Not Another Investment Podcast

Send us a textHave you ever wondered how a seemingly straightforward investment strategy can spiral into unexpected risk over time? Join Edward Finley, a veteran Wall Street investor and occasional professor at the University of Virginia, as he unpacks the complexities of dynamic asset allocation. We challenge the status quo by illustrating how a typical strategic asset allocation, like one with a 75% equity and 25% credit risk, can morph into a much riskier portfolio if left unadjusted, potentially ballooning to 94% equity risk after 30 years. Learn why adaptability and periodic adjustments are crucial for maintaining a consistent risk profile and ensuring long-term investment success.But that's not all—we also dive deep into the mechanics and psychology of portfolio rebalancing. Discover the merits of counter-cyclical strategies that compel you to sell winners and buy losers, despite the psychological hurdles. We dissect periodic and contingent rebalancing techniques to show how these approaches can stabilize your portfolio's risk levels, enhance returns, and minimize volatility.Then, we explore the realm of tactical tilting, where portfolio managers make calculated moves based on economic indicators or expecting returns to revert to their mean.  But as we will see, that is easier said than done.Finally, we discuss how portfolio managers can use active risk in portfolios to fine-tune their risk allocations.  Bringing into focus asset classes like hedge funds, private equity, real assets, and others, we see that active risk can be an equally important decision in asset allocation.Tune in to understand the potential rewards and pitfalls of these dynamic strategies, and join the debate on the efficiency of markets over shorter intervals. This episode is packed with insights that will elevate your investment game.Episode notes:  https://1drv.ms/p/s!AqjfuX3WVgp8un_-h7LOKuedrf1aThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textEver wondered why some investors seem to ride the waves of market volatility with grace, while others get swept away by the current? Our latest episode of Not Another Investment Podcast offers a lifeline to those floundering in the choppy waters of strategic asset allocation. I'm your host, Edward Finley, guiding you through the complexities of matching your risk appetite with your financial aspirations. We tackle the psychology of loss aversion, the tug-of-war between liquidity and potential gains, and the distinction between systematic and active risks that could make or break your portfolio's performance.Venture with us into the realm of portfolio optimization where the elegance of Markowitz's mean-variance curve meets the gritty reality of our financial markets. Together, we'll dissect the science of combining different assets to construct a portfolio that not only sings to your individual risk tolerance but also waltzes along the efficient frontier of returns. But the path to investment nirvana is strewn with estimation errors and the ever-present specter of diversification. So, we'll arm you with the knowledge to navigate these pitfalls and manage risk like a seasoned pro.To cap off, we peer into the Black-Litterman model's crystal ball, revealing how it draws from the CAPM's market efficiency theory to craft portfolios that resonate with current market sentiments. Comparing this approach with its mean-variance counterpart, we illustrate how it shapes conservative and growth-oriented investments. Finally, we shift into the gears of risk control strategies, from the equity-heavy Black-Litterman to the harmonious risk parity approach, promising to inform your next investment move. Tune in for an episode that doesn't just scratch the surface, but charts a map through the investment management labyrinth.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8un20bLpr6Q2agiEmThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textEver wondered how the monoliths of commercial buildings and the serene stretches of farmland fit into the economic puzzle? Join me, Edward Finley, as I pull back the curtain on the real estate sector’s impact on both the economy and personal wealth. We start by dissecting the intricacies of commercial real estate, diving into its diversity, location-specific risks, and investment returns with the aid of NCREIF data. While exploring the ins and outs of this market, I'll also unveil insights into why commercial real estate may just be the versatile inflation hedge your portfolio craves.But our journey doesn't stop at city skylines. We venture into the fields of farmland and forests of timberland, examining their investment allure and uncovering the complexities of these assets. From addressing farmland's surprising performance metrics to timberland's role in the productive economy, we tackle the convolutions of classification and investment potential.Later, we pivot to residential real estate, analyzing the S&P's Case-Schiller National Home Price Index and thinking about your home as a part of your investment portfolio. Whether you're a seasoned investor or real estate rookie, this episode promises to equip you with valuable knowledge to navigate the vast terrain of real assets.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8untrU1lj57PT-_dyThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textUnlock the mysteries of real assets and their touted powers as inflation hedges with me, Edward Finley, on Not Another Investment Podcast. Together we explore the role of real assets in a portfolio.  We develop three categories of real assets, like commodities, production means, and infrastructure. By breaking down these complex relationships, we find that some "real" assets are more real than others.  You'll gain insight into not only the potential safeguards against inflation they offer but also the intricacies of investing in assets with their unique risks and liquidity challenges.Venture into the fascinating realm of commodity futures, there typical way investors gain exposure to commodities, and understand how the dance between futures prices and spot prices reveals much about the health of our economy. We'll clarify the concepts of backwardation and contango, where the roles of hedgers and speculators pull the strings behind the scenes, crafting the market's momentum and influencing the all-important roll yield. This nuanced understanding is key for those looking to tap into commodity spot returns without the hassle of physical inventories, and I promise, it's a topic that will sharpen your investment acumen.We'll put theory into practice by analyzing how commodity futures, particularly corn and oil, have performed through the lens of historical data. From the shockwaves sent through oil markets during COVID-19 to the long-term perspective on its efficacy as an inflation hedge from 1997 to 2023, this episode is a goldmine for enthusiasts and experts alike. And remember, for more in-depth resources, charts, and a chance to continue the conversation, visit Not-Another-Investment-Podcast.com. Your engagement is not just welcomed—it's essential in fueling our journey to demystify the investment world.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8unnB8BqkHQD1_6HGThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textUnlock the secrets of hedge fund arbitrage strategies with me, Edward Finley, as we navigate through the thrilling intersections of finance and probability. Prepare to have your perceptions challenged as we dissect the complex mechanics behind the high-octane world of merger arbitrage, distressed arbitrage, and event-driven arbitrage. Through this episode, you're bound to gain a deeper understanding of how hedge fund managers play the odds in a market where knowledge of financial intricacies, legal frameworks, and regulatory landscapes can make or break multi-million-dollar deals.Venture further into the labyrinth of hedge fund tactics as we scrutinize the enigmatic performance of distressed arbitrage strategies and their deceptive volatility. We'll dissect this high-risk investment game, revealing how it thrives on the brink of bankruptcy, drawing in astute investors with the allure of high returns amidst the smoke and mirrors of market fluctuations. With an analytical lens, we'll break down the statistics that lay bare the true nature of these strategies, from their negative skew to the high kurtosis that defines their risk profile.Finally, we cast a spotlight on the allure of multi-strategy funds as we probe the delicate balance they strike in pursuit of portfolio diversification and efficiency. The episode culminates with a critical analysis of their performance, peeling back the layers to determine whether these funds truly deliver on their promise of attractive returns for the savvy investor. Join me for this riveting journey through the risk-laden terrain of hedge funds, and arm yourself with the insights needed to navigate these complex investment strategies.Episode Notes:  https://1drv.ms/p/s!AqjfuX3WVgp8uwOODPqoWCYdwAFzThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textUncover the opaque world of hedge fund arbitrage strategies where the stakes are high, and the strategies complex. I'm Edward Finley, your guide through the maze of these strategies that seek to earn return by uncovering mispricing of risks but really do so by taking on much more hard-to-understand risks.In this episode, we'll start with the two main bond arbitrage strategies:  convertible arbitrage and fixed income arbitrage. We'll discover the role of convertible arbitrage in providing liquidity to the very important convertible bond market. Learn why certain companies lean towards issuing convertible bonds in the first place, and how important convertible arbitrage strategies are in making this market function well.  But gain an understanding of what risks investors take in providing that liquidity.Then join me as we explore the two primary fixed income arbitrage strategies:  interest rate arbitrages and credit arbitrages.  Learn about the two most common interest rate arbitrages that focus on preferences of bond investors and peculiarities in how Treasury futures settle to create opportunities for investors.  And uncover the three typical credit arbitrage strategies and their approach to earning returns when markets misprice a firm's risks.  And in both cases, observe with me the complexities of owning these kinds of risks.In the next episode, we'll close-out hedge fund arbitrage strategies by exploring the equity-focused arbitrage strategies:  merger arbitrage, distressed investing, and event-driven arbitrage.Join us as we embark on this exciting expedition into the hedge funds' arbitrage playbook and their ripple effects across the financial markets.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8ukUSIvQvpsQ8WjaMThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textEmbark on a journey with me, Edward Finley, to crack the code of absolute return strategies, the hedge funds aiming for consistent returns no matter the market mood swings. We're tossing aside the economic weather vane and zeroing in on how these strategies skillfully balance the scales between long and short stock positions and more complex trading strategies. By dissecting equity market neutral and managed futures strategies, you'll grasp the art of maintaining an even keel in the tumultuous seas of the stock market, where every wave of volatility is a test of precision and foresight.As we chart the course for future episodes on arbitrage strategies, prepare for an education that's not just about surviving the market's storms, but thriving within them.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8ukNZD4f14GAW6CNVThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textUnlock the enigma of hedge funds with me, Edward Finley, as we explore these complicated (and controversial) investment strategies.  We will see that they are not really an asset class but instead are a universe of diverse trading strategies, from directional plays to arbitrage opportunities. In this episode, we dissect the perception and reality of these complex instruments, developing a taxonomy of hedge fund categories based on their myriad risks. We navigate the murky waters of data biases that can obscure the true performance of hedge fund strategies, and we lay the groundwork for a deeper comprehension of the pivotal alternative risks employed by hedge fund managers.We will look at the universe of securities that a manager trades in, the types of trades she engages, as well as the leverage and illiquidity in order to categorize hedge funds by their risks.  We will learn that common risks, like equity risk and interest rate risk, play a relatively small roll in hedge fund performance.  Instead, hedge funds deliver a mix of alternative risks that will help us categorize them into three main categories:  Dynamic Market Strategies, Absolute Return Strategies, and Arbitrage Strategies.We will start our exploration of hedge funds with the largest category, Dynamic Market Strategies, including equity long-short and macro.The largest hedge fund strategy, equity long-short, is an intricate web of systematic risk and nonlinear relationships to broader market returns that are the result of how these managers trade. Through examples, we clarify the often-misunderstood mechanisms of gross and net exposure, leverage, and beta-adjusted market exposure, providing a masterclass on how equity long-short funds balance the scales of risk and reward.Finally, our analysis of Dynamic Market Strategies is not complete without a foray into the performance and intricacies of macro trading strategies. We unearth insights into the performance macro strategies by revisiting George Soros's legendary bet against the British pound, offering a thrilling case study of macroeconomic speculation and its potential for astonishing profits. This tactic serves as a testament to the high-octane intellectual analysis that underpins successful macro trading but also the huge uncertainties in making those bets.You will leave this episode enriched with a profound understanding of the complex machinations of these two hedge fund strategies.  Future episodes will explore the strategies that comprise the other two categories.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8ukFS322alTE4tvCtThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textIn this episode, we will build on what we learned about equities and bonds to uncover the principles behind constructing a resilient investment portfolio. Delve into the interaction of stock and bond returns with with me, Edward Finley, as I demystify the economic forces shaping their historical correlation. We're not just talking theory; I will share some practical wisdom on how to mix and match assets with varying expected returns and volatilities to either boost your gains for a given risk or trim the risk for your target return. Take a front-row seat as we use the quintessential 60-40 stock-bond allocation to demonstrate how a keen understanding of these assets' synchronicity can supercharge portfolio efficiency.This episode is more than just a lecture – it's a journey through the shifting tides of stocks versus bonds, pinpointing the eras in which one asset class eclipsed the other and what that means for your money. I will dissect historical performances, from the tech bubble frenzy to the somber 'lost decade,' laying bare the wisdom in upholding a balanced approach amidst the capriciousness of markets.By challenging the conventional notion that bonds are safer than stocks, I will invite you to redefine 'investment safety' with a long-term vision. So, buckle up and prepare for a masterclass in investment strategy, where empirical data meets economic theory to arm you with the knowledge to navigate the financial landscape's constant evolution.Episode Slides:  https://1drv.ms/p/s!AqjfuX3WVgp8uj9zHsJs3oRQ6lx4Thanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!

Send us a textUnlock the mysteries of investing in the bond market with us! Your financial landscape is about to get a whole lot clearer as we guide you through the nuances of bond investments, from deciphering the difference between coupon and yields to delving into the depths of default risks. Whether you're a keen investor or an inquisitive citizen, this episode is your ticket to understanding the subtle dance between bond prices, interest rates, and the economy's future outlook.This time on Not Another Investment podcast, we're setting sail on the choppy seas of bond investing. Grab your life vests as we navigate the intricacies of the yield curve and term risk, shining a spotlight on the pivotal role of inflation expectations and growth forecasts in your bond yields and ultimately returns. As we analyze the inverted yield curve's warnings and the Federal Reserve's monetary maneuvers, you'll gain invaluable insights, arming you with the foresight to bolster your investment strategy in the face of an ever-changing market.And for those who thrive on the thrill of credit risk, this episode is nothing short of a masterclass. Watch the fog lift as we examine credit premiums, expected loss rates, and Merton's theory with a critical eye. By scrutinizing empirical data alongside the theoretical explanations, we'll challenge assumptions and redefine your understanding of the premium you're owed for shouldering the risk of default. Don't miss out on this journey through the real-world ebb and flow of the bond market—tune in and transform your approach to bond investing.Notes - https://1drv.ms/p/s!AqjfuX3WVgp8uXghGAOm1ZzfqJwF?e=UDRvMFThanks for listening! Please be sure to review the podcast or send your comments to me by email at info@not-another-investment-podcast.com. And tell your friends!