[REPLAY] Eric Peters – Trading and Evolution at One River (First Meeting, EP.18)
Dec 16, 2024
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Eric Peters, Founder and CIO of One River Asset Management, shares his journey from trader to fund manager and the lessons learned along the way. He discusses the sobering realities of the current market landscape, including the challenges of private equity and asset allocation. Eric highlights the importance of effective risk management, especially during crises, and dives into the intricacies of volatility and thematic macro strategies. His engaging 'Weekend Notes' also serve as a unique lens into market complexities, showcasing his insightful anecdotes and macro wisdom.
Eric Peters highlights his journey from hesitancy to becoming a successful trader, learning vital lessons about market volatility and loss management.
One River Asset Management employs high-conviction strategies focused on volatility trading, demonstrating adaptability to changing market conditions through thematic macro views.
Peters warns that the current market environment requires a shift toward simpler, resilient investment strategies, emphasizing genuine diversification amidst anticipated low returns.
Deep dives
Introduction to Capital Allocators and 10 East
The episode begins by introducing 10 East, an investment platform designed to help sophisticated investors access private markets without the complexities and costs associated with maintaining a family office. Led by Michael LaFell, the firm offers unique co-investment opportunities in areas such as private credit, real estate, niche ventures, and private equity. The team at 10 East has a proven track record, having participated in over 350 transactions over the past decade, ensuring members receive ongoing monitoring and reporting typical of institutional investment organizations. This framework is aimed at providing investors exposure to alternative asset classes that are often not available through traditional investment channels.
Eric Peters: Early Career and Transition to Asset Management
The discussion shifts to Eric Peters, founder and chief investment officer of One River Asset Management, who shares insights from his formative experiences in trading. Peters recounts his initial hesitations about working on Wall Street, stemming from observing his father's lack of enthusiasm for the job. His journey began when he reached out to various industry professionals for mentorship, leading him to Chicago's trading pits, where he learned valuable lessons about market volatility and loss management. His experiences ultimately propelled him to a significant trading career that transitioned from floor trading to establishing his own investment firm.
One River's Strategy and Approach to Market Conditions
Peters elaborates on how One River employs high-conviction absolute return strategies that are rooted in thematic macro views and systematic investments. The firm focuses on volatility trading, which allows them to adapt to changing market conditions by identifying various opportunities based on historical trends and macroeconomic strategies. Peters emphasizes the importance of understanding underlying market shifts and the optimization of asset allocation in a rapidly evolving environment, particularly following crises. This approach highlights One River's commitment to discerning different sources of volatility while managing risk effectively through strategic asset selection.
Reflections on Market Trends and Investor Behavior
Peters provides a sobering perspective on the current market landscape, emphasizing that the interplay of rapid changes and economic fundamentals poses significant challenges for investors. He discusses how corporations and investors have historically relied on low economic volatility, leading to increased leverage and financialization of the economy. The rapid decline in equity markets, fueled by external shocks, will necessitate a reevaluation of risk and investment strategies moving forward. Peters foresees a shift toward less leveraged and simpler investment portfolios as firms and pensions grapple with the consequences of their previous high-risk approaches.
Looking Towards the Future of Investing
Finally, Peters reflects on what the future may hold for investment portfolios, especially considering his belief that the era of high returns from private equities may be waning. He projects that investors will need to adopt less complex and more resilient strategies as they will likely confront a prolonged period of low returns. The focus will shift toward genuine diversification and mitigating risk rather than simply achieving inflated return targets. This evolution will reshape the investment landscape as significant market adjustments occur, urging investors to recalibrate their expectations and strategies in response to new economic realities.
Eric Peters is the founder and CIO One River Asset Management, an investment manager dedicated to delivering high conviction absolute-return strategies, where each individual strategy comes out of the team’s expertise in thematic macro, volatility, systematic, and inflation trading/investing. Eric has been a long-time trader and writes a widely dispersed email called Weekend Notes, in which he shares macro insights through colorful anecdotes.
Our conversation starts with Eric’s early exposure to trading, macro blow-ups, and the formation and activities of One River. We then turn to the current environment and get his sobering thoughts on what has transpired and what the turmoil will mean for private equity and asset allocation going forward.
