Increased sophistication in manager assessment is an important trend in the search for alpha. My conversations with Michael Mauboussin and Annie Duke suggested frameworks to think about enhanced decision-making processes and prompted a deeper dive into the ways allocators and managers can improve their craft. This week and next explores some of the tools available to help make it happen.

Basil Qunibi is the CEO of Novus Partners, a data analytics company whose mission is to help the world’s top investors generate higher returns. As big data pervades commerce across industries, Novus is the most well-known provider of tools to analyze investment manager performance, allowing allocators to play Moneyball by breaking down the attributes of manager skill. Novus’ 200 clients are split between allocators and hedge fund managers who collectively oversee approximately $3.5 trillion of assets.  You can learn more about the company and its service at novus.com

Our conversation starts with Basil’s path to creating Novus and dives into the tools an allocator can use to improve their understanding of a manager’s skill, including the data sets available to allocators, the levers a manager employs in driving returns, the relationship between data and a manager’s process, a framework to analyze crowded names, and future horizons for data-driven assessments of managers.

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Show Notes

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2:46 – The founding of Novus

5:45 – What did the qualitative assessment of managers look like at first for Basil

6:50 – How did he start to quantify managers

09:47 – What he saw in the initial data

13:24 – The early days of Novus, going all the way back to the concept

            14:05 – Direct from Dell: Strategies that Revolutionized an Industry

            14:07 – Sam Walton: Made In America

16:27 – Novus’ first product

19:13 – Core components of measuring the skill of a manager

            19:54 – Exposure management

            22:10 – Capital allocation

            23:27 – Idea selection

            24:10 – Position sizing

            25:11 – Tactical trading

25:45 – How should this data be used

28:08 – Why this data is useful for capital allocators

30:48 – How efficient is the market for talent

31:54 – What has happened to stocks that are crowded compared to those that aren’t

35:15 – How does Novus use conviction in their metrics

36:43 – Consensus and concentration

40:02 – How Novus went from servicing allocators to also helping managers themselves

42:22 – Overview of Novus’ clients and what they’ve been able to learn from all of this data

46:45 – What other markets could Novus be applicable to

48:56 – Most creative application of this data by a client

49:53 – Closing questions