Gregory Blotnick on What Led Him To Err And What’s Next After Brattle Street And Prison

When Gregory Blotnick, formerly of Brattle Street Capital, walked out of FCI Coleman Low prison one year ago, destined to complete his sentence on home confinement, he was overcome by feelings of gratitude. It was a gorgeous, sunny day.

Describing the experience as “surreal” and “straight out of a movie,” Blotnick had friends he hadn’t spoken to in years offering to pick him up as soon as his release date was posted online, but in the end, his mother received the honor.

“I think everyone wants to be that friend who picks their buddy up from prison and gets to see the joy on his face and be a part of that moment,” he said. “It really is a once-in-a-lifetime thing. I remember turning around and looking back after I walked out, like, man, I can’t believe I made it through that.”

Gregory Blotnick: On the other side

Looking back, Blotnick said Riker’s Island was far more violent and dangerous, and people die there all the time.

“That place was the first time in my life I got right with God and told him, like, if this is it, you can hit the lights. I’m straight. It’s been an incredible life,” he added. “Somehow, I’m still here, so he must have plans for me. I just need to figure out what they are.”

Blotnick said people are less likely to die in federal prison - despite the fact that there are 150 men in a cramped, open dorm or barracks-type setup. Of course, no one wants to be there, and men are in bad moods while the guards don’t show up for work.

“It’s like the ideal petri dish for breeding anger and violence,” Blotnick explained. “It felt great to be out of that powder keg, and it’s another surreal, crazy feeling to have walked in there with absolutely nothing [and] then walked out a few years later with absolutely nothing plus two books to pass the time while waiting for my name to be called: [Baruch] Spinoza’s Ethics and Plutarch’s Moralia.”

Now six months after his home confinement is complete, he’s ready for a fresh start. In an interview with Hedge Fund Alpha, Blotnick shared more on his new venture - and past mistakes.

Gregory Blotnick on the launch of Valiant Research

Before launching Brattle Street, Blotnick worked as an analyst at some of the top multistrat hedge funds including including Citadel LLC and Schonfeld Strategic Advisor.

He recently launched Valiant Research, an independent research firm focused on the consumer and retail sector. The firm provides market intelligence and analytics to institutions, small businesses and individual investors.

“Even before I got home, I had friends interested in helping me get back on my feet, part altruistic, part knowing that I could be of use to them at a price,” Blotnick said. “The majority was guys on the operating side, running small businesses, who needed a fractional COO/CFO-type at a reasonable price. I think the one thing I heard more than anything else from long-time relationships is, ‘I need someone good with numbers that I can trust.’ So after getting squared away with lawyers on my end as far as what I can and can’t do, that was the genesis of most of Valiant.”

However, he said the individual investor side of the business has been the “more ambitious part” as he determines how best to serve them.

“I’m moving very slowly, and at this very moment, the plan is fluid; a lot of people saw the Valiant launch headlines and started hitting me with ideas,” Blotnick added. “There’s a lot of sharp buy-side guys who have feedback on how this could best be done, and I’m listening. Especially for people who have spent the last 10 or 20 years at institutions, they have the entrepreneurial itch and want to contribute their time, energy and capital in helping to build something, and so it’s on me to be patient and methodical while figuring out how to put all these pieces in place.”

Gregory Blotnick on serving retail investors

He decided to specifically serve retail investors because he wanted them to be able to benefit from the lessons on investing and trading that he had to learn the hard way, “through losing small fortunes and losing years of time.” Blotnick sees people making the same mistakes he did repeatedly, and he wants to help them reach the next level because he doesn’t feel anything about investing is hard to explain.

“Once you understand the basics of trading markets, most of the battle is just patience, discipline and humility,” he added.

Blotnick also feels investing is an apprenticeship business. He noted that while investors can learn a lot about the basics of fundamental and technical analysis from reading books, portfolio construction and risk management are a lot less straightforward.

“Everything I know about those I learned on the job from wonderful mentors, and I’d like to pay it forward the same way it was to me,” Blotnick added. “Overall, this is a very crowded space. Everything in financial services is a crowded space. What I am doing is not unique at all, and I don’t have a sales pitch beyond readers are smart and they’re able to recognize high-quality research from nonsense. That I believe in my heart, and so it’s just on me to execute.”

Gregory Blotnick on patience, discipline and humility

Blotnick says every mistake he’s ever made was because he violated his three pillars of patience, discipline and humility. In the case of Brattle Street, he set a strict goal of getting the fund to perform within 24 months — or he would shut it down.

“I’m not entirely sure this was the wrong approach, because a fund with mediocre two-year returns is dead in the water,” he said. “But what I did a really poor job anticipating was the extent to which I’d feel that pressure in the first year. If you’re six months in, and you’re down, say, 10%, it becomes much harder to stick to your multi-year fundamental ideas. Put differently, if you’re down 20% in year one and up 25% in year two, you’re flat on a two-year basis and don’t have a track record anyone will be interested in. This means your time horizon compresses on all your new and current ideas, you start taking shots that you shouldn’t be taking, and sloppy process is always followed by sloppy P&L.”