Eric on Flirting with Models Podcast - July 2020

Eric, CIO of Standpoint, joins Corey Hoffstein on a podcast episode of Flirting with Models. This discussion takes on a technical angle about building trading systems, testing systems, and applying trading rules to futures markets. Corey and Eric not only spend time on what it takes to build a good investment strategy but also the operational requirements of managing a strategy in a mutual fund.

Key Takeways

  • Before computational finance was an acknowledged area of study, Eric started a finance club that combined friends from the large agricultural industry in Kansas with friends that were interested in systematic investing.
  • Computing power is a tool to help make decisions when building an investment strategy, which can be helpful and harmful. It’s not necessarily impressive to use AI or neural networks to manage data, what really matters is how the algorithm was built and how a designer interprets the output.
  • Costs to manage an all-weather strategy in a mutual fund have decreased dramatically in the past 10 years, mostly due to technology and improvements in cloud computing, cyber security, and industry efficiencies.
    • The risk premia in the market are what they are, you can’t create new ones. There is no alchemy here. A bunch of data scientists can’t create a bunch of new models and push them into the market and everyone starts making more money.

      - Eric Crittenden, Standpoint

    • When you’re most confident and you don’t think something can happen, often times it does. And if you’re unprepared you really only have yourself to blame, and it’s going to hurt.

      - Eric Crittenden, Standpoint

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