Sep 9, 2021 · 1h 1m · capital-allocators
Leda Braga – Systematica Investments (Manager Meetings, EP.10)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Ted Seides presents an in-depth conversation between institutional allocator Mario Terrien of CDPQ and Systematica Investments CEO Leda Braga on the mechanics of quantitative trend following and risk management. Together, they explore how engineering discipline, data science infrastructure, collaborative firm culture, and proactive governance drive long-term institutional investment success.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 12.4% of the talking time here. How this is scored →
Ted as informed peer 4.8 Guest teaching 5.3 Guest disagreement 1.4 Ted pushing back 0.2
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 50:30 Critique of siloed platform business models
Leda directly challenges the popular multi-manager pod platform structure, arguing that siloing IP prevents the scalable consensus necessary in a low-fee environment.
Hardest push from Ted ▶ 8:30 Ted queries quant technical vetting hurdlesTed presses Mario on how allocators can genuinely evaluate quant teams whose technical mathematical capabilities far exceed those of the allocator.
Biggest teaching moment ▶ 22:40 Masterclass on trend following mechanicsLeda clearly breaks down the math and portfolio construction of trend following, explaining why it functions as a paid-for tail risk insurance policy for equity drawdowns.
Ted holds their own ▶ 9:30 Mario details CDPQ quant manager evaluation playbookMario demonstrates deep allocator expertise by detailing CDPQ's rigorous technical playbook for testing out-of-sample data hygiene, model validation, and governance.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Mario Terrien on Selecting Systematica and Portfolio Sizing | 7 | 2 | 1 | 2 | Ted interviews Mario Terrien regarding his diligence process and portfolio sizing methodology for CTAs. Both display strong institutional knowledge regarding gamma profiles, overlay programs, and validating quant processes. | |
| Leda Braga's Academic Roots and Entry into Finance | 4 | 4 | 1 | 0 | Mario asks standard biographical questions about Leda's path into engineering and finance. Leda explains how the engineering problem-solving mindset and the 1990s London derivatives boom drew her into quant finance. | |
| Female Representation and Diversity in Quantitative Finance | 5 | 6 | 2 | 0 | Leda reframes the discussion around women in quant finance, explaining the structural pipeline issues including math bias, market time inflexibility, and risk framing. She rejects quotas in favor of upstream initiatives like Math for Girls. | |
| Founding Systematica Investments and Leadership Mindset | 4 | 4 | 1 | 0 | Leda explains the spinoff of Systematica from BlueCrest and outlines her leadership philosophy of tackling difficult conversations first. Mario agrees enthusiastically with her operational routine. | |
| Core Principles and Mechanics of Systematic Trend Following | 6 | 7 | 1 | 1 | Leda provides a comprehensive pedagogical explanation of trend following, signal extraction, negative skewness in equities, and positive expected return insurance. Mario validates this by recalling the 2008 commodity reversals. | |
| Macro Market Shifts, Randomness, and Algorithmic Execution | 4 | 6 | 2 | 0 | Leda dismisses vague narratives about market regime shifts, noting that market randomness remains the fundamental challenge. She highlights how PCA reveals modern risk-on/risk-off dynamics and algorithmic execution capabilities. | |
| Sponsor Break: Ridgeline Investment Management Tech | 5 | 6 | 1 | 0 | Segment includes an ad read followed by Leda articulating core investment principles, noting that correlations are far more persistent than returns, meaning portfolio construction must anchor on diversification. | |
| Embracing Data Science, Alternative Datasets, and Alpha Decay | 5 | 6 | 2 | 0 | Leda explains how data science is the core business rather than an add-on, rejecting emotional decision-making. She details the challenge of alpha decay in alternative datasets and the requirement to ingest dozens of new feeds yearly. | |
| Expanding into Alternative Markets and Investing in China | 4 | 6 | 1 | 0 | Leda describes alternative markets as Systematica's core competency and identifies China as the ultimate alternative market due to linguistic, regulatory, and operational complexity. | |
| Institutional Capital as a Catalyst for ESG Standards | 5 | 5 | 1 | 0 | Leda passionately argues that the institutional asset management industry has enormous leverage to enforce ESG and sustainability standards on corporate boards worldwide. Mario notes CDPQ's shared alignment on the topic. | |
| Leadership Philosophy, Cybersecurity Threats, and Succession Planning | 4 | 5 | 1 | 0 | Leda describes her role as the long-term vision keeper who absorbs the pain of saying no, and identifies cybersecurity and succession planning as her primary concerns. | |
| Collaborative Firm Culture Versus Pod Platforms and Entrepreneurship | 5 | 7 | 3 | 0 | Leda contrasts the multi-manager pod platform model with Systematica's collaborative IP model. She argues that pod platforms create siloes, whereas fee compression and scalability require centralized, collaborative research. | |
| Aligning Allocators and Managers Through SBAI | 4 | 5 | 1 | 0 | Mario and Leda discuss their work with the SBAI aligning allocator and manager interests, followed by rapid-fire closing questions where Leda identifies overfitting and unwinding in drawdowns as major sins. |
Statements from this episode (24)
Terrien: CTA strategies carry positive gamma and thrive in volatile markets
“That strategy as a positive gamma. That strategy thrives in more volatile markets.”
Terrien: CDPQ allocates to hedge funds through an unfunded overlay program
“For us, it became very important to calibrate well here because we have an overlay program. It's not a funded program. So we use our balance sheet to invest in hedge funds.”
Braga: Engineers focus on practical problem solving unlike pure mathematicians and physicists
“Engineers are the guys who want to solve the problems that people have, right? And then so they often look around in a university, you kind of sense that difference that they're pure mathematicians, they're physicists. And then the engineers, the guys who real…”
Braga: Systematica sees very few women apply or interview for investment roles
“Very few women on the investment side, and they don't even turn up to interview.”
Braga: Hiring quotas cannot solve female underrepresentation in finance
“You can't fill the positions based on quotas. So you need to go upstream from the problem and encourage more women to get qualified.”
Braga: Resolve difficult conversations before answering morning emails
“So I don't ignore conflict. I don't Run away from difficult conversations. I, in fact, I have this motto in the morning, you know, what are the difficult topics of the day? Let me do them first, right? If I know I have some tough conversations to have, I'll ma…”
Braga: Trend following is portfolio insurance investors get paid to hold
“That strategy in itself has positive expectation of return. So this is a bit like the insurance policy that I get paid to hold because the thing will have positive expectation of return. And yet when the rubbish hits the firm, I expect it to help my portfolio.”
Braga: Fearful discretionary traders derisk while systematic algorithms short
“Human beings, I think on average tend to take risk off if they fear. Whereas if you've got a systematic strategy, you have a good chance of carrying on with your investment process and just saying, no, no, the signal says I should short.”
Braga: Post-2008 PCA on liquid futures reflects risk-on, risk-off moves
“So for example, since the financial crisis, if you pick up the securities, the generic macro securities, the hundred or 150 liquid futures markets, and if you do a bit of principal component analysis on them, the first principal component looks like a risk on,…”
Braga: Electronic markets enable large trades without leaving a market footprint
“Markets have gone very electronic, and so it's possible with good techniques to trade large positions without revealing a footprint, and that's great.”
Braga: Strategy construction should prioritize diversification over target returns
“Well, if you control the vol, and you know the correlation is more persistent than returns, then your portfolio construction and your strategy construction should rely more on diversification than on target returns.”
Braga: Systematica seeks to process 50 to 100 new datasets yearly
“Just this morning I was having a meeting here about how do we enlarge our capability to process 50 to a hundred new data sets per year.”
Braga: Alternative datasets suffer from forecasting decay and become worthless over time
“Some of these alternative quirky data sets, their forecasting ability has a bit of decay. So they forecast for a while and then they become worthless.”
Braga: Investing in China is a no-brainer for large allocators
“And so we've really made a push into China. We've started our Shanghai office. And so China is, I think, a no brainer.”
Braga: Systematica's Chinese equity strategy is focused on ESG
“So for example, we do equity work in China on an ESG basis. So our offering in equity to China is a naturally ESG focused offering”
Braga: ESG implementation in China is twice as challenging as developed markets
“Doing ESG in the developed world is a big enough challenge because
The data needs to be cleaned up. It's often it's self-reported data.
Therefore, it doesn't experience that much scrutiny or criticism, but doing it in China, you double up the challenge.
Sourci…”
Braga: Senior leaders must say 'no' to opportunities in an organization
“In the list of opportunities that present themselves to an organization in business, the no's of the organization need to be said at the senior level. And junior people are never going to say no.”
Braga: Cyberattacks are the biggest external threat to Systematica
“What keeps me awake at night is a cyber attack, okay? I'm petrifying. We, over here, we spend so much effort in tightening up cybersecurity of our firm, educating everybody on cybersecurity.”
Braga: Systematica successfully fended off a sophisticated cyberattack
“There was an attempted attack here a couple of weeks ago. Nobody fell for it, but it was a very sophisticated attack.”
Terrien: Major succession shift coming to hedge funds in the next decade
“I think that we'll see a big shift in succession, whether it's in public or private markets, hedge funds over the next five, 10 years, where that generation is now moving into another cycle.”
Braga: Multi-manager platforms enforce siloed teams that hoard intellectual property
“The platform approach is naturally, from what I gather in the industry, is naturally a more siloed approach, right? Is the small team that wants to do their own thing and keep their own intellectual property and not share with anybody else.”
Braga: Resilience is the core entrepreneurial trait because hard work still fails
“I think resilience is perhaps the most relied upon attribute of the job of the entrepreneur, and this is probably why the man in the street is not an entrepreneur, right? The man in the street likes to do a good job every day, get paid, and feel a sense of acc…”
Braga: Overfitting data is the biggest sin for systematic traders
“Well, for the systematic trader, it's overfitting. It's just looking at all the data that you know is filled with randomness and coming out and say, ah, this is going to be a brilliant strategy and it's going to perform right. So overfitting to the data and th…”
Braga: Unwinding during drawdowns stems from poor upstream risk sizing
“Career-wise, in the running of the various strategies that we have run over the years, the mistakes that I have made, which I regret, have Almost all of them probably being related to unwinding strategies in the drawdown. Then you say, okay, what is the mistak…”