PIWORLD Investor Podcasts In The Company of Mavericks: Uncertainty, Volatility & Risk with David Dredge of Convex Strategies
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May 1, 2025 
David Dredge, a renowned risk analyst at Convex Strategies, shares his captivating insights from Singapore. He argues for the importance of embracing convexity in investment strategies, comparing it to insuring a house. Challenging Modern Portfolio Theory, Dredge reveals how it misdefines risk, seeing it merely as volatility. He emphasizes that true risk comes from unintended consequences and critiques regulatory complacency in financial markets. With engaging anecdotes, he illustrates how to navigate emerging markets and manage systemic risks effectively.
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Black Monday Crash Lessons
- David experienced Black Monday 1987 firsthand in Singapore, where markets crashed harder than in the U.S.
- This event exposed to him that traditional risk measures were insufficient and flawed.
Volatility vs Risk & Convexity
- Volatility is not risk; risk means what actually causes harm, which varies per individual.
- Convexity in portfolios lets you accelerate gains in good markets and decelerate losses in bad markets.
Incorporate Convexity with Options
- Ask your portfolio manager how they handle asymmetric correlation and risk beyond simple short-term metrics.
- Consider reconstructing portions of your portfolio with call options to capture upside and protect downside.