SI247: What is Smart Diversification? ft. Nick Baltas
Top Traders Unplugged
Introduction
Systematic Investor Series with Nick Baltas and I, Neil's cost of larson. Each week we take the pulse of the global market through the lens of a rules based investor. You're about to join us on a raw and honest journey into the world of systematic investing.
Today, Nick Baltas return to the show for a look at some recent published research papers by our friends over at Quantica and AQR. Despite our technical difficulties with my audio and notes...we discuss the timing and speed of executing trades and the pros and cons of trend following compared to stocks and bonds, how to achieve the best protection whilst maximizing returns during times of trouble in equities or higher interest rates and why short term strategies does not necessarily give you better protection, nor better returns. We also discuss the similarities and differences between trend following and economic trend and the importance of luck, why you get what you pay for in terms of manager performance and much more.
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Episode TimeStamps:
01:10 - What happened this week?
03:24 - Industry performance update
05:07 - Q1, David: About the speed of execution
10:43 - Q2, Oliver: Trend following vs. stocks and bonds
16:08 - A discussion on smart diversification
22:21 - Shorter term strategies = more protection?
25:22 - The role of lookback
29:07 - Paper on economic trend
36:16 - Trend following vs. economic trend
45:18 - Withstanding the pain of long term trend following
54:16 - Capping equity exposure
56:08 - Is fee reduction alpha?
01:02:01 - Does CTA replication models = single manager risk?
01:04:04 - The problems with managed futures indexes
01:07:54 - Thanks for listening
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