YouSaid · the spoken record

Basil Qunibi

lines on the record: 83
first: 2018-03-05
most recent: 2018-03-05
sittings or episodes: 1
sources: podcast

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“There are ways to make money and be a good person at the same time and never compromise on that. And so I think one example is if you're going to buy a healthcare company that at the end of the day is going to fire thousands of scientists and researchers and put them out of jobs and then raise the prices by 10,000 percent on people that are dying from some sort of rare disease knowing full well that people are going to die that try to avoid making money on things like that because life is short and when you're sitting in that rocking chair you don't want to make money off of stuff like that. There's plenty of other opportunities to have in the portfolio. So I'd say that that's carried a lot of weight for me over the years is just try to do the right thing and it's hard sometimes but that's important.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that you just have to be open to feedback a lot earlier in order for you to learn at a lower cost. By definition what happens most of the time is that people achieve certain success and it gets to their head and by definition when it gets to their head they're less open to what others have to say about what could be going wrong. And so what happens is you end up missing some of those initial signs. And then you fall really, really hard and you really hit your head. And that's when you learn the lesson. And my hope is to not fall on my head as much as I have in my life.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talent management systems in place in order to be able to develop these people and integrate them onboard them in the right way. I'm glad genuinely that we made these mistakes in the sense that that's how you learn. Do I wish I had known them earlier? Sure.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the sort of recurring themes in my life is failure and rejection. I think the first time probably was that experienced boarding school getting rejected by all those boarding schools when some of my friends had been accepted, when my parents expected that I would be accepted, sitting down my dad's office as a 14-year-old kid with 10 offer letters sort of that just came in from the mail, all of them thin obviously, and opening those up in my dad's office, that was such an important moment in my development. And then I think also similarly at Novis, I think when you look over our 10-year period, it's been a great success. But there have been periods where I felt like I was really failing. I think I've made some really big mistakes, and one of those mistakes was sort of the balance between talent recruitment, scaling that up, and talent management and making sure that you had the”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've been working with a sports psychologist on something called HRV training, which I think is really important. There's a good book on it called Coherence.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you become a bigger organization, now 100 people as a CEO, every day you get good news and bad news. And being able not to get overly excited or overly depressed about it, I think is important”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Definitely read a lot about psychology, and I think most people in our business at this point have read a lot about psychology, but I think that it's such an important area. And what's interesting is more recently I've really turned to physiology, and I've spent a lot of time in physiology. I've been on a two or three year journey just to understand my own physiology and to understand that ultimately your physiology is what leads to feelings, feelings lead to emotions. Emotions lead to thoughts. Thoughts lead to behaviors, and behaviors are what lead to results. And so when you think about looking at some of the great athletes that are out there, you see that they're really able to be cool, calm, and confident under pressure, and that has a tremendous amount of impact. That becomes really important because sort of your first day on the job, it's like you print business cards, you're like, oh my goodness, like huge high fives all around. And so your first days are really filled with a lot of good news because anything is good news.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“My dad used to always say to me when I was a kid shoot for the stars and my dad was really believed in me and I knew he believed in me but he was also tough on me and expected that I achieved my potential. And when your dad says that to you, it sort of sticks that he can accomplish anything. I'll give my mom some credit too. My dad told me to shoot for the stars, but my mom made me feel like I could actually get there.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Favorite sports moment. I mean, I think they're probably the top five involved Michael Jordan, a couple of those winning shots from Michael Jordan. Really special. And what's really interesting about Michael Jordan is that he struggled for a period of time to win a championship. And it took Level of adaptation on his playing style, in particular passing more for the bulls to win their first championship, which I just think is beautiful.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't want to get too proprietary. I think a lot of our clients are very sensitive about that sort of thing. I'll give an example that I think is relatively benign, but still very powerful in the sense that one of the things that I've seen more and more managers do is have a thoughtful position sizing framework that is sort of a multi-factor position sizing framework. For example, factoring in crowdedness as an actual score in how you size a position. And so one client that has maybe a five-factor model, crowdedness is one of them, and they've found that incredibly successful. So they still end up owning crowded stocks. But man, is the bar high to get to a seven or ten percent position on a crowded name? And I think that's had a tremendous impact since they implemented that on basically minimizing their max drawdown. So it's been really very special.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's such a well developed industry, though, from a sort of an omen for maybe where the hedge fund industry's heading, and I don't think it's a particularly great thing. Because if you look at the long-only world, the methods for performance evaluation are so well established and basically a Brinson-based attribution of looking at what is your allocation effect, your selection effect, and your interaction effect, and what is your active share and what is your active error and all these metrics to a certain extent pressure these long only managers to stay very, very close to the benchmark. And so it becomes really, really hard for your average long-only manager to generate a tremendous amount of active skill. We're very excited about it. We've got some amazing clients on the long-only side that are very committed to the process, and similar to that client back in 2009 that helped us to get into the private data business, we've got a couple that are helping us get into both the long-only business and getting”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Three to five years is really expanding our multi-asset class coverage. So most recently the biggest investment that we're making at Novus right now is in fixed income data, which is extremely expensive, extremely complex, but will allow us to do effectively the same exact framework on non-equity managers. And then Long Only is a big industry. I think they're struggling as well from an active management perspective. And so there's a big need within Long Only to look within and definitely something that we've started ramping up the client base on. So last year, I'd say we got a few clients. This year, we've gotten a few clients, and we anticipate that will be a big percentage of revenues in the coming years.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“The too big initiatives right now are really multi-asset class and long only. The reason why it's easier to do for equity managers is because pricing data is much more readily available. So for example, if you to calculate trading or even selection, you need really good pricing data. Now, what we've been doing over the last”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“We all know that. We all know that sharp ratio at the individual manager level doesn't matter as much as what the global sharp looks like, but that's a really hard thing to do for both the allocators and the managers. And so that's top of mind for me right now and something that I'm definitely spending a lot of time on trying to figure out a solution to that.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not human nature. And yeah, I think a big part of it is it's not human nature. And if there were some sort of psychological bias called activity bias, I think we all have it as evidenced by how many times we like to check our phone during lunch. But I think the other reason for it is the institutionalization of our industry has really led to managers not being able to express themselves as naturally as they normally would. And I give the analogy to my allocator clients. I say, look, if we could just all get along, if we could just let our managers run with twice as much of all, I think we'd probably get more than twice as much return. And”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“trade as much, should move around your exposures as much. You should focus on the following areas and invariably what it means is that managers should be doing less, not more. And that's been really, really hard for managers to do.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“That you can do to get better. Occasionally there are conclusions that are close to that, and that's when you know, wow, someone was able to independently come to these conclusions and adapt. But I think we'd all agree for any learning adaptive machine. Feedback is a necessary input in order to improve over time. And particularly important in the markets where I think the markets present probably one of the most difficult games of society. The rules are always changing. Regimes are always changing. And so it's really, really important for you to consider, not just change finally, but to consider adapting to that game. And so typically what we do is we bring a manager on board. We go through their historical trades since inception, and we come back with the analytics and we look at batting averages. We look at win-loss ratios. We help them understand their alpha generation. We run the Novus framework analytics. A lot of the conclusions are very objective. I mean, they're sort of like you should have less small positions.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over the last eight years. And that's a hard thing for a manager to digest because it doesn't really help for us to come back and say, hey, you're just awesome. There's really nothing”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I could tell you for sure that our allocator clients are becoming lower turnover. We're seeing the balance. I mean, that's beautiful, right? But not at fast enough of a pace, in my opinion. The manager business is really so exciting to me, because I find that managers a large percentage of managers are really world class athletes, some of the smartest folks out there, they're really driven, they're very entrepreneurial, they're extremely adaptive, they're very smart, there's a reason why they've got to where they got, it's because they're really good. There is a fair share of great marketers as well, but overall it's been super rewarding because anytime you work with a great athlete that wants to get better, it's a beautiful thing. And that business has evolved today into working with about a hundred managers to help them understand their own skill sets and their own fundamentals, to help them look into the mirror. And that's a really hard thing to do for a manager because the ultimate conclusion tends to be if you had done the following things, you would have generated an incremental seven hundred basis points a year.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's about a couple hundred clients, half allocators, half managers. It's actually a 50-50 revenue split at a 50-50 split between what we'd call partner clients, where we have a seat at the table with a clients in the sense that they'll invite us into the investment committee meetings. They'll invite us into the risk reviews, and we have about 20 people here that are in what we call our analytics team, and these are analytics experts that will read the tea leaves. And 50% of our clients are platform clients. And the platform clients that will integrate your data, and here's the platform, and we'll support you 100%, but basically you're running the platform internally, self-driven. What's interesting is we have about 4 trillion of aggregate AUM on the platform today. And so that gives you 3% of global AUM. I mean, that's a big number. So that gives you a lot of visibility into not only the position level transparency on the managers, but the balance and transaction behavior of the allocators.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you guys work with managers? And of course, the answer a starving entrepreneur should give is yes, of course, we do this all the time. And so we started working with managers and today they represent about 50% of the client base.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“started demanding full position level transparency, which, by the way, I think has been great because if you look at their turnover, it's gone way down. So to that prior point that I made, when you have more data and it's not just returns, that's a good thing for a manager. It's not a bad thing for a manager because now the thesis is diversified. It's not just returns will always be good. And so the mixture of those factors obviously developing something new with an exciting, with an existing client, and then getting an increase in transparency, we started first through the allocators to basically serve up the system that allowed them to analyze private longs and shorts. And then, interestingly, like 2010, managers started to come inbound. And they'd say, hey, we just met with XYZ pension or XYZ sovereign, and they were asking us about our batting average. We don't really know what our batting average is.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've always partnered with clients to do new stuff, and sometimes it's worked, sometimes it hasn't. 2009, twenty ten, we partnered with one of our allocator clients. It was actually a seed investor as well. And so they had a real need for daily position level data. The idea was to adapt our system from public data and exposure data to position level data. This ended up being an amazing partnership. And that we built a daily portfolio intelligence system that could take in information from an administrator, a custodian, a set of prime brokers, whatever, an accounting system, and effectively run a bunch of analytics on an even higher frequency than what we'd been accustomed to. And we built that system back in 2009, 2010, and at the same time an interesting phenomenon was happening, which is post the crisis in 2008, a lot of allocators felt like they needed to beef up the amount of transparency they were getting. And so particularly some of our big”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I know from our conversations that Nova started as a service to make allocators smarter. And over the years, some of the managers heard about it, mostly from their clients, and started hiring you for their own data set. Talk a little bit about that evolution.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Managers generated a lot of the value in small cap and microcap stocks as they move up the market cap spectrum is going to see that alpha deteriorate. And the first two, while they're about deterioration, the last one, liquidity deterioration, is about being in business. And it's the only fatal one of the three choices. And so for example, I've yet to see a manager that has experienced a significant liquidity duration, call it greater than sixty percent liquidity deterioration that has actually survived in the long term. Usually it's a cycle on the way up. You're not that liquid. You're taking in more capital. You're sort of reallocating capital to the names that you have in your portfolio because you're a long-term concentrated investor. The act of reallocating capital into those names pushes those names higher. So it's a classic positive feedback cycle. And that positive feedback cycle works on the way down too. And so as you get redemptions, you're forced to sell, you have more redemptions, you're forced.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Interesting to understand the skill sets because if a manager has tremendous position sizing skill, an increase in number of positions is going to effectively flatten that out. And by flattening it out, what's going to happen is usually the alpha from position sizing will deteriorate.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“But actually, from a fundamentals perspective, the right way to think about capacity from our perspective is to think about what journey a manager takes as AUM goes up. So we think that there are three paths that a manager can go in a forest, three separate roads that you can go. Sometimes you can pick more than one, but typically manager chooses one. And what I find really interesting, and this is coming from a place where I really want to help managers less from a place of criticism, is that the path that's chosen usually is an unconscious decision that a manager makes. But the first path with rising AUM is to increase number of positions. You see that across the board, that I'd say probably has decent market share in terms of the path. Now, this is why it's so important.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“And concentration is a pretty good performer too. But I think the thing that you have to watch out for with concentration in particular is liquidity. And in my experience the last 10 years analyzing managers, the key is really not where a manager is, it's where they're going. That matters a lot. So how do you determine where they're going? To me, the fundamentals really help you. And the fundamentals are all about today, not necessarily the past. But the best example I can give is the example of scale, which is something that a lot of folks spend a lot of time thinking about. Obviously, both allocators thinking about like when is a manager too big? And managers thinking about what their own capacity is. Now take away the marketing line that every manager has to have when they launch their fund, which is we're closing at five hundred or we're closing at seven hundred and actually ask them like, how did you come up with that number? And they usually give a pretty good answer.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“and separately on the short side, you know, I'd say if you have five years worth of data on a manager, you've got enough observations.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's actually a great question. What I will say is that the number of observations is really dependent on your number of positions at any given time. And it's also dependent on your turnover. So high conviction doesn't necessarily mean low turnover. Could have a manager twenty, thirty names at any given time, but turning those over a couple times a year. You could also have a situation where a manager has twenty positions for 10 years. And so what I would say is it's much, much harder to assess skill on a lower number of observations. By definition, if my holding period was ten years and I had 20 names, it's going to be really tough to analyze skill. You're just not going to get the data. I would also say that that's rare in our industry because of the probably because of the institutional imperative that has evolved over the last fifteen, twenty years, and that there's very few managers that can withstand running that structure. And so more often than not, when you're assessing skill alongside,”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Turn a little bit to conviction. The way you described assessing skill as requiring a large number of data points or big N. It seems like it would be the opposite in a high conviction portfolio. So you think about highly concentrated managers or activists where there are big position sizes, but probably not that many of them over time. How do you use the conviction metric?”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of them is Altaba for sure, which is, I think, the Yahoo spinout. I think you would probably just go on our website and find those stats. I'm not as much of an expert on it in sort of tracking those on a daily basis, but we publish that pretty widely. And so crowdedness, the way we think about crowdedness is not a bad thing. Actually, crowdedness is a factor outperforms over time. But it's extremely dangerous if you're not paying attention to it.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, it definitely is a measure of liquidity. I've joked around with some of my hedge fund clients. The managers all save, you could just tell me the stocks that are getting more crowded. That's great because you can make a lot of money that way. But the key is when it reverses. And I tell you there's three or four stocks right now that are in similar score to value.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“So yeah, it was valiant. And what we do is we come up with a benchmark between zero and one. One is you're the single most crowded stock in the Novus 5000 stock index. And zero is only basically one person owns it or no one owns it. Valiant was at one. Valiant had one hundred fifty or so hedge fund managers, and an aggregate they represented seven thousand percent of average daily volume. So seventy days worth of volume was represented by one hundred fifty managers. Now, really, is that bad? Not necessarily, but what it is is sort of a measure of future beta in some sort of bad event.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Four C's. Stan Ulchall, or my partner, gets a ton of credit for that. So let me just be clear about defining crowdedness. So, you know, conviction, for example, looks at the largest position sizes amongst hedge fund managers. But you look at each individual manager and you say, which names appear the most as greater than 5% positions? Concentration is really looking at the concentration of the shareholder base, which doesn't necessarily equate to crowdedness, but that's really shares outstanding. So you end up with a lot of activist type stuff in there. Consensus looks at how many managers are in an individual name, looks at popularity. And crowdedness to me is a measure of two things. It's a measure of how many managers are in the theater and how small are the exits. So the way that we actually define crowdedness is we look at how many managers are in individual name and what percent of total average daily volume do they represent.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“We started looking at overlap, and over time we've developed methodology for crowdedness, so we actually have four different forms of crowdedness that are published indices on our platform. So we have something called Novus Crowdedness Index. We have consensus, we have conviction, and we have concentration.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you have your hands on data, there are a lot of things you can study that allocators either are concerned about or pay attention to. One of those is this notion of crowdedness, which in some sense could be a derivative of what you talked about from looking at overlap. What have you seen in stocks that are crowded compared to other stocks and how would you define them?”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, everything that I've said up to this point, I have the data. It's at my fingertips. This is more of an opinion and more of just an observation that I've had is that I feel like it takes a while for the consistent long-term track record to catch up to the skill sets.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“A great question. I think the answer is ultimately yes, but by the time it does the opportunity is already gone. So what I mean by that is that this manager is extraordinary. They have $25 billion for a reason, but at $25 billion, it's going to be harder for them to do what they did between five hundred million and twenty million.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“How efficient do you think the market is for talent? So, for an example, even though the twenty five billion dollars of invested capital in this manager you described probably doesn't have their hands on the same analysis that you do, they're still managing $25 billion because the returns have justified it. If you look across managers, do you find that generally speaking, the capital flows to the managers with the best skill?”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Robust, right? And so that's how I think about persistence. And I think it actually is consistent with the notion of exposure management and capital allocation because you just don't have enough data points. We all know of managers that nail 2008, that a great job made the call, but they may have one, two, three, five calls within their lifetime relating exposure management or capital allocation. And so it's really tough to find persistence around that.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Terms of tea. So I think about number of observations as being a more important predictor of what will happen in the future than whether or not there's consistency in T. And I think that's a really important foundational frame. And so, for example, when I look at idea selection, I won't name any manager names, but I'll sort of give high level examples that are descriptive. There is a manager that exists today, runs about $25 billion. So I've narrowed down a little bit. And what I could tell you is they have generated close to ten percent annual security selection skill, just a thousand basis points per year. Now here's the interesting stat, is they have a thousand observations, and no one observation accounts for more than three percent of the total.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Persistence important concept. I have a general philosophy which is you sort of have to sometimes measure people based on the game that they're playing. So intentions matter. And so for example, if a manager's intention is to pick stocks and make most of their money picking stocks, well, they should be measured on stock picking skill, not on market timing skill. But in a similar vein, we often measure managers based on time. And so, for example, monthly returns is really the key metric in our industry. Take January's return as an example for a manager. What was that a function of? Was that a function of any conscious intention for the manager to generate a return in January? Not really. It's a function of ideas they came up with two years ago, ideas that came up six months ago, and ideas they came up with a month ago as a function of what the market did. It was a function what individual sectors did. And so when I think about persistence, I think about it in terms of n, not.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think that comes to a key question of the persistence of the metrics, because like performance, any of these metrics, stock selection, skill or capital allocation, it's all going to come from looking at past data. And I think what you're suggesting is if you can map how people generated the returns in the past with their environment. So those fundamentals, what was the liquidity profile that allowed them to elicit that return, that you start to draw some conclusions about the future?”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Assuming 20% of average daily volume has gone from ninety percent down to twenty percent. What's going to happen to that skill set? It's going to go away. And so now by understanding the fundamentals and how they map back to the skill sets, I can start to have a higher degree of accuracy in predicting what the future will look like from an alpha generation perspective.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“That actually security selection, position sizing, and trading is still strong, but the drawdown is largely a function of a bad market timing decision or a bad allocation decision, I might double down. But also what we didn't really talk about is the fundamentals that support those skill sets. For example, let's just say you and I ran an analysis on a manager. We found that they added two thirds of their alpha intramonth via trading. Now let me also introduce one additional data point, which is over the last six months, the percentage of the portfolio tradable in 30 days.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the challenge always is when a large portion of your thesis as an allocator, and I'm not saying this is the case for every allocator, but it is for some, when a large portion of your thesis is a function of what the manager's historical returns are. Well, by definition, if the returns turn bad, then your thesis turns bad. And so what ends up happening is you end up redeeming often at the worst possible time, or you end up contributing at the worst possible time to give you a statistic rolling three-year performance periods for hedge funds, correlation between different rolling three-year periods about negative 0.15. In other words, there's actually a little bit of mean reversion in there. By being able to introduce a new framework that helps allocators understand the underlying skill sets of managers, I think first and foremost, they can be more long-term oriented in understanding those are long-term skill sets and being able to attribute performance to different things. So, for example, if I'm an allocator and now I understand.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a great question. My hope in having developed this framework is really to help allocators become more long-term oriented in how they view managers and to give managers more rope.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cell decisions that you make between point A and Point B. And that one, I'd say, is sort of flat down for the majority of the population, but you can find pockets of persistence. We know, for example, some managers that add two thirds of their value from a return perspective intramonth. It's rare, but it's there. And so those last three skill sets, selection, sizing, and tactical training, to me are the intrinsic skill sets. You're in control of that, incredibly powerful.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have a group of 20 people start on January 1st and we could say here's a million bucks to each. You're forced to own the Dow Jones industrial average, all 30 stocks. But you have to own all 30 at every single point in time. But you can size them any way you want. We could have a huge dispersion in performance. And sizing is typically fully in your control. The only time it ceases to be in your control is when your capacity constrained. And now it's in the market's control. And so position sizing is critical. And just to put in perspective, I think the right measure for determining position sizing skill is looking at a placebo. What's the placebo? It's an equally weighted portfolio. And some managers generate something like nine hundred basis points a year of excess return to their equally weighted portfolio. That compounds over time in a big way. The final one is really tactical trading. So it's your incremental buy and sell.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source