This week on Weighing the Risks we are joined by Corey Hoffstein, Chief Executive Officer and Chief Investment Officer at Newfound Research. Newfound Research LLC is a quantitative investment and research firm dedicated to helping investors pro-actively navigate the risks of investing through thought leadership and investment acumen. At Newfound, Corey is responsible for portfolio management, investment research, strategy development and communication of the firm’s views to clients. Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University.

• [03:35] - Corey’s professional background and what led him to his current role?
• [05:12] - How does Corey define risk and how does he think advisors and investors should think about it?
• [07:51] - Has Corey ever seen someone try to measure “human capital risk?”
• [09:53] - How would Corey define a bubble, and what is a bubble more broadly?
• [11:30] - Does the overall growth in ETF assets under management indicate a stock market bubble or an ETF vehicle bubble? If not, are there other indications we could be in a stock market bubble right now?
• [19:58] - Is the recent popularity of actively managed ETFs a sign that active management might finally have its day in the sun again?
• [27:33] - What is return stacking and what are its potential benefits, and risks, for investors?
• [34:58] - How can advisors and investors diversify their investment process and timing, in addition to just the assets themselves?
• [43:33] - Base case economic scenario and how probably Corey thinks this scenario is
• [50:22] - Bad case economic scenario and how probably Corey thinks this scenario is
• [53:00] - Good case economic scenario and how probably Corey thinks this scenario is
• [58:17] - What does Corey see for the ETF industry and quant investing in its evolution in the coming years, especially in conjunction with AI?

Quotes

[05:25] ~ “In the world of finance, where I have ultimately come down on risk, is: it’s not volatility, it’s not drawdown [and] it’s not these other potential statistical measures. I think the risk that’s most relevant to most investors, generically, is just the risk of meeting their financial goals. ” ~ Corey Hoffstein

[09:53] ~ “I think my tongue-in-cheek answer to this would be, a bubble is something we all collectively regret investing in afterwards. In real time, a better answer would just be, [a bubble is] when price far exceeds fundamentals and/or the utility of something.” ~ Corey Hoffstein

Links

• Corey Hoffstein on LinkedIn
• Newfound Research
• “Money in the Way” by 2 Chainz

Connect with Us

• Meet Rusty Vanneman, Orion’s Chief Investment Officer
• Check Out All of Orion’s Podcasts
• Power Your Growth with Orion

Disclosure(s) - Wealth Management services are offered by Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor. Orion Portfolio Solutions, LLC is a wholly owned subsidiary of Orion Advisor Solutions, Inc. (“Orion”)

The CFA® is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

Access to the services presented is provided solely as a service to financial advisors. Orion Risk Intelligence does not make recommendations or determine the suitability of any security or strategy. Past performance of a security or strategy does not guarantee future results. Orion Risk Intelligence research and tools are provided for informational purposes only. While the information is deemed reliable, Orion Risk Intelligence does not guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with respect to the results to be obtained from its use.

Compliance Code: 3235-OPS-12/18/2024

This week on Weighing the Risks we are joined by Matt Osowiecki, Co-Chief Investment Officer at Water Island Capital. Mr. Osowiecki joined Water Island Capital 2007 and currently serves as Co-Chief Investment Officer of the firm. Prior to being elevated to Co-CIO in 2024, he served as a Portfolio Manager on the merger arbitrage strategy, and he continues to serve as a named Portfolio Manager on several of the firm’s funds. He has been a Portfolio Manager for the Arbitrage Fund since June 2016 and a Portfolio Manager for the Water Island Event-Driven Fund since September 2023. Prior to being promoted to Portfolio Manager, Mr. Osowiecki worked as a Senior Research Analyst on the merger arbitrage team at the firm. Prior to joining the firm, Mr. Osowiecki worked in the Investment Product Division of The Hartford and as a project manager in commercial real estate development. Mr. Osowiecki received a BS from the University of Connecticut.

Key Takeaways

• [02:03] - Learn more about Matt’s professional background and his work at Water Island Capital.
• [03:21] - How does Matt define risk and how does he think advisors and investors should think about it?
• [04:22] - What are some of the various Event Driven Strategies? How do Event Driven Strategies differ from Merger Arbitrage strategies?
• [08:42] - What are the main risks of Event Driven Strategies. Also, has a more aggressive FTC made those risks work? Lastly, what are the implications of her, or a new head of the FTC, for the Event Driven space?
• [15:32] - What are some of the drivers for the strong Q4, and specifically December, returns that Event Driven Strategies seem to foster.
• [16:24] - It is difficult to put Event Driven Strategies into an ETF strategy - how did they accomplish this at Water Island Capital?
• [18:41] - How do Event Driven Strategies dampen volatility in a conventional stock/bond portfolio?
• [20:40] - Base case market scenario and how probably Matt thinks this is.
• [21:40] - Good case market scenario and how probably Matt thinks this is.
• [22:37] - Bad case market scenario and how probably Matt thinks this is.

Quote

[08:42] ~ “The main risk [for] Event Driven Strategies, the obvious one, is that the event doesn’t play out the way the investor anticipates. I don’t want to say it just doesn’t occur, because it is always possible to bet against an event occurring, but the main risk again is that the investor is positioned the wrong way for the outcome of the event.” ~ Matt Osowiecki

Links

• Matt Osowiecki on Linked In
• “Enter Sandman” by Metallica
• Water Island Capital

Connect with Us

• Meet Rusty Vanneman, Orion’s Chief Investment Officer
• Check Out All of Orion’s Podcasts
• Power Your Growth with Orion

Disclosure(s) - Wealth Management services are offered by Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor. Orion Portfolio Solutions, LLC is a wholly owned subsidiary of Orion Advisor Solutions, Inc. (“Orion”)

The CFA® is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

Access to the services presented is provided solely as a service to financial advisors. Orion Risk Intelligence does not make recommendations or determine the suitability of any security or strategy. Past performance of a security or strategy does not guarantee future results. Orion Risk Intelligence research and tools are provided for informational purposes only. While the information is deemed reliable, Orion Risk Intelligence does not guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with respect to the results to be obtained from its use.

Compliance Code: 2897-OPS-11/12/2024