James Velissaris – Infinity Q

James Velissaris is the Chief Investment Officer of Infinity Q and also serves as the portfolio manager for the Public Investments Portfolio of Wildcat Capital Management, which is David Bonderman’s family office. With the recent spike in volatility, we were grateful to sit down with James, who will be speaking at our 4th Annual Liquid Alternative Strategies Summit (May 1 – NYC), and hear his thoughts about the importance of understanding the difference between volatility strategies and yield enhancement strategies.

JV Events Group: What are the defining characteristics of your fund?

James Velissaris: Infinity Q combines analytics, research, and trading (ART) to manage its investment strategies. Our team analyzes 50 million data points across global asset classes using robust quantitative models and screens. The team uses extensive due diligence to research discretionary and systematic investment ideas that originate from this analysis and from the buy side, the sell side and academia. As a final step, we utilize our expertise in derivatives to optimize trade structuring for both systematic and discretionary strategies. Our “Quantamental” process combines the depth of private equity investing with the breadth of quantitative analysis. We believe that every year there are 10-15 extremely asymmetric opportunities across asset classes, and we utilize our breadth to uncover these opportunities, and our depth to research and execute them.

JV Events Group: Why should investors consider investing in a volatility fund?

James Velissaris: Volatility arbitrage strategies historically outperform when volatility is high due to an increase in relative value opportunities. As a result, volatility arbitrage strategies are uncorrelated with equity strategies, and potentially provide benefits during stressful market events.

It is important to differentiate volatility arbitrage strategies from the pseudo-volatility strategies that have become popular in recent years. Selling put options, put spreads or doing an iron condor is not a volatility strategy. These are yield enhancement strategies that are highly correlated to equity portfolios in the left tail.

JV Events Group: Is the recent spike in volatility a reversion to the mean or just a temporary blip?

James Velissaris: The market environment over the last 5 years has been characterized by high fragility. Due to the amount of central bank influence on asset prices, risk becomes compressed for a prolonged period of time, and sows the seeds for a short-term decline in risk assets and spike in volatility. We have experienced these episodes in June 2013, October 2014, December 2014, August/September 2015, January/February 2016 and now February 2018. The core reasons risk becomes compressed including accommodative and highly reactive central banks are still in place globally, albeit to lesser extent. As such, we believe risk will become compressed following this event and we will patiently wait for the next tantrum event.

JV Events Group: How does your fund fit into a broad-based portfolio?

James Velissaris: We designed our portfolio to have zero beta to the S&P 500 over a cycle and have greater than a 50% probability of generating positive performance during declines in the S&P 500. Historically, our strategy has experienced a beta to the S&P 500 of 0.07 and has generated an average gain of 1.01% in months the S&P 500 declined.

JV Events Group: Thanks James. We look forward to hearing more of your thoughts at the 4th Annual Liquid Alternative Strategies Summit May 1st in NYC.