SI313: The Paradox of High-Volatility Alternatives ft. Alan Dunne

In this episode, Alan Dunne and I explore Mario Draghi's latest vision for Europe and discuss an insightful interview with Kenneth Rogoff, titled "We Will See More Spikes in Inflation," which covers key macroeconomic issues. We also explore the recent Goldman Sachs reports, highlighted by the Financial Times, showing significant outflows from multi-strategy funds. Alan shares his perspective on the current macro landscape and why he believes we may witness more “flash crashes and extreme market moves” in the near future. Finally, we dig into two articles by Cliff Asness—"The Less Efficient Market Hypothesis" and "In Praise of High-Volatility Alternatives"—which challenge traditional thinking on market efficiency and make a compelling case for considering higher volatility versions of strategies like Trend Following over their low-volatility cousins.

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Episode TimeStamps:

00:42 - What has caught our attention recently?

05:04 - Draghi's vision for Europe

08:09 - Keneth Rogoff's outlook for inflation

14:02 - Clients withdrawing money from multi-strat funds

19:58 - The big macro picture

27:33 - Is monetary policy still loose?

29:11 - Industry performance update (Finally!)

34:11 - The carry unwind

41:20 - Are people underestimating trend following?

44:51 - Are markets becoming less efficient?

48:30 - Why higher volatility funds may be good for your portfolio

56:52 - A historical perspective on volatility

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