112: Fulcrum's Suhail Shaikh – Absolute Return Investing, Market Timing and The Role of Luck

Suhail Shaikh is Chief Investment Officer of Fulcrum Asset Management and is the portfolio manager of Fulcrum’s Discretionary Macro and Diversified Absolute Return strategies. In today’s incredibly volatile environment of tariff wars and deglobalisation, investors tend to be more sensitive about the level of their absolute returns, than their performance against the benchmark. In this episode, we delve into the philosophy of absolute return investing, we talk about the role of skill versus luck, the use of Nowcasting, learnings from the COVID-19 pandemic and the ever controversial topic of market timing. Enjoy the show! 02:00 Started off working on the intranet and taught myself HTML 02:30 Internship at Goldman Sachs 03:30 A lot of well-known global macro traders made their money during equity market crashes 05:00 If you are constantly looking for the next accident, then 90 per cent of the time you are wrong. It is important to make money while the sun is still shining 10:00 Crisis risk offset and momentum during COVID 13:30 Leaving the model aside 15:00 Using Nowcasting for analysis 18:30 AI has been more useful to us in portfolio construction, risk management, scenario analysis and stress testing. I’m more sceptical about AI being helpful in alpha generation. 22:30 Behavioural finance and Fulcrum paper: ‘Don’t Bet the Ranch’ 23:30 To determine whether someone is skilled or lucky, look at the number of views they take over time 31:30 Sizing [trades] is a complex topic 33:00 The role of dynamic asset allocation 34:00 “The biggest accidents in asset management happen when, in a draw-down, people don’t know whether they are benchmarked or absolute return” 35:00 “Dynamic asset allocation is market timing” 40:00 Global Macro and the Magnificent Seven 42:00 Bitcoin and momentum strategies 44:30 Some clients explicitly prohibit us from investing in Bitcoin The paper "Don't Bet The Ranch: Hit ratios, asymmetry and breadth" can be found at: https://fulcrumasset.com/insights/investment-insights/dont-bet-the-ranch-hit-ratios-asymmetry-and-breadth/