29 episodi

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.

Alpha Exchange Dean Curnutt

    • Investimenti

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.

    Andy Redleaf, Principal, Park Financial Group

    Andy Redleaf, Principal, Park Financial Group

    The son of a physician and with a penchant for math, Andy Redleaf came upon options in high school, even before they were listed on the CBOE.  Post college, Andy landed in an option trading role and was making markets on the CBOE during the 1987 stock market crash. In his rendering, the introduction of stock index futures dramatically increased correlation among stocks and the creation of portfolio insurance left some investors short a put that no other investors were long.  In combination, this left the market vulnerable to such a sharp one day plunge in stock prices.  Our conversation considers market stress periods in the context of the neat mathematical models and their simplifying assumptions that may be enablers of these seismic events.

    We talk as well about Andy’s hedge fund career, first co-founding Deephaven and then founding Whitebox.  Both ventures were focused on exploiting mispricings in complex securities such as convertible bonds and the relative value between equity and corporate credit securities.  As the head of Whitebox for two decades, Andy oversaw the firm’s expansion into a global multi-strat fund that traded all asset classes and through periods of vol both high and low.  Our discussion brings to life the instability that Andy saw lurking beneath the surface of calm markets in the period prior to the financial crisis.  He shares his analysis of the wholesale mispricing of mortgage risk that was evident in the statistic that nearly 90% of the refinancings on New Century’s book increased the amount owed from the original mortgage.  This, Andy suggests, is an indication of a more desperate borrower.

    As we explore the important risk events that have helped shaped Andy’s philosophy on risk, we also pivot to the financial climate that is today.  Andy is skeptical that ultra-low interest rates are stimulative and sees the decline in interest rate income as a headwind for consumers who are trying to reach a specific financial goal through savings.  Today, Andy is principal of Park Financial Group, a firm finding opportunities to prudently lend in today’s climate of highly bifurcated credit allocation.  I hope you enjoy this episode of the Alpha Exchange, my conversation with Andy Redleaf.

    • 53 min
    Scott Ladner, Chief Investment Officer, Horizon Investments

    Scott Ladner, Chief Investment Officer, Horizon Investments

    In 1998, Scott Ladner hit the derivatives scene at First Union, just as LTCM was imploding and equity volatility was rocketing higher.  No sooner would the Fed help contain that risk episode, then the tech bubble would be set in motion.  An intense period of “stocks up, vol up”  during which valuations expanded to unheard of levels, followed by an equally intense, “stocks down, vol up” characterized the period of 1999 through 2001 and provided hands on, sometimes painful experiences for Scott in managing convexity risk.  Short airline volatility during the September 11th terrorist attack, Scott quickly came to appreciate the potential for significant gap risk and discontinuity in markets, a reality not contemplated in the textbook version of Black Scholes.

    My conversation with Scott considers insights gathered over a career managing volatility exposure across asset classes and how he came to his role as CIO of Horizon Investments.  Scott shares his views on how volatility can come and go, how many factors can come to impact the price of options and how important it is to have a number of little bets on versus being overly concentrated in a singular exposure.  He points to the value, but also the dangers of option models, learning along the way not to take the output too seriously and to constantly re-examine the assumptions being made.  Today, Scott’s dashboard consists of credit, liquidity and risk metrics with the goal of identifying incongruities that help him focus his research to better understand market dynamics.  In this context, we discuss the early and late year vol events of 2018.

    Lastly, we discuss Horizon’s efforts on behalf of its clients to manage wealth and reach retirement goals within the constraints of the low growth and low interest rate environment.  His team is seeking to build risk management techniques that work specifically in today’s unique economic and financial climate.  Noting that there is now “an ETF for everything”, he sees the last 10 years as the age of product.  The next 10, in contrast, he views as the age of planning, where the focus should be on how to best utilize these new products to maximize the wealth and overall experience of retirement for individuals.   Please enjoy this episode of the Alpha Exchange, my conversation with Scott Ladner.

    • 50 min
    Jon Havice, Founder and CIO, DGV Solutions

    Jon Havice, Founder and CIO, DGV Solutions

    A nearly 30 year career has given Jon Havice exposure to just about every strategy across the spectrum of asset markets. A freshly minted Wharton graduate with a major in engineering, Jon came upon O’Connor Associates in the early 1990’s where he cut his teeth trading listed currency option markets. Pre-euro, Jon would experience seminal FX vol events like the ERM unwind,Tequila crisis and Asian contagion in short order, gaining an appreciation for the impact of positioning on currency vol surfaces.

    As his career progressed, Jon would manage the gamut of arbitrage strategies, focusing on exotic options, convertible bonds, capital structure and muni bonds and dispersion. Our discussion brings to life the lessons to be had from trading through market crisis periods, including the importance of counterparty risk and the degree to which asset prices can stray from fundamental value. We also dive into the vol risk premium, exploring its attributes and how it has evolved over the years in light of the heavy hand of Central Banks. In a world of exceptionally low rates, Jon worries about the glut of yield-chasing capital in private credit and the potential that valuation distortions have resulted.

    Today, Jon is CIO of DGV Solutions, a firm he founded in 2014 to offer customized investment management products in a transparent and cost efficient manner. His firm deploys its expertise with a purpose, partnering with clients with inspiring missions that Jon and his team feel very connected to. Please enjoy this episode of the Alpha Exchange, my conversation with Jon Havice.

    • 47 min
    Alberto Gallo, Partner and Portfolio Manager, Algebris Investments

    Alberto Gallo, Partner and Portfolio Manager, Algebris Investments

    Earning his chops as a macro economist on the sell-side, Alberto Gallo has seen the pendulum of risk swing from extreme fear to euphoria. During his tenure at Goldman Sachs and then at RBS where he ran the Global Macro Credit Research product, Alberto provided buy-side clients with key insights on seminal volatility events like the Global Financial Crisis and the Eurozone Sovereign debt crisis. Now, as a Partner at Algebris Investments, Alberto leads the firm’s Macro Strategy effort, a credit-oriented portfolio designed to navigate the ever tricky terrain of present-day markets. Our conversation considers portfolio construction in a world starved of yield, of low cross-asset risk premia, and one in which the potential for more drastic policy response may be on the horizon. Alberto’s views on today’s regime of monetary policy point to the side effects that result from negative rates, as the banking system suffers, and investors are deprived of income. On the changing nature of volatility in markets, Alberto provides thoughtful insights. He points to the increasing degree of forward guidance employed by the world’s large Central Banks, a factor that has depressed volatility and led to more days of sun for market participants. But since there’s no free lunch, days of rain, while fewer, have become more substantial storms. Alberto details the increased frequency of flash crashes and sharp risk-offs during the post-crisis period, perhaps the result of investors being forced to embrace carry at skinny margins for error.

    On inflation, Alberto points to a bottoming of CPI in the US even as structural drivers of low inflation, like demographics and technology, are likely to remain going forward. As the view that monetary policy has lost some of its punch and may be responsible for increasing income inequality, Alberto considers the trend towards lower Central Bank independence and greater cooperation with governments on the fiscal front. Will this work? In Alberto’s rendering, it might, but it’s all about how a more unified version of fiscal and monetary policy is deployed. I hope you enjoy this episode of the Alpha Exchange, my discussion with Alberto Gallo.

    • 42 min
    Louis-Vincent Gave, CEO and Founding Partner, Gavekal

    Louis-Vincent Gave, CEO and Founding Partner, Gavekal

    In 1999, as a new century was nearly upon us, the Euro was born and the US tech bubble was in full sway, Louis Gave hung a shingle to start an independent research firm with his father, Charles. Twenty years later, Louis remains CEO of Gavekal, a firm that has helped institutional clients distill global market risk throughout different cycles. Our conversation focuses a good deal on China, an economy that Gavekal has carefully studied. Calling China the biggest macro story the world has ever seen, Louis and his team have had a front row seat on the economic transformation in China and the manner in which 400 million citizens have been lifted out of poverty. Through our discussion, we learn more about how China interacts with the global economy and specifically the stabilizing role that the country played during the financial crisis, as well as during the growth recessions of 2012 and 2016. Our conversation also focuses a good deal on inflation. Amidst the well-worn narrative that inflation shortfall is a global issue, Louis has interesting insights on the social tension that is resulting from higher inflation. He points to riots in Hong Kong, Chile and the Green Jacket uprising in France, all linked to inflation. In the US, Louis is skeptical that inflation is as hard to come by as commonly reported, noting that core CPI is essentially at a 10-year high. As fiscal and monetary policy are both working in the same direction around the world, is the price of inflation too low? Louis sees recency bias at work and a failure of market participants to appreciate the regime shift that may be in motion. He views the price of crude as critical to watch insofar as the outlook for inflation is concerned. We finish our discussion with Louis’ views on portfolio construction, citing caution for the long treasuries / long growth stocks allocation that has rewarded investors during the post-crisis period. Please enjoy this episode of the Alpha Exchange, my conversation with Louis Gave.

    • 57 min
    Ben Melkman, Founder and CIO, Light Sky Macro LP

    Ben Melkman, Founder and CIO, Light Sky Macro LP

    Fascinated by markets at a very young age, Ben Melkman has spent his investing career thinking through the intersection of politics, macroeconomics and the price of options.  After earning a degree from the London School of Economics, Ben hit the FX desk at Morgan Stanley, quickly establishing himself as an invaluable resource for the largest macro hedge funds who sought his counsel on how best to structure trades in light of vol surfaces on offer across asset markets.  After a highly successful run at Brevan Howard, Ben established Light Sky Macro in 2016.  Our conversation is about large vol events.  With respect to the Global Financial Crisis, Ben dove into the complexities of credit derivative markets, concluding that the price of insurance was outlandishly cheap relative to the actual risks and the potential for contagion.  In our discussion, Ben makes highly insightful points around the inherent risks of over-reliance on modeling, the degree to which correlation assumptions can lead to gross underestimation of risk and the vast interconnectedness of the financial system.  Ben’s views on the interaction between politics and markets and the manner in which investors sometimes fail to anticipate regime shifts is fascinating.  He points to the onset of Abenomics in 2013, a massive campaign that aggressively pushed the yen down, Nikkei up and volatility up.  In the period prior to this wholesale shift in policy, option prices were all skewed in the opposite direction.  As we finish this excellent discussion, Ben looks forward to the potential that the combination of more aggressive fiscal policy in conjunction with accommodative monetary policy might cause a re-think of the inflation shortfall that has characterized the post-crisis era, at the very time when inflation is a highly unloved asset class.  Lastly, Ben offers thoughts on the 2020 US election, excited about the potential market action that may arise from the starkly different views offered by the Democrats and Republicans.  Please enjoy this episode of the Alpha Exchange, my conversation with Ben Melkman.

    • 57 min

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