AI Could Change Markets Forever | Systematic Investor | Ep.417

Summary

Niels Kaastrup-Larsen and Rob Carver discuss a calm-but-tense market backdrop, focusing on government debt, bond yields, and why bonds may be regaining trend-following relevance. Rob discloses shorts in US and Korean 10-year bonds and a long equities position, while warning that the Simplify CTA ETF has drifted from a diversified managed-futures strategy into essentially an energy fund. They also cover systematic investing, discretion, AI risks in quant research, and whether volatility should change trend speed. The conversation closes with a review of quant equity factors and manager diversification.

• Government debt and bond yields dominate the early discussion, with Treasury buybacks seen as small relative to the market.
• Rob Carver discloses short US 10-year and Korean 10-year bond positions and remains long equities with reduced overall risk.
• Simplify's CTA ETF is criticized for style drift from diversified managed futures to mostly long energy with no shorts.
• Trend following has had a solid August and September, but equity momentum may be weakening.
• Rob explains why robust optimization and simple systematic rules matter, and limits discretion to entry decisions.
• AI poses research overfitting and implementation risks; AI-driven retail herds could affect volatility but are hard to trade.
• VIX-based adaptation of trend speed is interesting but not clearly robust enough to implement.
• Quant equity managers show increasing idiosyncratic performance, making manager diversification valuable.