Devin Anderson, Co-Founder, Convexitas

Over a 15 year career at Deutsche Bank, Devin Anderson watched the pendulum of risk swing. Developing solutions for clients during the ultra-low vol period before the GFC, through the crisis itself and then again during the relatively benign periods of its aftermath, Devin has observed the tendency for modern markets to lurch from quiet to chaos. In the process, he’s had a front row seat in how various hedging strategies have performed and why. We explore the poorly timed decision by Calpers to unwind its hedging program just before the Pandemic related market sell-off in 2020, a discussion through which we learn more about Devin’s co-founding of Convexitas, an overlay manager working with clients to efficiently hedge risk. In Devin’s view, the “why” of tail hedging is clear: to realize explosive gains in down markets that can be used to fund purchases of newly cheapened assets. The hedge vehicle should generate and deliver cash at the right time and because of this, structure and implementation become important parts of the product.  Next we explore the VIX, the ubiquitous but also poorly understood metric. Here, Devin differentiates between products like vanilla index options that have convexity with respect to spot prices and those, like VIX options, that are written on vol itself. Both serve important roles, but require different monetization game plans. I hope you enjoy this episode of the Alpha Exchange, my conversation with Devin Anderson.

Om Podcasten

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.