Hortz: Your website mentions that your investment strategy is grounded in academic research and uses financial and economic concepts commonly examined by leading academics. How does that research help your investment process?

Dassori: Academia provides a rich pipeline for ideas and the key for us is translating theory to profitable investment strategies. At the root of our investment process are concepts that are regularly the subject of academic research—carry, momentum and value. New approaches and measures related to these continue to be developed, and this offers a great source of information as we build upon our process. To this end, we connect directly with professors at top universities to discuss their research and how it could be incorporated in our system.  We benefit greatly from this active dialogue and debate as we adapt efficiently to new market dynamics.

Hortz: Your market observations indicate we have to “meet the challenge of a changing investment environment.” How would you characterize the nature of this change and the ways you are trying to address it?

Landis: The rate of change in markets has been dramatic and we expect further changes to market structures in the future. For example, there is a trend to increased liquidity in broader index level products as opposed to the underlying cash instruments they are based on. And with this, we believe in moving with liquidity, not away from it. Our number one screen is liquidity and signs of liquidity.

Also, the use of computers has taken previous inefficiencies out of many instruments. Previously, viable investment edges versus competition have become less and less sustainable, and many legendary investors—such as Bacon, Soros, and Robertson—have given back money as inefficiencies they took advantage of have waned.

We believe that the use of dynamic technology can identify new opportunities that garner excess returns for investors. Our models are designed to be dynamic and their effectiveness at predicting excess returns is constantly re-assessed. 

Hortz: Besides being a liquid alternatives investment manager with a mutual fund and separate account offerings, your company overview mentions that you provide research and advisory services to investment companies, financial advisors, robo-advisors, etc. Can you walk us through how you work with these clients?

Landis: We have built an analytical engine that has a range of useful applications for investors. As different client types have different requirements and preferences, our goal is to make our process as useful as possible, and not just for us. We produce signals every day and maintain a research library on our website that is open to the public. We actively engage with other investment firms and encourage clients to use us as a resource for their own investment research and analysis.

As an example, within the basic robo-advisor world right now, the core of market allocations are based on Modern Portfolio Theory. While modern portfolio theory is interesting, it is close to 30 to 40 years old at this particular point and markets have changed … the world has changed …. the nature of information has changed. So, the utilization of just modern portfolio theory as a way to invest is a good basis, but with hedge fund and statistical analysis, you are going to have more complex ways, and different ways, of actually analyzing the markets and getting the returns and risks that you want to get. The way we look at the markets is the way the more sophisticated investors are looking at the markets, through utilization of economics, utilization of statistics, utilization of algorithms, to make sure that we are looking at all different factors. At the end of the day, the basis of what we are doing is not rocket science in any way shape or form, but it is a more sophisticated way of actually analyzing the markets, which is the next generation of how people are making money. That’s how you create both a beta play and an alpha play. This is the future of where some robo-advisors will be able to differentiate and be able to deliver more value to a larger group of customers. 

Hortz: How exactly did you go about “engineering” an alternative investment process? Any advice for other RIAs considering or in the midst of engineering new investment methodologies?