Morgan Stanley grills BlackRock CIO on his worst bets | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Rick Rieder has spent 17 years at BlackRock building one of the most respected fixed-income track records in all of finance. He oversees roughly $2.7 trillion in assets, chairs BlackRock’s firm-wide Investment Council, and earned Morningstar’s Outstanding Portfolio Manager award in 2023, according to Morningstar.

None of that protected him from investments that went sideways in ways he never expected or prepared for in advance. In a new episode of Morgan Stanley’s “Hard Lessons” series, host Seth Carpenter pressed Rieder on the bets that burned him personally.

The conversation covered a Peloton position that collapsed, a hedge fund launched months before the 2008 crisis, and bond trades that nearly derailed everything. His admissions carry direct lessons for how you manage risk inside your own portfolio every day.

Rieder built early conviction in EV technology over Wall Street

Rieder described himself as a self-proclaimed “tech geek” who has stood in line for every major product launch throughout his career. That obsession drove him toward electric vehicles well before the broader market accepted the investment thesis. He recalled being the lone voice in rooms where skeptics argued batteries were too expensive to scale.

“I remember doing all the work and looking at that it wasn’t really an auto business, it was an energy business,” Rieder told Carpenter, according to Morgan Stanley’s Hard Lessons series. His key insight was reframing the sector around efficiency and scale rather than traditional automotive competition.

If you have ever held a position the market dismissed outright, you understand how isolating that kind of conviction can feel. Rieder’s EV thesis eventually paid off, but the process demanded a level of emotional discipline most retail investors underestimate entirely.

Peloton taught Rieder a lesson about why leadership matters in equity investing

Rieder was among Peloton’s earliest investors and bought the connected fitness company well before its pandemic surge took shape. The stock climbed from roughly $25 per share to over $150 between early 2020 and late that same calendar year.

Peloton’s market capitalization peaked near $50 billion in January 2021, when the stock hit its all-time intraday high of $171.09 on January 14 2021. The collapse came fast once pandemic restrictions eased and consumers returned to traditional gyms across the country.

Rieder admitted he held on too long because he believed leadership could pivot the business model before time ran out entirely. “I quite frankly thought the company could have reversed course, could have changed course; they didn’t,” he told Carpenter.

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That experience has reshaped how Rieder evaluates every equity position he considers for his portfolios at BlackRock. He spends far more time meeting with CEOs and assessing whether management teams possess the agility required to adapt effectively.

“Do they know the numbers? Do they know the business? Are they good operators? That to me is like the whole gig,” Rieder said.

Peloton shares have dropped by over 97% from their pandemic peak, and the company continues to battle declining subscriber counts and revenue erosion, according to Motley Fool.

For you as an investor considering individual stocks, the takeaway is direct and clear: strong products alone cannot sustain share price appreciation. You need leadership that can execute fundamental pivots when the original thesis breaks apart.

Peloton’s rise and collapse show one truth: great products don’t save stocks, disciplined leadership and timely decisions do.

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A bond trade early in Rieder’s career nearly ended everything

Before BlackRock and Peloton, Rieder learned his first lesson about position sizing on a bond trade that went badly against him. He was fresh out of school, convinced his analysis was correct, and kept buying more as the market steadily moved against his position. The experience taught him that one security, if sized incorrectly, can threaten an entire career before it gains traction.

“Soros used to say the crowd’s right 80% of the time. You just can’t be caught in the other 20% because you can get your head handed to you” said Stan Druckenmiller, Founder, Duquesne Family Office.

For your own portfolio, the lesson is clear: define the maximum amount you are prepared to lose on any single position before entering it. Respect that threshold without exception, regardless of how confident you feel about the underlying analysis driving your original decision.

The 2008 financial crisis changed how Rieder manages leverage and liquidity risk

Rieder launched R3 Capital Partners, his own hedge fund, just months before the 2008 crisis dismantled global financial markets entirely. The fund carried leverage, and when asset classes that were supposed to move independently all correlated downward at once, there was nothing to do.

“There were some days I’d walk into the office and say, ‘ This is going to be so hard,” Rieder recalled. He joined BlackRock in 2009, and the lessons from the crisis still govern every risk decision he makes across portfolios. BlackRock now manages over $14 trillion in total assets.

How 2008 reshaped Rieder’s risk framework for good

Rieder now obsesses over liquidity, leverage exposure, and tail-risk scenarios that most investors dismiss as remote and improbable events. He described the constant tension between staying invested to generate returns and preparing for the one catastrophic event that could erase years of gains overnight.

The same principle applies directly to you: stress-test your retirement accounts and brokerage holdings against scenarios you consider unlikely.

Rieder says contrarian investing has become more profitable

Social media and herd behavior have made consensus positions more crowded and vulnerable to sharp reversals, Rieder explained during the conversation. He described modern financial markets as increasingly resembling a “gambling institution” where participants pile into identical bets simultaneously.

“Being a contrarian and going against consensus has become much more, I think, profitable,” Rieder told Carpenter. He also dismissed a foundational academic concept outright during the same interview. “I actually think they should throw [the efficient market thesis] out because that is so far from the truth,” he said.

For you, the practical implication is worth remembering: when every headline, social media post, and analyst report simultaneously point in the same direction, the opportunity may already be fully reflected in current prices. Rieder’s approach is to fade extreme consensus moves and stay positioned along the longer-term trend.

Rieder’s worst bets offer a framework for protecting your investment portfolio

Based on Rieder’s decades of managing institutional capital through multiple cycles, several principles translate directly to your personal investment approach:

Key takeaways from Rieder’s investment failures

Size every position so no single investment can inflict permanent damage on your overall portfolio or retirement savings.
Define your exit strategy before entering any trade, and establish clear criteria for when you will cut your losses.
Evaluate executive leadership teams before buying individual stocks, because management determines whether a company can pivot successfully.
Maintain enough liquid assets to survive unexpected market dislocations without being forced to sell at the worst prices.
Resist the emotional urge to double down on losing positions simply because you believe your original analysis was correct.
Pay attention when every investor in your circle agrees on the same trade, because crowded positions carry reversal risk.

“We’re not in the business of being right, we’re in the business of generating return for clients,” Rieder said. That distinction matters for you too: being correct about a long-term trend is meaningless if you exhaust your capital before the market validates your thesis.