Capital Allocators Monthly (March 2018)

April 2, 2018 by Ted Seides

Having fun with these markets (or weather) yet?  The more things stay the same…

1. My latest Institutional Investor column is entitled “Learning from the Dumb Money.”  The premise is based on a simple, but profound concept introduced in my podcast with Seth Masters.  You can find it here:

2. Everything by Morgan Housel. Last month, I recommended Matt Levine’s daily Bloomberg column Money Stuff (here). What Matt is to corporate finance, Morgan is to investing. I started reading Morgan’s work a year ago, and I haven’t missed a piece since. Morgan writes about investment markets, history, and human behavior with an imminently readable, elegant writing style. You can access Morgan’s blog here.  I’d highlight Ironies of Luck this month as one of my favorites. Morgan describes a take on one of my favorite investment aphorisms: “Volatility is downside deviation; upside deviation is called performance.”

3. Pulling the Goalie: Hockey and Investment Implications, Cliff Asness and Aaron Brown
If you love sports and statistics as I do, it would be hard to miss Cliff’s latest.  The concept is sensible: pulling the goalie increases the volatility of outcomes and takes advantage of the skewed point system for NHL victories even though a team’s chances of scoring are worse than getting scored upon. I’d especially highlight pages 8 and 9, in which they apply the lessons to the experience of CIOs.

4. Pitch the Perfect Investment, Paul Johnson and Paul Sonkin,
Paul and Paul’s book should be required reading for everyone in our business. I had them on the podcast last fall, and ever since have heard regular, overwhelmingly positive, feedback.  In fact, a successful hedge fund manager let me know they retooled part of their internal communication process to follow Paul and Paul’s framework, and immediately saw the benefits.

5. Francois Chollet on Twitter
I came across this Tweet storm by Francois Chollet, an Artificial Intelligence researcher at Google. He describes the issues that AI has wrought with the way we consume information. Although it’s far outside my area of knowledge, I found it a clear, intimidating perspective. Francois may come at this with a bias, but it nevertheless is a fascinating quick read.

This month’s podcasts offered a set of perspectives on volatility, modern data analytics, and 401Ks.

Capital Allocators
1. Rick Selvala. CEO of Harvest Volatility, brings a crystal-clear mind to describing a feared, if not terribly well understood, area of the markets.

2. Basil Qunibi, CEO of Novus, gets in deep discussing how managers can use data to improve their insights about managers.

3. Clare Flynn Levy and Cameron Hight, CEOs of Essentia Analytics and Alpha Theory, respectively, lead fintech companies that seek to improve outcomes for portfolio managers by using data to enhance trading and portfolio construction.

4. Wayne Wicker, CIO of ICMA Retirement Corp, applies a long tenure in the corporate pension and Foundation world to managing 401K plans for millions of public servants.

5. My take, I got on the other side of the microphone last fall to discuss life and investing with my friend Khe Hy.

Best of the Rest
1. Patrick O’Shaughnessy with Savneet Singh.
I can only take credit for introducing these two.  Savneet is a special person with a great mind.

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Have a good one,