Systematic investing

40th Anniversary Video Transcript

Raffaele Savi, Global Head of BlackRock Systematic

I like to think that team has been -- active for over 40 years and I've been here for at least half of those.

Jeff Shen, PhD, Co-head and Co-CIO of Systematic Active Equity

I think, one thing that could be surprising is, how smart people are, but also how nice people are.

Ronald Kahn, PhD, Global Head of Systematic Investment Research

You know, one of the great things about the investment business is we do bring in people with a lot of different backgrounds, and that makes it I mean, I think it helps us make better investment decisions, but I also think it makes it a more interesting place to work.

Tom Parker, CFA, Chief Investment Officer, Systematic Fixed Income

You know, I think the most interesting thing is that we've always worried when people leave, we go, how are we going to replace them? What are we going to do? But, you know, quantitative techniques have one advantage is, the insights don't go down in the elevator. They stay in your model. And I always call them the ghost in the machine.

Raffaele:

We work really hard to turn innovation into consistency.

Ron:

We’re really a group that turns, you know, basically turns research and data into alpha.

And so research is at the heart of what we do. And so we have to keep innovating because the ideas that we use, they're all about informational advantages. So if you buy most Blackrock systematic products there's not a risk premia or behavioral, anomaly component to them. Most of what we do is informational advantage.

We identify data that tells us things that the market doesn't understand, but we know the market figures these things out eventually. So for us, we always need to be coming up with new things. And so I think we've never had a stronger culture of innovation and creativity that we have now.

Jeff:

Clients look at BlackRock and think it's a big place. So we always say that, while it's a big place at the same time, it's all about delivering the benefit of a scale for our clients. How can we leverage a scale of BlackRock, of Systematic, for the benefit of our clients?

And I think we can think of all this benefit of a scale in multiple dimensions, in a sense, and allow us to really get data that we wouldn't be able to get before, to really allow us to trade much more efficiently for our clients to leverage the benefit the scale, and also to have a diverse team that can cut across multiple disciplines, not only having the best of a computer scientist in the world, but also having the best economists in the world and have them work together to provide solutions for our clients.

Tom:

Alpha is the hardest game in town. You know, you're competing against Nobel Prize winners. You have geniuses, you know, large tech teams. And it's just everybody wants to be in that game and it's a zero sum game. And so that's always been the challenge. And we even gave ourselves two harder challenges.

So alpha is this amazingly hard challenge, doing alpha in fixed income where there's very little idiosyncratic risk is even a bigger challenge. And then saying you can actually gonna be market neutral is kind of an amazing challenge. And sometimes you kind of wish, oh, maybe we shoulda compromised some more or added more factor exposure out of more beta.

But there also is just a great feeling of satisfaction when you actually get things that work and you go, wow, we're competing with the best people in the world, the best finance people in the world, and winning.

Raffaele:

It's remarkable, I feel that truly the best is always yet to come. The best is always our next idea our next iteration. We've done incredible work, that's the team. I've been fortunate to be part of that team where a lot of people did a lot of incredible work-- there's so many more things that this team can do so I'm looking forward to all the future milestones.

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Stock and bond values fluctuate in price so the value of your investment can go down depending upon market conditions. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. The principal on mortgage- or asset-backed securities may be prepaid at any time, which will reduce the yield and market value of these securities. Obligations of US Government agencies and authorities are supported by varying degrees of credit but generally are not backed by the full faith and credit of the US Government. Investments in non-investment-grade debt securities (high-yield bonds or junk bonds) may be subject to greater market fluctuations and risk of default or loss of income and principal than securities in higher rating categories. Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax.

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