YouSaid · the spoken record

Krishna Memani

lines on the record: 35
first: 2025-05-30
most recent: 2025-05-30
sittings or episodes: 1
sources: podcast

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“If you are an allocator, then it's kind of the performance is relative to your benchmark and you benchmark, that's how you are evaluated, and your benchmark is for most institutional portfolios. It's still very much MSCI Acqui for the equity component.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, again, you have to distinguish between the type of investor you are. So if you are an asset class investor, And your mandate is international investing. International may not have done well relative to domestic investing, but somebody allocated money to you and they're looking for you to do better than international benchmarks and your peers in doing the same thing. So there the career risk is really not direct. The career risk is in terms of flows. That is, if you had a global mandate or international mandate, so it's not.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Sounds like a good idea. I'll be again, as I said, schooled on whichever platform I kind of put that out. As an investor who has kind of stuck with this for almost 40 years. Yeah. It has been a challenge. And what I am doing is acknowledging that challenge. That is the lack of correlation that we were expecting from international equities. Hasn't worked out. That's it”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So that when the opportunity comes back, we are kind of thinking about it the right way rather than just sticking to the mantra that we have thought about for the last 30 years.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I've been a victim of this diversification because I constructed my portfolio and have posted this on Twitter for everyone to see, which is, you know, I have bought international small cap and I bought US small cap and I bought developing markets. So I have constructed a portfolio in a very diversified way. It has worked out fine, but it could have worked out a lot better for that. Am I doing something relative to that? I think the thinking with respect to that has to be about some valuation context in the environment. So if you are going after sticking with it for 30 years, if you were going to flip that switch. Doing it when the U.S. markets are the most expensive, probably isn't the right thing to do. But that doesn't take away us thinking about what the drivers of that when that is not the case.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“And if you look at the correlations of international equities relative to U.S. domestic equities, correlation is very, very high. So it's giving you some diversification benefit, but it is not giving you the level of diversification benefit that you think you are getting.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, one has double digit volatility, the other has five, six percent, and they react in different economic environments very, very differently”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that from a risk management perspective because of different volatility characteristics of the two instruments, that is still very much valid.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so let's kind of make sure that we are talking about the same diversification. So, you know, diversification between equities and bonds”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, that's a really good question. So, success of diversification from my mind has to be evaluated over a reasonably long period of time. So five, ten years, even 20, 30 years, I think those are the timeframes that you have to evaluate it on so that everything that has, you know, everything economically has had an opportunity to play itself out. And all we are talking about is the security specific volatility for individual securities that benefits from this diversification. So I think it has to be evaluated over a long period of time. And that's why when it hasn't really performed for as long period as it has not, despite their recent performance, the point I would make is let's kind of think about that a little bit and look at why that has been the case.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“In this case, absolutely, diversification worked. The question is, is the diversification or the relative performance of European markets and the rest of the world? Is it all concentrated in a very short period of time? What do I mean by that? I think if the expectation is that the U.S., because of tariffs and all sorts of policy responses, the things that drove the dollar and the flows into the US go away on a sustained basis. The trend will probably persist. I would posit that probably isn't, or at least that probably isn't a very realistic scenario at this point.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Confluence of dollar weakness tariffs. Those are really the things that have kind of had an impact on dollarized returns, if you will. If they remain sustainable, then it will be worthwhile looking into those markets. And the thesis would be proven. But we have also had episodes where we have had these types of moves. And pretty soon, in six months, a couple years you give back all of these spectacular relative returns.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“And a lot of these returns are dollar-driven as well. So a significant portion is really this thing. And a lot of it is because of the upcoming fiscal expansion in Germany. Okay, so for this to be sustainable in the long run, I think the economic picture for the continent. Has to change meaning, you know”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think the underlying economic environment has to change for that dynamic. Actually, underlying economic and industrial environment has to change dramatically for that to kind of play out. So, if you look at the world from a capitalization standpoint, what we are talking about is US on one side and Europe, Japan, India, China, Brazil, those are the really the places that we are talking about. Structurally, U.S. economy has done better. The dollar is the reserve currency. And the growth outlook over the last 10 years have been much better in the US than it has been. So flows coming into the US ought not to be a surprise in that environment. Okay. Right. And for flows to go the other way, basically the fiscal expansion in Europe has to get going in a massive way. And that fiscal expansion has to lead to companies and institutions that can take advantage of that fiscal expansion.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So every portfolio manager would tell you that their strategy is we look at ROIC That's what we focus on, and therefore that's how we kind of structure our portfolio to pick companies individually. Now, if they say that thing and they are kind of focused, and that's how I hired them, And instead, they focus on getting into, let's say, crowded trades because they are going up, then that's really a red flag from an allocation perspective.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so I think an active manager is kind of caught in a way, right? On the one hand, you have to outperform your peers. On the other, you have to outperform the benchmark. And that is a challenge, and that challenge leads to the sort of things that you are talking about. That is, well, they may do very well relative to the benchmark without crowding into the most crowded trades, but if their competitors are crowded in there and do much better than them. That's an issue for them. So that's their way of solving that particular challenge. I think the crowded trades have been there for a long period of time, but I think the way I would evaluate that is how much of portfolio manager's performance is really driven by the core views that they express as to what their edge is, right?”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Evaluating from a track record standpoint, let's say, or from a performance standpoint, let's say, does adding emerging markets to a globally diversified portfolio? Does that really add a lot of value to the process? Does just, let's say, develop market index, both US and Europe and perhaps Japan, can that deliver some level of correlation to the overall index without you being stuck in places like China for a long period of time or Brazil or Mexico for that matter? So I haven't found the solution. If I had found the solution, I would have implemented that in my personal portfolio. My point is we ought to think about that and we don't really think about it because diversification on a global basis has been the mantra and the accepted doctrine forever.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“If you think about it in statistical terms There is a way to diversify their tail risk. But what I'm saying is, we need to evaluate that and see or reevaluate that and see if there are some other techniques and methodologies that we can use where this doesn't become the only way for you to mitigate your overall risk in the portfolio.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“I think in the institutional world, as opposed to retail war. Yeah. I think diversification is still the matter. And again, to emphasize, it is the right thing to do. Why do you keep saying?”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“SP 500, on the other hand, for the large cap U.S. market is a very, very solid benchmark. I mean, there are peculiarities with respect to additions and taking out of the index, but I think that is to be expected in a dynamic market. And I think for the most part, it has worked out reasonably well.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's where benchmarks come in, and that's why we need benchmarks, because otherwise it'll be free for all. As an asset allocator, if my returns were 10%, let's say, I can always claim that I did a fabulous job and my benchmark outperformed by 1,000 basis points. So there is tyranny of benchmark, but this is a necessary tool that we need. I think a separate question is the extent of the kind of the diversification of the benchmarks. You talked about MSCI Acqui and even things like Russell 3000. So there are issues with diversification.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“The thinking in this world is always the benchmarks are terrible, but they are terrible, but better than anything else that we have So, I think there is a role for benchmarks, and benchmark providers are important participants in the market. And the market capitalization of companies like MSCI and ST Global kind of tell you as to how valuable that those franchises are. The way as an investor, you know, if you are an asset manager or if you are kind of an asset allocator, How you are doing has to be evaluated in some sort of a rigorous framework.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, Captain Geth financialization of the economy, and right now the drivers in the Indian equity market, at least for the last five years, really has been the domestic investors as opposed to foreign investors. So I think that is really from a flow standpoint. That is the difference”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think domestic flows relative to international flows are really very important in determining the state of the equity market. And the best example counterpoint to what you're talking about that I can give you is really India. It's India used to be a market that was supported entirely by foreign flows. And foreign flows, and when there was a panic in New York, all sorts of money would leave India and come here and the stock market would crater. Over the last, let's say, 10 years as the Indian economy took off and financialization and the savings And the equity market as opposed to land and property became the primary source of Savings and deployment of those savings. I think the characteristics”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“And that is absolutely true. I think the period from, let's say, 2010 onwards in the US is especially galling. And I think if I had to come up with a reason as to why that has kind of worked out the way it has worked out, is basically because of dollar-related global flows. That is, I think the profitability basically attracted a whole lot of things that were going to come to or a whole lot of flows that were going to come to the US because of the perceived strength of the dollar during that period. As I said before, growth was higher than interest rates in the US. So it was a natural kind of place for those flows to kind of arrive at.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“I was the messenger of this thing, and I kind of diversified my portfolio based on that thinking. The idea about portfolio construction with respect to diversification isn't That diversification is a bad thing. I think that's a right approach. I think given the history over the last 30, 40 years, we ought to think a bit more about are there other drivers rather than just simply believing in the historical track record and the volatility context of that historical track record.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think there's an element of that for sure that is international markets have done poorly relative to US markets. One anecdote here. I used to be the spokesperson for Oppenheimer funds with respect to globalize your thinking. In 2011, when the campaign came out. So”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“The length of time that it hasn't worked, and given the length of the magnitude of how it hasn't worked, I think it is worthwhile spending a little bit of research focus to analyze what the drivers were, as you say. And see if there are some other things that we can divine out of this 30 year episode.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there are several drivers. I think the kind of the tech supremacy of SP 500 is certainly one of them, the profitability of the tech franchise is another one. Low interest rates in the US where growth was higher than interest rates certainly was a factor in driving returns. And kind of the existence of private equity, which got multiples high. So there are a plethora of reasons as to why things haven't performed. And therefore, it is worthwhile spending, these are speculations on my part, but this is worthwhile spending a little bit of time figuring this out in a little bit more rigorous way than we have done so far because, you know, right now, again, if anybody puts up a notion that diversification is bad, they'll get schooled. But I think give...”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“So, again, let's just kind of narrow it down. When we are talking about this level of diversification, what we are talking about is US stocks not working or U.S. stocks doing better than international stocks. So that's what we are talking about.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“That people follow very religiously hasn't worked. So shouldn't we kind of think about that and try to delve into what are the drivers? And it opens up a new research field. Because I would argue that the overall research in financial kind of investing basically hasn't evolved a lot since the 90s. It's basically redoing the same papers with a little bit of changes here and there. But the core thinking Cap M relation. And I continue to do that. I have a very diversified portfolio and I will probably stick with it. But I think it is also fair to recognize that it hasn't worked and therefore we should look at it in a little bit more detail and kind of not take the mantra of diversification as religion, which is what it is right now.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so again, my argument isn't that diversification is a bad thing. I think from an economic principles, from financial principles, diversification is a good thing. And if you can find a way of mitigating your overall security specific risk, you are to do that. The point I'm trying to, I would like to make is the fact that it hasn't worked. And therefore, kind of relying on 30 years or 40 years or 100 years of history to come to some sort of investment principles.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it came from Cap M and William Sharp and that coderie of academicians who basically did the pioneering research in this field in the, let's say, 70s, 80s and early 90s.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Diversification thesis basically says that if you have security specific risks in individual securities, if you can find a way of diversifying that away, then that is something that you should do because it reduces your overall risk profile without sacrificing too much in return terms. So that's where the theory comes from. No, no, but who”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source
“Diversification is the biggest free lunch available in the investment world. And I think from a longer term perspective, that is absolutely true and probably something that we ought to think about. But as you mentioned, the results over the last, it's not just last 15, 20 years, the results over the last 30 years, 40 years have been very, very, very different than what you would have expected if you had gone down this path. Doesn't mean that the basic principle is invalidated. It's just simply means that you have to think about it and acknowledge the fact that it hasn't worked out according to plan.”
2025-05-30 · Odd Lots · Krishna Memani on Wall Street's Very Expensive "Free Lunch" · IDENTIFIED FROM THE TRANSCRIPT · source