Flirting with Models is the show that aims to pull back the curtain and meet the investors who research, design, develop, and manage quantitative investment strategies.
Join Corey Hoffstein, Chief Investment Officer of Newfound Research, on a journey to explore systematic investment strategies, ranging from value to momentum and merger arbitrage to managed futures.
For more on Newfound Research, visit www.thinknewfound.com.
Andrew Beer & Adam Butler - Attack of the Managed Futures Clones
In this special episode of Flirting with Models, I’m joined by two guests: Andrew Beer of DBi and Adam Butler of ReSolve Asset Management.
Rather than my usual interview format, I wanted to foster a conversation about the replication of managed futures strategies. Specifically, I wanted to bring on two practitioners who both share the same high level beliefs – namely that more investors should allocate to managed futures, that managed futures are well suited for replication, and that replication can help dramatically reduce fees – but differ on the implementation details.
And it is in that disagreement that I hoped to highlight the different pros and cons as well as any embedded assumption in any of these replication approaches.
We discuss return-based replication, process-based replication, determining the number of markets to trade, expectations for tracking error, and more.
I hope you enjoy this episode with Andrew Beer and Adam Butler.
Dean Curnutt - The Reflexivity of Equity Volatility (S6E16)
In this episode I speak with Dean Curnutt, founder of Macro Risk Advisors and host of the Alpha Exchange podcast.
This episode is all about the nature of risk. More specifically, the endogenous risk that can manifest in markets. We discuss the crash of 1987, Long-Term Capital Management, the Financial Crisis of 2008, the XIV implosion of February 2018, and the 2020 COVID crisis.
With these crises in mind, we touches upon topics such as reflexivity, crowding, risk recycling, and the evolving role of the Fed. Dean also shares his thoughts about the nature of risk, how it is woven into the fabric of markets, and why it seems like there’s a crisis every 11 years.
For those who love to think about risk and the nature of markets, this episode is for you.
So sit back, relax, and enjoy this episode of Flirting with Models with Dean Curnutt.
Gerald Rushton - Commodity Strategies (Trend; Carry; Congestion; and Volatility Carry) (S6E15)
In this episode I speak with Gerald Rushton, senior member of the QIS Structuring team at Macquarie Bank.
Our conversation largely revolves around commodity strategies, including thoughts on trend following, commodity carry, commodity congestion, and commodity volatility carry. Gerald argues that the latter three are particularly well suited to be paired with equity hedging strategies, and we spend quite a bit of time discussing the major design levers behind each strategy.
Gerald also provides some insight as to how QIS desks have evolved over the past decade, why he believes QIS desks can provide unique edge, and the many ways in which they can customize mandates for clients.
Please enjoy this conversation with Gerald Rushton.
15 Ideas, Frameworks, and Lessons from 15 Years
Today, August 28th, 2023, my company Newfound Research turns 15. It feels kind of absurd saying that. I know I’ve told this story before, but I never actually expected this company to turn into anything. I started the company while I was still in undergrad and I named it Newfound Research after a lake my family used to visit in New Hampshire. I fully expected the company to be shut down within a year and just go on to a career on Wall Street.
But here we are, 15 years later. I’m not sure why, but this milestone feels larger than any recent birthday I can remember. I’m so incredibly grateful for what this company has given me. I’m grateful to my business partner, Tom. I’m grateful to employees – both past and present – who dedicated part of their lives and careers to work here. I’m grateful to our clients who supported this business. I’m grateful for all the friends in the industry that I’ve made. And I’m grateful to people like you who have given me a bit of a platform to explore the ideas I’m passionate about.
Coming up on this anniversary, I reflected quite a bit on my career. And one of the things I thought about was all the lessons I’ve learned over the years. And I thought that a fun way to celebrate would be to take the time and write down some of those ideas and lessons that have come to influence my thinking.
So, without further ado, here are 15 lessons, ideas, and frameworks from 15 years.
Devin Anderson – Strategy versus Structure in Tail Hedging (S6E14)
My guest is Devin Anderson, co-founder of Convexitas.
The theme of this episode, as you can likely guess from the title, is strategy versus structure. While we often focus on strategy specifics on this podcast, Devin hosts a masterclass as to why the structure you wrap your strategy in can ultimately determine the type of strategy you can deliver.
Specifically, we discuss option-based tail hedging and the types of strategies that can be delivered in hedge fund, mutual fund, ETF, and separate account wrappers.
In the back half of the conversation, we dive into how Convexitas implements their risk mitigating strategies. Specifically, Devin explains why Convexitas focuses on convexity with respect to the S&P 500 and actually refuses to customize this mandate, despite having the ability to do so at scale.
Finally, we end the conversation on a bit of a spicier note, where Devin explains why most market pundits overstate the influence large, scheduled derivative rolls might have on the underlying market.
Please enjoy my conversation with Devin Anderson.
Martin Tarlie - Bridging the Gap Between Financial Planning and Portfolio Management (S6E13)
In this episode I speak with Martin Tarlie, a member of the Asset Allocation team at GMO and spearheading their work on Nebo, a goals-based investment platform.
Martin describes Nebo as, “bridging the gap between financial planning and portfolio management,” with a key innovation being the reformulation of risk from volatility to not having what you want/need when you want/need it. In other words, constraints on both wealth target and horizon.
This reformulation of the core problem introduces a number of complications to the portfolio optimization process. For example, under classic power utility, lower volatility is always preferred. But if you’re an investor expecting significant shortfall with respect to your wealth targets, increased volatility may be something very much worth pursuing.
We spend plenty of time in the weeds discussing topics such as: the limitations of dynamic programming via backwards indication, the term structure of return variance, ergodicity economics, and portfolio selection sensitivity to utility function choices. And while these are all important details, at the end of it all, what Martin stresses most is that it’s the reformulation of the problem being solved that ultimately leads to a more pragmatic solution for allocators.
Please enjoy my conversation with Martin Tarlie.