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CME Group

30 Candid CEO: Don’t Tweak Your Models! with Aref Karim of Quality Capital Management – 2of2

“We are not a firm that is constantly tweaking models, trying to calibrate.” – Aref Karim (Tweet)

Welcome back to the second part of our discussion with Aref Karim. In this episode, Aref discusses his firm’s strategies and the broader philosophies that drives what he does. He also talks about market volatility, the need to innovate while keeping models intact, his perspective on drawdowns, and what investors should be asking their managers. You’ll learn something about the art galleries and music that fuels his inspiration, and what he thinks it takes to become a successful hedge fund manager.

You will be amazed by the candid truthfulness of Aref at the end of the episode as he speaks about his personal life and the current state of his business. Thanks for listening to Part 2 of the conversation, I hope you enjoy it.

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In This Episode, You’ll Learn:

  • What strategies his firm uses regarding commodities and currencies.

    “Some people make money by calling directions in the markets and others do it by just changing the level of conviction.” – Aref Karim (Tweet)

  • How Aref explains his investment strategy in a concise and understandable way.

    “What we have is a mechanism which we believe quite efficiently tries to change the levels of convictions so that the portfolio is looked at as a whole.” – Aref Karim (Tweet)

  • Why volatility is an important source of information when making investment decisions.
  • How to make the best of the current market environment and innovate.

    “The environment we’ve seen over the last few years since the crisis has been extraordinary, it has been unusual.” – Aref Karim (Tweet)

  • Why his firm evolves their model on a macro level and does not change the model every time the markets change.
  • How QCM manages risk.
  • Aref’s perspective on drawdowns and how to make investors comfortable with drawdowns and see them as an opportunity.

    “You can never predict drawdowns – it’s like going on a holiday at the beach and expecting perfectly sunny weather at the right time, and then suddenly encountering rain and adverse weather – those things just happen.” – Aref Karim (Tweet)

  • How investors should be evaluating the track records of managers given that some firms’ models have changed over time.
  • How growth and technology have effected the relationship managers have with potential investors and why it is still best to meet the manager in person.
  • When investors ask questions of potential managers, the economic alignment question often gets left out.

    “They just want to jump straight into the model, does the model do this or that, as opposed to understanding maybe the higher philosophy.” – Aref Karim (Tweet)

  • What it takes to be a successful fund manager: treating it like a business even if you are investing for yourself.
  • Aref’s personal appreciation for the arts, art galleries, opera, and jazz. How it inspires him.
  • How Aref sees the current state of QCM and why he believes in its future.

    “Assets have sort of come down from where they were – but we look at that as real, this is how things are. Longtermism is something that is very crucial to me, I’m passionate about it.” – Aref Karim (Tweet)

Resources & Links Mentioned in this Episode:

  • Learn about Long Volatility vs Short Volatility, mentioned as “Long Vol” by Aref in the episode.
  • Aref’s suggestions on becoming a successful fund manager:
    • “Get rid of cognitive biases and avoid emotional biases.” – Aref Karim (Tweet)

    • “Try and keep [the model] solid, simple, crisp, and clear – where you know how the parts are moving together.” – Aref Karim (Tweet)

This episode was sponsored by Swiss Financial Services:

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“The old touch and feel, the real story – the right story – from the managers side is a scarce opportunity these days.” – Aref Karim (Tweet)