How to Be a Successful Active Manager

You have to kind of be expressing your view on option pricing or derivative pricing. And then you can earn, if your view is correct, then you earn a positive return. Now when we do this, what we find is that the portfolio which just consists of the simpler product type actually in first order dominates. But even if you're risk loving, you should never invest in these more complicated multi-year enhanced product portfolios. No matter how your utility function looks like.

Transcript

chevron_right

Play full episode

chevron_right

Transcript

Episode notes

Our focus for today's episode is the topic of structured products and we welcome two expert guests to weigh in with their research and insight on the subject. Felix Fattinger is an Assistant Professor of Finance at the Vienna Graduate School of Finance whose research focuses on complexity from a number of perspectives. Petra Vokata is an Assistant Professor of Finance at Ohio State University, currently working in areas of household finance, financial innovation, and consumer financial protection. Both Felix and Petra offer some amazing takeaways for retail investors, deftly balancing the data with their ability to read it and implement the lessons we should learn about structured products. We then welcome Jill Schlesinger back to the show to talk about her new book, The Great Money Reset. We hear from her about the process of writing the book, her aims for its publications, and the main questions it can help individuals answer.

Felix Fattinger thanks his co-authors Marc Chesney, Jonathan Krakow (both University of Zurich) and Simon Straumann (WHU – Otto Beisheim School of Management).

Key Points From This Episode:

Felix talks about his interest in complexity and how to understand the three different types of structured products. (0:07:23)
The definition of headline rates and their relationship to expected returns. (0:18:23)
Laying out the biggest lessons from Felix's research; price competition regulation, expected returns, and simulating portfolios. (0:32:21)
Petra shares her reasons for researching structured products and what she focuses on. (0:40:36)
The doubts Petra has about YEPs, the evolution of their fee structure, and estimating their expected returns. (0:49:02)
The YEP index and how it can help investors mitigate certain issues. (1:02:42)
Actions by banks that increase headline rates of return and how this relates to expected returns. (1:06:56)
Unpacking the biggest lesson from Petra's research about understanding fees and payoff. (1:10:12)
A 60-second recap of Jill Schlesinger's previous episode with us. (1:14:53)
Explaining the idea of the 'great money reset' and why Jill's latest book was so much easier to write than her first one. (1:17:22)
Jill shares the five steps to go through before a reset and expands on the important considerations. (1:21:33)
Tips for negotiating with your boss and final thoughts on approaching a financial reset. (1:32:04)
Today's after-show; recent time off, listener reviews, community and event updates, and a song from RootHub. (1:41:22)