YouSaid · the spoken record

John Chisholm

lines on the record: 84
first: 2019-03-08
most recent: 2019-03-08
sittings or episodes: 1
sources: podcast

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“I think there's no question that the machine learning and big data, artificial intelligence, those are early days, right? Those things are starting to impact investors and how people invest, but we're still in the early days of that in quant, let alone in finance in general. And there's a lot more to come. But I would say things have changed a lot since the 80s and 90s. The sophistication, not so much big data, but just any kind of data now is a lot more available. Than it was then. So we have a lot more information, and quants can do things today that they couldn't do 20 years ago. Fundamental investors could maybe do them for a small group of companies. Quants couldn't. Today, we can look at all these. We have industry-specific information about lots of companies that we just didn't have access to 20 years ago.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's really a little bit of the reset idea. So there's definitely a pattern that differs a little bit. The rate of decline in some of these things accelerated during the financial crisis, immediately after the financial crisis. And the payoff to value is the biggest one where it's clearly been the worst 10-year period for value globally post GFC that we've seen in the long-term history, whether it's the US history or longer history. That's different. That all being said, a lot of the factors, it's an average thing, right? There's some signals that still work today, not much worse than they work 10 years ago, but the average signal, the payoff decrease is a little bit every year.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Misprices have changed a lot. So if we take any particular signal that we've used 10 years ago and we look at the payoff to that signal today, it's lower today, right? So typically whether it's inefficiencies being squeezed out of the market, it's arbitrage by different types of investors, whatever it is, typically the payoff to these characteristics decreases over time. So as a result, we're, in a way, we're on a treadmill. We need to keep on finding new ideas to replace the old ideas that aren't working as well anymore.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Vice versa. One of us can be doing a meeting with some of our clients. Another one can be running internal meetings. So it really helps us, I think, do a more effective job of managing the firm to have the structure we have.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“To Ross getting one answer and then coming to me and getting a different answer And we thought, given the fact that we, in fact, do have highly lined visions, we do have areas of expertise that are complementary to each other. We thought this is something that not only could we pull it off, but it would actually be beneficial for Acadian. So we're now a little over a year into the role. We think we're managing firm effectively. We're getting feedback from our team that that's the case. And I think it's working extremely well so far. What we typically do is issue comes up, we will discuss it together. We'll figure out where are we, what are we looking to do. And there are times when it's an area Ross has a lot of expertise in defer to him more. There's times when it's an area I've got a lot of expertise in defer to me more. It's great when we do need to be in two places at once, right? He can be in Tokyo and I can be in Boston or”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And we both shared our views on what's our vision for Acadian, where do we want the firm to go, what would we like to do differently with our executive committee? It turned out we were very well aligned in terms of where we wanted Acadian to go. So when we looked at sort of are there situations, I have a lot of respect for Ross, my current COCO, he has, I think, a lot of respect for me. He comes from a marketing client service background. I come from the investment background. And we both wanted each other to remain at the firm, thought about how can we do that. And we looked at examples where there had been co-CO structures in the past at other firms. The ones that worked relatively well, and there are some. Generally, you had COCOs with highly aligned visions and that were able to work together to provide a single voice to the firm, right? So you don't want somebody coming.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, absolutely. Let me do that because it is a great question. We went through a succession process. Our former CEO was stepping down, was retiring from the CEO role. And so myself and one of my colleagues, Ross Dowd, were internal candidates for the role. We have a selection process where we had an equivalent of executive committee. Essentially, you can think of it as eight individuals running the firm, making that decision.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“No. So I'm still interested. I still go to investment policy committee meetings. But if you're taking on a new role and you've picked someone to succeed you in your job, you really need to give them the ability to run that function. We've got a great successor, my successor, Brendan Bradley is our CIO, started last year as CIO. He's been with Acadian for a long time. And got complete confidence in his ability to manage the investment function. I still participate in some of the meetings and I'm interested in the research and I talk to lots of the investment professionals. It's part of my job as CEO is being in touch. What does an investment firm do? We invest for our clients. So it's still important. But Brennan is managing and leading the investment team.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“If we found the right partner, I think we'd be very excited about doing something in China. We're certainly doing some work there. We've had some people not fully-time based there, but spending a lot of time in the market. But that's something that remains to be seen, whether we'll find the right opportunity to really be a player there.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Singapore is we're serving right now we're serving Asia, ex Japan out of Singapore. But China is liberalizing and there's plenty of non-local managers now setting up shop to manage money for Chinese institutions in China. The challenge is in China you need some scale, you need a partner because you can't touch the retail market without a local partner and there's only really four big institutions that you've got that are like sort of the equivalent of a cowper's, for example. So that market, the institutional market is very narrow and the rest of the market, the retail market, you need to partner.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“No, the government's actually moving to liberalize, so it had been very difficult for a non local investor. To invest in Chinese assets and to manage money for Chinese institutions, we do manage money for Hong Kong clients, but that's sort of still a separate regulatory structure.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, there's a lot of variation, but a lot of Europe, you know, like the UK, for example, you've got public pension plans just like in the US, you've got state of California calpers and calsters. Well, in UK, you've got local authority pension plans. And you can sort of think of them as the equivalent of public plans here in the US You've got large companies based in the UK that have private pension plans. So there is some state provision. But again, just like in the US, you have Social Security, but that doesn't exclude all these other types of pension plans.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So right now our mix is probably 70, 30 US, non US. We, from a business perspective, as a firm, you want to be diversified. So having a fair amount of non-U.S. exposure with our clients is something we strive for. We think there's a lot of great growth opportunities in terms of just the growth of pension markets, of institutional investor markets in Asia, for example. There's still growth in Australia, in Europe as well. There's pockets. A few years ago, Germany really didn't have defined benefit pension plans, slowly evolving a little bit. So there's definitely opportunities.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I think Frankfurt's got the economic in many ways the commercial center of Europe. A lot of people don't love Frankfurt because I live near Frankfurt for a bunch of years. It's not always, it doesn't have the cultural reputation that Paris does, for example. That being said, it's a very comfortable city to live in. So I think Frankfurt will do well. That all being said, if we did something with another office, we're just basically opening up an office to meet the regulatory requirements. We'd still keep London. That would still be a major center for portfolio management for client service team.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We've got clients probably 30, 35 countries, but really the coverage of Singapore, Sydney, Tokyo, London, we are thinking because of Brexit, we may need to open an office in Dublin, perhaps Amsterdam, but there's enough uncertainty there that we haven't actually pulled the trigger yet.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I was at the game first time I've ever gone. You don't know how long the Patriots, you know, this might be their last Super Bowl in a while. Yeah, I've heard that before. Good idea to go.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And there may be times when you want to hold on to something that's become less attractive because it might be expensive to trade out of it and it hasn't fallen that far. So it's important to be smart about how you use these factors. And I'd say one of the key things we do is we worry a lot about the engineering of our process. How do you put these factors together? How do you minimize the slippage, the transaction costs while still getting exposure to the underlying factor in the portfolio?”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Portfolio construction can be a lot better than what people do when they're doing. What people talk about factor investing, if you look at a typical factor, It's not built in a very efficient way. It's more costly to investors in ways that the investors can't see, things like how they trade the portfolio. So if they simply take a rank order of companies based on some factor and they rebalance, they buy some of the most attractive ones that have just gotten into that list and sell some of the ones that have fallen out. That can be a lot of turnover.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“There's some periods if you built a portfolio that has the most attractive, whatever it is, 10% of, let's say, U.S. momentum stocks and then the least attractive were shorts, or you just went long, the most attractive 10%. There are some periods where your portfolio beta, your sensitivity to market movements might be two. So you might have a huge amount of volatility in the portfolio. And there's other times when your sensitivity to market movements might be very low, might be a beta of 0.5. Why does that matter? It impacts how you can control risk. If you're doing these single factor portfolios, for example, unless you're very careful about how you build them, you are likely to take on all kinds of unexpected risks in the construction of those portfolios. With a multi-factor approach, you're not beholden to any one factor. You've got all these different characteristics you can emphasize in the portfolio, and you can trade them off, and it allows you to manage risk better.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“No, it's a great question. And in some ways, our approach is very much like factor investing. In other words, we consider these different signals. We consider them to be types of factors. What's different is that we integrate the factors. So, for example, let's suppose you just bent on momentum factor by itself.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Almost negligible. But if I'm trading a less liquid company that may be more efficiently priced than the return opportunity may be much greater, but I need to now account for what's it going to cost to get in in the position and what's it going to cost to get out of the position someday.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you implement that in a portfolio? So ultimately, I'm going to hold stocks in a portfolio. I'll hold Amazon or I won't. I'll hold PG&E or I won't. What's my weight going to be? Hopefully it'll be less 10 years. Hopefully high on Amazon, lower zero on P. But the idea is you've got to then turn those expected returns that you're getting from the signal generation part of your process into portfolio positions. At Acadian, we use a pretty quantitative approach to do that as well. We use what's called an optimizer that basically trades off the return expectations we come up with from the signals. Into and maps those into portfolio positions by trading those off against transaction costs. So if I'm trading, again, Amazon, Samsung, a big liquid company, transaction costs are probably going to be pretty low.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And so now, even if value does badly, maybe momentum and quality and these other things do well enough to allow you to still outperform, which is always the goal for us and for our clients. And so that's sort of the genesis of signals. It's just there are different types of characteristics that we use to help predict company returns. And we then combine them. So when you say signal consumption, a couple of pieces of that. One is how do you combine these things, right? Is the payoff to value the same as the payoff to quality? Well, probably not. So you have to figure out what do I expect to get if I'm looking at it. Does it differ by the type of company I'm looking at? Is a tech company, maybe it has different drivers of return than a utility? And so I have to mix the weight on those signals depending on what kind of company I'm evaluating. And so that's part of consumption. And the second part of consumption is...”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“And maybe that's a signal that on average has some payoff associated with it for companies in many industries. So now I've got value and I've got this. Let's say a thing people talk about a lot in markets is momentum. So I've got momentum. Companies have good momentum. They've been performing, they've been outperforming their peers for the last six to 12 months. Maybe that's indicative that on average in the future they're likely to outperform for the next, say, one to three months. I want to wrap that in. So you combine all these different signals and you've got what you historically people call a multi-factor model.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So, how do you get around that? So, let's say you believe on average value is going to outperform. Like some people might not believe that, but let's say I do. I want value in my portfolio, but I don't want to underperform for 10 years in a row. What can I do? I can take other characteristics that I believe are also predictive of return and combine those with value. So I might say, for example, quality measures, right? I want companies that are well managed. How do you define well-managed? Well, a dozens of definitions, but let's say one definition is inventory turnover. Do you have companies that turn over their inventory more frequently than companies in the same industry?”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. Let me start with the signal generation part because that's maybe the part that'll be easiest for people to start with. The basic idea is there's different characteristics companies have. Those characteristics can be on average predictive of returns. So for example, one characteristic is how expensive does a company look on whatever metric PE ratio, right? So you've got a company that has a P ratio of eight and one that has a P ratio of 40. If that's all you knew about those companies, which one would you want to own? If you look the last 50 or 60 years globally, you'd say I want to own the PE8 company. Right, on average, it's going to do better. The problem with that is you could have a 10-year stretch where the PE40 company kills the PE company like we've just had. Value has not gone well. What would you rather own, right? The last 10 years would you rather own Amazon or would you rather own PG&E, right? I mean, so...”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's two parts to it. One is what's under our control, what we can do. We can build portfolios that are active in the sense that they are very different. They look different from the benchmark. They have higher levels of tracking. They have high active share. The other part of that isn't the client's job. So if the client hires 20 managers like that, they're still getting close to back to an index.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Describe us as active. So most of what we're doing is highly active, potentially high tracking error against a benchmark. We have the flexibility so we can build low tracking error strategies. This ties into this concept of capacity. How much money can you manage and still expect to add the value your clients are looking for? And typically the more money you manage, the harder it is to add value. So at levels of active risk, lower expected value added, you could manage more money. There's some clients who are happy hiring managers for that. They're also usually happy paying lower fees. So you really have to trade off both from a perspective of adding value and from a perspective of running a business. Where do you want to be? Most of our strategy is highly active, but we have some that are shading more towards enhanced index.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“There wasn't any big data. There was little data. There were statistics. So what's the average payoff to value? And how do we build a portfolio that captures that payoff? Very simple quantitative tools that we used back in the middle 80s.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“We're a quantitative manager. We were all my background, aerospace engineering, all quantitative, Gary's background, Gary had gotten a PhD from MIT. So we were all very quantitative, but Quant at the time was not as sophisticated as what today is, right? There wasn't any machine learning”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the State Street job was also a part-time, that was also while I was at school working for them for like, there was some time off in January and then the spring semester, I worked for them as a potential employer. But in the end, Gary's goal was to launch an asset management firm, myself, and we had another colleague, Churchill Franklin, and another colleague Ron Frasier. They all came aboard, we all came together about the same time around 1987 when I graduated. And so we launched Acadian as an active money manager at that point.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Headed a guidance system. So I worked there full time and I got a part time job like sort of after hours job working with a fellow named Gary Bergstrom who was later one of my co-founders at Acadian. He'd been a Portfolio manager at Putnam and in the 70s, and then he left sort of off on his own consulting for money managers, consulted at the time as big project when I was working with him was for State Street, later State Street global advisors. And we helped build and design their first international index fund. And then later on, some international active strategies. So that was sort of a part-time job. I went back to, that made me decide, that was more interesting than the aerospace stuff I was doing at the time. That made me decide to go back.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to be an aspiring rocket scientist, exactly. And so I got my undergraduate degree, but I found my senior year, I'd gotten really interested in investing, and I was spending a lot of time mostly just reading about investing, whatever it was, journal, business publications, journals. And when I decided, okay, what do I want to do now? I thought, well, I probably want to go back to grad school. Do I want to do finance, investing business, or do I want to do aerospace? And I had had an opportunity to apply to several different programs, so I had both. I had a finance opportunity and an aerospace opportunity. And I thought, why don't I try to test both out? I'll get a full-time job here in Boston area. The only place, there's not a lot of airspace jobs in Boston. Draper Labs is one that works on guidance systems. So if you've got a satellite or a missile, you try to figure out where's it going to go, how does it get there?”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“When I went to college, my passion, what I was excited about was really building or designing spaceships. This was in the early 80s. So you were over.”
2019-03-08 · Masters in Business · Acadian’s John Chisholm Discusses Investments · IDENTIFIED FROM THE TRANSCRIPT · source