Today, we are joined by Yao Hua Ooi, Principal at AQR Capital Management, for a conversation on how they use systematic tools like trend following, to take advantage of inefficiencies in markets. We discuss the pros and cons of risk premia strategies and how they manage to improve the Sharpe ratio while making sure the "dual" mandate is fulfilled, how they have moved beyond pure price trends as part of the evolution of their trend programs. We also discuss the process of building a trend following strategy and why they prefer to build models rather than mimic a strategy through linear regression, their approach to adding alternative markets to their portfolio, why they are always concerned about capacity and much more.

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Episode Timestamps:

02:50 - Introduction to AQR

04:12 - Their investment philosophy

08:47 - Risk premia strategies

11:55 - A historical perspective

13:55 - Too focused on Sharpe?

22:24 - Changing the narrative

30:41 - Being unconventional

35:13 - Getting comfortable with the data

39:22 - The future for economical trend following

42:55 - Their research process

47:05 - The managed futures space

48:39 - Pricing trend following

55:00 - The need for daily liquidity

57:32 - The portfolio construction process

01:00:12 - The pros and cons of replication

01:04:25 - Applying risk management

01:05:40 - Adding new markets

01:09:19 - The role of trend following

01:13:08 - Reaching the limit

01:16:05 - Trend following disagreements

01:17:52 - Expectations for 2023

01:19:47 - Thanks for listening

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