Investing Legend Roy Niederhoffer about Pushing the Boundaries of Quant

Sep 28, 2021

We had a very special guest this week – Roy Niederhoffer, founder and president of R. G. Niederhoffer Capital Management, a NY-based quantitative investment firm. With a strong musical background and an original plan to become a neuroscientist, Roy might have led an academic life if it weren’t for his programming skills and an offer to join his older brother’s hedge fund, one that he couldn’t refuse. He joined us for a fascinating conversation, covering topics such as:

• His early life, a diverse set of interests and becoming a highly-skilled generalist
• Striking out on his own – why would an institution ever invest with a 26-year old running computers in his living room?
• Developing short-duration strategies that are uncorrelated to both traditional and alternative investments
• Long volatility vs short volatility strategies
• The inescapable dopamine rush of capital markets and the importance of managing emotions
• Trend-following, convexity, and why the frequency of observations matters so much
• Behavioral neuroscience applied to markets
• Leaning into the work of Danny Kahneman and dissecting his magnum opus over dozens of weekly sessions
• Identifying price patterns that will trigger predictable emotional responses from market participants – therein lies the edge
• The difference between strategy management and risk management
• Printing of fiat money and the conditions for an elimination event that can wipe out multi-generational wealth

He also summarized his general investment theory, which seeks to identify asset-class characteristics that can be generalized, those that will remain idiosyncratic, and some that might eventually spill over into other markets. Roy is a true polymath, with a unique perspective and a generous disposition to share his knowledge.

 

Thank you for watching and listening. See you next week.

 

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

 

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.