- Business Insider named 10 investing heavyweights to its list of 100 people transforming business.
- They include the godfather of smart-beta investing, a millennial running the research operation at the world’s largest hedge fund, and a short seller who can move the market with a single tweet.
- See the full list of the 100 people transforming business here.
The investing landscape has seen an incredible amount of upheaval in recent years – and it has technology to thank.
Quantitative investing has blossomed as a money-making juggernaut using techniques never seen before. Artificial intelligence and supercomputers have armed traders with an unprecedented amount of information. Markets are moved by short social media posts. And it’s never been easier for young professionals to invest their own money.
We identified 10 visionaries who are either helping usher in investing’s technological revolution, or doing something wholly unique and influential. Read on to see the full list of 10 people transforming investing.
Rob Arnott, chairman and founder of Research Affiliates LLC, helped commercialize quant investing
Rob Arnott has built his career on challenging convention.
“Inherent scepticism is probably the single most dominant contributor to my career,” Arnott told Business Insider. “Basically, when I hear something that’s conventional wisdom, I’ll often test it.”
“Does it work? And does it work for the reason people think it does? When it doesn’t, I’ll write an article about it and publish my research, and that’s when the fun starts.”
Now the world’s biggest firms pay Arnott for advice. He serves as chairman and founder of Pimco subadvisor Research Affiliates LLC, where he advises on more than $US200 billion.
Perhaps his best-known accomplishment is pioneering an investment strategy known as “smart beta.” The backbone of smart beta is a technique he’s created and popularised called fundamental indexation. And it’s helped push quantitative analysis into the investing mainstream.
Pravit Chintawongvanich, equity derivatives strategist at Wells Fargo, brought volatility trading to the mainstream
During his time as head of derivatives strategy at Macro Risk Advisors, Pravit Chintawongvanich provided investors with an entry-level education to the complicated world of volatility. Along the way, he brought splashes of colour by chronicling the moves of traders like “50 Cent” and the “VIX Elephant.”
Now, Chintawongvanich plies his trade at Wells Fargo, where he still uses the options market as the backbone for his research. He says options are invaluable tools for both directional trades and hedging, not to mention the role they play in diversifying portfolios.
“The options market can give you useful information that you’re not going to see anywhere else,” he told Business Insider. Chintawongvanich’s research around volatility and its associated options was thrust into the spotlight in February 2018, when the Cboe Volatility Index, or VIX, saw an aggressive spike.
All his warnings around shorting volatility came to roost. And in terms of the long-volatility trade, the investing public had two easy points of reference in the form of 50 Cent and the VIX Elephant. Chintawongvanich had made volatility accessible and understandable for they layman – no easy feat.
Lori Heinel, deputy global chief investment officer at State Street Global Advisors, is championing a gender-diversity revolution in corporate America
On a rainy morning in March 2017, workers installed a bronze statue of a young girl, with fists clenched on her hips, standing tall opposite the Wall Street bull in downtown Manhattan.
New Yorkers quickly recognised that Fearless Girl was more than just a new tourist attraction. State Street Global Advisors, one of the world’s largest asset managers, had strategically installed it on the eve of International Women’s Day to kick-start a campaign for gender diversity in America’s boardrooms.
Lori Heinel, its deputy chief investment officer, remains the most public voice of the $US2.5 trillion asset manager’s efforts.
State Street’s widely used index funds serve as major pipelines of capital to public companies. The firm also formulated a Gender Diversity Index exchange-traded fund (ticker: SHE) to track the performance of companies that advance women in leadership.
By extension, the company has leverage to make demands of company boards on things that improve long-term performance and shareholder returns, such as diversity.
Since the campaign launched two years ago, Heinel has found that more than 300 of the companies State Street engaged with have added female directors to their previously all-male boards.
“Other major asset managers and asset owners have also started to advocate on behalf of having women in the boardroom,” Heinel said. “We count as many as $US15 trillion in assets that are now taking a stand.”
Barry Hurewitz, global head of UBS Evidence Lab Innovations, is redefining how investors use ‘alternative data’
One could argue that the name given to UBS’ Evidence Lab is a bit of a misnomer, since it consists of nearly 50 labs with experts worldwide who focus on topics ranging from climatology to web scraping.
Hurewitz has positioned the research unit to be more than just an aggregator of unconventional datasets. The Evidence Lab first leans on UBS’ army of sell-side analysts to discover investors’ most pertinent questions. From that standpoint, it then mines the data to provide them with answers, including the unexpected.
Hurewitz has led the Evidence Lab through tedious investigations, like stripping down a Tesla, Chevy Bolt, and BMW i3 to understand how electric cars stack up against each other and the against the industry they’re trying to disrupt.
Findings from such experiments are compiled in an Excel workbook, making it easy for finance professionals to slice and dice them to their satisfaction.
“This kind of common library of all this content cleansed, enriched, organised, brought into a format that the majority of the world is very comfortable in is very different than anything that’s out there in the world – at least that I’ve come across,” Hurewitz said.
Karen Karniol-Tambour, head of investment research at Bridgewater Associates, is the millennial overseeing a major operation at the world’s largest hedge fund
Bridgewater’s “Daily Observations” note has become a bible for thousands of investors seeking the best ideas on financial markets. Karen Karniol-Tambour, the firm’s head of investment research, oversees the engine that produces these client-exclusive musings.
The daily notes, on topics ranging from portfolio diversification to how the world’s economies are changing, synthesise Bridgewater’s decades of following the markets and offer an alternative perspective on trends that everyone else is watching.
Karniol-Tambour is one of the most powerful women and millennials in finance, having shot up the ranks of the largest hedge fund to her current position at age 31.
Recruited from Princeton 12 years ago, she quickly secured the mentorship of Bob Prince, a cochief investment officer, as a junior staffer on his team. She also had the opportunity to work directly with Bridgewater founder Ray Dalio during the financial crisis as part of a small ‘SWAT’ team that sought out market opportunities the firm had not yet exploited.
Karniol-Tambour ties her rapid success directly to Bridgewater’s famous culture of radical transparency, with its brutally honest feedback. “If we want to make money at the firm, we have to be completely willing to ask questions about each other’s ideas,” she said.
Chida Khatua, cofounder and CEO of EquBot, is the first CEO to merge artificial intelligence and traditional stock picking into a product anyone can invest in
If you’re looking for the intersection of artificial intelligence and traditional stock picking, it probably looks a lot like Equbot’s AI Powered Equity ETF.
The roughly $US150 million fund – which cofounder Chida Khatua says is the first of its kind – is powered by IBM’s Watson supercomputing technology. At its core, the ETF constantly analyses information for 6,000 US-listed companies, then overlays a human-advisory component.
It’s also doing quite well, boasting a 21% return so far in 2019, a full 6 percentage points more than the benchmark S&P 500.
Khatua is a major driving force behind the fund and its success. He has two master’s degrees in computer engineering, including one from Stanford, and 18 years of experience working in machine learning at Intel. His expertise is the backbone of EquBot.
“Working at Intel gave me insight into how machine learnings and AI technology are maturing, and how the benefits can really be maximized,” Khatua told Business Insider in an interview.
He continued: “It gave me a unique perspective, and I asked myself for a while when the right time would be to go out and create some product that can help many people.”
Marko Kolanovic, global head of equity and derivatives strategy at JPMorgan, brought quant criticism into the mainstream
Marko Kolanovic thinks people spend too much time thinking about fundamental drivers that dictate market action. Sure, it’s the most accessible and easily understandable area, but it doesn’t tell the full story.
Kolanovic, who serves as global head of equity and derivatives strategy at JPMorgan, instead prefers to look at the less obvious push and pull occurring under the surface of markets. He notes that these forces are largely driven by options and quantitative strategies, of which he’s a keen student.
“You need to look at other potential drivers – whether that’s options hedging, a spike in volatility that prompts selling, or a change in trend,” he told Business Insider. “You need to look at positioning and see if a certain type of investor is stressed.”
He continued: “You see the signal, you see the flows, and that may be a more plausible explanation for the market move than the story of a company missing earnings.”
Kolanovic’s stature grew in prominence when a series of calls he made ended up coming true. His research started moving markets. And in the process he helped bring awareness around quant trading to the investing mainstream.
Andrew Left, founder of Citron Research, is a short seller who moves markets with his tweets
Short sellers have existed for a long time. But they have obtained a new level of reach and influence since the advent of social media. No one knows it better than Andrew Left, the short seller and founder of Citron Research. He’s reached the top of the field with a big assist from his widely followed Twitter account.
Of course Left didn’t get where he is today by simply tweeting. He had to establish a track record. His best-known success story was his bearish call on Valeant Pharmaceuticals, which he branded a “pharmaceutical Enron.” Now that he’s made a name for himself, Left can move a stock with a single tweet.
“I try to use my Twitter judiciously,” Left told Business Insider. “The reason why I think my tweets are so effective is I don’t use it as a platform to talk about Trump, what I had for dinner, my opinion on the State of the Union address.”
He continued: “You know that if I tweet something, it’s because it’s actionable. That’s the key thing to me. I try to put out pieces that are not only actionable on the stock but also make people think where these stocks live in a particular universe.”
Jon Stein, CEO of Betterment, founded the first unicorn robo-advisor
Jon Stein founded the robo-advisor Betterment because he thought humans needed help saving money for the long term. In his mind, financial institutions offered too many conflicts of interest and snap judgments and not enough objective assistance.
Humans are “not rational – we’re impulsive,” Stein told Business Insider. “We’re not well evolved to think about things like retirement or even next year.”
The company now manages $US16 billion in assets for 400,000 clients using a blend of algorithms and human advisors, and it’s contributed to a wave of innovation in the industry.
When a human creates an account with Betterment, they’re asked a series of questions about their investment goals and their views on risks. Based on their answers, Betterment chooses from seven stock ETFs and six bond ETFs to maximise the user’s returns. It can rebalance their portfolio and also minimise their tax bills.
There’s no minimum balance for a basic digital account and no fees on trades. While users can call the company and talk to an investment adviser, Stein says a majority are happy letting an algorithm handle their portfolio.
“In code everything is very clear,” he said.
Vlad Tenev and Baiju Bhatt, the cofounders of Robinhood, built the go-to online brokerage for millennials
Robinhood cofounders Vlad Tenev and Baiju Bhatt were rejected by dozens of venture-capital investors while seeking funding for Robinhood. Less than five years after its launch, the no-fee trading app is valued at $US5.6 billion.
The appeal is clear: Robinhood is making it easier for young people to get into trading. It’s also become a valuable source of information for how that still underrepresented group thinks about investing. And did we mention it’s easy to use?
“The initial product was very simple, very understandable,” Tenev told Business Insider in a 2017 interview. “People got it right away.”
Encouraged to go into finance since he was young, Tenev founded two companies before Robinhood. But the trading app was his breakthrough: Hundreds of thousands of people joined its waiting list before the public launch, and the company now says it has 6 million accounts.
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