YouSaid · the spoken record

Sébastien Page

lines on the record: 77
first: 2021-01-08
most recent: 2021-01-08
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I would mention some of the takeaways from my book, Quantitative Methods Work Best When used with a healthy dose of qualitative judgment. That's something I've learned over time. I wish I'd realized earlier. Risk is easier to forecast than returns, and this has tremendous investment implications. When in doubt, it pays to stay invested for the long run. Think of Mael Evator pitch, stay invested, stay diversified. Diversification works very well when you don't need it and not so well when you actually need it during crashes. And if you're an investor, you really need to take that into account. And lastly, in markets, you really need to expect the unexpected things change very quickly in markets. And we've just been through such an environment.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“But diet, exercise, sleep, reinforce each other, take care of yourself. Don't wait for motivation. Just build habits. It's much easier to do things well when it's a habit as opposed to waiting for motivation, which is very fickle. There's another book, Barry. I'm going to cheat. I'm going to add another book, The Power of Habits by Charles Duhig, I think, is worth reading.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Perspective talked about the secret to happiness in life earlier, lower your expectations. I think managing your expectations is important, not getting worried about short-term setbacks. Just look at the long-term trend and make decisions based on the long-term trend in your career, not short-term setbacks. And last one I will say, take care of yourself. All the advice. Can give people starting their careers. I think that's the most important one. Diet, exercise, sleep, all these things reinforce each other. It's like a virtuous circle. You can't take one away, right? Eat well. You'll have more energy to exercise. Exercise, you'll sleep better.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“The other one I would say sometimes is underestimated, emphasized communication When you move from being a student to working in the real world, you move from an environment where it's basically a meritocracy, right? You study hard, you get good grades. But in corporate life, collaboration, teamwork are really, really essential. So maybe as a student, 90, 95% of your success is from your own intellectual merit and how hard you study. On the job, you'll realize that even for the most technical of roles, maybe about as half of your success, maybe more is determined by how well you communicate. Because in corporate life collaboration and teamwork are so essential to success, especially in side large organizations. So don't neglect communication. Lastly, I would say adjust your”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“This is mostly advice I've gotten from Mark Kritzman mentioned him earlier. First, always look to build your human capital. And by that I mean your network of industry contacts could be your publications and journals, your reputation on the conference circuit, could be your education credentials, for example, the CFA charter, anything that differentiates you from your peers and that ultimately no one can take away from you. It's your own human capital. Second, I would tell people starting their careers, stay close to revenues in a lot of jobs it means staying in front of clients, but it might also in investment management mean to stay close to investment decision making. But stay close to revenues because your role in the value chain will be more motivating and more obvious.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Deep work by Cal Newport is one of the best books on time management I've ever read on philosophy or dealing with change and uncertainty, I would say anything on stoicism is interesting, books by Ryan Holliday like The Obstacle is the Way Stillness is the key. Those are excellent books. Entertainment, entertaining business stories. The book about Theranos, Bad Blood, was fantastic and just finished a billion dollar loser about WeWork, which is also a fascinating story. Apologies for that.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe less well known is by an ultra runner. And even if you're not into ultra running is worth reading, the book is titled North by Scott Jurek. And it's about how he broke the record for running through the entire Appellation Trail on the East Coast. Another one that's good is Can't Hurt Me by David Goggins, if you want motivation. To realize how important sleep is. Productivity.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so I love to read, that's very hard to answer when you read 50 plus books a year. I generally read about business, philosophy, some history, psychology, sports. I read nonfiction. I love memoirs and biography. And I was told, I knew you might ask that question. So I prepared a few books by category. I know I'm cheating, but business. I would say recent book I've read is The Right of a Lifetime by Bob Eiger, ex-CEO of Disney. Excellent, very well written. Lots of business wisdom. Sports, sports memoirs. This is an older one. Open by Andre Agassi and even if you're not into tennis, it's just a fantastic book to read. Another one”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“And we've co-authored a lot of papers together. I like to say basically everything I know about quant finance and asset allocation I've learned from Mark.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“This interview by my professor, and he also had a business relationship with Mark and with State Street. And I'll just say that I learned years later over a glass of wine that Mark had pushed back really hard from taking me on as a research intern. Apparently he had said, and I quote, I don't care if he's free because we didn't, I was writing my thesis for my master's degree, so there was no salary involved. Apparently, it said, I don't care if he's free, my time is not free. This was over a glass of wine a few years later. At the time, though, back then, all I got was a call from State Street in Montreal saying, hey, Mark can't wait to work with you. He's very excited that you're going to come to Boston. Ultimately, I did this research project for him as an intern, and he ended up mentoring me for over 10 years.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Let me name two mentors. First, my father. I talk about him in my book. He was a finance professor for 40 years. I even took a couple of his classes. Second mentor was Mark Kritzman. He is CEO of Wyndham Capital. He also teaches finance at the MIT. And there's a story I like to tell about the early days of my collaboration with Mark Kritzman. And I interviewed with Mark for research internship. I don't think it was a good interview, except that I'd read every single paper he had published up to that point and thought and still think he's a genius. He was reluctant. He had access to the best students from the best universities in the U.S. But he was pressured into”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“I love that question. I mean, my answer is not going to be very original right now, but I just finished Queen's Gambit, which I thought was excellent. And the other one is my son, he's 13. He'd never watch the lost series, and I've never watched it either. So we've just started from the beginning. We're in season two of the lost series, which is an older show, but we really enjoy enjoying it. So, Barry, no spoilers, please.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Factor exposures and then backfill the historical data for those factors. So I guess what I'm saying is there are different ways of addressing this issue. But is more data always better than more recent or more relevant data? The answer is no. And part of this also comes down to risk regimes, right? You can forecast the type of regime you think you're going to be in and then sample data from a similar regime in history, for example.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, so sector weights change over time and even the classification and which stocks are included in the index. Emerging markets are another really good example. Emerging markets used to be very much commodity dependent, cyclical factors and financials. Emerged markets now have become a lot more high tech than they used to. You have some large tech platform companies like you have in the US, in China, for example. Historical data is useful, but it's not always the case that the longer your data set, the better for your financial risk modeling. And one way to get around this is to use factor models. And here I'm talking about looking at how the asset classes are composed, what the asset classes look right now based on the current”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“to two percent as a share of corporates and the weight of riskier bonds has changed. The duration of the Bloomberg Barclays has increased. It was four and a half years back in twenty five. Now it's six, seven years.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Fluctuation in sector weights within asset classes make it such that if I use in my model all the data from the S&P 500 or data from a long time ago, I'm looking at a different sector composition, for example. Technology sector and the S&P 500 has been really, really unstable from 5% of the index, it actually reached 29% in 99 during dot-com. Then it declined back to 15 in 2005. And now it stands at 21%. So you're really not looking at the same asset class if you use this to do a strategic asset allocation. You're basically modeling the risk of an asset class that no longer exists. And there are other examples of that. Even in bonds, the duration of the index has changed, right? The weight of high quality bonds has decreased from 21%.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to say falls just to be a bit controversial. The real answer would be just not always. Academics like to go back to the early 1900s, right, to create robust data sets. But if you think about it, the data back then, I don't know. We didn't have computers. We didn't have cars. People use horse and buggy to get around. Many financial advisors, for example, will think about investment policy statements or strategic asset allocations for their clients. based on long-term data on return and risk, and they'll average across different risk regimes. Well, first of all, in the book, I show that higher frequency, shorter term data are more predictive of risk going forward than longer-term data, just from a risk forecasting perspective. The other issue is that”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Quantitative process, we were just talking about value and momentum and when both agree. How do you use data and insights like that, but make them relevant for the current market environment? And in that intersection, you can create a replicable process where there's room for judgment. And you can succeed as an investor. So Barry, I'm pontificating a lot, but this is a question that I've thought about while writing my book and throughout my career because in a sense, like I've straddled bottom up and top-down investing, I've also straddled quantitative and fundamental investing, especially over the last five to ten years of my career.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll always remember the presenter was a well regarded thought leader, someone who's traveled academia and practice. Always remember what he answered. His answer, it stayed with me and I've used it over time. He looked at the presenter and he was clearly, he'd just landed, he's clearly jet lagged, so a little bit patient. He looked at the presenter and he said, and this was more a reply to the garbage in, garbage out, or so-called gigo critique. So if you don't think you can forecast expected returns, you shouldn't be in the investment business. And the point is that investing is about forecasting. When we invest, no matter what, we make a judgment about the future in the way we allocate our portfolio, in the way we position our portfolio. So there are quite a few chapters in my book that are about how do you use a quantitative”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a place for fundamental stock picking, for example, but there's a in between there's a tremendous amount that our industry can do bringing both together. And I dedicate a lot of my book about this. And, Barry, there's a story at the beginning of the book about a quantitative research conference that I was sitting at several years ago when a fundamental investor basically raised their hand and asked a pretty rude question amongst quantitative peers or investors. And he basically said, you know, your models for forecasting returns are not valid because they're basically garbage in. And if you use a portfolio optimization model,”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“I like active versus passive. There's a place for both quantitative and fundamental. And in the case of quant versus fundamental, the intersection of both is what fascinates me. And if you set aside applications in high frequency trading, for example, where really the technology is the advantage and the research is the advantage, and you go to what we do, which is tactical ass allocation, strategic asset allocation, or even for stock pickers in general, fundamentals matter and experience matters. And if you're able to bring together quantitative insights with data, Judgment and experience, I think you can get a more robust investment process in a lot of cases. Look, I just want to be clear, there's a place for systematic quantitative strategies of standalone.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to be really careful in there. There are advisors that specialize in that to taking the investor side or consultants, for example, that can help institutional investors. Individual investors have to be extra careful and work with their financial advisors. I think you really have to not just jump in based on a Google search, if you will. This is an asset class where the top quartile can be very different from the bottom quartile, probably even more than in... public markets. I do think that the factors for success in those markets resemble the factors for success in active management in public markets, depth of resources, replicability of a proven process, a philosophy that is consistent over time, experience, and so on. So you want to look for those factors as well.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk about this in my book is that it's just not a free lunch. You need to account for the risk properly. You can earn a liquidity premium, but it is like shorting an option to a certain extent, if you will. And if you have the right approach to it, there's nothing wrong with private assets and private equity. They're just not the free lunch that investors are making them out to be. I think investors just have to be careful when they think about those types of investments because they're not as transparent as public markets.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“And the account properly for the timing of cash flows coming in and out, you start uncovering a completely different story. There's an academic that's done a lot of research on that. I quote him in my book. His name is Ludovic Falipu. And he shows in some of his papers that actually private equity over long periods of time can actually underperform public equities. Now there's a wide range within private equity, and it depends who you invest with. But it's a fascinating chasm between industry and academic research. The takeaway...”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Academic research and investment practice disagree the most chasm in our industry between the two? I'll tell you it's on the performance of private assets over time. And you see a lot of numbers that suggest that private equity outperforms public equity by a lot, both in absolute and in a risk adjusted basis. And then if you dig into academic research where people actually scrub the data and they remove zombie valuations from the database and they account properly for survivorship bias and reporting bias.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Private assets can have a role in many portfolios, but there are not a free lunch, and many investors think of private assets as a free lunch. Private equity in particular. This is fascinating, but if you ask me, in the context of what I mentioned earlier that I wrote my book in part to bring academic finance into the industry, into the practice of asset allocation, if you ask me where”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“It's your time horizon is long enough, it will pay off. So there's investor psychology in there. And I'm guessing a lot of financial advisors are listening to your podcast and they're probably throwing their phones on the wall at me right now because if you're a financial advisor, investor psychology is what you have to deal with with your clients day to day. And your role is essentially to tell them not to sell in March of 2020.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“when markets are crashing, as we've seen this year in Q one during COVID. So while this is generic, I think important advice, again, the implementation of how you diversify, and the title of my book is Beyond Diversification, what you do beyond that matters quite a lot. But if you look over time, staying invested is probably the most important of the two pieces of advice because over time, if you can weather exposure to loss, especially in a low-rate environment where you're not going to get anything out of bonds anyways”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“I meet someone in an elevator and you give me 30 seconds to give investment advice between floors two and four, I'm going to say stay invested for the long run and stay diversified. So those are probably the two most generic pieces of investment advice, but I think they're important where it gets complicated is again in terms of implementation, diversification means different things depending on what you have on the menu, what you diversify across and depending on which market environment you look at. between risk assets, it actually works really well when markets are rallying, which is, if you think about it, when you don't want it. And it really doesn't work.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, let me give you a kind of pithy answer, but I think it's important and then a more philosophical answer. The kind of immediate answer is, look, implementation matters as well. If you make a statement like when value and momentum agree, it's a good time to buy and you design a strategy to take advantage of that. The strategy that you actually design and the way you implement that broad concept can lead to vastly different exposure to loss and vastly different performance over time. So it's a broad statement where implementation and risk management practices matter quite a bit. So that's very few of my pithy answer. But philosophically,”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“As well. So the stars are starting to align at the six to eighteen month horizon for the recovery trade. However, it's really going to be a bumpy ride. And as we're recording this webcast barrier, we're getting some worrisome news about how devastating this new wave of the virus is while we're waiting for the vaccine to be deployed, including mutations, travel restrictions, and so on. But the path to get there is treacherous.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“sectors perform well, they're still cheap on a relative basis to other parts of the stock market. So you have agreement between positive momentum and attractive valuation, which historically across markets is a good time to buy into the asset class. Now, add to that the macro factor, you can check the macro box too because we're in a recovery from a fairly drastic shock, but you can think that there is a fair amount of pent-up demand in the economy and that year-over-year comparables will be showing substantial growth. And small caps in value tend to be the asset classes of choice during an economic recovery. So check that box too. And then you can, to a certain extent, check the sentiment and technicals box.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“We're in an interesting position right now because if you look at academic studies, a good time to buy is when both value and momentum agree. So to your point, we started getting really unexpected news on the vaccine. Like 95% effectiveness and updates on production capacity were not priced in. I was looking at probabilities produced by the group called the super forecasters. And the forecast was 50% chance that we get 21 million doses before March 2021. So coin toss. Pfizer came out with their news and to illustrate how that was not priced in. That probability immediately jumped to 88 and now it's at 99%. So that has helped those small cap values.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Then it's clear still to me that growth has some secular, which I think long-term advantages. Growth stocks do well in low-rate environments. And there's clearly a sector advantage with technology disruption being more tilted or oriented in growth stocks and in the growth style versus value. But the other reason I would say value is not dead. There's a tactical opportunity here because we're entering economic recovery. But also if you step back and you think in a capitalist system, companies evolve and reinvent themselves. Banks can make money in low-rate environments. Think of those that have thriving wealth management businesses or trading, for example. Energy companies, which are also a big component of value stocks, can move and And so on. So I don't think value is dad, Barry.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, you're really asking all the hot button questions for asset allocators, right? The role of bonds going forward is the 60-40 debt. Value growth is the other one. And in our asset allocation committee, we debated all the time. I don't think value is dead. In fact, in the medium term, you could see the rotation that started with vaccine news continue during the economic recovery.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“In loans which benefit from rising rates. So yes, sentiment is high. There are pockets of fragility in the market, not a systemic issue in my mind at the moment.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“We've flooded the markets with liquidity. We had at 1.30% year over year growth on money supply. That's basically the biggest chump in the data set that I have. And I've seen estimates for stimulus measures between fiscal and monetary globally as high as 25 trillion, depending how you measure it. But that's a tremendous amount of liquidity. So it will create pockets of speculation. But I don't see it at this point as a systemic issue for markets, ultimately bearing our portfolios right now. We're neutral between stocks and bonds, and we're taking advantage of relative valuations on the recovery trade with long positions, for example, in small caps. And we've started to lean into value, and we have some credit exposures.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“In the current environment, it certainly creates fragility in markets. The puzzling thing is that risk appetite at the moment seems high, but in pockets of the markets rather than, say, a systemic issue, as in prior crises. So pockets of the markets like the one you mentioned, Bax IPO, Robin Hood. Some technology companies. But if you look at, we haven't composite indicator where we put together a bunch of variables on surveys to get investor sentiment as well as positioning, that composite indicator is only slightly above medium. And you also still have the proverbial, and I hesitate to use the term, but cash on the sidelines in the sense that there's $700 billion extra AUM in money market accounts versus what we had pre-COVID. What's happening? Why are pockets of the market showing fragility? I mean,”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“For passive, it's not a black and white answer. In my mind, there's place for both active and passive in markets, as I saw in the article you wrote. And remember, you know, passive ultimately doesn't work if you don't have active managers setting prices.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“pricing practices and people were selling the healthcare ETF, dragging down companies that have nothing to do with drug pricing like medical equipment or contact lenses. So, those are good examples of when people stockbickers would have had opportunities to buy temporarily undervalued companies because they're just being dragged down with ETF trading. There are also good examples of when people, for example, sold financials because of lower rates, but companies with positive duration like REITs, which used to be part of financials, would sell off as well. So it's like throwing the baby out with the bathwater. In the original paper on this, we titled it The Revenge of the Stock Pickers. Look, I just don't think we should look at average results for active managers. We need to look at how skilled active management is done, those that can add value at consistent, replicable philosophy and process, depth of resources to do that. And I'm not at all saying that there's no place.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“A good question. And Barry, I saw you wrote a good article about active versive where you show that passive has not taken over the world when you measure the asset size correctly. And you talk about your approach, whether it's place for both, active and passive. So I'm with you on that. Broadly speaking, passive creative opportunities for active. And in my book, I have an example about this. I talk about when ETFs trade around a theme with high volume and how when that happens, all the constituents in the ETF start moving together, irrespective of fundamentals. So I show those correlation spikes. This creates opportunities for stock pickers. So I show examples where, for example, regulators were going after drugs.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Which, when you have options, like in the example you described, is obviously different from your volatility. And in my Andrew Loe example, exposure to loss is obviously different from volatility. And I'm not claiming this is not something that our industry knows. We just ought to have the right tools and the right approaches and the right way of thinking about those exposures. And it's not just hedging or put options. It's a lot of aspects of financial markets.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and it's a good example because it's extreme and it's directly using nonlinear instruments like put. But the issue of fat tails is broader than that, right? It's the behavior of markets. It's how we think about so-called carry strategy. It's how we think about credit. It's how we think about liquidity risk in portfolios. Even you and Iberry so far in this podcast have talked a lot about volatility. But really, when we think about forecasting risk, constructing portfolio, we really ought to talk about exposure to loss.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in this simulation, all he does is just sell out of the money put options on the S&P 500. So essentially, he sells insurance. The strategy is just to load up on tail risks. And it just so happened that in the 90s, you didn't really get called on those short put options. But what it is, is picking up pennies in front of a teamroller. And when you look at many risk premium or how our industry thinks about liquidity risk, for example, or carry strategies or even how we Construct allocations to credit in our portfolios. A lot of those strategies return streams, if you will, are short and optional. And that is embedded tail risk that our industry ought to pay more attention to and find better ways to model. So I have a couple chapters on that in the book, the black swans, if you will.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“The strategy is so simple a monkey could do it. But despite the simplicity in Angelo's backdest, the strategy doubles the sharp ratio of the S&P 500 from 0.98 to 1.94. So double the risk-adjusted return. It only has six negative months compared to 36 for the S&P 500. And here I'm going to quote Angelo because he sets it up nicely. Then he reveals what this strategy is. And this is where we illustrate fat tail risk. Can you guess, Barry, what this strategy is?”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Or quantitative analysts running back tests. And in the book, I have a great example for this. It's from Andrew Lowe. He's a professor at MIT. And there's the fascinating case study on the issue of fat tails. In a paper he wrote in the early 2000s, his study is based on monthly data from January 92 to December 99. And he simulates an investment strategy that requires no investment skill whatsoever. Okay? No analysis, no foresight, no judgment.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Those are interesting statistics, Baron. I actually have a chapter where I talk about those probabilities and how they compare in real life versus mathematical models that rely on a normal distribution. Look, the issue of fat tails is actually a really well known issue. But I would argue we don't pay enough attention to it. I would say many quantitative analysts, especially when they backtest strategies like risk factor premium, for example, don't really account properly for fat pails. Someone once told me that the only people capable of generating a sharp ratio of 3.0, so 3.0 return to risk ratio, were either Bernie Madoff.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Working on this book, I wouldn't call it work at all. It's what I do, it's how I think. And I had this desire to put it all together in an organized way, going from forecasting return, forecasting risk, and then constructing portfolios. That's how I've divided the three sections in the book.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“My motivation in particular for the book was to build a bridge between investment research, academic research, and the practice of investment with a focus on asset allocation decisions. So I reviewed over 200 papers. I integrated some insights from my colleagues at T-Ro Price, as well as from my own 20 years in the business. And one thing I wanted to do was make it accessible without sacrificing the rigor. An author I had in mind when I started writing is Malcolm Gladwell. You know how he takes deep research and makes it interesting and accessible? I wanted to write something like that for asset allocation. And you could say finance is in my DNA. I have absolute passion for it.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source
“Which leads to better opportunities for alpha, for stock pickers, for those that know how to do that well. So you have the advantage of relative valuation and looking forward relative to backwards and the breadth of investment opportunities working in your favor.”
2021-01-08 · Masters in Business · Sébastien Page on Smart Asset Allocation · IDENTIFIED FROM THE TRANSCRIPT · source