Resolve Riffs Investment Podcast

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.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. It is, without a doubt, the most logical starting point for any portfolio that seeks both global diversity and risk balance. Preparation before prediction. First, do no harm. Yet there is a wide range of ways to structure and deploy Risk Parity – as always, the devil is in the details (for a deeper dive check out our recent whitepaper). We had the pleasure of speaking with Alex Shahidi and Damien Bisserier (co-founders of Evoke Wealth and ARIS Consulting), creators of the popular RPAR ETF, on topics that included: Their history and journey before joining forces Multiple definitions and iterations of Risk Parity The consistent mispricing of global diversification benefits (why Risk Parity works) Why the investment industry is wired to overweight prediction and underweight preparation Behavioral hurdles and the real struggle with FOMO Of course, it wouldn’t be a true Risk Parity debate without addressing the role of bonds in the current zero-bound environment and the importance of duration adjustments on bond holdings, as well as the role of currencies and different ways of obtaining exposure to commodities. A true Risk Parity primer. Thank you for watching and listening. See you next week.

Today’s conversation is with David Berns, an emerging thought leader in asset allocation and behavioral finance, who is pushing the boundaries on how to best measure real-world behavioral preferences and build optimal portfolios that actively incorporate this extra information. We open the conversation with a discussion of his involvement in the design and launch of three new ETFs, which seek to deliver an investment experience that addresses both traditional mean-variance preferences, and also accounts for real investor behavioural and cognitive biases. We then discuss core themes from his new book, “Modern Asset Allocation for Wealth Management”, which marries advances in portfolio optimization with a scientific approach to measuring real investment risk preferences. I was impressed with David’s thinking about fundamental investment principles and driving ambition to go beyond traditional portfolio formation techniques to account for loss aversion and reflection, and higher moments of the return distribution. It’s clear David genuinely cares about client satisfaction with their investment experience and is advocating for ways to treat clients as unique individuals with novel preferences and goals. This discussion has something for everyone from advisors to portfolio managers to planners and even for end investors.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. Every time equity markets experience a major selloff, investors’ attentions are drawn to the handful of strategies that actually benefitted from the event. So-called crisis alpha comes in many flavors and iterations, which further complicates the allocation decision. Our friend Jason Buck (CIO of Mutiny Fund) sought to solve this problem a few years ago. He joined us for a conversation that included: The different kinds of risks to portfolios and how to protect against them What actually constitutes a tail event Moneyness, sizing and using wrinkles to reduce volatility drag Finding an ensemble of strategies that doesn’t bleed money outside of major drawdowns Rebalancing – a true and underappreciated source of return We also discussed how to position a tail protection strategy (or an ensemble of them) within an overall diversified portfolio and what form that portfolio might take. The difference between time-series and ensemble probabilities was also debated – and the term ergodicity may have been thrown around a bit. Thank you for watching and listening. See you next week.

Many traditional value or factor based investors have been scratching their heads for the past few years, wondering whether a shift in fundamental dynamics may have permanently altered the way markets behave. Corey Hoffstein has been wondering the same thing, which prompted him to spend the last several months speaking to experts in options trading, market microstructure, and the hidden effects of passive index investing about how these forces may be reshaping the underlying market ecosystem. These conversations and subsequent analyses led to the publication of Corey’s latest whitepaper on Liquidity Cascades, where he seeks to triangulate impacts from several potential paradigm shifts to identify what’s driving price action in today’s markets. We cover all the major themes from the paper and discuss practical implications and key risks for investors over the next few years. Corey shares some new charts and analysis, and elaborates on key figures and themes from the paper that you won’t want to miss. As soon as Corey published the paper I couldn’t wait to do a deep dive with Corey just like this. And as usual, the conversation did not disappoint. Please enjoy this conversation with Corey Hoffstein on Liquidity Cascades.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. The advent of Exchange Traded Funds (ETFs) brought about one of the largest and most transformative trends in the investment landscape. With legions of enthusiasts and no shortage of detractors, ETFs also ignited the so-called passive investing revolution, upending the industry and sparking controversy. We could think of no better guest than our friend Dave Nadig (CIO and Director of Research at ETF Trends and ETF Database) for this conversation, which covered: Understanding that not all passive investments are created equal There’s much more discretion than meets the eye – even in the S&P 500 index Price-discovery distortions – (possibly) on its way to a new equilibrium The coining of a new concept – Reflexivity Inflection Point The Rise of ESG and why the category has been outperforming in 2020 The discussion heated up as we debated who gets to define “E”, “S” and “G”, and semantics converged to a better definition – values-based investing. A wildly entertaining episode made even better by the live questions and comments. Thank you for watching and listening. See you next week.

Brian is the founder of Shaping Wealth and author of two books, The Investor's Paradox and The Geometry of Wealth. We spoke about the connections between wealth and happiness, and the myriad complications that distract people from what really matters. On our journey we touched on the importance of setting constructive expectations, how to navigate the relative nature of happiness, how the human brain interfaces with social media and markets, and how the advisor role is extending in the direction of holistic financial wellness. Brian's diverse background in manager selection, fund management, and investor education gives him a unique perspective on how humans connect with money and each other.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. In the digital age, we are all suffering from varying degrees of information overload and must lean on trusted guardians of the narrative to make sense of it all. Our good friend Ben Hunt (Epsilon Theory), one of the most reliable guardians, joined us this week for a thought-provoking conversation that included: How he witnessed and reported on the COVID pandemic story unfolding well ahead of most people and his current efforts in helping to supply medical masks in the US Why mainstream media keeps getting it (mostly) wrong Staying true to your wolfpack and avoiding the temptation of adding too much cheese to a story – even though it might greatly amplify your reach Gresham’s law and how fiat news often crowds out truly important stories Wallstreet as a highly effective narrative machine that keeps driving investors to buy like clockwork Ben’s alter-ego Neb took charge when describing the system as dominated by crony capitalism and ultimately broken, while his B.I.T.F.D. mantra got plenty of pushback from the South-Americans across the screen. Towards the end Ben returned and shared some very cool images from his own Narrative Machine, focusing on the stock that has dominated headlines this year. 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. Behavioral finance has been at the forefront of investing for many years now, yet it is still largely misunderstood and rarely applied to investors’ actual habits. Our good friend Dan Egan has been pushing this frontier, and in this conversation we covered: The fallacy of trying to predict what makes us happy and how that applies to investing Why understanding our biases does not provide immunity against them Formulating incentives and nudging investors towards habits that can benefit them Generalizations vs uniqueness across investors Imagining who is trading against you – and what they might know that you don’t We also discussed the importance of narrative and the study that suggests stories often outweigh the experiences themselves. A true session of psychoanalysis for investors! 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. His hypothesis on the adverse effects of passive investments in market behavior has catapulted him into the spotlight, but that’s just the tip of the iceberg. Earlier this year he became one of our most popular podcast guests; this time Mike Green (Logica Capital) returned with guns blazing. In a less formal and less constrained happy hour conversation, we discussed: Logica’s long-volatility strategy and use of options for different exposures What an end game might look like if the drive towards passive continues unabated Inflation, interest-rates and MMT How Buffett sometimes plays a version of liar’s poker with the market Covid, the economy and a possible paradigm shift A golden age for impostors and the benefits of being too big to fail The conversation branched into demographics, philosophy and history, including a re-examination of the 1970’s stagflation – for which Mike offered an alternate interpretation (and broke an icon or two along the way). Thank you for watching and listening. See you next week.

Although technology has revolutionized many aspects of our lives, there are still some industries that resist change and professionals who are certain that the old way is the right way. Some believe this applies to investment advisors. They most likely have never met Shiraz Ahmed. He is the quintessential modern advisor, with whom we had the pleasure of riffing on topics such as: Building and improving your career by observing your peers (and learning from their mistakes) Finding a niche of people that you can really connect with instead of cold calling The value of conveying your true self and embracing a genuine narrative Navigating the ambiguous compliance and regulatory environment when engaging on social media His expertise in US-Canadian cross-border investing We also discussed Shiraz’s motto of paying it forward, how he lives by that rule, and what he actually means when he says an advisor needs to put his money where his mouth is.

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day. While the theme was the Chinese investment landscape, this episode can also be described as the Bobby Schwarz show. From his early days as a floor trader in Chicago, through his experience making movies in Hollywood, then finally founding RCM Alternatives, Bobby recounts countless memorable stories including: The high-octane environment of life on a trading floor, including heart and panic attacks Verbal exchanges with big names in Hollywood (including John McClane aka Bruce Willis) and creating a multi-factor model to gauge movie success that is used to this day Returning to Chicago to build a new business and adapting to an industry in constant flux Venturing into China, learning the culture and understanding their values Big risks and even bigger opportunities The candor and quality of Bobby’s narrative produced meaningful insights and great humor, making this one of the most entertaining episodes of our Riffs to date. 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. For the last 12 years, the Fed and other major central banks have exerted overwhelming influence and power over investors’ behavior and capital markets. Since the pandemic began, governments have been forced to step up and unleash a fiscal tsunami to help ailing economies during the deepest recession in living memory. To make sense of this convoluted macroeconomic environment, we invited Jeff Weniger (WisdomTree) for a wide-ranging conversation that included: Birthrates in western countries and their impact on growth Fiscal and monetary policies The power of narrative in driving animal spirits Inflation and the velocity of money Mega cap stocks and other market distortions We also discussed how families have adapted to shelter-in-place measures and the implications on the jobs and housing markets. Jeff shared data and multiple anecdotes, which made this both highly informative and very entertaining. Thank you for watching and listening. See you next week.

Today we interview Lars Kestner, a Managing Director at a European investment bank. Over his 20+ year career on Wall Street, he has led teams that have managed derivative risk across a vast range of market environments. He is the author of Quantitative Trading Strategies, a cutting edge text on systematic trading. Lars designed and employed his first systematic trading system to trade 30yr bond futures before entering college. We discuss two papers that Lars released on his website, satquant.com, in the last few weeks. His paper “Preferred Portfolios” describes a novel framework for assembling strategies with wildly different characteristics into a coherent and resilient portfolio. We discuss how to sort strategies into Boosters, Defenders, Diversifiers and Selectors based on a novel quantitative method. We then go on to examine the theoretical limits of diversification, and the importance of aligning strategy composition with investor psychology and goals to minimize the potential for abandonment. We also discuss a brand-new paper called “Replicating CTA Positioning: An improved method”, which proposes a method to peer into current CTA portfolio positioning. This is of value because CTA trend-followers are often the marginal buyer in markets at certain points. The ability to identify concentrated risk positioning and/or potential turning points may offer investors a unique edge. Lars is clearly passionate about using quantitative methods to maximize investment results in the real world and he offers a variety of valuable nuggets for the perceptive listener. Please enjoy my conversation with Lars Kestner.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. Despite the common understanding – and ubiquitous disclaimers – that past performance is not indicative of future returns, it is well documented that performance chasing can be almost considered a fundamental law of capital allocation among institutional and retail investors alike. It is also an open secret in the industry that well-connected managers are much more likely to receive institutional allocations than obscure ones. To discuss and shed some light on a recent whitepaper that explores these topics, we invited our good friend Brian Portnoy to bring his vast experience as a hedge fund analyst and allocator to bear. Throughout the conversation we cover: How to determine whether a manager has skill The evolution of alpha through time Many ways of defining alpha The role played by familiarity bias Principal-agent problem in capital allocation It was a far reaching discussion with many layers, and once again much improved by the many questions and comments we received throughout the live stream. Keep ‘em coming! Thank you for watching and listening. See you next week.

Dan Egan is the Directory of Behavior Science and Investing at the online advisor, Betterment. In launching this rather unique career, Dan levered a Masters degree in Decision Science at the London School of Economics into a role as Behavioral Finance Specialist at Barclays Wealth in London before moving on to Betterment. With 15 years operating at the cross-section between human behavior and markets he is one of the world’s foremost experts in this field. To kick off the discussion I wanted to know: What do investors really want? Not what they say they want, or what economists say they should want, but what their day-to-day behaviour says about what they actually want in practice. And moreover, how can advisors avoid disappointing them? We also spent a while discussing the idea of nudging. I wondered about the type of nudges that Dan’s research suggests might be helpful and how he thinks about navigating the fine line between nudging and manipulation. Lastly we discussed how Dan’s understanding of human behavior factors into Betterment’s portfolio construction and lessons learned along the way. Dan is a data junkie and his unique perch has allowed him to gather critical insights into how humans interact with markets. I came away with some practical insights applicable to almost every facet of our investment business. Please enjoy my conversation with Dan Egan.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. To help us make sense of this market we invited Chris Schindler back to discuss: Why the next 10 years are likely to be very challenging and different from the past 10 years Why investors should set very low return expectations for virtually every major asset-class The power of recency bias and lottery-ticket (wishful) thinking The role of commodities and how to use them effectively in a portfolio Portfolio construction as a source of both risk and possible alpha The dangers of mispricing risk of private investments and assumed negative correlations We also discussed how Risk Parity is a) disastrously mis-specified by most investors and b) held to a much higher standard than almost any other investment approach, even though it is still the most coherent starting point for a global diversified portfolio. Thank you for watching and participating with your questions. See you next week.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate current and most relevant themes in the world of investing. Among hot and contentious topics in investing, cryptocurrencies certainly rank top of the list – including their designation as a form of currency. From a techno-libertarian experiment, Bitcoin, its peers and particularly the blockchain technology that underpins them, have morphed into a global phenomenon that promises to revolutionize finance itself. Our conversation with our guests Tyrone Voss Jr (401 / Altruist / Human Advisor Podcast) and Shaun Cumby (CIO at 3iQ) included: How cryptocurrencies can be thought of within the context of a portfolio Digital Gold vs Long-dated call options on a store of value The generational factor between believers and detractors Cold vs hot storage Stable coins and crypto’s money market This was a true learning experience for us, enhanced not only by our guests’ knowledge of the space but also the many questions we received. Special thanks to Shaun and Tyrone for joining us, and to everyone that tuned in and participated in the discussion. See you next time.

With the popularity of sports betting personalities entering the investing world we thought it would be timely to bring an expert sports handicapper to discuss the similarities and differences between these highly probabilistic domains. Our guest for this conversation is Steve Merril of ProSportsInfo.com. Steve has been a professional sports handicapper and betting analyst for over 24 years and can be seen and heard every week on numerous radio and TV shows across the United States. We discussed the history of sports betting going back to its early days in, of all places, Chicago! It seems all things handicapped, whether futures markets or sports books, originate in Chi-Town. Other topics include the three keys to winning long term in sports betting, the sharps versus the squares, steaming the line and the differences in discrete events in the world of sports versus the continuous distributions in financial markets. If you are a fan of books like Bringing Down the House: The Inside Story of Six MIT Students Who Took Vegas for Millions or Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street, you’ll definitely find this conversation fascinating. Enjoy!

Today’s guest produces the Breakingthemarket blog, which exploded onto the scene in spring of last year, spewing shrapnel at traditional beliefs about investment objectives and portfolio construction. Borrowing key concepts from Ed Thorpe and the Ergodicity Economics community, Matt - who would like to remain anonymous for now – builds portfolios that focus on maximizing geometric returns by combining uncorrelated investments with frequent rebalancing and appropriate exposure informed by the Kelly criteria. We dig into how Matt’s background in mechanical engineering informed his approach to the problem, why he thinks most investors are upside-down in their investment approach, and why his strategy of Geometric Rebalancing may be a compelling strategy for all markets. We dig deep into portfolio concepts like how he estimates returns and other portfolio inputs, the relative importance of errors in means and covariances, and how to manage portfolio exposures over time. We also discuss the principles of ergodicity economics and some broader implications for policy and the wealth distribution. I’d been looking forward to this for months and it did not disappoint.

This week we interview Andrew Miller, CIO of Miller Financial Management. Andrew’s passion is at the intersection of investment management and financial planning, and he has extremely novel perspectives on both domains. We trace Andrew’s background in structured credit and alternatives and map this experience to his current framework for thinking about diversification and sources of risk and return. We also discuss how Andrew’s views on diversification have evolved over time and how he thinks about factor strategies and alternative premia, including how he applied trend-following principles to factor exposures. Andrew spends a lot of time on engineering optimal asset location strategies and shared some compelling facts about how some fairly simple steps can improve expected returns by almost 1% per year. It’s rare to find someone with deep theoretical and fundamental understanding of nuanced investment topics who has found very practical ways to deliver the potential value of these strategies to clients on the ground. There’s something here for everyone!

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. Most pension plans and other institutional investors with long-term liabilities are faced with an enormous mismatch between the return assumptions in their actuarial models and the combination of sky-high equity valuations and rock-bottom bond yields. Some have chosen to address their funding gaps by adding leverage to their portfolios. Topics of this include: Different types of leverage – Implicit vs explicit, recourse vs non-recourse Hidden leverage in private investments Volatility targeting – pro-cyclical vs counter-cyclical Leverages towards concentrated vs diversified investments and market fragility The conversation was greatly enhanced by a series of questions from our friend Mike Green (Logica Capital) – who we hope will join us in the coming weeks. Special thanks to Mike and others that have participated with their questions. Keep them coming and see you next Friday.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. The recent pandemic-led selloff has once again highlighted the importance of having ballast in portfolios to deal with extreme equity volatility – and ultimately protect investors from disastrous outcomes. This week we discussed: Whether bonds can continue to provide protection given rock-bottom yields If gold will outshine other safe-haven assets in the current environment The tradeoffs between sovereigns and the shiny metal The current economic environment and the possibility of a paradigm shift The team also explored how both bonds and gold should fit into a risk parity framework where investors do not necessarily have to make a choice but can rather benefit from owning either one – or both – at the right time. Thanks for watching and see you next week.

Jason Buck is a founding partner of Mutiny Fund, an asset management firm with a vision to make high-quality tail hedging solutions available to a wider community of investors. Their fund aggregates managers with different tail-hedge styles, including options strategies, VIX relative value, and short-term trend traders to manage tails of all shapes and sizes. We cover: Why tail risk is best managed through the use of ensembles The so-called "Dragon Portfolio" as a risk-parity solution that adds an extra dimension of risk How to think about sizing tail-hedge strategies in portfolios How to make hay while the sun is shining while remaining positioned for a storm How to manage the behavioral challenges of strategic allocations to tail-risk strategies Jason brought a lot more to this discussion than just a pitch for tail hedges. It's clear he's thought deeply about the investment problem in general and has a clear vision about how tail hedge strategies can fit into a broader portfolio structure. You'll definitely want to check this one out.

Adam and Pierre focus their discussion on diversification as a combination of "diversity" and "balance". Diversity is about holding investments that are designed to thrive in very different market environments, and for different reasons. Balance has the objective of ensuring that investments are all able to express their unique personalities. Risk parity is the ultimate expression of diversification. Sadly, many investors are misguided about the concept, and focus on the wrong things. We drill to the heart of the idea and illuminate why a risk parity portfolio should be the starting place for most investors.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. We were joined this week by our friends Wes Gray (Alpha Architect) and Tobias Carlisle (Acquirers Funds) to discuss value investing, its prolonged winter and how it has fared in the current environment. This broad conversation includes: How value has historically outperformed growth, despite appearing to lag most of the time The mental – and emotional – fortitude required to stick with it during tough periods Active share – disaggregating value from broad equity beta Difference between harvesting Value in Long-Only vs Long-Short strategies Raw yields vs Excess yields Separating Value from Quality The group also compared different value metrics against portfolio turnover and capacity, their relative cheapness with respect to the market as well as versus themselves over time. Please enjoy this episode and join us live next week!

In this wide-ranging discussion, Logica's Mike Green describes a mosaic of ways to "seek out a straddle", and reveals new data and analysis to help flesh-out his thesis on the growing importance of systematic passive flows to U.S. stocks. Mike makes a persuasive and disturbing case for how a series of regulatory changes driven by economic and political objectives have corrupted the equilibrium and signaling mechanisms of modern markets, and offers a framework, with specific examples, on how to position for a market environment that few currently expect. Adam challenges Mike on a number of conjectures but Mike rises to the occasion with novel analysis and counter-intuitive interpretations bolstered by a variety of charts, tables, and illustrations. Trust us – this episode will challenge almost everyone's beliefs and is not to be missed.

This is “ReSolve’s Riffs” – live on Youtube every Friday afternoon to debate the most relevant investment topics of the day. On our second episode, we invited our good friend Corey Hoffstein (Newfound Research) to analyze the roller-coaster experienced by equity investors in the past 3 months and discussed: the disconnect between the equity rally and the pain in the broader economy the companies and sectors that have led the charge how Trend signals in equities have evolved in the recent period how investors might position themselves going forward We also address the big question in most investors’ minds: should they jump back into the stock market and avoid additional FOMO or take this second chance to embrace a more diversified and adaptive approach? Watch – or listen – below and join us live next Friday!

Join us for our inaugural episode of the “ReSolve Riffs” series where the team will go live on Youtube every Friday at 3pm over cocktails to discuss topics that are in the immediate zeitgeist of the investment world. In this episode we cover the very heated tail protection debate. The team discusses the challenges with different types of tail protection implementations including: the difficulty in sourcing the right strategy the challenges of different fund structures, whether diversification alone is enough to manage tail risk and, the benefits of tail ensembles. We also cover the behavioural challenges at all levels of investor sophistication that make it so difficult to stick with tail protection as a strategic long-term allocation, and make a case for the type of investor that might benefit from these approaches. We hope you enjoy the episode and that you’ll join us to riff live with the team!

How long will the recession last? How deep will it be? What are the long-term implications for the economy, markets, and society? The global pandemic has ushered in a period of extreme uncertainty and investors are left with too many unanswered questions and afraid for their portfolios. Where do we go from here? In this episode, the ReSolve team begins with an examination of some of the macroeconomic narratives that may drive capital markets for the coming months and years. But since these future paths are all plausible – and some quite compelling – we then provide a framework to deal with such a wide range of possible outcomes. This conversation is meant to help investors navigate these uncharted waters and how to think about portfolio allocations in extreme market conditions. Be sure to check out the slide deck – which we reference throughout the episode – as well as some useful links below. Links https://investresolve.com/inc/uploads/pdf/The-Pandemic-Portfolio-Gestalt-University-Episode-13.pdf https://investresolve.com/adaptive-asset-allocation-global-risk-parity-with-macro-factors-lp/ https://investresolve.com/blog/demystifying-risk-parity-with-realvision-and-90-years-of-history/ https://investresolve.com/webinars/ce-demystifying-risk-parity-90-years-history/ https://investresolve.com/podcasts/resolve-12-days-of-investment-wisdom/

The idea that mainstream media could, to some degree, pursue the agenda of powerful groups might have been dismissed as conspiracy theory in the past. But over the years much has changed in how we perceive and interpret the flood of news and data-bits that compete for our attention each day, forcing us to seek out ways to distill the noise in search of something closer to the truth. Gestalt University’s latest guest has emerged as one of these trusted sources. His Epsilon Theory portal is one of the most respected and widely read information outlets in financial media. A prolific writer with a background in applied statistics and game theory, his acute understanding of history and behavioral analysis have equipped him the right tools to shed light onto the real forces that guide The Narrative Machine. He is, of course, Dr Ben Hunt. A departure from our usual conversations, Adam, Rodrigo and Ben discuss how information is shaped, delivered, and ultimately drives the narrative that underpins capital markets and the global zeitgeist. They discuss how this has led the current political and financial climate to deviate from the dominant paradigm of recent decades, and how this affects portfolios and risk management. Please enjoy our latest episode with Ben Hunt.

This episode of Gestalt University could not be timelier, having been recorded two weeks prior to the current market correction that began in late February 2020. The discussion of fragile versus robust approaches is especially important given how recent volatility has led simpler tactical strategies to signal a complete shift away from equities and towards cash. This in turn has left practitioners second-guessing the wisdom of their indicators and hesitant to pull the trigger. For this fascinating conversation we bring none other than Corey Hoffstein of Newfound Research. Corey has lived by the “risk cannot be destroyed, only transformed” dictum, which has guided the core of his investment philosophy across three axes of diversification – sources of risk, process and time. Our similar thinking (including recent warnings of the dangers involving simple DIY tactical heuristics) led to an extensive research collaboration and ultimately to co-launch the Newfound / ReSolve Robust Equity Momentum Index (following requests from our FinTwit brethren). Our discussion with Corey goes deep into the benefits of building strategies based on Ensemble Methods while considering the impacts of cost, the role of timing and luck, and ways to increase one’s confidence in a back-test. We also examine the behavioral benefits of strategy execution using an array of signals as opposed to binary approaches. A plateful for investors of all stripes, especially practitioners.

Chris Schindler’s journey really took him all the way down the rabbit hole. He joined the Asset Liability Group at Ontario Teacher’s Pension Plan in 2000 and soon became one of the founding members of the newly formed Tactical Asset Allocation Group. Most of his 18 years at Teachers’ were spent exploring and developing quantitative tools and strategies to optimize portfolio allocations. An early insight regarding the importance of maximizing investment breadth (or unique independent return drivers) drove his research towards the world of CTAs and Risk Parity, eventually becoming one of the pioneers in Alternative Risk Premia (ARP). There’s a good reason why this one runs a bit longer than previous episodes. We discuss the recent explosion in index-investing (“there’s no such thing as passive in this world”), Alternative Risk Premia (and why returns have suffered so much in recent years) and Chris’ new project: a truly uncorrelated alternative to ARP. Please enjoy this incredibly insightful conversation between Chris, Adam and Rodrigo.

For the quant community, it was arguably the most awaited book of 2019. Finally, a peek behind the curtains into the most successful hedge fund manager in history. The +66% average (gross) returns that Jim Simons and his army of data scientists produced over the last 17 years in their Medallion fund captured the imagination of investors across the globe and their obsessive secrecy just added to the aura of mystique. After much resistance from the protagonists (not least of which Simons himself), our guest today was able to pierce that bubble and tell the story of Renaissance Technologies. A 20 year veteran of The Wall Street Journal, Gregory Zuckerman has authored best sellers such as "The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters", "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History", and co-authored the award-winning "Rising Above: How 11 Athletes Overcame Challenges in their Youth to Become Stars" with his two sons. Our 30-minute conversation with Zuckerman tracks a different course from his recent interviews, focusing on how the journey to write this book has changed his understanding of the asset management industry and how his relationship with some of the characters has evolved. But most importantly, we discuss a topic that has been at the core of ReSolve's philosophy from the early years: the idea of harvesting sustainable edges from group relationships as opposed to individual trades or securities. Waste no time and dive right into the latest episode of Gestalt University.

As fees across the world of financial services have decreased over the last few years, the former quotas and commission-based model under which investment advisors operated sounds like a relic of a bygone era. Back then, advisors were not in the business of providing services such as estate or tax planning, let alone financial education. Mike Hirthler, of Jacobi Capital, was a pioneer and an innovator. When he left the commissions-based job he got just out of college to launch a fee-based advisory firm, there was no shortage of skeptics telling him he would never make it under this new model. But it didn’t take long for the industry itself to follow suit. After almost 35 years in the business, Mike recounts the difficulties of the early years and how the important decision of remaining independent ultimately contributed to the firm’s success. A student of behavioral finance and the psychology of markets, he remains passionate about financial literacy – both for the younger generations that he supports in local colleges (and mentors at the office), as well as the ‘boomer’ generation (many of whom have been his clients for decades) that are currently dealing with the challenges of retirement. Following the teachings and lectures of Charlie Munger over many years introduced him to the concept of mental models and combining disciplines to improve problem-solving, which led to an interesting “encounter” with his “mentor-at-a-distance”. It was also through one of his lectures that Mike came across the work of German mathematician Carl Jacobi – who inspired his firm’s name – and one of his most important lessons: "Think through your major problems backwards; invert, always invert".

In this episode Adam Butler and Rodrigo Gordillo host ReSolve's Head of Quantitative Research, Andrew Butler to discuss how ReSolve employs tools from the field of machine learning to produce meaningful and practical improvements in investment outcomes. We start with Andrew's background in applied mathematics and in particular his experience applying ML tools to solve complex real-world problems in the physical sciences. It was fascinating to hear Andrew recount how he came to understand that the tools that work well to model physical systems are much less useful in a financial context. This was a consistent theme throughout the discussion. Our objective was to offer a high-level overview of the ML toolset so we started by defining what ML is and digging into three traditional classes of ML: unsupervised learning, supervised learning, and reinforcement learning. We make each method accessible with simple examples and discuss how ReSolve uses the respective techniques to improve outcomes at virtually every step in the investment process. At many points the group paused to reflect on the myriad ways in which financial markets are distinct from other problem categories. We explore why it is critical to view financial markets through the prism of ML for any statistical inference, and discuss several tools that should be handy in the toolbox of every modern financial analyst. Of critical importance, we reinforced the fact that the ML toolset is useless – if not downright dangerous – if deployed naively without the direction and support of experienced operators. Without a deep understanding of the unique properties and pitfalls of financial markets ML tools are likely to do much more harm than good to portfolios. We also discussed why the most important step – by far – in data-driven research is the validation and online learning step – the sentinel – where trader intuition and experience can amplify results by orders of magnitude. There was some debate about the role of machines and humans in finance and more broadly, and how those roles may evolve. Rodrigo held out hope for sustained human dominance in complex tasks while Adam argued that machines could be playing a much larger and positive role in society already if humans would just get out of the way! There is a lot of marketing around the field of machine learning at the moment but very little nuanced, practical wisdom. We hope you take something of practical relevance from our conversation.

Social media has democratized access to media, providing Wealth and Asset Managers with an unprecedented opportunity to capture investor mindshare via digital marketing. Tune in and listen as Mike Philbrick, ReSolve’s President hosts an epic digital marketing roundtable discussion with experts in the field of digital marketing for Asset and Wealth Managers – Chadd Weston and Simon Jalbert from Traction House, as well as veteran Wealth Management professional Justin Castelli from RLS Wealth Management. Together we go deep to tackle the application of digital marketing as it relates to Wealth and Asset Management businesses covering the following items and MORE! How the network effect informs how to most effectively market to your client and prospects. How to zero-in on the highest impact content How to cross-purpose your content and find the best platforms for distribution How to find your tribe and hone your niche market with the right mix of marketing and selling The changing paradigm of “know-like-and-trust” in a digital economy. You will not want to miss this episode. Whether you’re a veteran marketer or just starting the process, this podcast provides unprecedented access to some exceptional minds in the realm of digital marketing for Wealth and Asset Managers with real boots-on-the-ground experience.

Let’s face it – Meb Faber is everywhere, and he’s built an asset management business from scratch with a very unconventional approach. I wanted to take a look back at that journey to get some perspective on the good, the bad, and the ugly along the way. Meb shared some interesting stories and surprised me with some of the lessons learned. Meb has launched a really thoughtful and unique family of ETFs but I was interested in some of the ideas on Cambria’s shelf. He shared some other concepts that he’s excited about but that the market isn’t ready for yet, including a compelling and more tax efficient alternative to typical income strategies. Most people are aware that Meb takes great pleasure in busting financial myths. We discuss his pet peeve at the moment – market cap weighting – and some research that he’s conducting on why investors should consider strategies that avoid over-allocating to mega-cap companies. It’s amazing how such simple strategies with intuitive explanations can be overlooked by investors for so many years. My favorite part of the conversation was when Meb described how his thinking had changed over time. Consistent with many of the most thoughtful professionals I’ve chatted with over the years, most of Meb’s lessons relate more to how investors behave in markets rather than the nature of markets themselves. He provides some great illustrations. I think you’ll enjoy some of our “off-roading” and discussions on topics he isn’t asked about very often. Any time with Meb is time well spent and this is no exception.

Academics and practitioners are no longer surprised by the existence of the low volatility anomaly. Many papers have been published in credible journals describing the effect and several explanations have been proposed. But most of the explanations seek to preserve the traditional relationship between risk and return that serves as the fundamental basis of modern economics. Eric Falkenstein turns this concept on its head. Eric wrote his thesis on the low volatility effect long before it was acceptable to talk about in polite company. Despite the size of the effect and the depth and breadth of Eric’s analysis, it violated the critical “equilibrium” theory of the day and was rejected by every journal. Eric learned some valuable lessons from this experience that listeners would do well to pay attention to. I was most intrigued with Eric’s research into an alternative equilibrium model, rooted in aversion to relative rather than absolute wealth. If investors are more concerned with relative status rather than absolute wealth then the low volatility phenomenon is a legitimate risk factor. Eric’s work covers far more than just low volatility investing and risk models. Our discussion branches into politics, social policy, and eventually into his new pet project – cryptocurrencies. This was an all-around incredible conversation that listeners won’t want to miss.

You can’t read, watch or listen to Rob Carver for any length of time without recognizing that he has done a lot of thinking about the problem of uncertainty. Traders will connect with Rob’s story of experiencing a large and unexpected loss (is there another kind?) that led him to question whether his models were in sync with the current market environment. The experience contained a silver lining, as it prompted Rob to formalize an approach for analyzing what to expect from strategies in different market environments. Rob shared his thinking and his findings, which many listeners might find quite surprising. Rob has thought more deeply than most about how to design portfolios that are most likely to perform out of sample. We discuss how Rob thinks about the construction of strategic policy portfolios but we also dive deep into quantitative strategy design. I was especially fascinated to discuss Rob’s recent presentation on the “Three Judases” that cause many systematic strategies to fail in live trading. Rob is an open book and generously distills mission critical wisdom from decades of trading into digestible nuggets that will add value for almost any investor.

When asked about his past, what Larry Swedroe really wanted was to work with the New York Yankees. That dream died when CBS sold the Yankees to George Steinbrenner on January 4th, 1973. But another door opened at the same time that would forever change the trajectory of Larry’s life. As CBS was selling the Yankees, the collapse of the Bretton Woods Agreement had unleashed a maelstrom of volatility in the foreign exchange markets, which caused a great deal of trouble for US corporations with foreign operations. Corporate Treasury departments were rudderless and needed people with brand new skill sets to manage the new world order. Larry was in the right place at the right time. He learned fast, and over the decade following the collapse of Bretton Woods he led some of the largest Treasury and FX operations in the world while managing their FX risk with completely novel instruments like currency and interest rate swaps. Then he moved on to mortgages and was one of the progenitors of the multi-trillion dollar securitized mortgage business. By the mid 1990s Larry was ready to retire from finance and settle into a university teaching gig. But, he was approached by a group of planners starting an RIA firm and invited to spearhead the investment side of the business. Fama and French had published their seminal paper on the Cross-Section of Stock Returns in 1993 and by 1995 David Booth had launched an asset management firm to commercialize their ideas – Dimensional Fund Advisors. With the courage and confidence earned from cutting his teeth at the vanguard of two major financial industry innovations, Larry had the conviction to embrace the academically backed “factor” approach from the outset. Over the next couple of decades Larry would go on to write over a dozen books making the case for a disciplined, academic approach to investing. And his firm would grow into one of the largest independent advisory firms in the country. Larry is obsessed with academic finance. We talked at length about the factor zoo and he described the process he uses to identify the factors that are most likely to continue to produce strong excess returns in the decades to come. The low beta factor came under scrutiny with Larry expressing a healthy skepticism. He observed that low beta returns have been regime dependent with low beta outperforming when it loads on value characteristics but underperforming when it loads on growth characteristics. The low beta factor portfolio currently loads on growth characteristics. Larry prefers to own quality in value stocks and lower portfolio beta by lowering total equity exposure. In this episode, ReSolve’s CIO Adam Butler and Larry discuss the pitfalls of single factor strategies because they often load negatively on other premia. Larry shared his story of discussing how to introduce momentum into the DFA value oriented portfolios. He describes how they conceded by holding onto value companies that had moved out of the typical value range so long as they were exhibiting positive momentum. This has been a substantial contributor to DFA’s performance in many products since it was introduced. It is often the case that “value” strategies are short momentum stocks or quality stocks and vice versa. Larry describes ways in which thoughtful portfolio construction can lead to much more effective long-term performance. Larry emphasized how important it is to stay up on the literature because the structure of the markets, and our understanding of them, change over time. He uses the example of “book to market” as the classic value screen, but how this metric has become less useful over time as developed economies moved from a mostly industrial base to a service orientation. Today, so much of the value of companies is in brand names and technologies, which aren’t recognized on the balance sheet. He presents a highly counterintuitive case of companies that would...

Mark Kritzman graduated with a business degree in a time of intense crisis and change in financial markets, and this experience shaped the arc of his career. He has dedicated his professional life to the study of asset allocation and portfolio optimization and his papers on these and other topics have earned over a dozen top awards in finance, including nine Bernstein/Fabozzi/Levy Awards. This conversation between ReSolve’s CIO Adam Butler and Mark is loosely guided by core themes from Mark’s newest book, “A Practitioner’s Guide to Asset Allocation”. Mark describes why he embraces Samuelson’s Dictum and how this has motivated his focus on asset allocation as the most fertile ground for active returns. Relatively small traders can drive mis-priced securities back to equilibrium but asset classes can – and do – stray far from equilibrium because traders lack the capital necessary to correct mis-pricings on their own. This is exacerbated by other barriers to arbitrage like institutional tracking error constraints and benchmark-oriented incentives. Given Mark’s views it’s not surprising that his team at Windham Capital focuses mostly on Tactical Asset Allocation. He expresses the view that the policy portfolio concept is profoundly misguided since markets have highly unstable distributions. Dynamic markets imply that optimal portfolios should change over time in response to changes in expected return, risk and correlation dynamics. Mark makes the case that portfolio optimization gets a bad rap but that most of the protests are disingenuous. Sure, out-of-the box optimization is error-maximizing on portfolio weights but that’s irrelevant for a few simple reasons, most prominently because no one with any sense would use an optimizer out-of-the-box, but also because while small changes in portfolio estimates might lead to large changes in weights, the expected mean and variance of the portfolio would hardly change at all. We address the 1/N arguments and Mark makes clear why they’re bunk. We cover a lot more ground but toward the end Mark divulges that he’s publishing a new paper with mind-blowing implications. I won’t give away the plot here… Mark has forgotten more about finance than most investors will learn in their career. Put down what you’re doing and listen to this right now.