The Challenges of Derisking and Lagging Effects of Top-Down Investing

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.