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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“What are the Well, the first one is sort of the bread and butter, idea selection, stock picking, security selection, whatever you want to call it. And it depends how you measure it, but I think if you're being objective about it, a manager picks a security. It's like picking a marble from a marble jar. Now you can define the marble jar any way you want, but that's a universe of similar marbles. I think a good approach is to, you know, if you picked a large cap tech stock, well, you picked it from a marble jar with large cap tech stocks. You can apply a geographic frame to it. You can apply a market capitalization frame to it. But irrespective of what frame you choose, at the end of the day you are selecting something from some sort of universe. And so we can measure that. And we found an incredible amount of persistence on idea selection. The fourth is position sizing. So it's once you select that marble, how big do you make it within your portfolio? The perfect example I always like to give is we could”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“are intrinsic. They are a function of what you are doing. You are in control of those things. And so as a function of that, I think the next three we have found persistence, beautiful level of persistence. It gives me the faith based on data that there is a tremendous amount of alpha in the hedge fund industry.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the second is really capital allocation. And it really depends on what kind of manager you're talking about. But if it's an equity long short manager, it's really how you allocate it by sector, maybe geography, maybe market cap. If it's a event-driven manager, it might be capital allocation by asset class. Where are you within the capital structure? But generally speaking, if we just focus on the equity long short space for a minute, that's also a detractive activity because, again, it tends to be performance chasing. There tends to be a bandwagon effect associated with it. People tend to have more money in tech when tech is hot and less money in financials when financials not. And so I'd say the first two exposure management capital allocation are extrinsic skill sets. And what I mean by that is that those skill sets are really a function of the market, the outside.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because the likelihood of that persisting is very low. Similarly, I tend to be quite forgiving to managers who experience a significant amount of deterioration of return as a function of exposures. I'd say most folks are sort of in the middle consistently negative. It's like a silent drag on performance, and it's the kind of thing that compounds over time.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Particularly skeptical when I see a manager that has generated a significant amount of lifetime return based on exposure management.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is there a wide range? Meaning if you mapped out a distribution of outcomes just on exposure management, do they tend to clutter around losing a little bit of money? Or are there some people who are really, really bad at it and a few that are really good at it?”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. See, I think that it typically comes from, I think, a conflict between wanting to maximize your return and so having as much exposure as possible at any given time, and protecting the firm. Effectively, your sensitivity is not just a function of your fund's performance, it's a function of your firm's performance to short-term shocks. And so when you go back and you look at periods like August, September 2011, March, April 2013, or even 2014, you look at October 2015 through February 2016, what you find is managers go into these periods of time sort of at full capacity on exposures. When they really should be increasing it. And so it tends to be as you stated a reactive behavior and chasing. And as a function of that, it tends to be detractive.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“A surprisingly major component of people's return, particularly those that say they don't care about what the market does. Their bottom up stock pickers, but it's a surprising component”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, this ended up developing over a much longer period of time. We've developed a framework called Novus Framework, and it's a particularly simple framework, which basically says that managers have five degrees of freedom to generate alpha. The first one we call exposure management. So it's moving around gross and net. Very simple. Now what's interesting is we found over time by now having access to private data and we have about fifteen hundred houses. Exposure management on average detracts approximately two hundred basis points a year. The manager's performance”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Valuation of security's top positions. And some of the conclusions were really simple. If you did a look through analysis and allocator and you owned 5,000 equities, And your top 10 were nine percent. There was really very little chance that you were going to generate substantial alpha over the S&P, right? And so some of the conclusions were that simple. Other conclusions were your top position is 600 basis points because you have eight managers that all own the same name and that might not be a level of conviction that you have. So that was the initial product.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“identical to other managers, and the results were incredible because sometimes you'd find managers where fifty, sixty percent of the portfolio was the same as an allocator. I think one of the key things that every allocator tries to do is find uncorrelated streams of alpha. And if your managers were overlapping with each other, well, they weren't really uncorrelated. And then the final piece is something we called an aggregate or look through analysis. And so we do a look through aggregation of all the data to give a fund, a fund or an allocator, a sense of what does my portfolio look like on a look-through basis as if it were a single entity.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say that the analysis was probably split into three separate sections. The first and most important was really what we call the individual manager analysis. So it was a five pager on every single manager that looked at independent calculation of the manager's performance using public regulatory filings. A lot of assumptions in place, but that was very valuable for a lot of our clients just as an independent check on what the manager was reporting. We looked at the batting average, the win-loss ratio, the alpha generation of a manager. We looked at key statistics like liquidity, their market cap focus, so things like median market cap, number of positions, concentration, you know, top five, top ten, et cetera. And then we do a deep dive and break it down by sector, by market cap, by geography, and so forth. So that was the first main block. The second block was an overlap analysis. So we would take all the manager positions and we would overlay them on top of each other. We would calculate the percentage of each manager's portfolio that was identified.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“A small pitch. It was look, we're going to be the best analyzers of public regulatory filings. And we're going to go through all these public regulatory filings and we're going to deliver you an analysis on a quarterly basis that did the deepest diagnostic on public regulatory filings that you could find. And it was hard initially a lot of folks weren't really looking at public regulatory filings, so it wasn't even replacing a job that existed. It was sort of introducing a whole new job. A few people we found were doing it. And these were, in my humble opinion, particularly great investors, and they tended to be people that were on the margin, smaller fundifunds, folks in Virginia and Tennessee, places like that that were doing their own work and felt like the work that we were doing was better. So the initial product is we basically sold a package called the partner package. And the partner package was called 100 grand a year, and you got the best possible.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Dan was at Ivy as well. Stan was at quantitative superstar. There was an Excel problem that I couldn't solve. Stan was the man. And we became really good friends and we had sort of developed this vision together. We went back to the recruiter that had placed both of us at Ivy. I got named Michael Goodman Long Ridge partners somehow convinced Mike to lend us a couple offices at like a thousand bucks each in the back room. There was a room probably the size of the room that we're in right now, size of conference room and no air conditioning. I had to kind of leave the windows open. We had our servers in there. It got really hot. But that was the starting point of Novus and we packed that room. It's one point. I think there was like 12 people in that little room. But it was such an amazing experience.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“of the frustration combined with wanting to do something and wanting to do something big in life really led me to this vision at the time of creating the next generation investment platform for allocators. That was the vision. And so back in 2007, I'll probably quit in February or March, and then in April I started Novus. My partner, Stan Alchuller, who's concurrently Novus, heads up product and research is just a phenomenal individual. And I think that's really important. You're starting something to have the right partner. I'd spoken to Stan about this kind of early on and sort of in the spirit of a great leader, I said, Stan, you should quit first. So Stan quits. And then I quit.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“When I started Nova was about twenty four years old, I didn't have much money, had some like maybe fifty thousand dollars saved up. I thought it was a lot of money at the time. And Ivy had a couple offices. One was in Times Square. And the other office was out in Long Island, in Jericho. And so often I'd have to take the Long Island Railroad and spend a lot of time reading. Since college, I really have loved reading the stories of great entrepreneurs, great investors. I'd say that's taken a big amount of share of my reading time. Back then, I was reading direct from Dell by Michael Dell, made in America by Sam Walton. I was reading about some of the great market wizards. These are the types of things that I was reading as a young kid. And it was inspiring to me that one day I could start my own firm and be entrepreneurial and apply some of the lessons that I had learned. And so that was kind of the background of what was going through my head at the time.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was part of the frustration. I felt it should have been received well, felt objectively speaking, I felt like it would have helped us improve our returns, and I basically did what any great investor should do, which is take a bad bet and lever it up. And I started nervous.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this is more like 12, 13 years ago. It was received well in the sense that people were interested a lot of very smart people at Ivy. So to a certain extent, I think people were happy that I was doing it and they weren't. But at the same time, I think all human beings, you know, we receive information. It turns out that right now when I'm speaking from kind of the outer part of my brain, the smarter part of my brain. But when you speak, someone else doesn't receive it. Most people receive information, actually sort of the amygdala. I think that that's probably one of the things that I miss was people usually filter information very quickly as is this a threat? That's kind of step one. If it's interesting, you know, maybe it gets the smarter part of the brain. But if it's a threat, usually it sort of gets blocked or ignored. And so I think for the most part people found it to be often not consistent.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“or an opinion based on their most recent meeting with the manager, and saying XYZ manager is feeling really good right now. I could tell that they've got fire in their eyes. I could tell that they said they're seeing more value than ever. We asked them about their liquidity, and the manager said liquidity is incredible. We asked the manager about the opportunity set in large caps even though they've invested in small caps, and the manager said that they see the opportunity the same exact way. And that sort of this information or foundation that I had built armed me to say actually liquidity's deteriorated significantly over the last six months or their batting averages in larger cap securities are lower than their batting averages in small cap securities. And so maybe I felt confidence for me, maybe I was a nuisance for other people, but that was incredibly rewarding.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“What I saw is that I had an edge in being able to objectively measure manage or skill and fundamentals for the purpose of doing what ultimately every single investor does, which is forecasting the future. Ultimately, if you make an investment in a manager, you're forecasting how they will perform in the future. You're not investing in their historical track record. You're investing in their future track record. And so I felt like by having access to all this data and understanding the skill sets of managers, so for example, wasn't quite as sophisticated as this, but we started to look at things like batting averages, not when loss ratio is not yet. That came later. We looked at alpha generation bisector by market cap, things like that, and we looked at fundamentals. And I felt like the fundamentals were really important. It gave me the confidence to be able to sit down in a meeting with folks that were much more experienced than I was. Having them effectively give a hypothesis.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Didn't receive a lot of encouragement, I think, along the way. I was the new kid on the block. And so I was definitely the youngest research analyst there. I was given probably least amount of responsibility from a manager coverage perspective. I had two or three managers that I primarily covered and they were probably the smaller allocations.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sort of had an objective, and the objective was I wanted to understand the skill sets of managers and I wanted to understand their fundamentals.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“gross in that by sector market cap, maybe geography. And that was not necessarily being systematically analyzed, particularly when you got attribution. So you'd get long, short attribution by sector and so forth. And then finally, we actually got some full position level transparency. We'd get in the days of single prime, you'd get a printout from the prime broker of all the positions. And so I basically locked myself in a cube. I wasn't quite at the office level yet, but I locked myself in a cube and I spent maybe a year just deep diving on that data across all hundred and seventy managers.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, and they were statements of fact in the sense that a manager had to report, for example, on a thirteen F, assuming they had a hundred million dollars of investable assets at the time, had to report a list of all of their long positions. And you knew that fact, as of the following day, they had these positions, this market value in this quantity. If you had D's and G's, it would get even better or more frequent, and obviously that's expanded over time. So today, even on a daily basis in Europe, managers are required at a certain level to disclose all their short positions. And so I felt like that was a really valuable data set, and say 95% of the people that I interacted with didn't. That ended up getting confirmed in the early years of Novis. But the second data set was the monthly exposure reports or risk reports that we were getting from managers, and typically they would give you AUM, number of positions, top 10 positions, long short.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Foundationally, it started with data. When you're analyzing a company, you're going to go through the 10 Qs and the 10Ks and you're going to pull down the financials and you're going to start building models in Excel and things like that. With managers, there were really a few data sets that were available. Obviously returns. Everyone had access to returns. But there were three additional data sets that we had access to that we really weren't doing much with. The first one was public regulatory filings, 13 Fs, D's, Gs, threes, fours, fives, if you really want to expand the AMF in France, the CBM in Brazil, the Ministry of Finance in Japan.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it was certainly very important in the sense that much of it really centered around the individual portfolio manager, the quality of that portfolio manager, the quality of the team, the quality of the process, the edge, but it often was highly linked to the last twelve months performance. We'd anchor off of that. So if someone was up 50% in the last 12 months, they were a superstar and the line of questioning would move in that direction if they were down 20%, they were an idiot. And I didn't feel like that could possibly have been the case. Just my understanding of how things tend to mean invert, there's skill and luck involved. After reading the Market Wizards books and things like this of a stock operator, there's always luck involved in investing. And so the idea that we would fundamentally analyze the manager, sort of trying to understand the weight of the manager versus how many votes they got in the last year to obviously take a line buffet. That was really something.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“There was no equivalent really of an income statement balance sheet and cash flow. There was qualitative research of the manager, and I think that's probably not too different than the qualitative analysis of a management team within a publicly traded company”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so when you think about investing in a stock, and a lot of the type of managers that maybe you and I like fundamentally oriented guys that are going to dig deep into income statement balance sheet and cash flow and model out companies and really do the work, put a lot of financial work, how much do they weigh that versus how much do they weigh the stock price over last year? And I felt like in the allocator business, we weighed the stock price over last year very heavily.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“The markets. And so I'd sort of developed a framework by the time I graduated college of being a fundamentally oriented investor. And so it was a big surprise to me to see that fundamental analysis of investment managers wasn't something that was incorporated into the work that we were doing.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wasn't good enough. I wasn't on the right path. So it was a great learning experience. And I interviewed a lot of hedge funds. I didn't get a lot of offers. Not to say that being in a fundifund is kind of the second best choice, but I ended up interviewing in a fundifund called IV Asset Management, which at the time was about $9 billion fundifund. I was fortunate to get an offer at Ivy. And really excited about the idea of interviewing some of the smartest investors in the world. And obviously, you know that much better than I do. But as a young 20, I guess 22-year-old kid at the time was really exciting opportunity. And so I started at Ivy and quickly made a niche for myself in addition to being a research analyst. I was basically the quant guy. I had gone through a journey in my life where I read everything Buffett ever wrote. I even got into like technical analysis, read about Elliott wave theory, and I was just a consumer of information. I wanted to learn more and more about it.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Honestly, it was a little bit out of frustration. I started my career at Maryland after I graduated UVA and great training for two years on the credit side. Always wanted to be in the hedge fund industry. And one of the benefits of going to UVA is you had these phenomenal hedge fund managers that would come back and give back to the community. So John Griffin from Blue Ridge top, Behavioral Finance, Paul Turk, one of my favorite classes called financial trading. So I always had a lot of respect for the hedge fund industry and I wanted to be a part of it. So I went to Merrill and it was a great program, great training, but I realized pretty quickly that I wanted to be in the hedge fund industry. And so I naturally started to interview at hedge funds. And a similar experience actually to when I was in eighth grade, ninth grade, I had to go and check out all these boarding schools in the Northeast. I basically got rejected by all of them, Phillips Academy and Phillips Exeter and Deerfield and Hotchkiss and just the most amazing institutions, but it was a wake-up call for me.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who collectively see approximately $3.5 trillion of assets. You can learn more about the company and its service at novis dot com Our conversation starts with Basel's path to creating Novis and dives into the tools and 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.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source
“Increased sophistication in manager assessment is an important trend in the search for alpha. My conversations with Michael Mobison 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. My guest on today's show is Basil Kunibi, 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, Novas is the most well-known provider of tools to analyze investment manager performance, allowing allocators to play money ball by breaking down the attributes of manager skill.”
2018-03-05 · Capital Allocators · Basil Qunibi - Moneyball for Allocators (Capital Allocators, EP.42) · IDENTIFIED FROM THE TRANSCRIPT · source