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Flirting with Models

Author: Corey Hoffstein

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Flirting with Models is the show that aims to pull back the curtain and meet the investors who research, design, develop, and manage quantitative investment strategies.

Join Corey Hoffstein, Chief Investment Officer of Newfound Research, on a journey to explore systematic investment strategies, ranging from value to momentum and merger arbitrage to managed futures.

For more on Newfound Research, visit www.thinknewfound.com.
96 Episodes
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In today’s episode I speak with Otto van Hemert, Director of Core Strategies at Man AHL.After briefly touching upon Otto’s background, we dive into one of his most popular papers: The Best Strategies for Inflationary Times. Otto shares the inspiration for the research as well as some of what he feels were the less obvious results.Trend strategies, which were a standout winner in the inflation resilience horse race, serve as the bridge to a discussion on seasonality. Interestingly, Otto’s research suggests that long-term trend signals are actually capturing seasonality effects!Otto shares his thoughts on different approaches to measuring seasonality, why he believes seasonality emerges in both commodities and financial markets, and how to think about combining trend and seasonality in a single portfolio.Please enjoy my conversation with Otto van Hemert.
My guest this episode is Clayton Gillespie, VP at Deutsche Bank where he works in quant equity research for the QIS team.Clayton began his career at Credit Suisse HOLT, where he got his hands dirty in extracting fundamental information. This formative experience dramatically impacted how he views how fundamentals should be incorporated into quantitative equity strategies.Today, at DB, he strives to improve quantitative equity strategies by anchoring them with a strong fundamental understanding.We discuss how fundamental and statistical interpretations can be at odds, how a strong fundamental understanding can help with the identification of emergent risk factors during regime changes, and how best to incorporate fundamental insights while avoiding potential biases from the analysts who deliver them.Please enjoy my conversation with Clayton Gillespie.
In this episode I am joined by Hari Krishnan, Head of Volatility Strategies at SCT Capital and author of the books Second Leg Down and Market Tremors.This is Hari’s second appearance on the show, but he comes to us with a very different topic: how to develop a low carry hedge for a commodity bull market.Taking a similar line of thinking to his book Market Tremors, Hari evaluates the market through the perspective of both commodity producers and consumers. By understanding their business incentives, Hari believes he is better able to understand their market positioning and the potential imbalances created in both futures and options markets.We discuss the conditional impacts of price on real world costs, how perishability impacts derivative markets, and the influence of seasonality.I hope you enjoy my conversation with Hari Krishnan.
In this episode I speak with Nick Baltas, Managing Director at Goldman Sachs and head of cross-asset delta one, commodity, and stocks strategies R&D and Structuring. There are three major discussion points in this episode. First, we discuss how Nick thinks about using the broad palette of systematic strategies he has at his disposal to solve the problems of asset owners.Second, we discuss Nick’s research on cross-asset skewness. Less commonly discussed among multi-asset strategies, Nick wrote one of the preeminent papers on the topic and provides considerable insight into the nuance of implementing a skewness strategy.Finally, Nick shares his thoughts on building multi-strategy portfolios, both in theory as well as with respect to meeting client needs.I hope you enjoy my conversation with Nick Baltas.
In this episode I speak with Bin Ren, founder of SigTech, a financial technology platform providing quantitative researchers with access to a state-of-the-art analysis engine.This conversation is really broken into two parts. In the first half, we discuss Bin’s views on designing and developing a state-of-the-art backtesting engine. This includes concepts around monolithic versus modular design, how tightly coupled the engine and data should be, and the blurred line between where a strategy definition ends and the backtest engine begins.In the second half of the conversation we discuss the significant pivot SigTech has undergone this year to incorporate large language models into its process. Or, perhaps more accurately, allow large language models to be a client to its data and services. Here Bin shares his thoughts on both the technical ramifications of integrating with LLMs as well as his philosophical views as to how the role of a quant researcher will change over time as AI becomes more prevalent.I hope you enjoy my conversation with Bin Ren.
In this episode I speak with Charles McGarraugh, Chief Investment Officer of Altis Partners.Charlie finds himself at the helm of Altis from a non-traditional route. His career began at Goldman, where his experience spanned everything from asset backed securities to liquid commodities. He then started a firm specializing in machine-learning driven sports betting before moving into cryptocurrency markets. Today, Charlie is betting that alternative strategies will play an increasingly important role for investors over the coming decade. We spend the majority of our conversation talking about Altis’s investment stack, which is comprised of two components: an upstream signal layer and a downstream strategy layer. The signal layer is responsible for ingesting data and constructing a prediction curve for different futures markets. The strategy layer ingests these prediction curves and constructs a portfolio. Charlie discusses the types of signals Altis relies on, how they turn prediction curves into trade signals, and where risk management fits into the equation.I hope you enjoy my conversation with Charles McGarraugh.
In this episode I speak with Dean Curnutt, founder of Macro Risk Advisors and host of the Alpha Exchange podcast.This episode is all about the nature of risk. More specifically, the endogenous risk that can manifest in markets. We discuss the crash of 1987, Long-Term Capital Management, the Financial Crisis of 2008, the XIV implosion of February 2018, and the 2020 COVID crisis.With these crises in mind, we touches upon topics such as reflexivity, crowding, risk recycling, and the evolving role of the Fed. Dean also shares his thoughts about the nature of risk, how it is woven into the fabric of markets, and why it seems like there’s a crisis every 11 years.For those who love to think about risk and the nature of markets, this episode is for you.So sit back, relax, and enjoy this episode of Flirting with Models with Dean Curnutt.
In this episode I speak with Gerald Rushton, senior member of the QIS Structuring team at Macquarie Bank.Our conversation largely revolves around commodity strategies, including thoughts on trend following, commodity carry, commodity congestion, and commodity volatility carry. Gerald argues that the latter three are particularly well suited to be paired with equity hedging strategies, and we spend quite a bit of time discussing the major design levers behind each strategy.Gerald also provides some insight as to how QIS desks have evolved over the past decade, why he believes QIS desks can provide unique edge, and the many ways in which they can customize mandates for clients.Please enjoy this conversation with Gerald Rushton.
My guest is Devin Anderson, co-founder of Convexitas.The theme of this episode, as you can likely guess from the title, is strategy versus structure. While we often focus on strategy specifics on this podcast, Devin hosts a masterclass as to why the structure you wrap your strategy in can ultimately determine the type of strategy you can deliver.Specifically, we discuss option-based tail hedging and the types of strategies that can be delivered in hedge fund, mutual fund, ETF, and separate account wrappers.In the back half of the conversation, we dive into how Convexitas implements their risk mitigating strategies. Specifically, Devin explains why Convexitas focuses on convexity with respect to the S&P 500 and actually refuses to customize this mandate, despite having the ability to do so at scale.Finally, we end the conversation on a bit of a spicier note, where Devin explains why most market pundits overstate the influence large, scheduled derivative rolls might have on the underlying market.Please enjoy my conversation with Devin Anderson.
In this episode I speak with Martin Tarlie, a member of the Asset Allocation team at GMO and spearheading their work on Nebo, a goals-based investment platform.Martin describes Nebo as, “bridging the gap between financial planning and portfolio management,” with a key innovation being the reformulation of risk from volatility to not having what you want/need when you want/need it. In other words, constraints on both wealth target and horizon.This reformulation of the core problem introduces a number of complications to the portfolio optimization process. For example, under classic power utility, lower volatility is always preferred. But if you’re an investor expecting significant shortfall with respect to your wealth targets, increased volatility may be something very much worth pursuing.We spend plenty of time in the weeds discussing topics such as: the limitations of dynamic programming via backwards indication, the term structure of return variance, ergodicity economics, and portfolio selection sensitivity to utility function choices. And while these are all important details, at the end of it all, what Martin stresses most is that it’s the reformulation of the problem being solved that ultimately leads to a more pragmatic solution for allocators.Please enjoy my conversation with Martin Tarlie.
In this episode I speak with Grug, an anonymous MEV searcher on the Ethereum blockchain. If that sentence made no sense to you, I promise this will be a fun episode.To begin the conversation, Grug explains the basic architecture of the Ethereum blockchain and how its structure allows for the emergence of MEV strategies like sandwich attacks, arbitrage, and liquidations. He discusses some of the criteria he looks for when identifying a profitable MEV strategy and provides examples of some of the long-tail approaches he has deployed in the past as well as some of the risks associated with them. We discuss the pro-cyclical nature of some of these strategies, the role of retail flow, and the edge in being able to deploy rapidly.Grug also provides his thoughts on the impact of alt-L1’s and L2’s on MEV, airdrop strategies, and the end game of MEV if Ethereum infrastructure becomes too centralized.Please enjoy my conversation with Grug.
My guest this episode is Doug Greenig, CEO and CIO of Florin Court Capital. Florin Court specializes in delivering an alternative markets CTA, trading over 500 markets ranging from Turkish cross currency swaps to French power markets. We spend the majority of the conversation discussing what makes these markets unique from traditional markets traded by CTAs. For example, who are the players in these markets, what are the unique considerations for introducing and sunsetting markets, and why we would expect these markets to trend in the first place?Doug also explains why he thinks these markets tend to behave better than traditional markets, why you don’t need special trend signals to trade them, and the significant diversification potential they can introduce.Please enjoy my conversation with Doug Greenig.
Today I speak with Pim van Vliet, Head of Conservative Equities at Robeco.It will come as no surprise, to those who know Pim’s work, that we spend the majority of this conversation talking about conservative investing. Specifically, we discuss the low volatility anomaly. But rather than rehash the usual high level talking points, I wanted to dig into the more practical considerations.For example, how are low volatility and low beta different? How do selection and allocation effects contribute to low volatility investing? Are low volatility and quality actually different anomalies? And how should we think about the influence of currency in a global low volatility portfolio? While Pim has nearly three dozen research publications to his name, he provides the balanced perspective of a practitioner, acknowledging the practical limitations to managing money in the real world.Please enjoy my conversation with Pim van Vliet.
In this episode I speak with Asif Noor, Portfolio Manager at Aspect Capital where he oversees the firm’s Multi-Strategy Program.Asif has spent the last 25 years of his career developing systematic macro strategies, giving him a depth and breadth of experience to understand what it takes to remain competitive in the space.While a handful of low frequency signals may have been sufficient a few decades ago, today Aspect’s Multi-Strategy Program incorporates hundreds of alpha forecasts ranging from intraday to several months. But this evolution also brings new challenges, which we discuss at length in this episode. For example, how are new alphas introduced and old alphas sunset? How do you unify alphas of different magnitudes and convictions? Or, how do you manage risk across so many signals?This conversation is chalk full of the practical, real world experiences of running a multi-strategy program.Please enjoy my conversation with Asif Noor.
My guest is Rob Croce, Senior Portfolio Manager at Newton Investment Management Group. This episode is all about what Rob considers to be the two super factors: trend and carry.  More importantly, how Rob uses them to inform how risk is taken within asset classes, across asset classes, and over time. Rob is not afraid to get in the weeds, either.  For example, on the trend side we discuss details such as how to combine trend signals of different speeds, how to balance the probability of a trend signal being noise versus its likelihood of continuing, and how trend signals can be improved using clustering ideas. From high level thoughts about diversification to low level details about measuring bond carry correctly, there’s a lot to unpack in this episode. Please enjoy my discussion with Rob Croce.
In this episode I speak with Michele Aghassi, principal at AQR Capital Management where she serves as a portfolio manager for the firm’s equity strategies. The conversation spans three major points: optimization, the opportunity in emerging equities today, and factor investing.  While these are the headline topics, the underlying theme of the conversation, in my opinion, is the idea of unintended bets.   More specifically, how controlling for unintended bets, whether through optimization or thoughtful consideration, can sharpen your resolve in your conclusions.  Whether it is the influence of China in emerging markets, the influence of currency in foreign equity returns, or crowding effects in factors, being aware of the potential for unintended bets can shape the how, where, and even the when of portfolio construction. Please enjoy my conversation with Michele Aghassi.
In this episode I chat with Jason Josephiac, Senior Vice President and Research Consultant at Meketa Investment Group.   Jason has largely spent his career in the institutional allocation space, first in manager research at United Technology’s pension and now on the consulting side of the table. Given this background, I spend the first half of the conversation trying to peel back the layers of how Jason thinks allocators should attack the portfolio construction process.  This includes his views on the risks of LDI, portable alpha in theory versus practice, and why he prefers to view the world in an absolute risk / absolute return framework. In the back half of the conversation we discuss Meketa’s Risk Managed Strategies framework, with its three buckets of first responders, second responders, and diversifiers.  We cover topics such as long volatility, managed futures, and what actually constitutes a diversifier. I hope you enjoy my conversation with Jason Josephiac.
In this episode I speak with the anonymous twitter user @macrocephalopod. The arc of our conversation follows the arc of his career: beginning with slow-frequency style premia in a hedge fund to building a prop desk that trades mid-to-high frequency strategies in crypto. A large part of the conversation can be characterized as comparing and contrasting the roles through the lenses of research, operations, and risk management.  For example, in what ways is long/short equity meaningfully different than long/short crypto?  Or, how important are topics like market impact, fill ratios, and borrow fails in mid- versus slow frequency strategies? While crypto is the venue, I believe the wisdom imparted in this episode spans all markets. Please enjoy my conversation with @macrocephalopod.
My guest is Roni Israelov, CIO of NDVR.  Prior to NDVR, Roni was a principal at AQR Capital Management, where he worked on global risk models, high frequency factors, and lead the development and oversight of options-oriented strategies. Taking a page from Roni’s career and research, our conversation is far ranging.  We discuss topics from global asset risk models to the application of high frequency signals to tail risk hedging.  While there are insights to glean in each of these topics, I think the conversation helps paint an insightful picture about how Roni thinks about research in general. Towards the end of the conversation we talk about the new research Roni is tackling at NDVR, a financial advisory firm for high net worth individuals.  The role brings new challenges to consider, such as liability management and risk tolerance within the framework of portfolio optimization.  Even though the topics differ, I think you’ll hear a very common thread in how the research is performed. Please enjoy my conversation with Roni Israelov.  
Doug Colkitt is an ex-high frequency trader, ex-MEV bot searcher, and founder of the decentralized exchange CrocSwap. In this episode, we talk about all three.  We begin with high frequency trading, where Doug walks us through the differences between maker and taker strategies, why queue position is so critical for makers, and why volatility is a high frequency trader’s best friend. We then discuss Ethereum-based MEV strategies.  Doug explains what MEV is, how the architecture of the Ethereum block chain allows it to exist, and a high level topology of the different types of MEV strategies that exist.  He also explains how the game theory behind MEV changed dramatically with the launch of Flashbots. Finally, we talk about his new decentralized exchange CrocSwap and its primary innovations, including dynamic fee levels, identification of toxic flow, and vaults that enable KYC. I hope you enjoy my conversation with Doug Colkitt.
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