this in total, you can say, 'Well, wait a minute, that's just the credit financing the deals.' I'm going to punt this one to Claude. I'll come back with some. But there's somewhere between a half a trillion and a trillion dollars of equity in these deals. So, again, they don't make up the entirety of the private equity funds except for a couple, which I would be concerned about. And so, there will be some hits taken. There'll be hits taken in the US, there'll be hits taken internationally. But even if you put that in the context of a $30 trillion economy or more relevant, like in the last year there was 13.5 trillion dollars of wealth creation which is going to be one of the drivers of demand into the economy this year. It definitely will be unpleasant but I think it will not happen all at once. When they happen, the losses that will likely be taken, they won't be losses in their entirety and I think it'll be spread over time. I think that in turn will create enormous opportunities for people who have fresh capital to do private credit investing either through traditional vehicles, through SPVs, either sponsors that we're going to have to look for alternative types of sponsor finance other than just unit deals. There will be opportunities in direct lending and there'll be enormous opportunities in credit solutions, hybrid solutions, and, you know, we've done it before. You know, if you look at our, you know, I'm a distressed debt analyst, and that's what we did in 1991 at Jefferies. We are comfortable owning equity through the other side. So whether it's our main hedge fund or our private credit funds, we now have different vehicles that we can operate within. We don't have a legacy portfolio which I'm excited about and, you know, I think it'll be a certainly be an interesting time. I will say these markets are more interesting than, it's sort of a hackneyed term to use but it is interesting.

Well, I think when we were, the royal we, when we were small as a fund, like a few hundred million dollars, I think our main tool was shame and humor. To kind of try to, you know, you don't have a lot of financial heft. You use what you have. I think the shift has really been more towards a dare to be great message. Not always, but I think, you know, if you look at our recent letters to companies, I don't know if you'd even call them like activism in the classic sense. People think about activism being really confrontational, trying to unseat boards of directors or management teams and affecting change. I do think it's important to have that tool in your toolkit. I've often said that activism without proxy contest is like Catholicism without hell. So you need that, that's a laugh line if anyone wants to chuckle. But for the most part what we have, where I think if you call it activism or just being an engaged responsible shareholder, we've actually been invited in. Like we had the IR head of a major Japanese company come to us and say please write a letter, like we've been trying to get these guys to stop allocating capital to things other than our core business. They should, we're trading at a 60% discount. We need a voice. So that's happened more than once where management has either because they had a recalcitrant board or whatever wanted to hear our voice and in those sorts of situations we want to be constructive and we've done that recently with a letter to Indra Systems, a Japanese defense company, Ibaraki, who I mentioned, that board of SK Square which is a parent of Hanex or is a holding company for Hanex shares. I think the dare to be great message is a great one. That's a theme. I also see humor, intellectual humor, and I see a little bit of shaming. There are certain topics that seem ridiculous that you write about that should be shamed. And the way you write about compensation. So, all of these things I think are important for all of us in the market as we're determining what we're going to invest in. So, do you have a favorite letter? If somebody's like, I really want to go back and read Dan Loeb's letter, which one should it be?

The early ones were certainly, in hindsight, pretty outrageous. I'm sure that there were letters written that have never before since been filed with the Securities and Exchange Commission making references that I can't talk about today. But there were effective letters to like Star Gas and a company, well there were a bunch of them, you just go look them up and some of them have been aggregated. But I think the real thoughtful ones like to Sony and Yahoo, Sabes, they've really stood the test of time. Sony has basically adopted our entire business strategy and plan that we gave them in 2013. They've separated out their financial services. They're simplifying the business. A company like Fenuk. So I mean a lot of them, these are obvious things. They just needed a little nudge.

Well, I went to Columbia and I think this is coming full circle. AI. Dario's partner, I forget her name, but she was a liberal arts major at Santa Cruz. And although I studied economics, I went to Columbia. I enjoyed the core curriculum there, which was great because I read a lot of books that I never would have read and I've continued reading. Doni, we heard about you. Yeah, we heard about that. That was on the list. Iliad and the Odyssey and Rabelais, by the way, if no one's, it's an obscure text written by a medieval monk but really funny and really bawdy. I used to meticulously sit there with LexisNexis and Bloomberg and write every word. I would then iterate with my attorney and we would come up with something. He would take out the inflammatory parts or add in 'in my opinion.' Some of them I think remain. No, but I learned early on that there's a, if you want to avoid repercussions, legal repercussions, if you express an opinion, it's very different than stating something as fact. So and if you use words like 'apparently,' so there's a lot of those tricks in there intentional. More recently, they've become incredibly collaborative. Someone on my team will take a cut at it. And my son is, you will not like what your team writes. No, I like it. I like it. It just needs, it just needs to be spiced up. So my son is a musician. I took him to meet a music producer friend and he said I always fast forward the songs to the chorus. So most of the letters where there's a particularly quotable sentence, generally not always but about 80% of the time I came up with the zinger chorus line that you come back to.

I'm a fan of all education. Continual learning. Knowing how to write is a really important skill. It's as important as anything else.

Well, it's a very long story, but the short version of it was that I didn't, I was sort of culturally interested in my Judaism. I took my first trip to Israel in 2017 with Dan Senor which was a big eye opener for me. Shifted some of my philanthropy and interest into Israel. So sort of culturally and then kind of Israel focused. And then by chance I was philanthropically interested in two things: education reform and criminal justice reform. On the front of criminal justice reform, someone who had direct experience with that, Charles Kushner introduced me to a rabbi here in Miami named Shalom Lipker, who I got to know and got involved with an organization called Aleph. And through that, I got to know this rabbi. And when he got sick with COVID, I asked him what I could do because he was in the hospital as the first patient. He said to say Shema. I didn't know what that was. So from that day forward, his son taught me that prayer. The two of them taught me to read Hebrew, to study the siddur. We studied the Torah and it resonated with me as sort of a great framework for life. And then after October 7th, I realized a lot of other people, it's sort of a foundational, table stakes practice is to, you know, people read the Torah from something called Simchat Torah, around then you start all over. These are the first five books of the Tanakh, the broader, the longer Bible. And then I started something called the Simchat Torah Challenge because I realized that although I'd only done it once, it was a response to October 7th to challenge people who maybe had never read it or had given up on it to read the Torah week by week. And it's an incredible story that starts with Adam and Eve and the patriarchs and then spends the last four books on Moses. It's an incredible story that on the surface is interesting and historically it's interesting, but every single, as someone who wants to go really deep in things, I mean, there are literally thousands of years of scholarship on it. So it's a continual process every week to continue doing this, year by year, week by week, and I've had the opportunity to study with great rabbis on this.

How do I feel about things? Look, I as I say to my wife who constantly comes to me with her latest outrage about what is happening or what the president says, I'm like, yes, but think of the alternative. Like think what would be happening in the economy internationally, in the Middle East, etc. It's not a perfect process or necessarily how we would handle it, but, you know, I take that as a starting point. I think the economy is generally in a good place for the next six months, but I don't think anybody really knows what's going to happen in, you know, in 2027 or 28, let alone the back half of the year. So, it's a time to be, look, I'm optimistic and I'm a huge believer in America and the capitalist system, free enterprise and I'm wary of some of the forces that are trying to undermine that. And I think we're in a good place right now, but I'm also concerned about the forces that want to undermine that and the political situation where it's very at risk. So, I'm generally optimistic, but, you know, we're going to have to fight for everything that we have and hope to keep into the future.

Thanks everyone for coming to hear me. I appreciate it.