Skill, Technology · 2017. 5. 18. · Essentia Analytics | 16 Excellence Is Achieved By Maximizing...

Clare Flynn LevyFounder & CEO

Essentia Analytics

clare@essentia-analytics.com

Twitter: @cflynnlevy

Skill, Technology & Survival of the FittestESSENTIA-ANALYTICS.COM

@ESSENTIA_SBI

Active managementis now

Survival of the Fittest.

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It’s still all about human decision-making.

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Today, artificial intelligence is solvingsmall world problems.

Investment decision-making is a large world problem.

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O = L + SOutcome = Luck + Skill

(Performance)

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Focus on skill, not performance.

Focus on skill, not performance.

O = L + SOutcome = Luck + Skill

(Performance)

S = CD + UDSkill = Conscious Decisions + Unconscious Decisions

Process. Discipline. Self-Awareness.

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O = L + SOutcome = Luck + Skill

(Performance)

S = CD + UDSkill = Conscious Decisions + Unconscious Decisions

In the long term, the investor with the most skill wins.

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Focus on skill, not performance.

We’re hardwired to herd and react.

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The World’s Best Traders Do It

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$700M L/S EQUITY MANAGER

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We’re hardwired to avoid loss.

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$12bn EQUITY MANAGER

The Vast Majority of Investors Do It

$12bn GLOBAL EQUITY MANAGER

Spot the Difference

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Source: Ericsson, K. A. (2009). Discovering deliberate practice activities that overcome plateaus and limits on improvement of performance. International

Symposium on Performance Science, p.12.

Purposeful Practice

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Source: Ericsson, K. A. (2009). Discovering deliberate practice activities that overcome plateaus and limits on improvement of performance. International

Symposium on Performance Science, p.12.

Purposeful Practice

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Fund Management

Yesterday

Source: Ericsson, K. A. (2009). Discovering deliberate practice activities that overcome plateaus and limits on improvement of performance. International

Symposium on Performance Science, p.12.

Purposeful Practice

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Fund Management

Yesterday

Fund Management Today & Tomorrow

Process. Discipline. Self-Awareness.

Skill = Conscious + Unconscious Decisions Decisions

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Excellence Is Achieved By Maximizing Skill

Are You Already Using a Data-Driven Feedback Loop?

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Play to Your Strengths

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$700M L/S EQUITY MANAGER

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$12bn EQUITY MANAGER

Minimize Your Weaknesses

$12bn GLOBAL EQUITY MANAGER

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$12bn EQUITY MANAGER

Minimize Your Weaknesses

$12bn GLOBAL EQUITY MANAGER

Who it’s for: PMs who are exiting losers late

What it does: Improves exit discipline;

Mitigates loss aversion

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One Small Nudge…

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Exiting1 month earlier = +0.14% p.a.

$12bn EQUITY MANAGER

… Can Make a Significant Difference to Alpha

$12bn GLOBAL EQUITY MANAGER

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“I believe that the biggest problem that humanity

faces is an ego sensitivity to finding out whether one is

right or wrong and identifying what one’s

strengths and weaknesses are.”

Ray Dalio

Technology is the problem,and the solution.

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“It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.”

Charles Darwin

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www.essentia-analytics.com

Twitter: @essentia_sbi

Get in touch:Clare Flynn Levy

clare@essentia-analytics.com