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5: GMO's Jeremy Grantham - Mean Reversion, Trumponomics and EM

In this frank interview, MarketFox blogger Daniel Grioli speaks with veteran investor Jeremy Grantham, founder of asset management firm GMO, about how he got into the investment industry, the possibilities of a melt-up and the impact of Trumponomics on Emerging Markets.

1hr 5mins

6 Mar 2018

Rank #1

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23: Research Affiliates' Rob Arnott - Factor Timing, Cliff Asness and Value Factor

In this podcast, MarketFox columnist Daniel Grioli speaks with Research Affiliates founder and chairman Rob Arnott about his research into factors and addresses the criticism that AQR founder Cliff Asness had on his factor timing paper. He makes the case you certainly can time factors and that to sell out of value now, while it is the only factor that is cheap, seems not the best thing to do. He also believes that the industry will undergo significant change, but that machine learning is largely useless for long horizon investing.The three papers discussed in the podcast are:* How Can 'Smart Beta' Go Horribly Wrong?* Timing 'Smart Beta' Strategies? Of Course! Buy Low, Sell High! * Is Your Alpha Big Enough to Cover its Taxes?3:00 Considering Astrophysics4:30 Was a quantitative approach unusual in the early days?5:45 A lot of quant go wherever the numbers lead them8:15 Shockingly often conventional wisdom turns out not to be true when you test it11:55 Higher dividend is higher earnings growth17:15 Buybacks are smoke and mirrors to disguise management remuneration18:05 What risk premium is normal?24:15 You will never buy a bargain if you never buy what is out of favour, what is unloved.24:45 Get people of their fixation with past returns26:43 The spread between growth and value is wider than historic average. This means either a new normal or that value is a bargain.31:00 The small cap effect is driven by the 2 or 3 per cent superstar winners.31:45 Discussing the war of words with Cliff Asness34:00 People are pouring money into multi-factor strategies, because they are tired of waiting for value to work.36:00 Low volatility is trading at a premium, whereas historically it has traded at a discount. And people think they have less risk…?37:45 Four of the five factors are pushing you into an anti-value direction39:55 When momentum is chasing these bubble stocks you are slightly more likely to have a crash in momentum42:00 If you must invest in the US, have a defensive stance48:00 Those who say that factor timing doesn’t work, just have not done their homework50:00 The big failing of the quant communitie is that we view everything as a signal, instead of viewing it as an asset56:30 Talking ETFs58:45 My next paper with Cam Harvey and Harry Markowitz looks at how you can screw yourself up with quantitative methods59:55 Any research is data mining, but not all data mining is research1:01:15 The quant community is engaged in performance chasing without realising it, for the most part1:01:30 Start with a principal, start with a hypothesis, then test the hypothesis. Don’t go back to the same data again and again and tweak the process.1:02:30 Machine learning is going to be useless for long horizon investing1:08:10 The Future of the Financial Industry and discussing zero fees

1hr 10mins

4 Dec 2018

Rank #2

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9: O'Shaughnessy AM's James P O'Shaughnessy - Quantitative Investing

In this [i3] Podcast, MarketFox Editor Daniel Grioli speaks with quantitative investor James P. O’Shaughnessy, Chief Investment Officer of O'Shaughnessy Asset Management, about the moment he realised a rules-based approach was the only route for him and the subsequent journey into factors that resulted in the best-selling book: ‘What Works on Wall Street’

1hr 6mins

2 May 2018

Rank #3

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31: Castran Gilbert's Paul Castran - Real Estate Tricks and Surviving Crises

Paul Castran is a Senior Consultant with Australian real estate firm Castran Gilbert. He is a veteran of the industry, having conducted over 2,000 auctions. In this frank interview, Paul looks back on his career, the Australian real estate market with its ups but also its downs and answers some tricky questions about the business, including about underquoting, starting auctions below the reserve price and tips on how to deal with banks and whether to renovate before selling.Paul Castran podcast overview:3:30 What was real estate like pre-internet?5:30 Getting my first crack at real estate from Jeffrey Sutherland8:00 Buying my first shareholding in a real estate business10:00 The most expensive property you ever sold?12:00 Considering the horrible set of economic circumstances, what was it like to sell property in the 1990s?13:00 The 1987 crash16:00 Only people with real money saw very strong capital growth16:30 Was there ever a moment that you thought this the end of my career in real estate? Many!17:30 Every tenant I had went broke, bar one.19:30 What have you learned from that period?20:00 Don’t deal with just one bank22:00 Play the game as hard as the banks play it.25:00 Is there such a thing as THE property market?26:00 How do you value properties?35:00 When do you not use comparable sales?45:00 Are council site valuations any guide on what your property is worth?48:55 How do you make money flipping houses in Australia?52:00 Busting property myths: foreign buyers55:00 Auction tactics.1:01:00 In the current market, wait for the auctioneer to say: ‘It is on the market’.1:04:00 How much below the vendor’s reserve do you start?1:07:00 You can’t trust the numbers.1:09:00 Can you tell which suburb is the next up and coming one?1:15:00 Underquoting, does that still happen?1:18:00 Does staging a property make a difference?1:21:30 Does a renovation add value or just over-capitalises the property.1:26:00 Lessons learned the hard way.

1hr 31mins

16 Apr 2019

Rank #4

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32: Simon Russell - Behavioural Finance and Artificial Intelligence

Simon Russell is a specialist in the area of behavioural finance and decision making processes in asset management. He is the author of the book: 'Cyborg – How to Optimally Integrate Human and Machine Investment Decision-Making'. In this podcast, he speaks with Daniel Grioli about psychology, how to deal with noise and gaps in our understanding of behavioural finance.Overview Simon Russell podcast:1:00 min: How did you get started?4:30 min: I decided to try to bring together what we are doing in finance and what we should be doing [according to academic research]7:30 min: How did your background in psychology help you interpret what went on around you in investing?9:00 min: Most managers don’t outperform the market, but our ability as asset consultants to pick them was pretty poor as well.14:00 What did people most wanted your help with in terms of behavioural finance?16:30 Nudge 10 per cent of a large super fund with a million members, that is a lot of members that you can influence.18:30 Behavioural finance is the study of how people make financial decisions. 21:00 An approach to behavioural finance can be split out in three elements: Normative, descriptive and prescriptive. Normative is what you should be doing, descriptive is what you are doing and prescriptive is when you are restricted in what you can do.24:00 How do you help people move through these stages?26:00 How to deal with noise30:00 You are what you eat, so if you consume daily financial news you might become a short term investor31:00 Group decision making33:00 Anchoring is not mitigated by group interaction, if all of the group is exposed to this anchor.35:00 Decision making and board environments38:00 On using decision journals44:00 Cyborg, the book49:00 Humans are predisposed to see changes; quantitative methods do not52:00 Negotiation research says that we just don’t take enough of other people’s perspectives into account56:00 Banking Royal Commission and Psychology1:00:46 How decision making works in large organisations1:03:00 There are not just financial incentives that people are sensitive to.1:05:00 Gaps in how people use behavioural finance1:18:00 Discussion behavioural psychologist Gary Klein1:20:00 James Montier1:22:30 Three things investors can do to improve decision making

1hr 24mins

30 Apr 2019

Rank #5

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37: Acquirer Funds' Tobias Carlisle - Quantitative Value, Deep Value and Concentration

Tobias Carlisle is a deep value investor and founder of Acquirers Funds. He is author of the best-selling books 'The Acquirer’s Multiple', 'Deep Value', 'Concentrated Investing' and 'Quantitative Value'. Tobias has extensive experience in activist investment, company valuation, public company corporate governance, and mergers and acquisitions law. He has also worked as an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer.More recently, Tobias launched a deep value ETF, The Acquirers Fund (ticker: ZIG), which holds long positions in deeply undervalued, fundamentally strong targets for activists and buyout firms, and short positions in overvalued, financially weak companies. It started trading on the NYSE Arca in May this year.Overview of Tobias Carlisle podcast3:00 I was working as a lawyer in M&A when the tech crash happened8:00 There is this phenomenon in deep value where the worse the quality, the better the performance tend to be.12:00 Developing a quantitative value metric without the quality metric gives you better raw performance.13:00 Daniel: if you test Joel Greenblatt’s magic formula on Australian stocks it pushes you into all these mining companies.16:00 The spread between the most undervalued and overvalued stocks are at historic widths. 19:00 There are secular issues with price to book measures.20:00 Factors give this nice impression that it is scientific and filters out human emotion, but the rules change all the time.30:00 It is hard to short a cult32:00 Shorting on valuation is not the way to short; you want financial distress33:00 Keep shorting positions small36:00 Why launch the fund as an ETF and not as a mutual fund?40:00 Do you have sector constraints?43:00 Shannon's Demon45:00 The Kelly Criterion53:00 Criticism of using EBITDA metrics57:00 There is a machine learning component to the analysis1:00:00 Most investors are better off to hold a low cost index fund, but I believe that over the long term a value strategy will outperform the market1:01:00 There is a paper that says value investors win at the expense of other value investors.1:04:00 Blending managers is a difficult puzzle to solve.1:09:00 The rise of the fourth Buffett1:10:30 Which lessons have you learned the hard way? …. All of them1:13:00 We are all cognitively impaired.

1hr 18mins

13 Aug 2019

Rank #6

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30: Pzena's Rich Pzena - Value Investing, Tech Disruption and Incumbents

Richard 'Rich' Pzena is the founder and Chief Investment Officer of Pzena Investment Management, a value-style investment firm. Unlike what some investors believe, technological disruption is not destroying value-style investing, but is creating opportunities for them, Rich says. This because history tells us that ultimately it is the incumbent that benefits from innovation, not 'the next guy on the block'.Rich Pzena podcast overview:2:11 My father was a value investor until, 25 years ago, he became convinced electric cars would take over the world3:30 Trying to recreate Benjamin Graham’s work from ‘The Intelligent Investor’4:30 But we didn’t have unlimited resources, so we limited our research to stock starting with the letter ‘A’ or ‘B’5:00 There is never a reason to buy things full price6:30 Is the fact that the value premium is easy to measure today has affected its effect?8:00 The issue with value is not measurement; it is human nature. 11:00 Taking a detour in the oil industry13:00 Crazy valuations in the oil industry in the 1980s.16:30 As a sell-side oil analyst I learned the difference between having the data and guessing the data.19:00 Switching to establishing a small cap portfolio21:00 I saw what happened when you went from a boutique manager to a multi-billion dollar manager.25:00 Did you ever made stuff up as a sell side analyst?28:30 Highly engineered statistical (quant) models can’t possibly work29:50 Value is not a factor; price to book is a factor.32:30 Value is behavioural.36:00 Comparing our process to a simple, low price-to-book model37:00 Leaving Sanford C. Bernstein42:00 Joel Greenblatt told me to exclude the bottom third worst return on equity businesses and I was shocked at the result.45:00 Regression to the mean is just human behaviour: people don’t want to believe that management can fix the problems.46:00 Value is created when you don’t know what is going to happen.48:30 Value cycles happen because everyone adopts the same opinion on the market.52:00 Disruptive technologies have always been around and most of the time it is the incumbents that benefit. It is not always the new guy on the block.55:00 Tesla’s decision to make cars was a dumb idea.57:00 The next opportunity is the market’s obsession with the next financial downturn. 1:00:00 Which lessons did you learn the hard way?

1hr 2mins

2 Apr 2019

Rank #7

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39: Ned Davis Research - Rules of Research and the Inevitable Mistakes

MarketFox columnist Daniel Grioli speaks with Tim Hayes, Chief Global Investment Strategist, Joe Kalish, Chief Global Macro Strategist and Ed Clissold, Chief US Strategist of Ned Davis Research about multi-asset portfolios, asset allocation, the rules of research and the inevitability of making mistakes. Ned Davis Research is one of the largest independent institutional investment research providers in the US market. It combines both fundamental and technical research disciplines, and adheres to the adage: 'making money is more important than being right'.Overview Ned Davis Research2:00 What are some of the lessons you’ve learned the hard way?3:30 Joe: Ned always said: ‘Everyone makes mistakes. But the difference between the winners and the losers is that the winners make small mistakes’.9:30 Ned’s nine rules for interpreting markets15:00 The importance of being open to new techniques and datasets.17:00 Joe adds on a 10th rule20:50 A lot of people said they called the housing market in 2007, but I’m actually quite proud that we called when it was time to get back in 2009.27:00 Pay attention to correlations. Sometimes things are changing.28:30 How do you use base rates?30:00 Sometimes we are known as myth busters, because we blow up some common [held believes]. One of them is about the yield-curve inversion.34:00 Really good earnings growth is usually priced in when it gets announced and so is not good for price levels.36:40 We looked at 25 different value indicators to see which ones have done better over the years41:00 This has probably been the biggest divergence in the last 10 years of what happens in the US and what happens in the global markets.45:30 Ed: If you look at the US right now, it actually doesn’t look that bad.45:49 Joe: I start with a top down view47:37 You can’t just look at change anymore, you have to look at the second derivative: the change of change51:20 This is not the most exciting time in the bond market52:00 What is the difference between trend and market timing?54:45 You need to pay attention to the trend58:00 The value of asset allocation1:06:00 Make sure you’ve got that disciplined process in place to make trend decisions1:08:00 We only forecast for fun, but we pay attention to the indicators1:12:00 What is a mistake? It can be different things to different people1:15:00 Has your analysis been impacted by current market conditions of central bank policy and algorithmic trading?1:22:00 What are you working on at the moment?1:28:00 Tips to make better investment decisions

1hr 32mins

17 Sep 2019

Rank #8

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17: Willis Towers Watson's Sue Brake - Governance and the Real Cost of Poor Culture

In this podcast, MarketFox columnist Daniel Grioli speaks with Sue Brake, Senior Investment Consultant for Willis Towers Watson, about the importance of governance in asset management and the real cost associated with bad governance. Daniel also manages to get Sue to play a game in which he asks her to respond to quotes by David Swensen, CIO of Yale, about asset consultants.Overview of podcast with Sue Brake2:00 Changing careers, from banking to investing3:30 Banking is about implementing smart mathematical solutions, while investing is about effective decision making5:00 Executive retreat told me that there is no winning8:00 Embrace the mess; there is no straight line to becoming a president or CEO9:30 The longer you are in the market, the more you realise that humility is good.10:10 Failure is result of process not people11:30 Being smart doesn’t get you the whole way, you have to be curious and humble12:00 Founding my own gourmet food company14:00 Fortuitously I sold the company in 200716:00 Working at New Zealand Super22:00 The reference portfolio is a governance tool25:00 Simple reference portfolio beats most Australian pension funds26:00 The reference portfolio can show you the difference between good governance and poor governance27:30 Why does currency matters?29:00 You have periods where currency fluctuations really can make or break you.31:00 Is being far away from financial centres a positive or a negative?34:30 Working at the IMF38:00 What aspect of investing are universal?39:00 Boards are like the Little River Band: there are no original members40:00 Organisational efficiency42:00 Investment cultures that have a competitive edge44:00 Putting a price on governance45:30 Less than 2 per cent of pension funds get the AAA rating for governance46:00 The 12 factors of good governance47:00 ADD LINK OF CLARK AND URWIN PAPER ON 12 FACTORS50:00 Changing nature of asset consultancy53:00 Are asset consultants gatekeeper?54:00 Does the ownership of a consultant matter?56:00 Do consultants need more skin in the game?58:00 David Swenson says, Sue Brake answers

1hr 6mins

29 Aug 2018

Rank #9

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16: Research Affiliates' Mike Aked - Australian Office, CAPE Ratios and Simplicity

Investment consultant and MarketFox columnist Daniel Grioli speaks with Mike Aked who has just established the first Australian office for Research Affiliates in Melbourne. Mike speaks about the reasons behind coming downunder, asset allocation issues and responds to criticism from quant investors on the CAPE ratio. He also discusses the importance of simplicity over complexity. 5:00 Cultural differences in investing 8:00 Working with Gary Brinson 14:00 Create a resolve during good times as a buffer for bad times 18:30 Why copy the endowment model? 20:00 Avoid the bankruptcy of the decision-making process 23:00 Is a strategic asset allocation a useful tool? 30:00 Whatever you do it won't be perfect. 35:00 Research Affiliates to release more short term views 38:30 In positive climate, more momentum; in negative more value 41:00 On sizing positions 46:00 CAPE ratio and its criticism 53:00 Are factors getting more expensive? 58:00 Simple is not easy; it is a step beyond complexity 59:00 Much of complexity does not add any value1:05:00 Managers give protection against uncomfortable investing

1hr 9mins

14 Aug 2018

Rank #10

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10: Intelligent Investor's Jason Zweig - Value Investing Today and Benjamin Graham

Acclaimed business journalist and writer of the Wall Street Journal’s ‘Intelligent Investor’ column Jason Zweig speaks with MarketFox columnist Daniel Grioli about value investing in today’s world and tries his hand at answering the question: How would Benjamin Graham invest today?Short overview of content of podcast:2:00 How did you get started in industry?5:20 It is only when you talk to people about money when you really learn what they are about.8:00 Jason's 2015 book, The Devil's Financial Dictionary’. It defines the entry 'day trader', as 'idiot'. He also lists 'data' as 'the raw material that Wall Street uses to build its fabrications on'.13:30 Having more information is probably a social good, but makes the job of a long-term investor more challenging.19:40 Facebook. Any successful organisation is somewhat indistinguishable from a religious cult. 28:30 ‘Your Money and Your Brain’, How did you come to write that?35:00 The Intelligent Investor. Jason says his involvement was due to luck.40:00 How would Benjamin Graham invest today?46:00 Regression of the mean is still there, but we don’t see much sign of it.50:55 Smart Beta might just work, at least as long as investors are too dumb to notice that it is working.55:00 Robo advice. Will it help overcame human biases?

1hr 2mins

14 May 2018

Rank #11

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12: Pzena's Allison Fisch - Value Investing and Emerging Markets

MarketFox columnist Daniel Grioli speaks with Allison Fisch, a Portfolio Manager and Senior Analyst at Pzena Investment Management, about how you can apply a value strategy in emerging markets. Is it possible in the first place? Fisch believes so, but some adjustments are necessary to make it successful. Overview:4:00 – Value investing is really all about psychology, the psychology of markets.8:00 – Can you use value strategies in emerging markets? Yes, but with some differences. 11:00 – Country selection hasn’t mattered buch in developed markets, but in emerging markets it does13:00 – Using quant tools to screen the universe.15:30 – You are looking for companies that are sick and you want to know whether they are having a cold or whether they are terminal16:00 The sweet spot is where there is something bad going on in a company, but they have the ability to recover from it.17:00 – We look at the 20 per cent cheapest companies.21:00 – We are in the worst cycle for value strategies. Is there something broken?22:00 – The bigger the high, the worse the hangover.25:00 – How do you deal with technology stocks in a value strategy?29:30 – The biggest change in emerging markets in the last 10 years is the make-up of the market32:00 – State-owned enterprises are trading at a discount. How do you get comfortable with these companies?34:30 – Disruption and value strategies, do they mix? And the ‘Death by Amazon’ index.35:30 – In emerging markets you don’t have incumbents, so it is just the disruptors getting more expensive.38:00 – Today’s environment is like a bathtub; which company gets flushed down the drain?41:30 – The moat of brand is not what it used to be.


20 Jun 2018

Rank #12

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35: Neuberger Berman's Michael Recce - Data Science and Winning Companies

Michael Recce is Chief Data Scientist with Neuberger Berman and is leading the firm’s effort into incorporating data signals into the investment process. When working on predictive algorithms for the advertising industry, he realised that these applications would work just as well in finance. After all, if you know which products customers are interested in then you know which companies are winning, he says. Michael Recce Podcast overview:0:30 What is a data scientist?2:00 Has your study of neuroscience given you new insights into how computers think?3:00 Predicting what ads people are interested in shows you which companies are winning; that is not priced into stocks.4:20 Data-science driven investing will be bigger than the quant revolution was5:00 Bootstrapping problems in data science; you don’t know what you don’t know5:30 Most of the data that people want to sell is not useful7:30 Asking questions around time series are not the right questions10:00 We start with a fundamental model and the fact that it is quantitative means we are using computers.13:20 What are some of the datasets that you are most excited about today?15:00 Signal decay, how do you deal with it?17:00 Data-driven investing is very different from the way most people think about investing18:30 I pay 1/20th of what a hedge fund pays for the data20:00 Are we solving the right problems in investing?21:00 The different time domains of data.25:00 How to deal with bias in data.29:00 To what degree is creativity a part of data science?33:00 Can you build the values that an organisation might have into the algorithms?34:00 Partnership with the UN on sustainability data36:00 Is this just added complexity for boards?40:00 I just finished the first course in teacher portfolio manager how to code.45:00 My bet is on fundamental manager that learn to code.


2 Jul 2019

Rank #13

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36: GMO's Lucas White - Climate Change, Energy and the Low Carbon Economy

Lucas White is the lead portfolio manager for the GMO Climate Change Strategy and a member of GMO’s Focused Equity team. Together with the firm's co-founder Jeremy Grantham, Lucas has developed a strategy to invest in companies that are likely to profit from climate change mitigation and the transition to a low-carbon economy. In this episode, MarketFox columnist Daniel Grioli asks Lucas some pretty pointed questions around the viability of ESG-focused investment strategies.GMO Lucas White podcast overview:1:00 How did you get started in climate change strategies?5:00 Jeremy Grantham’s research into resources and climate change8:00 The issue with apply climate change risk models on portfolios11:00 What is the right way to look at the carbon footprint of your portfolio?15:00 If you are going to get rid of fossil fuels than you are putting a lot of burden on other materials: copper, cobalt, lithium.20:00 Looking at the quality of data on climate change21:30 Figuring out what business models fit the universe.22:30 Although we believe that electric vehicles are going to take over our motorways, that doesn’t necessarily make us excited about Tesla or BYD. These companies are very expensive.24:00 A better way to gain exposure to electric vehicles32:00 Do GMO’s multi-asset funds allocate to the climate change fund?35:00 Stranded assets: doesn’t it depend on when we stop using these assets?38:00 Nuclear energy, is it more viable than renewable?


17 Jul 2019

Rank #14

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38: Promethos' Ivka Kalus - Women Investors, Responsible Investing and Millennials

Ivka Kalus is a veteran of the investment management industry, having worked as a senior international equity portfolio manager for the likes of Boston Advisors, Pax World Management and State Street. She has been named among the top three female investors in the US by Citywire.In April 2019, Kalus launched Promethos Capital, a majority female-owned asset management shop that focuses on responsible investing. Why? ‘Because the market needs a firm like ours’, she says.In this no-holds-barred interview, Kalus, who is Chief Investment Officer of Promethos, questions why people ask whether there is enough female talent to reach 30 per cent board quotas but don’t question whether there is enough male talent to fill 90 per cent of board roles, as currently is the case. She is proud to admit that while she is not a Millennial many of her opinions could be classified along those lines. And she sees ESG investing as a work in progress. Please enjoy the show.Podcast overview of Ivka Kalus:2:20 I was trained as a biologist, but didn’t like the lab3:40 As I went back to school to study environmental economics, the iron curtain fell6:00 I ended up being the mining analyst at Putnam Investments6:30 The number of women in asset management has shrunk, as has the diversity of thought8:30 In finance a lot of people don’t understand the difference between correlation and causation9:30 More investors are getting involved in ‘intentional capitalism’10:00 About 1 per cent of assets is managed by women. The market needs a majority women-owned firm12:00 How can we get more female participation in the asset management industry?15:30 On millennials17:00 Millennials are very serious, maybe because their experience is shaped by the Great Recession and climate change. 20:00 Using values to make unbiased decisions23:00 Using ESG data as alpha predictors28:00 Is progress in diversity held back because men feel threatened by women?32:00 Diversity is one aspect of better decision making, but it needs to come with skin in the game and a mechanism for aggregating opinions rather than having one dominant opinion.35:00 Often people ask: Are there enough experienced women to get every board to 30 per cent female? Well, are there enough experienced men to fill 90 per cent of boards?38:00 Will Vanguard’s plan to vote again directors with more than four board positions affect female directors more than male directors?39:00 SRI was started by religious organisations in response to the Vietnam war.45:00 If you only exclude 10 per cent of the investment universe you can still build well-diversified investment portfolios.47:00 How do clients determine what their values should be?48:40 In general, we haven’t figured out the language yet for what it means to do no harm. But that is also the exciting part; we are still figuring out how alpha is generated in ESG52:00 Building concentrated portfolios gives us the freedom not to own everything58:00 Diversity ETFs; do they capture it?1:01:00 What are some lessons that you had to learn the hard way?

1hr 6mins

18 Jun 2019

Rank #15

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34: MarketFox's Daniel Grioli – Decision Making, Emotions and the Psychology of Investing

Daniel Grioli is the voice behind many of our podcasts, but he is also a professional investor and adviser himself. Having worked within Australian pension funds, in his last capacity as deputy CIO, Daniel understands the issues institutional investors are facing. In this podcast, [i3] Insights editor Wouter Klijn delves into these issues, not only from an investment point of view, but we also address organisational challenges and behavioural ones.Overview Daniel Grioli podcast:2:00 Who is the MarketFox?7:20 Do you still find psychology applicable in finance?11:00 Is swearing off emotions entirely a good idea?13:00 Emotions and decision making15:00 Institutional investors are far too focused on optimising17:00 Attributes of good investors.18:00 Self-awareness and group awareness21:00 Starting a business out of frustration25:00 Technology allowed me to start a business in a way I couldn’t 10 years ago26:00 Optimisers are very sensitive to the assumptions you put in, so you get the answer that you want.27:00 Too many marginal positions.31:00 Finding a clients edge. An example in the property market34:00 Risk appetite is context dependent37:00 Managing expectations40:00 Tips for investors in institutions and for entrepreneurs wanting to start their own advisory business47:00 Asset management progresses one funeral at a time.


4 Jun 2019

Rank #16

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11: Jack Gray - GMO, Probability and Jeremy Grantham

Dr Jack Gray is an renowned academic, investment practitioner, teacher and investment philosopher. He was previously Co-Head of Asset Allocation at GMO Boston, having worked with GMO between 2005 and 2008, and prior to that between 1998 and 2003. He was also previously Chief Investment Officer at SunSuper, one of Australia’s largest Superannuation funds, and an Executive Director at AMP Asset Management. He speaks with MarketFox columnist Daniel Grioli about the difficulty of explaining probabilities and the limitations of mathematics, his days at GMO and working with Jeremy Grantham; and finally, Artificial Intelligence and robo-advice. As usual, Jack speaks his mind, but always thoughtfully and knowledgeably.Jack Gray Podcast overview:4 min: ‘You don’t need a lot of maths to be comfortable in investing’11 min: Discussing Gerd Gigerenzer on heuristics12:30 min: Most people can’t handle probability thinking. In Latin there is no word for probability.18 min: What would you have done differently?19:30 min: The efficient market hypothesis was beautiful, but it didn’t make me a better investor26 min: Days at GMO: ‘I was Jeremy Grantham’s handbag and that is okay’.37 min: Neuroscience and biases: ‘We can’t control fear; you need to have brain damage to do that’.39:50 min ‘Be patiently impatient.’40 min: ‘Investing is a bit like marriage; we get it about 50 per cent of the times right.50 min: Increasing specialisation; how do you deal with it?52:30 min: Factors: this is an industry driven by fashion, but not all fashions are bad.53:50 min: Scale: on the administrative side there are some efficiencies, but on the investment side there are inefficiencies.1:02 min: AI and advice: most parts of advice is routine. People are 80 per cent the same.1:04 min: Building AI in the 1980s; I failed and learned the limitations of mathematics

1hr 19mins

5 Jun 2018

Rank #17

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25: Fidelity's Alva Devoy - Molecular Engineering, Robo Advice and Retirement

Alva Devoy is Managing Director Australia for Fidelity International. Alva started out her career as a molecular engineer, developing vaccines, but the Iraq War made her change her mind about her path and she switched to asset management. She talks to MarketFox columnist Daniel Grioli about the business of asset management, robo advice and the quest for the retirement holy grail.Overview of podcast with Alva Devoy:4:00 As a market strategist you are standing on quicksand. It is the most uncontrolled environment.4:40 How does research in finance differ from that in science?5:45 Started out as a pharma analyst.9:00 As an analyst your models are your safety blanket10:00 The real art is in finding the why behind the data points11:30 Coming to grips with the perversity of markets14:00 Mentors15:30 Self-actualising; make sure you don’t neglect all the other aspects that make up you17:00 Pulling information towards you is harder in Australia because of distance19:00 The advantage of using the ebb and flow of labour in Australia to our advantage is incredible20:30 When I got to Australia I thought I was going to be a hotshot, but the investment expertise in Australia is phenomenal.22:42 What advice would you give for people in a leadership role?24:30 Don’t transfer your view of success unto other people26:45 You don’t become a leader because you are a subject matter expert anymore. It is about finding experts34:00 What does a high-performance culture look like?37:45 Pension funds should really approach investments from a total portfolio level40:00 This bull run has felt miserable; no one felt confident43:30 At what size does stock picking become irrelevant?46:00 What is the problem with favouring boutique fund managers?48:00 Within Fidelity we have different factories48:45 Are fund managers just asset gathers?50:00 Passive + active; but all ecosystems need to be in balance52:00 The mix of active and passive is like cordial: the water is free and you add concentrate to taste55:00 Will big tech companies enter asset management?58:00 Selling today is a mix of product placement and client servicing. Product flogging is dead.1:00:00 How many true partnerships could we have in Australia? Five.1:01:00 Retirement; why don’t we see more innovation?1:03:00 The relatively low impact from the GFC on Australia has kept risk appetites high1:05:00 Fidelity hires former State Plus Head of Research Richard Dinham to design what retirement looks like for Fidelity1:07:00 Risk profiling is dangerous.1:09:00 Robo advice is great, but you do need outside expertise to make sure your investments point in the right direction1:12:30 Three tips for better investment decision-making1:16:00 You can’t legislate against human behaviour1:17:00 If you don’t understand something, even if it is the next best thing, stay away from it.

1hr 19mins

15 Jan 2019

Rank #18

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40: Frontier Advisor's Fiona Trafford-Walker - Manager Selection and Value Investing

Fiona Trafford-Walker is one of the world’s most respected asset consultants. Trafford-Walker is a founding member of Frontier Advisors and has advised many of Australia’s largest pension funds on their investment strategy. Currently, she is a Director and member of the Investment Committee at Frontier, but has announced to leave the company on 6 December 2019 to focus on her directorships. She is a Non-Executive Director at the Link Group, Prospa Group and the Victorian Funds Management Corporation and a member of the Investment Committee at the Walter and Eliza Hall Institute. Trafford-Walker was named as one of the Top 10 global asset consultants by CIO Magazine from 2013 to 2016 inclusive. She was also announced as a winner in The AFR and Westpac 100 Women of Influence Awards for 2016 in the Board/management category.In this podcast, we look back on her 25 years with Frontier, her career as an asset consultant and discuss a variety of topics, including manager selection, asset allocation and the changing landscape pension funds face today.Overview Fiona Trafford-Walker podcast:2:30 I’m an accidental asset consultant4:30 You’re named as one of the most influential asset consultants in the industry. What makes a good asset consultant?5:35 You have to be willing to collaborate7:00 Technical skills are very important, but equally important is time in the markets7:30 The changing role of asset consultants over the years9:30 As asset consultants have increased their senior staff, have conversations become more focused on strategy?10:30 There is still the need to have a blend of specialist and generalist skills11:50 Are we already heading to having a panel of asset consultants?13:00 Is there a good balance between the time spend on manager research and that on asset allocation?14:30 What type of data should inform changes in asset allocation?16:00 There is not much you can do about geopolitical risk; predicting what politicians are going to do next is pretty hard.16:30 But trade wars are a real thing that have an effect on markets18:00 Are the struggles of active managers, particularly value managers, structural or cyclical?19:00 There seems to be a need to tweak the value process to allow for the new capital-light business models. But at what stage do you get style drift?21:30 Frontier Advisors took the decision to build a platform with all their research on it, quite a brave step in an era where softcopies get distributed easily.26:00 You spent some time arguing for lower fees in the industry. Are we at the right level?27:30 The real change has been the internalisation of asset management by some funds.29:00 Can internalisation refocus asset management on the long term?30:00 Bottom draw mandates31:00 To what extent should asset owners engage with the companies they invest in? You are on a number of boards and see both sides?33:00 Governance certainly has changed as asset owners realise they are the beneficial owners35:00 To what degree can you divest from companies as a fiduciary?38:00 The challenge of developing retirement products41:00 At the moment, the willingness to do things together [as funds] isn’t there.42:00 What is next in store for you?44:00 What issues come up in mentoring new asset consultants?


15 Oct 2019

Rank #19

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22: India Avenue's Mugunthan Siva - Indian Stocks, Modi and Reforms

In this [i3] podcast, we take a look at India. [i3] Insights editor Wouter Klijn spoke with Mugunthan Siva, founder and managing director of India Avenue Investment Management, about the Indian economy, what Modi’s reforms mean for institutional investors and changing attitudes towards ESG issues. Siva spent a large part of his career as an asset allocator with the investment arm of Dutch bank ING and later at ANZ. He has a unique view on the opportunities but also challenges that India presents.Podcast overview: 3:30: Why set up a single country fund? 5:00: With India it is a bit more difficult to determine the direct relation with Australia, as we can with China 6:30 Modi reforms, what do they mean for investors? 8:00 What mobile technology means for financial services in India10:30 What does the introduction of GST mean for interstate trade in India?12:00 Foreign investments and work for the young population of India13:00 Urbanisation will see a shift to a more organised economy14:00 Made in India15:30 Infrastructure projects in India and land and labour reforms.16:30 Spending US$ 1 trillion on infrastructure17:30 Indian stock market consists of US$3trillion and 6000 companies, yet only 200 stocks are covered by brokers20:00 What is your favourite stock in India?22:30 Indian banking sector.24:00 The new bankruptcy code will address bad debt problems among the banks25:00 India’s IT sector26:30 Buying Indian IT stocks is not an India play; 90 per cent of their revenues come from overseas27:30 Large distances has caused a speedy take-up of e-commerce28:30 ESG and governance in India31:00 Attitudes towards environmental issues: plastic


14 Nov 2018

Rank #20