Resolve Riffs Investment Podcast

Today’s conversation is with Alexander Mende, Senior Investment Analyst and Head of Investment Research at RPM Risk and Portfolio Management in Stockholm, Sweden. RPM is an alternative investment firm, focusing on directional investment strategies, specifically Managed Futures and Global Macro. Alex is responsible for portfolio management, quant and macro research, manager screening and selection at the firm. We spend the first few minutes discussing the experience of living with COVID-19 in Sweden before moving onto the technical discussion. We explore the evolving role of managed futures and trend following both in terms of client expectations and how managers have adapted strategies to deal with the current macro-environment. In contrast to many similar firms, RPM takes an active approach to manager risk exposure. Alex describes how the firm manages risk both “horizontally” – by changing relative manager allocations through time – and “vertically” – by scaling exposure to the overall portfolio in response to proprietary models. Alex “opens the kimono” on two of RPM’s most useful indicator suites, the CoMaSe model designed to identify conditions that may lead to coordinated market selloffs; and the MDI model that measures the aggregate “trendiness” of market conditions. We walk through case studies to better understand how RPM uses the tools in practice and their potential value-add. Alex is clearly a passionate, no-nonsense quant and it’s clear RPM thinks about the problem in a novel way, with commensurately attractive results.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. The year that saw the fastest decline, followed by the steepest recovery in market history has left one topic top of mind for most investors – volatility. Though down from its eye-watering spike in the first quarter, the VIX (CBOE Volatility Index) has remained significantly higher than in previous years, and not without good reason. The ongoing pandemic, a bifurcated and fragile economic recovery, the most polarized US presidential election in living memory, continued geopolitical saber-rattling between China and the US, and the list goes on… We had the pleasure of hosting one of the foremost volatility experts in the industry – Wayne Himelsein (President and CIO of Logica Advisors) – for a deeply insightful conversation that covered: His background in the industry, and how he met and partnered with Mike Green Why “absolute” doesn’t mean steady returns – the lumpy nature of positive convexity Why Logica loves gamma and how to “scalp” it Unknown unknowns, unrealized vol and protecting against events that are by definition, outside of your sample distribution The difficulty in sizing a long-volatility strategy within a broader portfolio Wayne also delved into his investment process in some detail, including how Logica measures and adapts to market phase-shifts. You should probably just stop what you’re doing and press play. Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. As US equities and bonds continue their apparently unstoppable rally, their expected return over the coming years grows vanishingly small, Especially if markets are faced with anything other than the goldilocks environment of growth, deflation and abundant liquidity that has ruled the past 12 years. Readers of our research (as well as any student of history) will know that stocks and bonds can go through prolonged periods of synchronized underperformance, while Risk Parity can navigate virtually any form of inflationary or growth shock. But when executed properly, with periodic rebalancing, Risk Parity can benefit from a substantial tailwind, as we showed in our recent paper – Maximizing the Rebalancing Premium. Our discussion of the rebalancing premium and its implications for investors included: The traditional thinking on rebalancing is likely outdated – adjusting for drift is not enough Defining the rebalancing premium and how it can be maximized The benefits of rebalancing for different implementations of Risk Parity Why buy-and-hold investors are paying this premium Risk Parity vs the ubiquitous 60/40 The debate also delved into the importance of reducing volatility drag to smooth out the path portfolios take and improve geometric returns. Thank you for watching and listening. See you next week.

ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. In an upside-down market it’s hard to know which way is up. Many investors rely on Kevin Muir, otherwise known as the Macro Tourist, to help them navigate these uncharted waters. Kevin is a pragmatic macro analyst and trader who is focused on trading markets as they are, rather than how you might wish they were. This means being conscious of your own ideologies and biases and actively setting them aside so you can see with clear eyes, and adapt your thinking in response to shifting data and insights. Modern Monetary Theory (MMT) was the center of gravity for the conversation. Kevin describes his journey of discovery and how the underlying mechanics reflect the actual plumbing of the global economy. He explains that Sovereigns that borrow in their own currency and are able to print money are not constrained by deficits. Rather, Sovereign borrowing acts as a direct credit to the private sector. As such, governments are constrained by whether the aggregate productive capacity of the economy can absorb the demand from the private sector that results from their borrowing. Inflation arises when demand exceeds this productive capacity. As a result, long-term prosperity depends on how quickly a country can increase its productive capacity, since this rate will dictate how quickly the government can create wealth for the private sector without creating inflation. MMT is often embraced by those on the left, who believe it provides an imperative for spending on government programs. Kevin explains that deficits can also arise from cutting taxes, so it is a bipartisan theory. We address several concepts including: How does MMT impact the role of confidence in a currency? What would happen if Japan canceled the debt held by the Bank of Japan? What was the impact of fiscal cuts during the Obama administration? How do we direct spending to areas of the economy that are more likely to achieve capital formation? How do we implement MMT without exacerbating the already large wealth gap? If MMT is coming, what is the highest convexity trade? Mike, Rodrigo, Richard and Adam stick around after Kevin leaves to discuss MMT in a broader context and raise even more questions. Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. Even the term used to describe this asset-class is loaded with controversy. Some say cryptocurrency is a misnomer, since Bitcoin and its lesser known brethren can neither be considered a medium of exchange nor a store of value. Rob Furse (co-founder & president of Echelon Wealth Partners) and Matthew Edwards (CEO & CIO of Dalpha Capital Management) would certainly disagree with the latter. We invited them to discuss this and other topics including: The role of crypto (currencies or assets) in investors’ portfolios Can bitcoin really be thought of as ‘digital gold’? How to position these assets using both legacy and newer investment frameworks What the endorsement of well-known money managers does for Bitcoin Regulatory hurdles and the road to institutional acceptance We also debated the current global macro backdrop and why ideas like MMT will likely push an ever-growing number of investors to venture into the crypto space. There may also have been some brief speculation regarding the identity of the elusive Satoshi Nakamoto, author of the original Bitcoin whitepaper. Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. Before you begin, we highly recommend that you first watch this short video, which serves as a  foreword and sets the table for this episode. After enjoying many years of immense popularity, factor investing (also known as alternative risk premia or smart beta) is suffering from significant underperformance, both across asset-classes and especially within security selection. While some factors have fared worse than others, there’s no doubt that the space as a whole is enduring an intense and prolonged winter. The team at ReSolve has been thinking deeply about this theme for the past two years, and this episode expands on the framework we have developed to understand the current environment for factors – and for the generation of sustainable alpha more broadly. Topics include: The origins of factor investing and why they used to work The adoption curve – similarities and differences between investment edges and new technologies Reflexivity and the “hard problem of investing” Value investing – why the most intuitive risk premium has suffered the most How changes in markets’ microstructures and the macroeconomic backdrop affect these dynamics We also offer ideas on how investors might seek sustainable edges going forward and how to position their portfolios to this new reality. This is an ongoing and open-ended discussion, and we certainly welcome your thoughts and feedback. Thank you for watching and listening. See you next week.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. It is said that creating a job for yourself is always better than getting one. Whoever said that probably never lived through the trials and tribulations of being an entrepreneur. But some people just can’t help themselves. Phil Bak is one of these serial entrepreneurs. He joined us to riff on topics such as: Building businesses from a young age and knowing when to sell them The recent sale of his company and his next project Overcrowding and saturation within the ETF space Seemingly endless opportunities in fintech Insurance landscape ripe for massive disruption We also discussed the current state of smart beta strategies, their significant underperformance and how investors should think about sustainable edges in the coming years. We will be further exploring this topic in our next episode. Thank you for watching and listening. See you next week.  

Today’s conversation is with Marat Molyboga, Chief Risk Officer and Director of Research at Efficient Capital Management. Marat is a soviet trained mathematician who achieved his Masters in Applied Mathematics in Moscow, and holds an MBA in Finance from University of Chicago, a CFA, and a PhD in Finance from EDHEC business school. He has authored or co-authored 20 published papers. Efficient specializes in building multi-manager investment solutions for institutional investors with a particular focus on managed futures. Marat describes the fundamental building blocks in the qualitative and quantitative framework that Efficient uses to select managers, and form and monitor portfolios over time. In addition, we explore four papers in detail on topics like combining carry with trend, how the makeup of Chinese commodity markets impacts risk-premia for Chinese CTAs, the potential benefits of short-term trend signals, and how novel portfolio construction techniques may help investors construct more resilient portfolios of CTAs.   Marat has a unique perspective on commodity trading advisors and listeners will learn about how institutions utilize and evaluate CTA portfolios, and specific techniques that can drive improvements in trend strategies and portfolios of CTA funds.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. Ever lower interest rates and debt-fueled growth have been the major driving force for asset price appreciation over the last four decades. Many have now come to believe that the system is close to a breaking point, teetering at the edge due to a virtually unpayable debt overhang that has created multiple asset bubbles across the world. To make sense of the current macroeconomic backdrop and where we might go from here, we had the pleasure of hosting Diego Parrilla (Managing Partner at Quadriga Asset Managers). Topics included: His previous life as an energy analyst and his thesis on The Energy World is Flat Bubbles and Anti-Bubbles Central banks, monetary expansion and inflation – how to boil a frog False diversification, correlations breaking down and constructing true balance Soccer teams can’t depend on 11 strikers – how his strategy creates positive convexity to become an effective goalie for a diversified portfolio His concerns over inflationary pressures in the coming years and his asset allocation approach reminded us of our own Risk Parity framework. While the topic proved initially contentious, we eventually found common ground in the principles that will help drive positive outcomes for investors in the coming years. Thank you for watching and listening. See you next week.