Capital Allocators – Inside the Institutional Investment Industry Rick Selvala - Harvesting Volatility (Capital Allocators, EP.41)
Rick Selvala is the co-founder and CEO of Harvest Volatility, a ten-year old manager of a variety of volatility strategies that oversees $13 billion in assets. After starting his career in the Treasury department at General Motors in the mid 1980s, Rick has spent nearly three decades trading derivatives on the sell side and buy side. Rick has an uncanny ability to break down this complicated investment area and make it sound simple.
Our conversation discusses the world of volatility, including intelligent uses of derivatives, overcoming headline risk, characteristics of successful traders, assessment of alpha, the current volatility environment, and strategies that capture returns. His insights left me thinking twice about some of the assumptions my System 1 brain had formed about volatility. Time for System 2 to go to work.
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Show Notes
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3:03 – Rick's path to Harvest
5:17 – How should one think about volatility as an asset class
7:56 – Volatility as a path to enhance yield
11:07 – Is there a programmatic way to implement
12:55 – Volatility as a path for insurance
15:45 – Where do people go wrong with leverage
18:28 – What level of understanding of this space do clients really have
21:58 – How would someone express the idea that volatility is cheap in the market
22:04 – Bill Spitz podcast episode
24:24 – What strategies could managers take advantage of in a low volatility environment
26:01 – How does Rick asses if someone is a good trader
27:32 – How do you identify firms that are too bold
29:26 – Does the community have a good sense of whether traders are acting responsibly
30:08 – How do you determine if a manager is outperforming
32:11 – Is there a structural return from selling insurance to the market
34:13 – Have computer systems changed trading in the derivatives market
35:14 – Taking a look at the current environment
38:43 – Recent market turmoil
39:58 – Are quants impacting market volatility
41:26 – What's next on the frontier for Harvest
45:02 – Closing questions