Weighing The Risks

Corey Hoffstein of Newfound Research - Surging Growth In ETFs: A Sign of A Market Bubble, or Just The New Preferred Vehicle for Investors?

Episode Summary

This week, Rusty Vanneman and Nick Codola talk with Corey Hoffstein, Chief Executive Officer and Chief Investment Officer at Newfound Research. In this episode, we will discuss whether ETFs are the new preferred vehicle for retail asset management, just as Mutual Funds replaced individual stocks for the average retail account, or is this record-breaking growth a symptom of financial market exuberance? In addition, we take a closer look at what these implications might mean for equity markets, fixed incomes, as well as alternatives.

Episode Notes

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

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