Alexander Mende: Risk Managing the Risk Managers

Today’s conversation is with Alexander Mende, Senior Investment Analyst and Head of Investment Research at RPM Risk and Portfolio Management in Stockholm, Sweden. RPM is an alternative investment firm, focusing on directional investment strategies, specifically Managed Futures and Global Macro. Alex is responsible for portfolio management, quant and macro research, manager screening and selection at the firm. We spend the first few minutes discussing the experience of living with COVID-19 in Sweden before moving onto the technical discussion. We explore the evolving role of managed futures and trend following both in terms of client expectations and how managers have adapted strategies to deal with the current macro-environment. In contrast to many similar firms, RPM takes an active approach to manager risk exposure. Alex describes how the firm manages risk both “horizontally” – by changing relative manager allocations through time – and “vertically” – by scaling exposure to the overall portfolio in response to proprietary models. Alex “opens the kimono” on two of RPM’s most useful indicator suites, the CoMaSe model designed to identify conditions that may lead to coordinated market selloffs; and the MDI model that measures the aggregate “trendiness” of market conditions. We walk through case studies to better understand how RPM uses the tools in practice and their potential value-add. Alex is clearly a passionate, no-nonsense quant and it’s clear RPM thinks about the problem in a novel way, with commensurately attractive results.