Invest Like The Best
Episode 41 Quant vs. Traditional Investors and How Alphas Become Betas
Invest Like The Best

Episode 41: Quant vs. Traditional Investors and How Alphas Become Betas

Quant vs. Traditional Investors and How Alphas Become Betas

Leigh Drogen has worked as a statistical arbitrage portfolio manager is the founder of Estimize, a data company that works with some of the world's largest hedge funds. We cover traits that help funds perform well, crowdsourcing in funds, and algorithms and automation.

This podcast is sponsored by:

The CFA Institute. The CFA Institute is the global association of investment professionals whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investors' interests come first, financial markets function at their best, and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world. The views expressed in this podcast do not necessarily represent the views of the CFA Institute.

[00:02:45] – A look at Leigh’s early career and how he got started in investing

[00:05:39] – Leigh is asked to describe the inefficiency in sell-side analysts’ estimate set

[00:08:04] – What happened when things stopped working towards the end of 2007.

[0:09:35] – The proper dimensions to separate any sort of potential Alpha edge

[00:11:15] – The traits that help a fund perform well

[00:14:49] – How the scientific process plays into Leigh’s research strategies

[00:19:18] – Explain what Estimize is and what it does

[00:20:55] – How people are compensated for the estimates

[00:23:33] – The scale of how many estimates they get per company

[00:24:57] – Why you need to be part of this informational arms race if you hope to survive

[00:28:30] – What happens if everyone buys Estimize data and the Alpha built into it goes away?

[00:31:04] – What has been the evolution in these hedge fund platform type companies

[00:35:00] – If Leigh was designing a firm from scratch, what would it look like

[00:37:25] – Understanding Numerai and crowdsourcing in funds

[00:41:41] – What is an example of interesting data set that Leigh as come across

[00:45:38] – What is the potential for a hybrid model between a quant only with a discretionary picker.

[00:51:35] – How do you know when something is busted or broken?

[00:55:33] – Exploring his most memorable individual day in his career – Flash Crash

[00:58:16] – With all the algorithms and automation, will we continue to see more of these unforeseeable dislocations like the flash crash?

[01:01:00] – Bloomberg article about passive investing rates

[0 1:07:50] – What is Leigh most excited about the future

[01:13:15] – Kindest thing anyone has ever done for Leigh

[01:13:41] – Founder of Estimize Explains How He Plans To Disrupt The World Of Wall Street Research

Quant vs. Traditional Investors and How Alphas Become Betas

Introduction

Patrick
I've often joked that this show should be called, this is who you're up against. Because I am so often having conversations with brilliant people across the investment landscape who are effectively my competition and yours. This week's conversation fits that description because it gives you an inside view of how things work among some of Wall Street's most competitive investment firms. My guest is Leigh Drogen, who has worked as a statistical arbitrage portfolio manager and who founded and now runs Estimize. A data company that works with some of the world's largest hedge funds. Our conversation centers on the massive shift, from what we call discretionary portfolio management, basically stock-picking. To a landscape that is increasingly dominated by quantitative investors of various types. We talk about how any investor might hope to earn alpha and how doing so is harder and harder. There are so many great stories in this episode told by someone with the perfect career experience to know how the system actually works. After many episodes where I've been learning on the fly about topics like venture capital, permanent equity, or even health.

The Investing Spectrum

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