Is There an Equilibrium of Long and Short Complex Exposures in the Market?

We next turn to Scott’s time at Secor Asset Management, running portfolio solutions and working with global pension plans on asset/liability risk. Scott shares his perspective on the recent blow-up in the long-dated Gilt market, stating that in some ways this was an accident waiting to happen given the mismatch in duration exposure required and that accessible through the cash Gilt market. The balance of our discussion is spent on Scott’s work as CIO of Advocate Capital, a firm he founded in 2016 to deliver risk mitigation solutions to investors. Part of this product suite is the RRH ETF, a vehicle designed to protect investors from rising rates through a combination of exposures that serve as cost effective proxies for being short duration. Scott shares his framework for implementing a multi-asset set of strategies that profits when interest rates rise.

With Scott’s view that inflation will prove sticky and that the terminal funds rate will be higher than currently priced by the market, investors need to be thoughtful around portfolio exposures like RRH that may cushion the blow of higher rates. I hope you enjoy this episode of the Alpha Exchange, my conversation with Scott Peng.

Please see rrhetf.com for more information on performance and disclosure data for the RRH ETF.