#116 - Sarah Ketterer - Without a Quant Risk Model, I'd Argue an Investment Manager is Completely Blind

48 minutes

In Episode 116, we welcome entrepreneur, CEO, and fund manager, Sarah Ketterer. Meb dives right in, asking about a quote on Causeway’s website which references how the shop blends fundamental and quant analysis. Sarah gives us her approach, which details how the fundamental and quant approaches work together, supporting one another.

Meb pushes for more details. What’s Causeway’s actual process? Does it begin with a quant screen then an analyst takes over, or the other way around?

Sarah tells us it depends on the client. She provides more details, but her feelings about the importance of a quant approach really comes through when she tells us “without a quant risk model, I’d argue an investment manager is completely blind”.

Next, Meb brings up value, and asks what role it plays in Sarah’s approach, and how she sees value today.

Sarah tell us that every strategy Causeway manages has a value emphasis to some degree. The more fundamental, the heavier the value exposure. And the quant-focused funds also have value, but those use momentum as well. This dovetails into a discussion of how not all clients want to sit through deep value cycles. They want returns now, not on a rolling 3-5-year basis. But a great value manager has to think in that time frame. Sarah notes how investors have to be patient with a value approach, yet human nature is not inherently patient.

This bleeds into a discussion of cheap countries and career risk, and the gap between value and growth – Sarah tells us this gap has reached extreme levels. Meb asks about the opportunities she’s seeing. Sarah notes how the opportunities depend on the amount of risk you want to take. For instance, she can find you a good Turkish bank right now, but do you want that level of risk exposure?

There’s way more in this episode – some opportunistic finds in Britain… Why Sarah is “wildly bullish” on China… Sarah’s view on the biggest mistakes investors make regarding risk… And, of course, her most memorable trade.

All this and more in Episode 116.

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