Alpha Exchange

Dean Curnutt
Alpha Exchange

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.

  1. JAN 30

    Eric Balchunas, Senior ETF Analyst, Bloomberg Intelligence

    It is said that death and taxes are the only two certainties in life. Add to these, the enormous growth of the ETF industry as a third irrefutable occurrence. Covering the landscape of exchange traded funds for Bloomberg is Eric Balchunas, a man steeped in the most plain vanilla of products like the SPY to the newest flavors of underlying exposures and payout constructions which he calls “hot sauce”. Our conversation starts with an overview of the massive ETF haul in 2024 and we learn that inflows were 1.1 trillion and each region set a record geographically. Eric stresses how effective the product has been in providing liquidity for end users and in the continuous decline in fees that the industry has successfully achieved. With this last point in mind we touch on Eric’s book, “The Bogle Effect”, which details his interactions with the pioneering founder of Vanguard, John Bogle. Eric estimates that on the very low side, Bogle’s impact has saved investors 1 trillion dollars through lower fees and increased competition in the industry. We next talk about innovations in the ETF market including unique structures that embed both leverage and derivatives, touching on tail wagging the dog scenarios in which a leveraged ETF amplifies volatility in the underlying. Lastly, we talk about ETFs that provide access to crypto exposure. With the resounding success of IBIT, the spot Bitcoin ETF, Eric sees XRP, Solana and Litecoin among those that will hit the market at some point as well. I hope you enjoy this episode of the Alpha Exchange, my conversation with Eric Balchunas.

    46 min
  2. JAN 23

    Anniversary Episode: Reflections on the Podcast

    Since 2018, Dean Curnutt has been hosting discussions with market professionals, focused on topics such as portfolio construction, hedging, monetary policy and the impact of financial products on markets.  Central to these conversations has been the exploration of an expert’s risk framework and how he or she goes about looking for opportunities. A little more than 6 years after its launch, the Alpha Exchange is celebrating its 200th episode. Along the way, Dean has been privileged to engage with hedge fund founders, investment strategists, fintech entrepreneurs, policymakers and even authors. A wonderful community of sophisticated listeners has emerged in the process. In this special conversation, Arthur Kaz asks Dean to reflect on the podcast and how it is a part of his own pursuit of a better understanding of asset price dynamics. Viewing the study of markets as quite humbling, Dean aims to have the Alpha Exchange contribute to the financial community’s collective understanding of risk. Asked about what’s on his mind with respect to today’s risk landscape, Dean argues that both gold and bitcoin have unique, option-like characteristics that might prove valuable should confidence in the US fiscal outlook further erode. What’s next for the podcast?  Dean shares some exciting ideas for expansion, including both short and long form video as well as working with university finance departments to deliver case studies that students can use to bolster their knowledge of real-world market events. Lastly, Arthur asks about MacroMinds, the charity that Dean founded in 2020 to bring the investment industry together to support student education. At the 5-year anniversary of MacroMinds, he says that it’s time to say “thanks” – to the donors, to the speakers and to those that have come together to help the initiative raise more than $1.3 million for students. We hope you enjoy this special 200th anniversary episode of the Alpha Exchange, a conversation with Dean Curnutt.  Thank you for listening.

    48 min
  3. 12/17/2024

    Ali Samadi, Managing Director, Equity Derivatives, Nomura Securities

    The “flow desk” as it’s often called on the sell-side is about repeatability and scale in the service of institutional clients. It’s a competitive business with not a lot of margin for error, especially in a product like equity options where being on the wrong side of a misbehaving Greek could spell trouble. With this in mind, it was great to welcome Ali Samadi, Head of Flow Equity Derivative Sales at Nomura Securities International to the podcast. Our conversation explores aspects of the salesperson / client interaction that make a relationship stick. Namely, Ali suggests that first and foremost, one must understand the client’s objective and tailor the coverage experience accordingly. As a derivatives expert, he sees opportunities to utilize the volatility surface not just in the construction of trades, but also as a source of information, as it may provide clues as to where investor interest is concentrated. We also talk about addressing the inherent negative selection risk for a sell-side desk. This includes the inevitable need to manage client expectations on what size can be transacted at a given price, especially when markets turn especially illiquid as they did on August 5th. Lastly, we spend some time talking about training younger professionals, a pursuit Ali is passionate about. He believes the best way to help junior colleagues advance is to have them review trades in order to develop a sense as to what the right price is. Along with this, he encourages those in the early parts of their careers to diversify their skill sets, learning at least something about other products and assets classes. I hope you enjoy this episode of the Alpha Exchange, my conversation with Ali Samadi.

    52 min
  4. 12/10/2024

    Michael Green, CFA, Portfolio Manager, Chief Strategist, Simplify Asset Management

    A major theme of Alpha Exchange podcasts over the years has been the impact that financial products that live and breathe within the markets have on asset clearing prices. Events like the crash of 1987, the GFC, the 2018 XIV event or the unwind of short variance exposure in March 2020 come to mind as examples. More recently, the substantial growth of leveraged ETF products has gotten a lot of attention, as a potentially amplifying factor with respect to underlying asset volatility. With this in mind, it was a pleasure to welcome Mike Green, a partner and Chief Strategist at Simplify Asset Management back to the Alpha Exchange. Our conversation drills down on leveraged products written on MSTR, the bitcoin buying company. Mike first describes how a leveraged product’s rebalancing requirement resembles a short straddle, buying when the underlying rises and selling when it falls. He next makes the case that the two times leveraged long products, MSTU and MSTX, are unique in that they are large in size and written on an underlying that is extremely asset. This creates the potential for vol amplifying feedback loops that result from the extremely large daily re-hedging. Mike believes the leveraged complex has contributed to the large premium of MSTR to the value of its bitcoin holdings. We talk as well about the costs being borne by the ETFs who have been forced to utilize the options market as the swap providers have reportedly limited the amount of leverage they are willing to provide. I hope you enjoy this episode of the Alpha Exchange, my conversation with Mike Green.

    55 min
4.9
out of 5
79 Ratings

About

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.

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