16 November 2020
GAM Systematic Cambridge’s Dr Frédéric Desobry discusses his passion for team sports, the importance of collaboration and misconceptions about systematic investing.
Although it may seem surprising, it is possible to combine elements of a scientific laboratory and a city trading firm. Fred Desobry, co-CIO for GAM Systematic's Cambridge team, enjoys a unique working environment with both characteristics. “From a scientific standpoint, each member of the team has strong intellectual rigour and curiosity. We have talented scientists involved in seminars and peer reviews on many subjects. We are also practical and performance driven.” Fred compares the business to a tech start-up given the company’s agility and innovation. “We are a diverse group of entrepreneurs, essentially,” he adds.
In what has been a unique and challenging year, agility, pragmatism and a good deal of entrepreneurial spirit have been much needed. Covid-19 and its consequences have impacted all markets and asset classes. “From a social / health angle, we were quick to send staff home with the ability to operate offsite,” Fred explains. “There was no disruption, which is a testament to our team and technology. We have been very hands on since the start of the year and communicated with clients daily. Importantly, Covid-19 has not prevented us from innovating and making enhancements to our business.”
An engineer at heart, Fred describes himself as a statistician who is intrinsically curious and particularly interested in trying to explain complex systems. He has spent over a decade designing and managing all aspects of systematic trading strategy lifecycles and joined GAM Systematic in 2019 after spending three years at Systematica Investments in Geneva and London. He holds a Masters and a PhD in Signal Processing (Machine Learning) from the École Centrale Nantes, which have fed into his investigative and analytical approach.
A team player
Fred’s decision to join GAM came down to people. “Once I started to discuss ideas with the team, I wanted to be part of the business. My colleagues at GAM are passionate and experts at what they do, but also very collaborative. That creates an inclusive culture. The team is based in Cambridge, where I worked in the past, so there was also a strong element of coming back to the place where I was focused on innovation and creativity as an academic researcher.” Fred says the close proximity of the university labs breathes entrepreneurship into the team’s effort. There is also a strong emphasis on environmental, social and governance (ESG) factors and sustainability in general. “Investment is no longer just about performance, it is also about how to invest, what to invest in, and ensuring what we do is meaningful and makes a difference,” he explains.
When describing his job, Fred finds it most appropriate to talk about the people he works with. “My colleagues are not only comfortable with data and analytics but also capable of understanding and utilising a multitude of financial instruments. We are problem solvers with the ability to adapt to different environments. Over the years, I have realised you cannot solve complex systems quickly on your own, collaboration with a talented team is key. A passion for problem solving and intellectual curiosity are must-haves in this market.”
As well as being a team player at work, Fred has a passion for team sports, which he describes as a balance between individual effort and collaboration with others. “When playing as a goalkeeper in five-a-side football with colleagues and friends, the game-theoretic element makes it fun. You face the same opponent multiple times in a row in the same game, influencing the outcome from what was done previously. It almost becomes a game within a game.”
As a keen cyclist, Fred admits it has been difficult to train during Covid-19. However, after purchasing a turbo-trainer during lockdown, he has begun training for the L'Étape du Tour – an organised cycle event that allows amateur cyclists to race over the same route as a Tour de France stage. “It is usually a mountain stage, so it is intense and requires significant preparation and training, but it is a great goal to set with a group of friends. I am hoping to compete there once the world reopens. It is something I have wanted to do for a while but I previously had to postpone as I relocated from Geneva to London.”
On the surface, Fred’s field of systematic investing – which applies scientific methodology to financial markets by building hypotheses and using data to prove or disprove them – appears complex and technical. In basic terms, Fred tends to say his role involves conducting investment management in a data and process-driven manner.
In his view, systematic investing is seen by many outside of finance as a ‘black box’ when in fact there is significant transparency. Many, he suggests, do not realise how innovative the process is and how many diverse views are involved. It is not just about data, algorithms and machines.
“In my opinion, systematic investing is not too complex to become mainstream. There is a misconception that models are oracles and decisions cannot be explained or audited. That is not how we view it. Being able to explain decisions that models are taking is integral. Models are in fact rooted in fundamentals. We are a research & development facility within GAM. The ease of discussions with the wider business and clients shows how explainable our process is. The complexity of the approach does not prevent it from being explained.”
An open environment
At GAM Systematic, Fred explains that there is a well-established process which occurs before any amount of money is actually put towards an algorithmic strategy. “It starts with an investment hypothesis which is typically strongly rooted in fundamentals or market behaviours. From there we start the research and build a prototype. One exciting milestone is when the wider team gets together and reviews an idea or discusses a problem we are trying to solve.
“Given the diversity in background and expertise we have in the team, these discussions are always fruitful. It is an open environment. We look for investment strategies that are uncorrelated to markets over the cycle, but also do not exhibit tail dependence during periods of market stress. At the end of the process, we ‘open the box’, so to speak, and evaluate the new strategy on data unseen previously. It is a great way to avoid over fitting a simulation!”
Importantly, Fred explains that there is no outright intervention when it comes to existing models, but this does not mean there is no human oversight. “We conduct close and constant monitoring. Each morning representatives from various departments (trading, operations, sales, research, tech) attend a meeting to review performance of the previous day, review the positioning of the various funds, and discuss market events. We continue to do this via Webex, given the circumstances. What matters most is a constant pipeline of innovations and a robust idea generation process.”
Looking ahead, Fred is optimistic for a return to a more normal way of life. Pre-Covid, he was an avid consumer of concerts and theatre until the closures. At the start of the lockdown, he found words from Matthew Warchus, the artistic director at the Old Vic, particularly powerful and useful to everyone: "Let us all focus on coming through this separation with our togetherness intact. Even strengthened. Take care of yourselves and each other. Be creative. There is going to be some great theatre on the other side."
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. Reference to a security is not a recommendation to buy or sell that security.