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Clare Flynn LevyFounder & CEO
Essentia Analytics
Twitter: @cflynnlevy
Skill, Technology & Survival of the FittestESSENTIA-ANALYTICS.COM
@ESSENTIA_SBI
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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.
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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.
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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
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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
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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
Fund Management Today & Tomorrow
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Process. Discipline. Self-Awareness.
Skill = Conscious + Unconscious Decisions Decisions
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Excellence Is Achieved By Maximizing Skill
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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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CONFIDENTIAL | 19
$12bn EQUITY MANAGER
Minimize Your Weaknesses
$12bn GLOBAL EQUITY MANAGER
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CONFIDENTIAL | 20
$12bn EQUITY MANAGER
Minimize Your Weaknesses
$12bn GLOBAL EQUITY MANAGER
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Who it’s for: PMs who are exiting losers late
What it does: Improves exit discipline;
Mitigates loss aversion
CONFIDENTIAL | 6
One Small Nudge…
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CONFIDENTIAL | 22
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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CONFIDENTIAL | 23
“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
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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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Free white papers & case studies at:
www.essentia-analytics.com
Twitter: @essentia_sbi
Get in touch:Clare Flynn Levy