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Flirting with Models

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.Episodes released in topic-specific seasons.For more on Newfound Research, visit ThinkNewfound.com. And to learn about Newfound’s suite of mutual funds and other investment offerings, please visit ThinkNewfoundFunds.com.

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Benn Eifert - Volatility Investing (S2E2)

I am joined today by Benn Eifert, founder of QVR Advisors.  QVR specializes in managing option-based strategies and Benn describes what he does as volatility investing. We quickly wade into the deep end with this one.  Benn schools me on relative value investing and dismisses my favored mental model of style premia for what he prefers to call “the Star Wars framework.” We chat about volatility ETPs, their impact on the volatility landscape, and how the market has changed since February 2018.  And with some spectacular option-driven blow-ups in the last couple of years, I ask Benn for his guidance on how he would think about due diligence in the space. Finally, while Benn deals exclusively with institutions at QVR, I get his thoughts on how volatility investing might play a role for individual investors.  We go deep with this one.  So let’s dive in.

1hr 6mins

30 May 2019

Rank #1

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Wayne Himelsein - The Quant Philosopher (S2E7)

In this episode I chat with Wayne Himelsein, president and chief investment officer at Logica Capital.  To our conversation Wayne brings over two decades of experience managing long/short portfolios, ranging from statistical arbitrage to factor long/shorts. For as deep in the weeds as he liked to go as a quant, Wayne has a philosopher’s streak and Twitter is his soapbox.  Of course, 280 characters can be limiting, so I start out conversation by putting Wayne in the hot seat and ask him to explain the deeper meanings behind some of his recent tweets. Using these philosophies as a foundation, we then dive into long/short portfolios.  We talk about the practical difficulties of managing these strategies and Wayne explains why he believes that beta-neutral is a fool’s pursuit.   We then switch topics to tail risk hedging.  These sorts of strategies are notorious for their bleed, and we discuss whether the payoff is ultimately worth the cost of insurance.  Wayne describes a few ways in which the bleed can be managed and the ensuing tradeoffs with each method.   In discussing both long/short and tail risk hedging strategies, I ask Wayne what due diligence questions he would ask if he were evaluating another manager.  I find this question always provides great insight into what managers of these strategies actually think is important.  Wayne does not disappoint. I hope you enjoy my conversation with Wayne Himelsein.  

1hr 15mins

17 Jun 2019

Rank #2

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Liqian Ren - In Search of Modern Alpha (S2E8)

In this episode I am joined by Liqian Ren, Director of Modern Alpha at WisdomTree. After receiving her degree in Computer Science, Liqian came to the United States to pursue her Masters in Economics.  Liqian then did a quick stint at the Federal Bank of Chicago as an associate economist, before returning back to academia to pursue her PhD at the University of Chicago. In 2007, Liqian joined Vanguard’s Investment Strategy Group, where she leveraged her background to perform economic and capital market forecasts, studies on asset allocation, and research into topics such as retirement income and investor behavior. Liqian eventually transitioned to Vanguard’s Quantitative Equity group, where research efforts were focused on deep, stock-level signals analysis and portfolio construction.  Becoming one of the first to act in a dual capacity research / portfolio manager role, Liqian developed a deep appreciation for implementation-aware research. We spend much of our conversation talking about factors in both theory and practice.  We hit subjects such as the risks of delayed implementation, mixed versus integrated portfolio construction, opportunities for factor timing, active versus indexed implementations, and how factors fit within a glide path. Finally, we discuss Liqian’s new role at WisdomTree and new areas of research she is excited to pursue. I hope you enjoy our conversation.

1hr 8mins

17 Jun 2019

Rank #3

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Jason Thomson - The Growth Factor (S2E6)

My guest in this episode is Jason Thomson, a portfolio manager at the William O’Neil family office. On paper, Jason doesn’t seem like a particularly good fit for this podcast.  He runs a highly concentrated discretionary portfolio of growth equity names.  He can be levered long, net short, or completely out of the market all at his discretion. What becomes rapidly apparent is that while Jason has ultimate discretion, he adheres closely to a disciplined, rules-based process driven by the empirical research of an in-house quant group.  The core framework of that process retains the spirit of William O’Neil’s original CANSLIM methodology, but now has nearly a half-century of learning and nuance layered on top. As a quant, it is tough to hear “growth” and not think “expensive.”  Jason dismisses the idea that growth investing is all about headline-making, high-flying stocks, though, and emphasizes the importance of valuations.  In fact, about a quarter of his holdings are turn-around plays.   We talk about the role of investment themes, the importance of position sizing, and how Jason thinks about managing risk in a portfolio with less than ten names. The idea of managing a portfolio the way Jason does definitely put me out of my comfort zone, but our conversation made me reconsider what I think I know about growth investing

1hr 17mins

11 Jun 2019

Rank #4

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Ben McMillan - Attack of the Liquid Alternative Clones (S2E3)

In this episode I chat with Ben McMillan, a founding partner of IDX Insights, a firm offering "indexing as a service." Ben cut his teeth in manager analysis at a fund-of-hedge-funds and we spend a considerable amount of time discussing how this experience impacted his research in building hedge fund replication strategies. As it turns out, a naive replication strategy is very easy to implement. A robust one, however, is deceptively difficult.  One of the most interesting insights I gleaned from this conversation is that the edge in replication may not be in applying more sophisticated math, but rather in the data sets applied. We discussed where replication might work, where it doesn't, and the dependent nature these liquid replicators have in crowd-sourcing their allocations from their less-than-liquid peers. Finally, we discuss how these sorts of replicators might be further enhanced by replacing standard beta factors with more customized index solutions. Ben is full of insights and this one runs long.  So let's not waste any more time and let's dive in.

1hr 33mins

30 May 2019

Rank #5

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Artur Sepp - Conditional Beta (S2E5)

My guest is Artur Sepp, Director of Research at Quantica Capital AG in Zurich. In 2008, Artur was working on structured credit products for Merrill Lynch, giving him a front-row seat to the ensuing credit crisis.  We use this experience as a jumping off point for our conversation, with Artur providing both pragmatic and philosophical lessons learned. One of those key lessons was the role of liquidity, which Artur argues is the key factor behind many premia we see in the market. Artur’s focus on liquidity grew as he transitioned to London in as an equity derivatives quant, where he was responsible for building models to hedge options on illiquid underlying assets.  Here we get into the nitty gritty, discussing a paper Artur wrote about the practical realities of delta-hedging options under a framework of discrete hedging and transaction costs. In 2015 Artur moved to Julius Baer’s advisory solutions group in Switzerland where he served as a client-facing advocate for alternative risk premia strategies.  Here Artur had to learn how to translate his deep quantitative knowledge into client understanding.  He shares with us some techniques and tricks he learned for effectively communicating what can be rather complex ideas. Today Artur works at Quantica Capital, whose flagship product is a Managed Futures strategy.  I ask Artur for his opinion on recent struggles in the managed futures space and what he thinks the future for trend following managers will look like.  You definitely won’t want to miss his answer. Artur is a fountain of quant knowledge and offers the unique perspective of someone who has both spent time deep in the weeds and time trying to explain the esoteric.  There are lots of gems in this one, so stay tuned.

1hr 13mins

8 Jun 2019

Rank #6

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Tammira Philippe and Elena Khoziaeva - It's all Greek to Me (S2E4)

In this episode, I am joined by Tammira Philipe and Elena Khoziaeva, both of Bridgeway Capital Management, a quantitative asset manager founded in 1993 offering systematically managed equity strategies.   But that’s not how Tammira or Elena would describe it.  And that’s what this episode is all about: communication in the realm of quant.   As President and CEO of Bridgeway Tammira provides us with a perspective of why effective communication is so important for building an enduring asset management firm and why quants, in particular, face an up-hill battle. Elena, who serves as head of US equities, offers us insight from the PM seat and provides some practical advice on how to best communicate difficult quantitative ideas. We discuss both the importance and difficulty of on-going investor education, smart beta’s impact on industry comprehension, and ideas for how quants can better communicate in the future.

1hr 34mins

4 Jun 2019

Rank #7

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Michael Krause - Evolving Long/Short Equity (S3E2)

In this episode I am joined by Michael Krause, co-founder of Counterpoint Asset Management and Counterpoint Mutual Funds. Our conversation covers two major topics. In the first half, we discuss some of the nuances of high yield bond timing and the subtleties of strategy construction. In the second half, we discuss long/short equity strategies. For listeners more interested in the technical, this is where the meat and potatoes of the conversation lies. We discuss Michael’s evolution from regression to machine learning techniques, the unintended consequences of accidental exposures, and managing risk through optimization while managing the risk of optimization. I hope you enjoy my conversation with Michael Krause.

1hr 8mins

3 Jul 2020

Rank #8

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Corey Hoffstein - Rebalance Timing Luck (S2E11)

My guest today is … me. But rather than interview myself, my co-portfolio manager Nathan Faber joins the podcast to take the reigns. In this episode, we talk all things rebalance timing luck. It’s been an obsession of mine for years and something we believe to be a dramatically misunderstood and outright ignored source of risk in portfolios. We discuss how we first came across the topic, some recent research into it, important implications for the industry at large, and how we can try to solve for it. I hope you enjoy the conversation.


9 Dec 2019

Rank #9

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Daniel Grioli - Thinking like a Fox (S2E1)

My guest in this episode is Daniel Grioli.  Daniel cut his teeth in the industry at Deutsche Bank in London, where he was responsible for valuing structured equity and hedge fund of fund products targeted at continental Europe.  His timing of joining Deutsche, while perhaps somewhat unfortunate for him, proves fortunate for us as he retells a few war stories and lessons learned from the desk leading into 2008. During the crisis, Daniel found himself back in Australia working for a pension fund, where he made a career in manager evaluation, selection, and combination.  That makes Daniel somewhat unique among prior podcast guests, as he provides us some insight into the decision making of capital allocators on the other side of the table. The breadth of managers evaluated gave Daniel some unique insights that he shares with us around where he believes the limits of quantitative and discretionary management lie.  He also shares his framework for manager selection, which he calls Via Negativa.   Presently, Daniel is leveraging this experience to build what he calls a “best ideas” portfolio, exploiting 13F reporting data to create a high conviction equity portf   olio for his clients. Finally, we talk about the i3 podcast that Daniel hosts and some of the most interesting guests he has interviewed. Without further ado, my conversation with Daniel Grioli.

1hr 29mins

23 Jun 2019

Rank #10

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Katherine Glass-Hardenbergh - All About Alternative Data (S2E9)

In this episode I am joined by Katherine Glass-Hardenbergh, Associate Portfolio Manager at Acadian Asset Management.   In her role, Katherine focuses heavily on the application of alternative data in Acadian’s fundamentally-driven, systematic investment process.   Purported as being one of the leading frontiers of quant finance, there is plenty of hype around alternative data.  Katherine brings refreshing transparency to our conversation, speaking just as candidly about the hurdles in alternative data as the opportunities. We discuss everything from what alternative data is, where it comes from, interesting examples in the ever-expanding landscape, some of the practical challenges of working with alternative data, and the many potential applications for use within the investment industry. Katherine provides insight into the world of alternative data that only someone deep in the weeds could.  If you’ve ever been curious as to the real-world application of alternative data, this is definitely the episode for you. I hope you enjoy our conversation.


20 Jun 2019

Rank #11

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Chris Meredith – Building a Robust Research Platform (S2E10)

Chris Meredith is co-Chief Investment Officer and Director of Research at O’Shaughnessy Asset Management.  In this episode, we focus on the latter title and talk all about what it means to develop a strong research program. Our conversation centers around what Chris considers to be the three key pillars: data, tools, and people.   Chris provides insight into how data sets have changed since the beginning of his career, starting with highly structured price and fundamental data to so-called “pointy,” highly specific data sets and now completely unstructured blobs of information.  He offers his thoughts into how this growing information set represents both an opportunity for researchers as well as a risk, requiring careful forethought into how it is going to be attacked. Our discussion of tools covers both the digital and the physical.  We talk about the influence of open-source software, the growing role of machine learning, and the operational benefits of treating each researcher’s laptop like a stand-alone research sandbox.  It is easy to tell that while Chris has a passion for the data and tools, he truly believes that they are for naught without the right people and he shares some of his ideas on how to maximize the potential of his team.  Chris also sheds light on the OSAM research partners program, which grants 3rd party researchers access to the OSAM data platform.  This new initiative is a highly unusual approach for a traditionally secretive industry, but early papers coming from their collaborations suggest it may bear significant fruit. Please enjoy my conversation with Chris Meredith.

1hr 4mins

20 Jun 2019

Rank #12

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Liquidity Premium with Adam Butler (S1E8)

In this episode, I sit down with good friend Adam Butler, Chief Investment Officer of ReSolve Asset Management.  Rather than take the usual interview style, we thought it would be fun to just sit down at a bar without an agenda and just record the stuff we would have been talking about anyway. With drinks in hand, we dive into a conversation that covers topics ranging from machine learning to analytical derivations of the correlation between trend following signals to the role of defensive strategies in a portfolio. We hope you enjoy.

1hr 10mins

17 Oct 2018

Rank #13

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John Alberg - The Man in the Machine (Learning) (S1E7)

"How do you come to a rational conclusion as to what a company is worth?"  A seemingly simple question with little-to-no clear answer. For John Alberg, a background in computer science and a passion for machine learning led him to view the problem through the lens of data.  "If it is true that you can use publicly available information to buy companies for less than their economic worth," he thought, "then you should be able to see it in the data." And thus was born Euclidean, an investment firm that marries machine learning with a deep value mentality. Our conversation spanned more than 2.5 hours and covered everything from the basics of machine learning, to the evolution of Euclidean's approach over the last decade, to the implications of adversarial examples in neural networks. This podcast, an abridged version of our conversation, picks up the thread mid-way through, where I have asked John to expand upon his experience with his startup, Employease, and how it influenced his value-based thinking at Euclidean. I hope you enjoy.


8 Jul 2018

Rank #14

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Jack Vogel - Momentum in Theory, Momentum in Practice (S1E6)

Today I am speaking with Jack Vogel, co-CIO of boutique ETF issuer Alpha Architect. I’ve known Jack for some time now and was particularly excited to bring him on the show for two reasons. The first, which you will quickly learn in the episode, is his near encyclopedic knowledge of investing literature. I’ve met few investors who have both the breadth and depth of recall that he does for both academic and practitioner studies. The second was because he helps manage a momentum strategy. Almost every investor has, at one time or another, at least perused the pages of Graham’s Intelligent Investor and value investing is considered by most to be as wholesome as Warren Buffett drinking a Coca-Cola while eating apple pie. Momentum, on the other hand, is often disregarded as performance chasing nonsense, with little foundation in the realm of real investing. Yet, as you’ll find in our conversation, deep care and thought goes into both understanding the anomaly itself and constructing a portfolio that can efficiently attempt to capture it. I hope you enjoy my conversation with Jack Vogel.

1hr 8mins

26 Jun 2018

Rank #15