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Maria Vassalou

lines on the record: 65
first: 2023-03-03
most recent: 2023-03-03
sittings or episodes: 1
sources: podcast

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“When I first got started, the world was different than it is now. I think what is important is to be cognizant of the fact that conditions change, the world changed, and we need to evolve with those conditions. So obviously I learned along the way, but I think what I know now was not necessarily applying 20 years ago and vice versa. So if there is a lesson for all of us to learn is that we need to keep evolving, we need to keep learning and we need to keep adapting to our environment.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I think they need to have both good technical skills, but also understand macros. So I think this combination used to be rare. I think it becomes more and more important to be able to combine STEM skills with more of the economic science and thinking that will help you understand the markets better.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Important time for a global world order and I think geopolitics will be really important and the leadership that world leaders will show now and in the coming months and years could shape our world in a profound way.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“In the old days, I was reading a lot of literature, and so my favorite book was Proust Remembrance of Times Past, which I read both in French and English and also various books by Dostoevsky, whom I like very much. But these days I read a lot about what's going on in the markets, the world, and I'm trying to think about those things. One of the last books I read was unrelated to that. It was Artist Therapy, which I found very interesting. And it's one of those topics where once you read the book, you think it makes a lot of sense. And you should have known this all along. But obviously I didn't before. And now some of the books that I have on my site and starting reading is 21 lessons for the 21st century by Yval Harari. And also leadership by Henry Kissinger. Because I think we are in a very”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“As I became more advanced in my career, I started meeting people who have been acting as mentors, certainly at Perella-Weinberg Partners, Joe Perella, was someone who spent a lot of time talking with me and I learned a lot from him, both about the profession and his experience. And I'm fascinated by the interest of my colleagues at Goldman Sachs to guide me through the farm, make my transition easier, mentor me. And I find this extremely impressive. I'm very grateful that they are willing to spend the time to do that. So I must say, not so many mentors earlier on in my career. But actually, more mentors later on.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I had the opportunity to meet a number of very interesting people through my career. And I can't say that I had mentors early on in my career, but I suddenly was around a very interesting and impressive people that I was able to observe and learn from them. In a way, because of my process, because of my path starting doing my PhD at London Business School, then coming to the US without having studied in the US, I was a little bit of an orphan when I came here. And so I didn't have an obvious mentor through the process. And perhaps that's one of the reasons why I try to find my path on my own. But over the years, I actually...”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Um, Well, one of the things say I used to do was go for long runs in Central Park. So that was one of the things that was keeping me sane during the lockdown. And otherwise, I watched all the usual shows and everybody was watching at that time on Netflix and Amazon and the various other streaming platforms.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“and I think it is an environment that favors active management. So stock picking will be a really important component, but there will also be a lot, as we are going through this deglobalization process and restructuring of supply chains, there will be opportunities across the board in different industries to capitalize on these changes in the economic structure of different countries. And some of these opportunities will manifest themselves in the public markets and some in the private markets. So the way we look at portfolios is holistically across private and public markets and really focus on the opportunities that may exist.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Suddenly, fixed income is more interesting now than it was in the past because real yields are positive. We are getting closer to peak rates. And so locking in some of these rates make sense. Credit will become an interesting area as we're going through this process. We expect default rates to rise a bit, but not at levels that we saw in previous crisis. But it's also interesting now because we need less leverage to achieve our return goals. And so in a way, cash is king again, whereas before it was not. So the way we look at portfolios, how we invest is different.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly, the reopening of China has a positive effect on global GDP. It will also potentially have a positive effect on inflation in the sense that the demand for commodities will increase as a result of China's reopening. The question is whether that will translate into more inflationary pressures that will see a backup in inflation in the goods markets or whether demand will have moderated enough in other places to keep”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Then they will give up part of their inflation fighting in order to stabilize the labor markets. If labor markets react more positively and we don't see a massive increase in unemployment, they're more likely to persist with their inflation fighting mandate.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that as inflation is coming down and stabilizes around the levels that you mentioned around 3.5%, the Fed will become much more attuned to its dual mandate. And start focusing on how the labor market is evolving. And I think that's obviously one of the factors that they're very focused on already. But at the moment, because the labor market is so tight, they're single-handedly focused on the inflation side of their mandate. Once inflation starts coming down and to the extent that unemployment starts rising, they will start balancing out the two sides of their mandate. And that's really where the policy will be determined. If an employment status rising rapidly”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“But since the pandemic, this process has reversed, and the share of labor is increasing again, which means that it compresses the share of real GDP that goes to capital. Now that makes it less attractive for capital to invest and obviously less profitable for them. And part of what the changing Fed policy is doing is redressing the balance of the shares between labor and capital in real GDP. So what we're likely to see is a decrease again of the share of real GDP that goes to labor. Which in the short run will be negative for risk assets, but in the medium to long run, it will actually increase the profitability of companies and also the incentive to invest.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“And so they will have to be very careful with how they message that in order not to damage the credibility of the Fed in the long run. In terms of the wages, it's interesting to see is also the evolution of the share of labor as a percentage of real GDP over time. And what you see is that the share of labor was much higher in the 90s and as globalization started expanding, the share of labor went down and obviously the share that would go to capital increased.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the Fed can help with certain things. They can't fix everything. And I think the factors that you pointed out suggest that it may be very difficult for them to go back to 2% under all these conditions. They can steadily go down to 3%, 4% of inflation. The question is whether They will be satisfied with that, and they will declare at that point that because of all this changing geopolitical and economic conditions, the 2% is no longer irrelevant and they will move their target, or whether they will insist on continuing to reach 2% and then the process over tighten and really damage the economy. There is a question of credibility of the Fed.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't see any reason for the Fed to cut this here. We are not seeing any loosening up of the labor markets, which means that the monetary policy hasn't really become restrictive enough to have an effect on the real economy in a profound way yet. Inflation continues to be elevated, still very far away from their target. The only case in my mind in which the Fed may cut rates is if we have some significant external shock That necessitates them to intervene in the markets. Something like what happened in the UK with the LDI crisis or God forbid some geopolitical event of great significance. In other cases, I don't expect them to cut.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Equity markets have been conditioned to always buy the dip and to really not fight the Fed in the sense of not fighting the Fed when the Fed kept doing QE and accommodating, increasing the monetary accommodation. But now they're doing the opposite. So right now not fighting the Fed means actually selling doesn't mean buying because the Fed wants to tighten financial conditions. The Fed wants to loosen up the labor market. So in fact what the market is doing is fighting the Fed. The bond market is doing better than the equity market. So I think what the two”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, one of the things I had said in another interview was that we had our year in January and now we should focus on alpha. But yeah, the January performance was largely driven by thin trading, positioning, shark covering, and also a number of very strong economic news. I think in a way the market is misinterpreting the Fed here because strong economic numbers, strong labor market data do not imply to me that we're going to have a soft landing, what it implies is that the Fed will have to go higher and therefore we're going to see a higher probability. Of recession going forward because the segment of the CPI where inflation is concentrated is in core services, ex-housing, and that's directly related to disposable income and to the labor market.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, housing is having some cooling effects, manifesting recently, but at the same time, we haven't really seen the housing rollover in the way that it did during the financial crisis. And that's because most US households have 30-year mortgages. They had the opportunity to refinance while the rates were at zero. And so they don't necessarily need to tap the mortgage markets right now. And others are really waiting for prices to come down before buying.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“No, it doesn't. And actually, you know, a lot of people were talking about being in a restrictive territory already in terms of the monetary policy. Most likely we're not at the restrictive territory yet because see how strong the labor market is.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. And the importance of risk management and downside risk control becomes even more important in this environment. You have to be very conscious of the potential for external shocks and constantly evaluate what the probability of these shocks to materialize is and how they will affect your portfolio. So it's a little bit of a different environment than the previous one where we were in a low volatility environment correlations were pretty stable and really the way to play that market was very different.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things we've been doing at Goldman Sachs and in my team is really to rethink our playbook. So what we are seeing now also means lower correlations across different markets. So there may be more opportunities for relative value trades or more opportunities for diversification. You need lower leverage than you used to need before. You have to lean on diversifying strategies and uncorrelated strategies. We think this is a great environment for alpha. It's a great environment for active management, but you cannot run the size of assets that we are running with just active management. And so...”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if it is a matter of easy versus hard environment. I would say that the investment approach has to be different.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's really hard for them to get back to 2%, and I'm not sure that 2% is the right target level anymore because of all the other factors we discuss, the deglobalization, all this segmentation in the markets that we are observing, the geopolitical developments, decarbonization, etc. I think all this developments are inflationary.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, we may actually go higher than that. I had said a few weeks ago that we may go up to 5.5% before we are done with the rate hikes. And again, I think what the Fed will do is it will continue hiking and then pause and depending on how inflation evolves there may have to do more. I think that inflation will come down to around 3 to 4 percent and then it's going to get very sticky.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“It could be the second half of 23, we could still have a scenario where the GDP for 23 is not negative, but we have started entering a recession. We don't expect the Fed to cut rates this year. We think that right now the market is pricing a terminal rate of around 0.5.3%.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if it's going to be short. I hope it's going to be shallow for the reasons we discussed that we are not getting into this environment with high leverage and high unemployment and household.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, we are in the recession camp. That's where we disagree with our colleagues at the GIR, but that's a healthy disagreement. We think that given where inflation is and where the forces of inflation are and given how stubborn inflation seems to be on the services sector housing, it's going to be almost impossible for this to be reduced without loosening up the labor market significantly. And if you loosen up the labor market significantly, you're likely to see negative GDP growth at some point. We don't expect it to be a deep recession because we are starting from good initial conditions. So, balance sheets are not overexpanded. Consumers are not over leveraged, and so on. But we do think that we are likely to see a recession eventually.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the multi-asset solutions, we are not in the camp of soft landing. That's where we disagree with our friends. You're in the”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“And we can tap on all the capabilities of Goldman Sachs across the firm and really service our investors using the 1GS approach.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“We can invest across sole asset classes, both in private and public markets. It depends very much on the mandates that we have. For each individual investor, we have different channels that we cluster the mandates, but effectively we can provide any solution that an investor may need.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“We had a rigorous discussion on the topic. Not everybody was on the same page, but we have a collaborative approach. So it was also part of my task to try to convince people that we had to moderate risk. And so eventually we did do that. But it's always good to have plurality of use and debate them because that's how we all become better at what we do.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. But by the fall of 2021, and particularly in November, I was convinced that we needed to start cutting risk in our portfolios because we had a period of the pandemic.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Those are easier to incorporate into the process because there are things that you can observe at higher frequencies and you can incorporate into the models through quantitative approaches. The hardest part is to incorporate the bigger picture and that's really where the qualitative overlay comes into play.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“We have a dual approach, so we certainly have a research process that is based on models that we have created and we keep evolving. But we also have a qualitative approach in investing. And that comes through the experience of our analysts and researchers on particular asset classes, but also in terms of our ability to think through the macro environment and the implications that they may have on the investment environment and the various asset classes. So one of the things that I do is to really try to think through all these developments that are happening and the effects that may have on the markets and on our investments.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“In the goods markets, there is this destabilization that we are observing in the geopolitical front that can significantly change also trade patterns, but it also affects alliances at the political level. We have changing demographics, we have the decarbonization process that it's also affecting investment production processes across the board. We also have the digitization process that has been going on for a long time, and it got accelerated with the pandemic. So there is a whole host of factors that affect the background. Of the environment in which we operate and how growth inflation is going to evolve over time. And at the same time, we have also a number of short-term drivers to the markets that we need to take into account.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“It's certainly a time when we need to rethink the way we approach investing. That's because now we are dealing with much higher volatility than we did in the past. We have instead of ample liquidity in the markets and accommodative monetary policy, we have a reversal of the monetary policy and actually withdrawal of accommodation. At the same time, we are going through tectonic changes in the world economic order. We're going through a deglobalization process where we see that actually onshoring becoming more and more a topic of discussion, there is fragmentation.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Focus on portfolio construction with good risk management framework and try to provide the right profile of risk adjusted returns for the particular needs of the investor, incorporating alpha in there, but not just focusing on the alpha component. And I think this is interesting in many respects. really fulfilling a big need of this institutional investors you're bringing together skills from the whole spectrum of the industry and you get to create the bespoke customized solutions so from for someone like me who started my career in academia and spent my research years thinking About the portfolio construction, asset allocation, macro asset pricing. And then I went into the hedge fund industry. This is an area that really straddles the whole spectrum of things that I have done and I think it's really where the future is.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, yes, we're looking for particular solutions, whether that's a liability, whether it's a completion of existing portfolio, whether it's a particular return target they have, whether there is a particular liquidity profile that they need to achieve. There are all kinds of needs that institutional investors have that they cannot satisfy by just investing in the hedge fund industry because the assets they manage are many times larger than what the hedge fund industry can absorb. At the same time, just being passive is not really the way to go. And so what I think is happening is the two areas are merging somewhere in the middle where really what the demand is, is for Creating holistic portfolios that incorporate asset classes from the whole spectrum of assets out there, whether it's in public markets or private markets,”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“They certainly create more intraday volatility. It's hard to say whether they maybe in some cases they make them more efficient. Maybe in some cases less efficient. But I think what is likely the case is that they create more intraday volatility.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so that means that the inflation is coming down and the markets will start rallying as soon as he would pronounce that, not because he was suggesting an inflation by and large is coming down, but he did say that in certain segments of the CPI we were observing disinflation, such as in the goods markets. And that could have been a case of AI-based algorithms that were utilizing words to really take advantage of developments in the markets. And the following day, the market will reverse the rally once people will digest what he actually said.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there is more intraday trading now than it used to be. So you have the passive investors and then you have a lot of intraday trading. And that's based on algos that are looking for short-term trends to capitalize. Some of them are AI based, so they may be looking for particular words, and then they will extrapolate from that. For instance, it was interesting to notice in the last Fed meeting Chair Powell used the word disinflation a few times.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“To take advantage of opportunities. Yes, but it's not very clear who the marginal investor is, or if they even exist. If they exist. And what I have noticed through the 15 years that I've been managing my own strategies is that the markets have become a little bit less efficient over time in the sense that they have become, you see longer deviations from fundamentals. Eventually they do correct, but you see longer deviations from fundamentals. Sometimes you see more intraday volatility in certain events, especially around announcements and so on. And so maybe this is attributable to an increased exposure to passive management. Maybe it's attributable to more noise traders. Used to call nice traders, which are effectively retail investors.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“That's Andrew's answer, I think, derives from the idea of the marginal investor, as we say in academia. So all you need is the marginal investor to rational.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“But there were two things. I mean, my strategies were always in the space of relative value across asset classes. So there was always some volatility to pick up. And so the strategies kept working. But by and large, in the overall industry, if you look at long short equity, there was very little within asset class volatility to pick up. And also you have a period that because of this extreme This concentration on passive investing is also problematic because passive investing works when the markets are efficient and the markets are efficient when there is enough trading happening for new information to be incorporated in the prices. If everybody is a passive investor, then you don't have this mechanism in place to incorporate information in prices right away to really benefit from them.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's actually the whole asset management business is changing. So we went from a period where hedge funds was really the hot area to be. And of course there are all these big hedge funds that were developed over time. But over time, as you know, there was this big shift or was passive investing. And so that was a big challenge for hedge funds. At the same time, we had all this decrease in volatility and financial repression because of the QE and all the extra liquidity that was in the markets that made trading in hedge funds much more difficult, if you like, in terms of providing Superior returns.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Being careful with risk management is very much risked, and even more than what I thought should have been happening at Soros. And so I spent the subsequent years trying to refine my models, make them much more smooth in terms of their return stream focus much more on risk management, downside risk hedging. And I think the models became better as a result.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. And now the great lesson. And I was still a global macro portfolio manager with my own silo at SAC Capital. But as you said, at Soros, it was all about big macro beds. And at the SAC Capital, it was all about risk management. So even though when I came from academia to sorrows, I would look at how they were running the portfolios and I was constantly scared because I felt they were taking way too much risk compared to what I thought from an academic perspective they should be doing. Of course I was novice at that time in the profession. Then I went to SAC and I realized that actually”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Going forward and incorporate this information into the model. So in that case, you want to evolve it or there may be factors that were not present before and you want to inform the model with it. For instance, how the monetary policy changes over time, the fact that we had QE for a long period of time. All these things are things you want to include in the model. But you have to be selective and really treat each case separately.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, Quantos always need to be evolved. So you can't build it. Yes, you can just build it and forget it. But it has to be done in a way that keeps up with the developments in the markets. So, for instance, when the British referendum happened, well, we didn't have such an event before in the market. So that's not something where you want to make your motto adapted to because we're not going to be having these events all the time. But that's an instance where you want to take your model and stress test it to see how it will behave depending on different scenarios that may transpire as a result of this event. So that's what we would do. And then we will decide whether to take down risk or leave the risk on and so on. If you have other phenomenon like changes in correlations between assets or changes in the level of volatilities, these are things that you want the motto to adapt to.”
2023-03-03 · Masters in Business · Maria Vassalou on the Small-Cap Effect · IDENTIFIED FROM THE TRANSCRIPT · source