Wayne Himelsein - The Quant Philosopher (S2E7)

06/17/19 • 75 min

In this episode I chat with Wayne Himelsein, president and chief investment officer at Logica Capital. To our conversation Wayne brings over two decades of experience managing long/short portfolios, ranging from statistical arbitrage to factor long/shorts.

For as deep in the weeds as he liked to go as a quant, Wayne has a philosopher’s streak and Twitter is his soapbox. Of course, 280 characters can be limiting, so I start out conversation by putting Wayne in the hot seat and ask him to explain the deeper meanings behind some of his recent tweets.

Using these philosophies as a foundation, we then dive into long/short portfolios. We talk about the practical difficulties of managing these strategies and Wayne explains why he believes that beta-neutral is a fool’s pursuit.

We then switch topics to tail risk hedging. These sorts of strategies are notorious for their bleed, and we discuss whether the payoff is ultimately worth the cost of insurance. Wayne describes a few ways in which the bleed can be managed and the ensuing tradeoffs with each method.

In discussing both long/short and tail risk hedging strategies, I ask Wayne what due diligence questions he would ask if he were evaluating another manager. I find this question always provides great insight into what managers of these strategies actually think is important. Wayne does not disappoint.

I hope you enjoy my conversation with Wayne Himelsein.

I hope you enjoy my conversation with Wayne Himelsein.

Previous Episode

Jason Thomson - The Growth Factor (S2E6)

My guest in this episode is Jason Thomson, a portfolio manager at the William O’Neil family office.

On paper, Jason doesn’t seem like a particularly good fit for this podcast. He runs a highly concentrated discretionary portfolio of growth equity names. He can be levered long, net short, or completely out of the market all at his discretion.

What becomes rapidly apparent is that while Jason has ultimate discretion, he adheres closely to a disciplined, rules-based process driven by the empirical research of an in-house quant group. The core framework of that process retains the spirit of William O’Neil’s original CANSLIM methodology, but now has nearly a half-century of learning and nuance layered on top.

As a quant, it is tough to hear “growth” and not think “expensive.” Jason dismisses the idea that growth investing is all about headline-making, high-flying stocks, though, and emphasizes the importance of valuations. In fact, about a quarter of his holdings are turn-around plays.

We talk about the role of investment themes, the importance of position sizing, and how Jason thinks about managing risk in a portfolio with less than ten names.

The idea of managing a portfolio the way Jason does definitely put me out of my comfort zone, but our conversation made me reconsider what I think I know about growth investing

Next Episode

Liqian Ren - In Search of Modern Alpha (S2E8)

In this episode I am joined by Liqian Ren, Director of Modern Alpha at WisdomTree.

After receiving her degree in Computer Science, Liqian came to the United States to pursue her Masters in Economics. Liqian then did a quick stint at the Federal Bank of Chicago as an associate economist, before returning back to academia to pursue her PhD at the University of Chicago.

In 2007, Liqian joined Vanguard’s Investment Strategy Group, where she leveraged her background to perform economic and capital market forecasts, studies on asset allocation, and research into topics such as retirement income and investor behavior.

Liqian eventually transitioned to Vanguard’s Quantitative Equity group, where research efforts were focused on deep, stock-level signals analysis and portfolio construction. Becoming one of the first to act in a dual capacity research / portfolio manager role, Liqian developed a deep appreciation for implementation-aware research.

We spend much of our conversation talking about factors in both theory and practice. We hit subjects such as the risks of delayed implementation, mixed versus integrated portfolio construction, opportunities for factor timing, active versus indexed implementations, and how factors fit within a glide path.

Finally, we discuss Liqian’s new role at WisdomTree and new areas of research she is excited to pursue.

I hope you enjoy our conversation.