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00:48
Studied economics at Berkeley under Janet Yellen and options and financial mathematics with options pioneer and founder of portfolio insurance, Mark Rubinstein. Started his Asian career at a time “most institutions did not understand risk”: October 1987. Created Bankers Trust core risk business model for emerging markets. Embedded positive convexity at the core of emerging market trading to better ride through market dislocations. Why historical volatility and correlation can be very poor measur
04:05
How to create convexity in portfolios. Supply-demand dynamic is the driver of volatility and massively influenced by structured product creation. Why taking “good risk” allows you to take more risk. Current strategy launched in 2012.
07:35
How does Convex Strategies fit into a balanced 60/40 portfolio?. “If you are not bearish, how come you have 40% of your capital in low yielding, non risk mitigating fixed income?”. Improving risk mitigation dynamics allow you to own more growth assets. How Convex Strategies helps fix investors’ compounding problems. It’s just math: Down numbers matter more than up numbers.
11:28
What causes this negative convexity? Which behaviour is responsible for it?. How to correct it?. The problems of short term return chasing. Replacing ineffective defensive allocations. Conflict of interest: Fiduciaries vs asset owners or goals-scored-per-game incentive structure vs standing at the end of the season. Hired to score goals: The problem and opportunity with defence in asset management.
17:43
How to “bend” the convexity of a portfolio - and why. Returns come and go, but fees are permanent. How Warren Buffett’s “hedge fund bet” could have been won. To fix the compounding of a portfolio, fix the convexity of your book.
23:25
Understanding time averaging and the mathematics of compounding: Where traditional financial mathematics fail.
28:12
CASE STUDY: Who are Convexity Strategies’ clients?. How does Convexity work with them?. Why stick to the 60/40 model when zero/negative interest rates finished off its main two benefits?. The cost of holding fixed income.
33:26
A Value Investor in Volatility: How to achieve efficiency (cost to pay out) in long volatility strategies. Have the cheapest possible insurance when you don’t need it while getting the biggest payout when you do need it. The benefits of being based in Asia but with financial oppression more opportunities in developed world as well. How to set up insurance that grows over time instead of deteriorating.
38:55
Team. Being a price maker not a price taker.
41:50
Timing: The best time to correct convexity in your portfolio was yesterday. - Not only because of insurance, but to achieve better compounding on the return side. Greenspan established the new normal in financial markets - but investors still haven’t fully adapted.
47:08
Why also asset managers and hedge funds use Convex Strategies. The asset that provides the best risk mitigation (volatility) is the cheapest while fixed income, which has become the least efficient, is the most expensive ever.

Convex Strategies: How to abandon the 60/40 model to improve compounded returns by superior risk mitigation and greater exposure to growth assets

Jan 20 2020 1 Comment
Many end capital owners have had potentially superior compounded returns destroyed through concave/negatively convex investment activities run by wrongly incentivized fiduciaries, namely short term returns with fees linked to positively correlated returns and/or negatively skewed returns. The industry standard 60/40 (or 50/50) model delivers over-exposure to fixed income and ignores the fact that zero/negative interest rates have killed off the traditional benefits of running yield, portfolio and risk mitigation and negative correlation to perfo ...more

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