Resolve Riffs Investment Podcast

This week we spoke with Glen Burella, PhD, Vice President, Business Development at Abbey Capital (US). Glen previously worked on the investment research side of Abbey Capital having a background in quantum computing and a theoretical physics PHD.

Our conversation with Glen covered the following themes:

• The incredible combination of stocks and trend following
• Glen’s attraction to science and math
• A glimpse inside a PhD in quantum physics
• First days at a new quant firm
• Behind the scenes at Abbey Capital’s research division
• Launching new products and taking business risk
• Abbey Capital’s focus on multi-manager portfolios
• Why multi-manager instead of single ensemble?
• Dealing with performance fees in a multi-manager portfolio
• Segregated accounts vs trade netting
• Selecting managers and assembling portfolios
• The role of CTAs in institutional mandates
• How CTAs are an optimal solution for the coming inflation volatility regime

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

This episode features Ben Hunt, founder of Second Foundation Partners, which hosts the Epsilon Theory content portal.

I reached out to Ben because I’d been starting to feel myself shifting gears on my feelings and perceptions around the ongoing COVID pandemic, and I knew Ben would be able to help put things in proper perspective.

For most of the past 18 months or so I have been firmly in support of most of the measures taken by governments to manage the health impacts of the virus. We adhered strictly to lockdown guidelines, supported border closures, followed protocols, and received vaccines and boosters as soon as they were available.

But over the past few weeks I’d felt myself becoming frustrated with the lack of progress on the policy front. After all, residents of developed countries have had access to highly effective vaccines for almost 9 months. Every resident has had ample opportunity to get fully vaccinated at no financial cost, and residents of many countries have had plenty of time to get free booster shots.

Yet still, here we are. Everyone I talk to seems to be much more terrified of testing positive than of actually getting the virus. Everyone wants to travel, or go back to university, or see family – live a fulfilling life with the people we care about! – but they’re petrified about facing trip cancelations, quarantines, and/or huge expenses from a positive COVID test.

Isn’t the world upside down when most people are more afraid of running afoul the regulations in place to prevent a danger, than they are of the danger itself!

These are the themes I felt I needed to cover with Ben, and we did cover most of them in our 90 minute conversation. Ben was extremely patient and generous with his time, wisdom and insights. However, I admit to still feeling like several critical points went unresolved. This gap was definitely my fault, and not Ben’s. It just took me a few days of further ruminating to see the holes I wanted to fill.

I think this is an important and timely conversation with someone who understand the topic from top to bottom, and who sees the issues with clear eyes, and a full heart. I hope you get as much value out of it as I did.

Daruis Dale is the Founder and CEO of 42 Macro, an investment research firm that aims to disrupt the financial services industry by democratizing institutional macro-grade risk management frameworks and processes. Prior to founding 42 Macro, Darius was a Managing Director and partner at Hedgeye Risk Management, an independent investment research firm based in Stamford CT. He joined us for jam-packed and timely conversation that included topics such as:

• Positioning for inflation volatility and the “Midas Touch”
• The Fed and accelerating the taper
• The Dynamics of the recent “Friday Smackdown”
• The missing “Guardians of the Gate”
• The implications for bonds
• Cyclical changes and secular regimes
• Declaring regimes and pricing them in
• Portfolio construction and conditional probability
• Why you don’t get paid for being too early
• Frontrunning pricing with intuition and expectations
• The Style Factor and why it’s the best predictor
• Back-testing regime ensembles
• Covariance ranking, layering and beta ranking in portfolio construction
• Selecting and weighting macro indicators
• Behavioral Economics and why being different is important
• The impact of Bitcoin on portfolios
• The effects of expensive markets relative to inflation
• Policy mistakes and corrections

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Phil Huber is the Chief Investment Officer of Savant Wealth Management, and author of The Allocator's Edge: A Modern Guide to Alternative Investments and the Future of Diversification. He joined us for a great discussion that covered topics such as:

• Educating advisors on the role of alternative strategies in portfolios and their benefits
• Recency bias and why “hindsight is 60/40”
• A different approach to building a truly balanced portfolio
• Why allocators find it difficult to diversify away from stocks and bonds, despite recognizing how expensive they currently are
• Dealing with an environment that most financial professionals have never come across in their lives
• Embracing alternative risk premiums and trying to understand why they work
• Private equity and hedge funds – the ‘gateway’ alts
• Niche vs large managers – why size matters and finding the sweet spot
• Path dependency and sequence of returns
• Communication challenges and getting clients across the line to embrace a novel approach
• Line item risk vs portfolio ‘gestalt’
• Fiduciary responsibilities, diversification, fees and behavioral considerations
• Behavioral coaching as an integral part of an advisor’s job
• A wide range of experiences and unrealistic expectations – why alternative strategies haven’t been fully embraced by retail investors
• In the absence of value, we negotiate price
• Overcrowding, passive-flows and factor underperformance
• The pitfalls of overly conservative assumptions
• Minimizing regret vs maximizing utility
• Plan vs planning – a perpetual, ongoing exercise

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Jack Forehand is co-founder, partner and CIO at Validea Capital, and is also the co-host of the popular Excess Returns podcast. He joined us for an awesome conversation that included topics such as:

• The different styles for interviewing guests –preparation vs improvisation
• Factor models to decompose the returns achieved by famed managers
• Peter Lynch and the real mystery behind his track-record
• Momentum vs return chasing
• Cycles, underperformance and the benefits of combining different methodologies
• The hard problem of factor allocation based on historical returns
• A pragmatic approach that earned Jack his Twitter Handle – @practicalquant
• Education, discipline and adherence
• The incredibly long winter experienced by the value factor – is it over
• Behavioral vulnerabilities – knowing about them doesn’t dampen their effect
• Holding minimum amounts of cash – the additional tail-wind for indexed products
• Tracking error can be more painful than the risk of losses
• Why finding your like-minded tribe is a crucial component of sticking with a strategy

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Perth Tolle is the founder of Life + Liberty Indexes, an index provider and sponsor of the Freedom 100 Emerging Markets ETF – a first of its kind strategy that uses personal and economic freedom metrics as primary factors in its investment process. She joined us for a great conversation that included:

• How her early life in China, Hong Kong and the US shaped her perceptions of freedom
• Isolating the “freedom factor” and using it, not as a tilt, but the primary basis for investment decisions
• The enormous task of quantifying, converting, and scaling 76 different metrics, many of which are qualitative
• Political, judicial, economic and social – freedom measured in its many forms
• Settling contradictions when different freedoms collide
• Why Perth has avoided the ESG label
• The many signs that suggested that this was a product that needed to exist
• Stumbling onto a fishing trip with industry heavy-weights and securing seed capital
• Reaching the important milestone of USD 100 million assets under management
• Forging her own path in an extremely competitive and challenging industry
• Accepting that she can no longer travel to several countries because of her work
• Her partnership with Alpha Architect
• New projects on the horizon

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

This week we had the pleasure of hosting our friend Jon Aikman, President and CIO of ReSolution Investments, for a broad conversation on the three-lettered acronym that has taken the investment world by storm in the last few years: ESG – Environmental, Social and Governance. We covered:

• How a background in law, banking and academia developed into a passion for impact investing
• While the environment has drawn most of the attention, we shouldn’t overlook the social and governance agenda
• Untangling definitions and acronyms
• Anti-carbon policies running ahead of replacement technology
• Oil isn’t going away any time soon – think carbon sequestration
• Environmental goals at odds with shareholder value maximization
• One man’s waste is another man’s biofuel
• Investors’ time horizons are often too short to take long-term externalities into account
• Any time people make investment decisions for non-economic reasons, opportunities arise
• How dislocations impose ripe opportunities for active management
• Green washing, opportunism and gaming the system
• Incorporating inflation hedging within an ESG framework
• The temporal question – developed nations evolved and polluted, emerging markets want the right to do the same
• The tough economic decisions governments, companies and individuals are likely to face 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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Tom Morgan is Director of Communications and Content for the Knall/Cohen/Pence (KCP) Group at Stifel. He writes a weekly missive called The Attention Span, which curates and synthesizes content, ideas and frameworks to help readers make sense of an increasingly complex world.

Tom, Richard, Mike and Adam wandered into a wide range of topics, but the central theme orbited around humanity’s universal craving for meaning and connection in the vacuum created by the post-modernist Western focus on empirical rationalism. Along the way we touched on the following subjects:

• The central importance of authenticity and following your passion to stand out and build community in an increasingly hostile information ecosystem
• The importance of intuition as a connection to the “extended mind” and the example of George Soros’ sore back
• The human obsession with the sacred and the profane, and how this need manifests in tribalism in the absence of religious context
• The West’s devilish obsession with left-brain priorities like data, taxonomies, definitions, and process, which are devoid of context and meaning
• The critical role of emergent dynamics in shaping our world from the bottom-up
• The potential for evolutionary processes to converge on awful solutions
• Potential dangers in applying constraints or directions in complex dynamic systems
• How asymmetrically powerful actors like Facebook’s engagement AIs might corrupt natural evolutionary processes and lead us down a dark path
• Why we are accelerating toward universal irrelevancy and must soon rethink the value of individuals and our social contracts
• How to “dance” with complexity and find the joy in adapting rather than controlling
• Why all meaningful change happens at the border of order and chaos
• Why the most important leaps forward always seem insane right up to the point when they are universally accepted

This is obviously a long list, but there is so much more between the lines and in the connective tissue of the discussion. The ReSolve crew had a lot of fun with this conversation and we think you will too.

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Wes, Patrick and the Alpha Architect Team are long-time friends of ReSolve, and were gracious enough to join us last-minute to discuss their huge win in the ETF white label space, with the launch of the ARK 21Shares Bitcoin ETF. Wes and team are known for their pure factor ETFs, but in the last few years they’ve pivoted from asset management to create an ETF Architect division, offering the “picks and shovels” for external managers to offer niche strategies with tight operations and low costs.

Wes and Patrick give us the straight goods on what it takes to launch a successful ETF, including:

• Overcoming their academic focus on factor-oriented quant strategies to entertain more diverse offerings
• How “ETF Innovation” differs from traditional approaches and fund conversions
• The “minimum effective dose” of operating capital and market buy-in necessary to facilitate a successful ETF launch
• A deep dive into the levers of economics and margins for launching and operating an ETF
• Insights on changes to tax and regulatory rules proposed by the Biden administration, and the economic merits of equalizing ETF and mutual fund tax treatment
• Evolution in market access – how investors access ETFs vs mutual funds and how to get shelf space for fund products
• The special considerations involved in launching a Bitcoin ETF
• Overcoming the negative roll yield typical of Bitcoin futures
• The state of arbitrage in the digital asset space, and why juicy returns will probably persist

You will not find a more candid, competent and credible team than Wes and Patrick to get the unfiltered version of what you need to deliver a successful ETF launch. It was also amazing to learn more about the machinations involved in standing up a crypto asset product, and getting a glimpse into the future of the space.

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

Traditional portfolios are faced with the prospects of depressed expected returns in the coming years, as implied by current stretched valuations of stocks, and near record low rates and credit spreads for bonds. Our recently released paper – Return Stacking: Strategies for Overcoming a Low Return Environment – co-authored by Rodrigo and our good friend Corey Hoffstein, shows how investors may materially improve their chances of success by allocating to uncorrelated managers that may offer more ‘bang for your buck’ and free up valuable ‘portfolio real-estate’. Fielding questions from the ‘Twittersphere’ as well as our live audience, this episode covers:

• The pitfalls of emulating large institutions with limited portfolio agility and mandate flexibility
• Stellar returns and recency bias – why so many investors remain anchored to the ‘60/40 portfolio’
• Why stocks and bonds are structurally not designed to thrive in high inflation and/or low growth environments
• How loose fiscal policy, layered atop highly expansive monetary policy, strengthens the case for persistent inflation
• A trip down portfolio theory memory lane
• Risk transformation and financial alchemy
• Leverage aversion – concentrated bets vs capital efficient diversified return streams
• Structural diversification, tracking error and absolute returns
• Return stacking as a form of liability hedging for advisors
• Finding structural edges and tilting the odds in one’s favor

The team also discussed the importance of separating the underlying components of any strategy, not only across asset-classes, but also beta, alpha, styles, and tilts, in order to use them as building blocks to create tailored portfolios with desired exposures.

There’s also an “Easter Egg” where Adam discusses the results of a forthcoming paper on the shockingly large potential benefits of trade and fee netting in multi-strategy products.

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, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.