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Kenneth Tropin

lines on the record: 68
first: 2022-08-12
most recent: 2022-08-12
sittings or episodes: 1
sources: podcast

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“Know there's a tough question. I mean, obviously, on one hand, our trading systems, our traders are so much more sophisticated and so much, it's more complicated. And, you know, we've learned a lot of lessons about managing risk. We've learned a lot of lessons about being opportunist in certain market cycles and merely conservative in other market cycles. And the only way to learn those lessons is through experience and making some mistakes and overcoming those mistakes and ultimately prevailing. So, you know, would have been great. Never have to learn through making mistakes, but that's the way the world works. And I think we've been successful because we've been intellectually honest with ourselves. When we make a mistake, we own it.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, the advice I would give is. Try and get a job at a really good macro fund that has some really bright people. And if you want to get ahead and you want to be successful, it's really simple. You show up before anyone else. You leave after everyone else. You never are screwing around on the internet. You're paying attention to everything that's happening. And trust me, if you have brains and creativity and innovation, there is no industry that rewards you better.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Know, I like spy novels. So the portrait of an unknown woman, David Silva, just came out. That's a great book. I've always loved the trilogy by Tolkien, something I read when I'm totally stressed out and I want to get into another world. It's a great place to go. And then I just devour all financial news and technology news and things like that”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“When I was at Dean Witter, I had a really tough boss named Charlie Fumafredo that ran asset management. Charlie Brooke, no nonsense. He had a Monday morning meeting at 8 a.m. every Monday and all of his division heads I was one of them had to be down there in the World Trade Center at eight o'clock. And man, I left my house at 6 because if you got to that office at 8.02, you waited for an hour till the meeting was over outside his office and then got to explain what you were doing one-on-one, which wasn't that much fun. So, you know, he was a great boss because he was no nonsense and tough as nails.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, I think about some of the people who really were just great mentors and great people to learn from Paul Jones comes to my mind. I met Paul about 40 years ago. And, you know, what an amazing person, philanthropist, gray trader, visionary for the world of finance. And was very fortunate to have him help me get Graham going back in 1994. He's been an insane role model, not just for me, but for a lot of people in finance.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, mostly the markets, you know, so obviously. Being in the position, a man of monitoring risk and performance and position taking of all these traders and trading systems, that's always front and center in my conscious. But there have been some really good shows that have come out that I've enjoyed. There's recently something I've been watching that's called Tehran. It's on Apple Plus. It's a pretty good show. Jeff Bridges is in a good show. I think it's on FX or something like that called The Old Man. That was a great show. So, you know, everyone needs a break from the markets once in a while. That's a couple of things I've been watching.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“We outgrew this space in Stanford. And so somebody called me and said, you know, this building in Rowate in Connecticut is available and it's pretty amazing. And I went up and I saw it. And it's this, you know, beautiful campus setting with about 100,000 square feet of office space. And it needed a lot of work, but it was really pretty cool. And so I thought, gee, what a better place, what a great place to try and attract the best people you could find to work in your fund from a quality of work life perspective. This was just an amazing place to run a hedge fund, to attract really talented people. You know, the success of a hedge fund is all about the people who work there. And having a great place to work is not unimportant. It looks like”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, no, back in 1994 when I started Graham, we moved into Stanford and we were in Stanford, Connecticut for some number of years. And that was a really good place for us to recruit and retain talent. And a lot of people enjoyed, as I did, the ability to have access to New York City. you know, also have good school systems and what have you in the suburbs of New York and in Connecticut. And a lot of hedge funds were in Connecticut.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, it's almost hard to fathom. I mean, think about all of Know the quantitative easing that's gone on and all Of the stimulus and all of the capital that there is, all the cash in the world, it's really huge. I think that is something that is a positive fundamental for equity prices. That cash has to get invested somewhere. Sometime somehow. So even if earnings aren't great, even if the economy continues to look slow, even if inflation is too high, I think there is an argument to be made that there's a lot of cash out there looking for a home and that cash is going to periodically be deployed into equities.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Exclusively invest in alternative assets, if you will. So there is going to be a continuing bid for beta because institutions need to invest a lot of capital. But will the economy continue to support ever higher valuations the way it did the last 10 years? I don't think we're there.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's really choppy price behavior I mean, Yeah, a little bit. I mean, you look at some of these rallies that had vicious bear market rallies this year, right? Where the market was up. Know 3% one day, and soon we were three percent the next day, and so on and so forth. And then the next week see exact opposite. I think that kind of erratic behavior, maybe not quite as volatile as that, is what I would expect. And I think there's a lot of money that needs to get deployed. And if I'm an investor, I'm an institution, I'm going to have so much in hedge funds, I'm going to have so much in private investing, but I need to be in liquid markets. I'm not going to adjust all.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I wouldn't go so far as to say much cheaper valuations, but I would say I think the risk is to the downside more than the upside.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Depending on what side of the policy you're on. But I think we're going to have a pretty thorny issue, which is that inflation and the things that need to happen for it to go down just are going to move slowly. And that's my base case. I could be wrong. We could really contract quicker. I mean, you mentioned that energy prices would come down some, you know, other commodity prices come down a lot. But let's also not forget crude oil is still about a dollar right now. And could it come down? Sure, but it hasn't come down that much. Are we going to get down to 80 cents or something like that? Maybe, but we're not there.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I'm sure he's not, and I'm sure the Democratic Party is not very happy going into a midterm election with really high inflation. I'm not sure for good or for bad politicians are really that involved in managing inflation, right? It's not what they do. The central banks really like to posture around it. But they'll take credit or blame accordingly as, you know.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“We're going to move in the right direction, but are we going to move as fast as the Fed would like? I don't think so. And that's why I think people who have this expectation that the Fed is going to be cutting rates sometime in the first or second quarter of next year, I'm not sure that's realistic”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Is secular trends, such as supply chain problems and what have you. And that's one of the reasons I think inflation is going to be around for a while is those secular trends are slow moving.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's a big factor. I think keep in mind your supply chain bottleneck problems. Are as persistent as ever. So, you know, our ability to do what you just said, right, go and start buying Porsches or something, it's not happening because you can't get them. So some of that stuff has to work itself out independent of the currency. But, you know, one of the things that's causing inflation.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I guess my question is, does it matter? I mean, if the dollar's going up because who cares? Well, because it's got a much higher interest rate than other currencies. I don't know if I call that it has a clean shirt. I think it's just it has favorable fundamentals. And people should buy things that have favorable fundamentals and not buy things that have lousy fundamentals.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“I was going to try capital. So until proven otherwise, I mean, Japan has committed to a maximum rate of 25 basis points while the US is marching on up 75 basis points today. So I think the dollar continues to intrigue me. It's moved a lot. We have to be cognizant of that. We've seen the dollar move 25% against the end, but could it go more? I think so. And could it go more against the euro? I think so.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Of dollars really interesting. I mean, the dollar's making a big move, and it continues to be a currency, right? that has positive carry versus its counterparts. So, you know, rates in the United States are still considerably higher than the rest of the world.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think it takes a couple years. I don't really think it happens in a let's face it, we're five, six months into the year, seven months into the year now. I mean, I don't think we're there. I think, you know, if we were to see Two years of poor performance in equities to buy the dip psychology would really erode a lot. But if you see seven months of poor equity performance, I'm not sure we're there.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“We obviously have to be concerned with it. And, you know, we would not be at all surprised to see the economy contract, the fed's rate hikes take effect beta slips, prices go down somewhat if you're talking about equities. And then at some point, buyers come back and invest because there's a perception. And if you think about, you know, the last decade or more, if you didn't buy the dips and equity prices, Are sort of punished by the market. And so there is a psychology that's been well trained into all investors, institutional and otherwise, that when equities go down a lot, you need to buy, shut your eyes and buy. And so I think we're going to continue to have that behavior occurring. And we'll just have to see how it plays out in terms of what does the market do, not just over the next quarter, but over the next several.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think we're pricing that yet. And I'd be a bit surprised if we don't, if we have continuing erosion of earnings, I think equity prices will follow that. Well, I'm not forecasting another 20% down, but I do think we could go down five or ten without”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, so this I mean, you know, there were equity hedge funds that were pretty levered. That had pretty highly concentrated, you know, growth bets and, you know, a lot of technology companies and so on. And a lot of those equities went down a lot. And a lot of those funds had to exit and a lot of investors exited some of those positions. And they've come back to Earth. And so I think some of the deleveraging. Has already occurred, and that's why the reaction function is not a severe, as you see, new earnings hit the”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think perhaps part of the explanation is that there was a deleveraging that occurred in the first quarter. And I think that is somewhat behind us so.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“This is just a little mean reverse. So I think of this as sort of a very normal correction after the years and years and years of unusually good performance for equities. And I'm not sure that a recession is completely priced in. I think a slowdown in the economy is somewhat priced in.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I don't know that that's all priced in there because think about it, we were up 28% last year, right? So it's a lot and we were down 20% this year.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“On the other hand, the bulk case is there's not a lot else to do with money. And so the sell offs are pretty well bought by institutional investors.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Things you can do. We do. I mean, it depends on a lot of our training systems are sort of momentum-based systems, but then we also have value-based quantitative models, and our traders are definitely looking at value. And I think, look, equities have come down a lot, but I think the question is what's next? And to me, do we test the lows? You know, we've bounced about 7% off the lows in the last few weeks. It would not surprise me as earning slowdown and, you know, the economy slows down and the effect of these rate hikes begins to kick in. Earnings should deteriorate. And the question is how much and how much will spending contract and things like that and what kind of demand destruction are we going to see? So I think equity is probably... Have some downside in them.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it really depends on what people do, right? I mean, I think, you know, some people can be very effective working remotely. And I think others are more effective when they collaborate. And I think it's easier to learn, right? When you're around people who are very bright and very innovative and you can hopefully piggyback some of that knowledge and experience and, you know, have it improve your knowledge base and your skill set. And so I'm a big fan of people working in offices to a significant degree. But I also understand that a lot of people really enjoy working remotely and I understand that. I mean, it's very efficient, right?”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“And most firms have similar policies. And I think that's reflective of employee having a lot of leverage over employers. And these policies will probably evolve, you know, because they all got birthed out of COVID and so on in an incredibly hot labor market. But I don't see drastic changes yet in how employees are thinking and what their work expectations are. I think we'll get there, but we're not there.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's a perception, not necessarily the reality. I think that will become the reality I don't think we're there. I don't think psychology changes so fast. So, I think employees here at Bloomberg, you have a three, you know, a remote work policy. Right. And free lunch. Perspective”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“And they're sticking to housing's really tight. Labor's still really, really tight. The employee still has the upper hand, you know, as relates to that.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. So They're going to need to see inflation contract quite a bit. And it will contract from the very high levels it's at now, but will it go down to their target? I'm not sure.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm waiting and see. I mean, I think we need to see inflation get a lot closer to the Fed's target. And I don't see inflation coming down as rapidly as the market is pricing in Fed cuts.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“We got that really bad inflation print a few weeks ago. And then. We've gotten some weaker data since. And so I think people Have priced in 50 basis points on the next hike. Maybe Hutson 2023. That's the thing their pricing and also cuts in 23, maybe, maybe not. You're not in the”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“It'll all be good January 1. It'll all go away. Exactly my point. So there are secular issues that are causing inflation that I believe the Fed really can't do that much about. And I think the problem that inflation causes for central banks are not going away so quickly. So I think this year may be unusually good for macro, but I think the upcoming several years are going to be also pretty interesting for what we do.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so the question, of course, is I expect there to be plenty of volatility next year. Will it be as volatile as 22? Maybe not, but will it be volatile enough? It to be fertile for what we do and constructive for what we do. And I think the answer to that is yes, I'm cautiously optimistic that will be the case. And I say that because I think of some of the problems that the Fed is trying to manage through and central banks in Europe are trying to manage through, these problems I don't see ending when we flip the calendar on 23. The supply chain bottlenecks going to end”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Correct, and just be patient and stay with it. We certainly did that on a portion of what we look at as our risk budget. But we're much happier. We're going to be more profitable. There's going to be more interest in environment when you're not looking at one asset class and that's the only game in town, but rather there's something to do in foreign exchange or something to do in rates or something to do in commodities or something to do in credit. All of these asset classes now are moving and moving a lot.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, for sure, definitely. I mean, we were able to generate on average returns last year a positive year. But there's way more to do this year And, you know, last year, if you were going to have a good year, you had to be essentially long beta. And we like the beginning.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. And so you've had great moves in a lot of markets. And what I'm excited about is I don't see that changing into a quiet moment anytime soon.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Moves that I've seen in a long time, like 20 years. I mean, we We've had a move in dollar yen, 25%. We haven't seen that in a long time. So that makes her”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so here's the thing. If they're telling us they're going to do nothing. That's not so helpful. If they're telling us that they're going to be moving interest rates a lot and they're not just going to do this at one meeting, but over some series of meetings for the next year or something, then there's a lot to work with in terms of the markets. They're going to move a lot. They're going to overreact. They're going to give us trading opportunities both on the long and short side. And so when I say the markets are more interesting than they've been for a really long time, it's for a variety of reasons. Markets are moving. We've got central banks all over the world starting to move. We've got equity prices moving a lot. There's a big realization of PEs to lower levels, right? As earnings start to decline and erode. You've got commodity prices that went through the roof in the first third of this year because of supply chain issues, the Ukraine war and so on. And then you've got the dollar making one of the biggest.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. You know, for us, it's nowhere near as productive an environment if asset classes are really quiet. If you think about interest rates as an example, we know today is a Fed meeting, but think about that Germany didn't raise rates for 10 years. Until recently, right So, just practically speaking, there's going to be less to do if you're trading German interest rates and the central bank's not moving them for 10 years. Now rates are moving and they're moving a lot. If you think about the US, the central bank started giving us something they never used to do, which was forward guidance. Shane, not only are we not changing rates today, but we're telling you we're not going to change rates for the foreseeable future.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, you know, because we're a macro oriented fund, what we're really concerned with is what's happening with interest rates, what's happening with foreign exchange, what's happening with commodity prices, and what's happening with equity prices. And all of those four sectors have been moving a lot. And so that's a really fertile constructive environment for us to try and generate returns.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's really an absolute return business. And, you know, we are trying to have our traders generate, you know, call it high single digits, low double digit returns with relatively moderate volatility. So annual volatility of 4% or something like that. And that's a pretty good ballpark idea of the parameters that we ask traders to live within. And that's a pretty comfortable place for our clients.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's a factor for sure. It's not the only one, right? Like liquidity can change. Sure. And that is something that can bite you when something that was relevantly liquid and easy to get in and out of becomes illiquid. And we've seen that in some of the situations you described earlier of funds having problems. And so one of the things we really scrutinize as risk managers is what's happening with liquidity. How is it changing? And is there any adverse behavior as relates to liquidity that we should be very careful and thoughtful about?”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, I think that it kind of speaks to who is Graham or a conservative firm. We've been doing this for 29 years. I've been involved in the markets for over 40. You learn a lot over that amount of time that you can't be in a hurry to try and make a profit. You've got to just be a patient investor. You got to be an opportunistic investor. And if you manage conservatively your business, I like the odds of you finding the moments when it's good for what you do and capitalizing on it.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“And invest in trading. But the question is how much? And we're just very process driven in how we look at risk, how we analyze it. And we've learned that we just have to make some hard decisions fairly quickly at certain moments. And we've had moments where we've had traders lose more than we would have liked to have lost. We've had trading systems that have had bad cycles, but we have prevailed over 29 years because in general, we avoid some really bad experiences that sort of, as you alluded to, we try not to let that happen to us or our clients.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, it always gives you religion about managing risk, right? I mean, at the end of the day, it's awfully important to make money for our clients and on our proprietary capital for ourselves. But the only way you're going to do that is by managing the downside. And so we're just really conservative in our risk policies. We're not so conservative that there's no breathing room to make money because if you're not willing to lose some money, you can't make any money. I mean, it's the age-old thing.”
2022-08-12 · Masters in Business · Kenneth Tropin on Quantitative Hedge Fund Strategies · IDENTIFIED FROM THE TRANSCRIPT · source