Giuseppe Paleologo on Quant Investing at Multi-Strat Hedge Funds

Quantitative investing is one of those terms that you hear all the time, but there's various explanations of what it actually means, or how quants actually make money. And of course, the term means different things in different contexts. In this live episode, recorded at the Bloomberg Equity Intelligence Summit on June 12, we speak again with Giuseppe Paleologo, the head of quantitative research at Balyasny Asset Management. We talk about his role, what quant investing actually is, and what the future of the space actually entails. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 0:59Speaker 01

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

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• 2:32Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Jill Weisenthal, normally joined by my co-host Tracy Alloway, but she's on vacation today, so it's just me in this intro. But in today's episode, you will hear a conversation taped live at Bloomberg's Reimagining Information Forum on June 12th. We spoke with Gapi Paleologo, Global Head of Quantitative Research at Ballyhasney Asset Management. He has a new book out. It's called The Elements of Quantitative Investing. Neither of us have read it because it would go way over our heads because we're not quant, so we don't know how to read that stuff. But Gapi is great at explaining all of this stuff in clear English. So we had a great conversation and we hope you enjoy listening to it.

• 3:14Tracy Alloway?

  So just to begin, I'm going to start with a really, really dumb question, possibly, but isn't all investing quant investing nowadays? I mean, every investor has access to some form of quantitative.

• 3:25Speaker 06

  They're all using numbers.

• 3:26Tracy Alloway?

  Yeah.

• 3:27Speaker 06

  I guess, yes. End of answer. Yeah.

• 3:31Tracy Alloway?

  So we're done here.

• 3:32Speaker 06

  I think so. I think so. I mean, pretty much everybody uses some kind of quantitative overlay, right? But to different degrees. So I have a friend who worked for one of the Tiger Cubs and they refused to use a sharp. They refused to use logs in a spreadsheet because they said that they were dangerous. Probably they took the log of a negative number. And so, yeah, no, two different degrees. But yes, there is some quantitative culture seeping through.

• 4:00Tracy Alloway?

  Okay, so what defines quantitative investing? How would you differentiate that from, I don't know, value investing, discretionary investing?

• 4:08Speaker 06

  Okay, I think that there are several possible answers. So I'm going to go with one answer that I read in my life as a quant, I think. It's a Wiley book. It's a very good book, by the way. And I think Cliff Asness defined quantitative investing as

• 4:31Speaker 06

  Basically investing in a large cross-section of assets having a relatively low edge, low expected return in all of them. And so that's his definition, but it's not quite, I think, complete enough at this point because you can also be a quantitative investor, trading a relatively narrow cross-section of assets, but with high frequency, right? So what matters really is the number of bets in a sense that you are gonna take, right? So I think that probably is, if you have a large number of independent bets or quasi-independent

• 5:13Speaker 06

  bets, this means that you need to be able to scale your method to a large number of independent bets, and this means that you are in some way a quantitative investor.

• 5:25Joe Weisenthal?

  Speaking of roles and jobs, what do you, Global Head of Quantitative Research at Belliassini, what is your job? You've been there like about six months, what does the job entail at a, at a fund, at a firm like Belliassini?

• 5:36Speaker 06

  Okay, Global Head of Quantitative Research, okay. So basically, I am the Head of Quantitative Research for equities, and maybe one day in the future, I will do, you know, some commodities or fixed income. But I'm perfectly happy to serve equities, you know, both discretionary and systematic. What we do is, I'm in my group mostly, I mean, I am in meetings, so I don't do any work. So we, in a sense, provide centralized quantitative services for, for the firm. So the first backbone thing that we do is you develop factor models wherever you can, right?

• 6:20Speaker 06

  So for equities at different horizons, ideally, you would like to develop them for other asset classes, but you know, factor models are the backbone of a lot of quantitative investing nowadays. And then hedging at the firm level and at the individual PM levels, which is apparently very simple, but actually it's very deep as a problem. And then we do portfolio advisory services, which is basically you go to PMs, you help them construct better portfolios, you help them understand their performance, which is extremely important, manage their risk, manage their drawdown, on occasion be their therapist.

• 6:59Speaker 06

  But this is what we do.

• 7:01Tracy Alloway?

  I know you're in meetings all day, but you know, if you were someone on your team, how would you be coming up with actual ideas for factors? I hear people who sometimes come up with ideas from Odd Lots episodes. Some of them have even turned out reasonably okay. But how does idea generation work? You sit down, you're like, I need to come up with a new factor today. What are you doing? What are you looking at?

• 7:23Speaker 06

  Okay, I want to specify a little bit more what's a factor, because otherwise it gets a little bit too vague.

• 7:33Speaker 06

  So like, there are factors and factors. So there are some factors that are real factors. And what are those? Those are essentially attributes of some kind that you can assign to your investable universe. And there are sources of returns that affect the individual securities through this characteristic. And they are pervasive, so every asset is in some form affected by this systematic source of return, number one. So they've got to be pervasive. The second thing is they've got to be persistent, right?

• 8:15Speaker 06

  So it's not the case that I have a lot of factor returns for two months and then nothing for 10 months, right? So that's not really a factor. And then possibly the third characteristic is that they have to be interesting. So they have to be in some way vaguely interpretable. So when you, you know, you match these requirements, it's a factor. Now, now imagine that you have the Trump factor. Let's say if Trump wins, a few stocks will definitely benefit. A few stocks will definitely not benefit from the election of Trump versus Kamala Harris. Another

• 8:59Speaker 06

  Source could be, well tariffs, right? Another source could be AI. Okay, AI definitely, right? Doesn't fit the characteristic of being pervasive because there is a relatively small universe that's affected by the AI theme. It is likely not to go, not going to be persistent. So it wasn't here like a few years ago and it will probably not be here in five years because everything will be, to some extent, AI. It's interesting, but that's a theme. It's not a factor. That's what I would call a theme. And, and there are also some like mathematical characteristic of a factor versus a theme.

• 9:38Joe Weisenthal?

  Like what?

• 9:39Speaker 06

  So basically, you can create a portfolio that tracks a factor and this portfolio will have a relatively small idiosyncratic risk. So it will be truly a reproduction of the systematic source of return that you were observing through the assets. So imagine that this systematic source exists, but you do not observe it directly. It's latent. It's out there. But you can actually reconstruct it with a portfolio. A theme is, let's say, 10 assets. You cannot really reconstruct it the same way because 10 assets are just too few to diversify away the idiosyncratic source of returns

• 10:23Speaker 06

  of the individual assets.

• 10:25Joe Weisenthal?

  So when you're like, I'm thinking about factor identification, how much of the money that you make, the actual returns, come from essentially factor identification? Or being able to identify a factor before other measure? Identify a factor that exists before other competitors out there in the market?

• 10:45Speaker 06

  Okay, that's a great question because I know, I think, I think I know the answer.

• 10:48Joe Weisenthal?

  Okay, great.

• 10:50Speaker 06

  But, and I mean, the reality is this. I think, you know, somebody else's factor is my alpha and vice versa, right?

• 10:56Joe Weisenthal?

  Say more.

• 10:57Speaker 06

  There are well-known factors. Let's say some variety of value and momentum or reversion. And, and you can bet on those and you diversify away everything else. And what you get is, basically, you get some returns that are priced, priced in the sense that, as you know, you you pay basically some risk for that, right? So this is priced return, and that's great. But once upon a time, like, these were not public knowledge. If you were lucky enough to be a hedge fund in the 80s, and I've I've met a few, you know,

• 11:36Speaker 06

  and you were maybe also investing in Europe, these factors were really working very well. And they were alpha, they were not called factors. You know, the first, I think, published paper is probably 89 for momentum, right? Now, there is alpha, and alpha is basically, ideally would be a return that has no associated risk to it. It hardly ever exists. So what you really have are factors that exist at some frequency, or in some universe, or with some characteristic that nobody else has found yet, and so they can be exploited more.

• 12:16Tracy Alloway?

  How do you make sure that when you're isolating a particular factor, you're not accidentally taking into account some other dynamics? So, you know, maybe you want to invest in a bunch of companies with, like, pricing power during the tariffs, but actually, your cohort of companies ends up just looking like a bunch of big tech companies, or something like that?

• 12:36Speaker 06

  I mean, the short answer, without explanation, is that you can, but the long answer is a little bit more involved. If you have true characteristics, like, I don't know, a tariff and a tech classification that are 100% correlated, well, then you really have only one, you don't need both, right? So, okay. But if I have in my, let's say, arsenal of of factors, if I have multiple factors, they're somewhat overlapping, but not completely overlapping, then you can build a portfolio that separates the impact of of one from the other.

• 13:17Tracy Alloway?

  So you try to isolate them?

• 13:18Speaker 06

  You can you can isolate them, you can kind of purify them. Now, there is also the scenario where there are factors that are not in the model, and they should be, and and basically, those, they complicate the picture a little bit. But otherwise, if you have a reasonable model... You are you're going to be able to separate them to understand what's the relationship. You can create a portfolio that exploits the first one and then create a second portfolio that is uncorrelated to the first one that exploits the second one.

• 14:10Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 14:26Speaker 07

  We're seeing a lot of insocial players come in, digital asset dedicated hedge funds, high frequency traders and that sort of thing, and folks who service insocial clients.

• 14:34Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Reece Merrick of Ripple says.

• 14:42Speaker 07

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 15:02Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 15:12Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw. innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 15:55Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 16:35Joe Weisenthal?

  Just zooming out for a second again, and this sort of relates to Tracy's first question, but also, I guess relates to my first question. If you have a fund and it has various PMs and analysts in there, is there a difference between quant at your level, which is at the fund level, versus, say, a pod or a PM whose specialty is quant trading? And are there different definitions or different senses in which that term can apply?

• 17:02Speaker 06

  Yeah, the fact is that, you know, quant is a very, very generic label nowadays.

• 17:09Joe Weisenthal?

  Yeah.

• 17:10Speaker 06

  So there are many, many quants and they do all sorts of very interesting jobs. Some of them are just differentiated because they live in different constructs. So nowadays, in a platform, especially in a quantitative one, it's not impossible to see pods and center groups. Okay, so that's one distinction. So what's the, what's the difference? In a pod, you typically have a siloed group. I'm probably unstating the obvious, but you know, you have a siloed group. They don't communicate with other pods. You want, at the firm level, to have independent sources of alphas.

• 17:52Speaker 06

  And their payout typically is a percentage of their P and L after costs. Okay, and then you're a quant in a pod. In a center group, typically you are part of a larger group. And the group will hopefully have large capacity. So these are, you know, a larger program, like a larger research program. Their compensation tends to be more discretionary, and that's a center group. Then you have all sorts of other quants. So you have people like me who serve the firm at the center level. I also serve the leadership of the firm.

• 18:36Speaker 06

  And then you have people doing, who doing, doing, for example, execution research. She's extremely, is extremely complex and interesting, right? So it's not black and white. Like you can do execution research and, and be responsible for some P and L. It's very, very, very rich nowadays and very specialized.

• 18:58Tracy Alloway?

  I was actually going to ask about execution because when we're talking about quant investing, I think a lot of questions are around factors and idea generation. But you have all the, I would assume boring stuff like liquidity, trading costs that you also have to think about. How do you actually incorporate those into your, your strategies?

• 19:19Speaker 06

  So you can do it in a variety of ways. It depends, first of all, what position the firm occupies in the ecosystem. So if you are a high-frequency trading company, most likely you are using, you know, your own capital because you are capacity constrained. So, you know, you don't need a lot of capital. So those firms exploit market microstructure, level information. Okay, so in a sense, a high-frequency trading firm.

• 19:52Speaker 06

  Does not have a market impact model in the traditional sense. They don't see parent orders, right? They execute at the microscopic level. If you are a hedge fund, typically you trade a lot. You have your own data set of orders. These data sets differ a lot. So you could have a market impact model for a quantitative trading group or a strategy. And you could have a different market impact model for hedging and a different market impact model for fundamental investing. And then what you get is basically a term, a function that you place in your optimization problem

• 20:34Speaker 06

  that hopefully helps you size the portfolio or trade the portfolio optimally. And this is extremely important. You know, market impact is a very, very sizable

• 20:49Speaker 06

  fraction of the lost P and L of a firm.

• 20:56Joe Weisenthal?

  What, as of today, what value is there in your world of specifically generative AI, L L Ms, et cetera? What, how do you, how do you currently or not currently get actual value out of them?

• 21:15Speaker 06

  Okay, so on this, I have really relatively little to say that's, that's original, but.

• 21:21Tracy Alloway?

  Tell us everything your employer is doing with AI.

• 21:24Speaker 06

  Yes, they'll send you their resume.

• 21:27Tracy Alloway?

  Thank you.

• 21:28Speaker 06

  But I think, okay, just let's recap the basics, right? So the basics are, at least for the time being, everybody is trying to be more productive with AI, right? So you want to have all your documents. You want to have now, you know, what perplexity has a finance module. I think one day soon, maybe Bloomberg will not have the keywords any longer. You just give, you know, Bloomberg a task and it will grab all the pieces of information and hand it over to you. And maybe you can schedule it. All of this is relatively table stakes.

• 22:09Speaker 06

  I mean, the agentic aspect is not yet, but it will become pretty soon. I think it's going to be very hard to compute with the likes of maybe Bloomberg, but for sure, let's say, you know, the big hyperscalers. So that's one. At the investment level, it's much more complicated. So in strategies where there is a natural richness in data, you can definitely use, if not deep learning or AI, but you can definitely use very advanced machine learning algorithms. And you do not have a data snooping problem. You do not have a backtesting problem.

• 22:54Speaker 06

  And so you are in a data-rich environment and you can do that. And it's not a secret that, for example, XTX has a very large on-prem, you know, number of Nvidia cards. I don't remember, H100 or something like that. So that's one thing, right? The question is really what's going to happen to the slower investment styles? And my view is that hopefully, large firms like mine will have an advantage. But we'll see, right? Why? Because we do have the scale. We have a large number of PMs. We have a lot of historical data. We have a lot of proprietary data that nobody else has.

• 23:38Speaker 06

  So maybe that will work out. But how to make it happen? I don't know, because things are changing so fast. And also, I'm relatively a tourist in the area. So I'm trying to learn a little bit more about it.

• 24:08Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 24:49Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 25:30Speaker 02

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• 26:23Tracy Alloway?

  You mentioned proprietary data, and this comes up a lot where people talk about, "Well, the competitive advantage nowadays really is that data set." I mean, is that, is that true? If I get something really cool and unique, I can automatically become, I don't know, a billionaire trader if I can figure out how to execute on it? Is that all there is?

• 26:40Speaker 06

  Maybe, yes. I have very weak beliefs on this. I don't know. Maybe, yes. We'll find out.

• 26:45Tracy Alloway?

  Well, so where are people getting interesting data sets from?

• 26:48Speaker 06

  I mean, you get interesting data from observing human beings actually investing. And you don't get to see a great PM investing, but I do. That's, that's the benefit.

• 27:01Joe Weisenthal?

  So from your central position, you just get to see a lot of activity. And you get to see novel data that other people don't get to see simply by being in the center of all of these different trades and everything. And that gives you a sort of higher abstraction layer, or whatever it is, that someone else in the market doesn't have.

• 27:20Speaker 06

  Yeah. And, and it's possible that, not in the distant future, good PMs will become good because they can improve on themselves by basically playing, or training, or having a baseline of an agent that reproduces their behavior. So, you know, there is an alter gappy, well, I'm not a PM, but an alter whatever, who says, "What would you do?", right? And you get a baseline behavior. And then you can think about it, and you could say, "Well, I would do something different." And then that becomes an example in a reinforcement learning process where, you know, the AI keeps learning from you, and you keep improving because the baseline is changing.

• 28:02Tracy Alloway?

  So before we came out here, I asked Perplexity to come up with a new factor. And it came up with something called the policy agility factor, which is supposed to be that countries that display policy flexibility have better outperformance over the longer term. Countries that are able to more quickly adapt to changing situations are outperformers over the long run. Can you grade that factor? I didn't do a back test, but like, if someone brought you an idea like that... Not me, perplexity. I don't want you to insult me over the next five minutes. What would you say to them? What are the problems with this?

• 28:42Speaker 06

  I mean, no, no major problems. There are questions. So the first thing that you want to make sure is that if AI, whatever it means, brings to you a definition, right, that definition should be at a point in time and should not be trained on all the, on all the past data, right? So number one, you want to do that because if you backtest that feature and in a way perplexity has already tested it, it's not a fair play. You know, the performance will, the backtest will look great. So unfortunately, we live in a world where some factors will never be backtestable.

• 29:27Speaker 06

  So you don't know whether they work or they don't work, right? You just know that you cannot test them in advance, like a policy agility. This seems to be a very low turnover factor, right? And it seems to be probably a very low sharp factor.

• 29:44Tracy Alloway?

  And a low universe.

• 29:45Speaker 06

  And a small universe. So how do you, how do you know? Well, probably you want to make sure that it makes sense and maybe you can start putting a small volatility allocation to it.

• 29:57Tracy Alloway?

  And then you would build it up as you watch it perform?

• 30:00Speaker 06

  Yes, out of sample.

• 30:01Tracy Alloway?

  Okay, so speaking of backtests, I have one more question, but it seems like quant investing, a part of the issue with this is you are looking back at historical data. That's all you have. You don't have data about the future, unfortunately. It strikes me as hard to deal with regime changes. So when you have a big break in how something works in finance or markets or the global economy, how does quant investing actually take into account those sorts of risks? Like, say, you know, a lot of investing is based on the idea that bonds and stocks are going to move inversely to each other. And then in 2022, they started moving together.

• 30:39Speaker 06

  I think that most people with a quantitative background in finance will tell you that regime change is very difficult to detect and to act on in an effective manner. So I think that's been my experience at least, right? So in every possible application, I've tried and it really never works for me. Maybe it works for somebody else. What I think it's a bit easier to do is to detect regime change in a human being. So instead of trying to use, you know, there are many, many algorithms for regime change. You know, there are Markov based, a Q sum, completely non-parametric.

• 31:24Speaker 06

  Instead of trying to act on regime changes in the environment, try to detect changes in the behavior of a portfolio manager and act on that because that works, I think. And usually, you know, jives with experience with, so that is something that can be exploited.

• 31:45Joe Weisenthal?

  I want to go back to an answer you gave early on, which is sort of like the old school factor investing and like the original versions and maybe there was sort of an international factor or a liquidity factor, the small cap factor, the value factor. And it feels like a lot of these things haven't worked in ages. And there's this debate that seems like, okay, is this like, is this the long cycle and eventually it's going to come back? Or is it that everybody not only knows about these factors and have discussed them to death, they're also extremely commodified in the sense that you could just buy an ETF of them, right? You could just buy a small cap ETF. It's trivial to execute. You could just buy a momentum ETF. It's trivial to execute a value ETF, et cetera.

• 32:27Joe Weisenthal?

  Like, my intuition would be, since everyone knows about them and they're completely commodified technologically, they're just gone. But there is still debate. Some people think it's only a matter of time before these come back in vogue and that it's the long cycle, et cetera. I'm curious how you think about some of the original factors that people discuss in their prospects going forward.

• 32:47Speaker 06

  Well, so some factors were identified, but then somehow they got demoted. So famously size, right? So conditional on having other characteristics of a stock size doesn't really explain much of your returns. And so it's a combination of other factors. Okay, well, that's that's one case. Then there are cases where it seems that some factors have been exploited. You know, their capacity has been exhausted and so you can't make an attractive return of them. There are some factors that still have a low sharp, but they still have a positive sharp.

• 33:32Speaker 06

  And so, you know, every positive sharp deserve, however small, an allocation.

• 33:39Joe Weisenthal?

  What's an example of that?

• 33:40Speaker 06

  Medium term momentum, I would say, right? Medium term momentum is tradable and is relatively high capacity. Then you have the whole term structure of momentum. So, you know, there is a shorter horizon reversal and whatnot. Short interest worked great until it didn't really work so consistently any longer. And and then they also assume different characteristics, right? So you start having more crashes and the like.

• 34:08Joe Weisenthal?

  Is there a mean factor?

• 34:09Speaker 06

  Uh, no, I don't think so.

• 34:12Joe Weisenthal?

  Okay. But is that changed any?

• 34:14Speaker 06

  It's a theme or something like that.

• 34:15Joe Weisenthal?

  Sorry?

• 34:15Speaker 06

  It's a theme or?

• 34:16Joe Weisenthal?

  It's a theme, okay.

• 34:17Speaker 06

  Yeah. I don't know that E S G is a factor either. I don't think so.

• 34:21Joe Weisenthal?

  Okay.

• 34:22Tracy Alloway?

  Oh, why do you say that?

• 34:23Speaker 06

  Because I don't think it's really that persistent.

• 34:26Tracy Alloway?

  Hmm. You mean it doesn't affect human behavior?

• 34:29Speaker 06

  Um, I think that just, I mean, there is also this feature, right? The moment that you say that a factor exists.

• 34:36Tracy Alloway?

  Hmm. It's reflexive, right?

• 34:38Speaker 06

  Yeah, there is reflexivity, there is a flexibility in this, right? But I I don't know that it really explains much of the returns in recent times.

• 34:46Tracy Alloway?

  So. I'm gonna ask one more question because I started with a dumb one and so I will finish with another dumb one. Um, is there good and bad alpha? Or is bad alpha just beta?

• 34:59Speaker 06

  No, every alpha signal is, you know, God's little child. There is no bad alpha.

• 35:06Tracy Alloway?

  All right, Gappy, thank you so much for coming back on Odd Lots.

• 35:24Joe Weisenthal?

  We're going to leave it there. That was our conversation with Gappy Paliolego. I'm Joe Weisenthal. You can follow me at the Stalwart. Follow Tracy at Tracy Alocke. Follow our guest, Gappy. He's at underscore underscore Paliolego. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashil Bennett at Dashbot, and Cale Brooks at CaleBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And if you enjoy the show, please leave us a positive review on your favorite podcast platform. Remember, Bloomberg subscribers get to listen to Odd Lots ad-free on Apple Podcasts. Just go to the Apple Podcasts app and follow the instructions there. Thanks for listening.

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