Roxton McNeal and Siddharth Sethi – Building Multi-Strategy QIS Portfolios (S7E16)

Bullish:

• $QIS - Simplify's QIS (Quantitative Investment Strategies) offerings provide defensive hedges and carry plays to mitigate tail risk and generate returns independent from traditional markets. These strategies are suggested as potential replacements for fixed income in portfolios due to challenges facing traditional bonds.

  • “We offer tools like the QIS ETF and SMAs with QIS strategies, both defensive hedges like convexity and carry plays like volatility premium to mitigate tail risk and generate returns that are independent from traditional markets or beta sources.”

    Roxton·6:06

  • “I think it could be within a sixty forty portfolio. I think it'd look really good maybe as a replacement for some of the fixed income strategies. Why am I saying that? Because with low yields of gutted their cushion, rising rates like we saw in '22 really hammering their value, any shocks like 2020 where they sold off along with equities not against them, Correlations crept up. Their safe even status is questionable now.”

    Roxton·30:01
• $STRUCPREM - Structural premiums, such as liquidity or volatility, are driven by real-time market dynamics rather than static theories. This approach requires dynamic allocation due to shifts in potency.

  • “Structural premium, like liquidity or vol differ from academic because they're driven by real time market dynamics. They're not static theories. And it's for that reason that we believe that they require that dynamic allocation since there are potency shifts.”

    Roxton·31:55
• $CROSSRISK - Managing cross-asset risks, particularly between rates and equities, is important in the current market environment. OTC instruments are used to cover these risks.

  • “We do have access to using certain OTC instruments so that we can cover some of those cross asset risks. So for instance, rates versus equities is a very typical, very talked about risk these days, especially after rates have been rising over the past few years.”

    Siddharth·39:16
• $VOLPREM - Volatility risk premium strategies can generate positive carry or yield, making them an attractive investment approach in certain market conditions.

  • “To make things more clear, and this is one of the recent examples for us, if you look at volt premium or volatility risk premium, typically, you would see that volatility risk premium can generate positive carry or positive yield.”

    Siddharth·32:56

Bearish:

• $FIXEDINC - Traditional fixed income strategies face challenges due to low yields, vulnerability to rising rates, and increased correlation with equities during market shocks, questioning their status as safe haven assets.

  • “I think it could be within a sixty forty portfolio. I think it'd look really good maybe as a replacement for some of the fixed income strategies. Why am I saying that? Because with low yields of gutted their cushion, rising rates like we saw in '22 really hammering their value, any shocks like 2020 where they sold off along with equities not against them, Correlations crept up. Their safe even status is questionable now.”

    Roxton·30:01