Insightful Investor #43 - David Dredge: Risk Management
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Oct 22, 2024 
David Dredge, Founder and CIO of Convex Strategies with over 30 years of risk management experience, offers intriguing insights into modern investment practices. He challenges traditional risk frameworks, advocating for a 'barbell' approach to navigate market uncertainties. Dredge highlights the significance of convexity in investment strategies, critiquing conventional measures. He also explores economic risks related to rising interest rates and emphasizes the impact of divergent investment returns, illustrating how key moments can make or break long-term growth.
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Black Monday/Tuesday in Singapore
- David Dredge's interest in risk began when he was sent to Singapore by Bank of America in October 1987.
- Two weeks later, during Black Monday/Tuesday, the bank lost far beyond its limits, revealing flaws in conventional risk models.
Understanding vs. Convexity
- Risk is about vulnerability to the unknown, not just predicting specific events.
- True risk mitigation allows for greater risk-taking and better compounding.
Redefining Risk
- Don't measure risk as volatility; risk is loss.
- Focus on pushing volatility to the positive side of the return distribution, like a race car with good brakes.