How do you create a portfolio strategy that takes into account both safety and the pursuit of your aspirational goals?

That’s what today’s guest, Ashvin Chhabra, set out to answer with the Wealth Allocation Framework. Ashvin is President and Chief Investment Officer of Euclidean Capital, a New York-based family office for James H. Simons & Marilyn H. Simons. The Simons Foundation is dedicated to advancing research in mathematics and the basic sciences and is currently one of America's largest private funders in those areas. Prior to his current position, Ashvin was Chief Investment Officer for Merrill Lynch and Chief Investment Officer at the Institute for Advanced Study in Princeton, New Jersey. He's also the author of a terrific book, The Aspirational Investor, which was published in 2015. Ashvin holds a Ph.D. in Applied Physics from Yale University in the field of nonlinear dynamics.

In this episode, Ashvin, Tano, and I discuss Ashvin’s background as a theoretical physicist, why he didn’t see himself becoming a great trader, how the Wealth Allocation Framework was developed, his frustrations with modern portfolio theory, how he brings behavioral finance into wealth management, how to think about inflation and wealth preservation, and so much more!

Key Topics:

Welcome Ashvin to the show (1:05)
The beginnings of Ashvin’s dream of becoming a physicist (2:58)
The deep insights Ashvin was exposed to in his university studies (3:53)
Benoit Mandelbrot’s influence on Ashvin’s thinking (5:51)
Ashvin’s transition from theoretical physicist to derivatives trading (9:20)
Why Ashvin didn’t resonate with a career on the trading floor (11:24)
How the Wealth Allocation Framework was developed (15:54)
Three main components of the wealth allocation framework (18:11)
The engine of wealth creation (22:24)
Why we need to understand models in their specific context (25:05)
An evolving view of risk (28:46)
Bringing behavioral finance into wealth management (31:23)
Ashvin’s perspective on the evolution of the endowment model (34:55)
Diversifying through various ecosystems (38:26)
How to think about inflation and wealth preservation (41:43)
Bringing in an element of common sense and humanity (45:26)
The macro issues that worry Ashvin (47:52)
The beauty of the non-linear aspects of financial markets (51:13)
Ashvin’s book recommendations (53:03)
And much more!

Mentioned in this Episode:

Ashvin B. Chhabra’s Book | The Aspirational Investor: Taming the Markets to Achieve Your Life's Goals
Ashvin B. Chhabra’s Paper | Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors
Patrick Bolton, Tano Santos and José Scheinkman’s Paper | Cream Skimming in Financial Markets
Robert A. Caro’s Book | Working
Robert A. Caro’s Book | The Power Broker: Robert Moses and the Fall of New York
Benoit Mandelbrot & Richard L Hudson’s Book | The Misbehavior of Markets: A Fractal View of Financial Turbulence
Benjamin Graham’s Book | The Intelligent Investor: The Definitive Book on Value Investing
Morgan Housel’s Book | The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Amor Towles’ Book | A Gentleman in Moscow

Thanks for Listening!

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Pour ne rien manquer – Récap. Décembre 2022 du Podcast Heroic People #86