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FUND MANAGER PORTRAIT: DR LINDA GRUENDKEN

10 December 2019

Linda is the senior scientist for GAM Systematic’s Dynamic Credit proposition. In recent years, she and the rest of the GAM Systematic Cantab team have been researching ways to systematically harness sustainable fixed-income and credit returns in the quest to develop a strategy capable of weathering adverse credit market conditions, while capturing the upside in more favourable trading climates.

Linda begins by explaining that the process of building and developing GAM Systematic’s credit capabilities has been a painstaking bottom-up effort, but the seeds planted over a number of years have finally germinated and are now beginning to blossom. “When we started building up our expertise, credit was a relatively unexplored market from a systematic perspective. So it was vital to understand not only the credit instruments, their risk and pricing in exact detail, but also their underlying joint return drivers and how they can best be harnessed under different macroeconomic regimes. “From our perspective, the highly liquid nature of credit default swap indices (such as the CDX and iTraxx indices) and single company credit default swaps (CDS) provides us with the scope to dynamically dial up and down our credit exposure in accordance with prevailing market conditions.

“From the CIO to the newest member of our research team, our overarching ambition has been to create a cutting-edge dynamic credit solution that addresses some of the drawdown risks in challenging markets in fixed-income securities. We believe our robust methodology and active positioning strategies should enable us to do just that.”

The height of ambition

Few people grow up with the intention of immersing themselves in financial data as a career plan and Linda was no exception. “I was fortunate to be academic from an early age (Linda skipped two grades at school) and was always fascinated by physics and maths, but I harboured much more glamorous aspirations than working in an office. In fact, I dreamed of being an astronaut. Piloting a space shuttle would have been quite an experience, but I have a really rigorous thought process which is quite suited to what I do now. Systematic investing is all about perpetual improvement and refinement. We are always looking for new ideas and innovations. So, as individuals and as a team, we need to be comfortable and happy working long days in search of that elusive ‘eureka’ moment. Having said that, nobody would describe me as an indoor person!

“I’ve always had a penchant for travelling (Linda numbers the Italian Lakes and northern Italy among her favourite places to visit) and enjoy a variety of open-air activities, including rock climbing and bouldering. The fundamental difference between the two is that the latter is a ‘free climbing’ (without ropes) pursuit which helps you to appreciate your limitations in a rather visceral way. It has taught me to push fear to the point where it becomes a useful emotion. When you can no longer rationalise what your next move should be, because your heart is palpitating to the point of dizziness, it is time to stop! Of course, that is not so different to the way the team thinks in the office. We naturally find ourselves obsessing about risk and potential downside in our search for positive asymmetry. The unrelenting objective is to optimise risk / reward trade-offs.”

As Linda goes on to discuss her other hobbies, it is difficult to escape the conclusion that she is a competitive and highly motivated person. “I love to play football with the guys! It started off as a kick about in the park but when our office team joined a men’s league I didn’t want to be left out. I wouldn’t say that I’m the most talented of footballers and I don’t have a specialist position. But, from a slightly naïve perspective, the sport has taught me the value of being stubborn and getting to the ball first. I like to outsmart and trip up the opposition and this mindset is pretty well-suited to a defensive position - although I’m not shy about taking a shot at goal from distance when the opportunity presents itself.”

Language and literature

“My love of travelling has inspired me to study languages, which, in turn, has fostered quite cosmopolitan reading tastes. My mother tongue is German and, having studied at the University of Pennsylvania (PhD in Higher Dimensional Class Field Theory of Varieties over Finite Fields), Brown University (Bachelor of Science in Mathematics) and Cambridge (Masters of Advanced Studies in Mathematics) my English is pretty good!!!! I have also read literature in French, Italian and Spanish (although I found the latter quite difficult).

“My fondness for Italy and classical settings – the outdoor opera in Verona is especially inspiring – drew me to read what has become my favourite work of fiction ‘My Brilliant Friend’ by Elena Ferrante. The story follows the relationship between two women: one of whom (Elena) is determined, down to earth and scholarly, while her best friend (Lila) is canny and enigmatic. As they follow their inevitably divergent life paths, Ferrante somehow manages to make their adventures irrevocably intertwined against a backdrop of a post-war society on the verge of dramatic change. I was completely magnetised by the character of Lila who was forced into work at an early age and demonstrates a lot of backbone, while I really identified with the character of Elena in her efforts to make the most of her education. Overall, I found the book emotionally authentic, captivating and totally immersive.”

Linda Portrait

Linda’s reading also extends to the philosophical and self-help genres. “Daniel Kahneman’s ‘Thinking fast and slow’ is an absolute must-read. It reminds me of the benefit and importance of slow thinking in this digital world of immediacy. It is no surprise to me that Kahneman’s work is used so extensively in behavioural finance (with fellow academic Amos Tversky, Kahneman published the groundbreaking ‘Prospect Theory’ in 1979, which helps us to understand why the typical fund manager can demonstrate tangible stock picking skill but is psychologically conditioned to hold the securities for much longer than optimal). As systematic traders, it is easy to feel that we are permanently fused to a high-speed internet connection, so making time for deliberate and rational thought is essential.”

Collegiate and collaborative

‘…escape into your mind and your work, into the place where you are only your living, breathing self, not a citizen of any state (or) a stake in (an) infernal game…’. Fittingly, this quote from another of Linda’s favourite books (‘The World of Yesterday’ by Stefan Zweig) underlines the reasons why she loves her job. “It is true that the work is completely absorbing, technical and demanding – I don’t mind that at all, it is a role that is particularly attuned to my scientific disposition. And it is easy to imagine that we are completely buried in data and only occasionally venture out of our individual silos, but the reality is somewhat different.

“Our office in Cambridge is entirely open plan and this creates a perfect environment for learning and idea sharing. When I first arrived, I sat next to Ewan Kirk – GAM Systematic’s Chief Investment Officer – not because I’m special…it is part of the induction process that all new starters go through here! The experience has helped define the way I think and I’m sure that’s true of every one of my colleagues. Observing successful people and being free to ask any question at any time helps to foster a strong culture that is collegiate and collaborative.

“My job title of senior scientist conveys a sense of a tutorial position, but it’s not like that at all. I don’t come from a credit background – my bible is Fabozzi’s ‘Handbook of Fixed Income Securities’. The fact that it is the book’s eighth edition that I leaf through almost daily is indicative of an asset class that has evolved considerably with the passage of time. I’m here to bring something different to credit research and strategy development and the same is true of every member of the team. We recruit brilliant people to look at things from an entirely fresh perspective. They drive their own research and idea generation with very little assistance from me.

“We tend to take it as a given, but what we do is really cutting edge, bordering on unique. We’re seeking to push the envelope and drive our brokers and the broader market to ‘think systematic’. This is an investment movement that is truly in its infancy and it is very exciting to be a leading part of it.”

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development.