David Sherman of CrossingBridge Advisors - Investment Strategies That Work In Highly Volatile Markets

Orion's The Weighing Machine
Orion's The Weighing Machine
Episode • Apr 5, 2022 • 1h 2m

Investing takes many forms. For most people, it is a way to grow their money and protect their financial future. This means that they are more likely to invest in things they are comfortable with and believe will give them the best return on investment. But when it comes to diversification, what are the best strategies?

In today’s episode, Rusty talks with David Sherman, President of Cohanzick Management and Founder & Portfolio Manager of CrossingBridge Advisors, an investment management firm specializing in ultra-short and low duration strategies, including special purpose acquisition companies (SPACs).

David talks with Rusty about the current market environment, particularly the high yield bond market, what investors should know about SPACs, and what the true risk-free investment rate is.


Key Takeaways

  • [01:54] - David’s role at CrossingBridge Advisors.
  • [04:27] - What makes David’s Global Value Investing class interesting.
  • [07:14] - What distinguishes his students from one another.
  • [09:15] - What qualifications David seeks in an analyst.
  • [12:07] - How the current market conditions affect the global economy.
  • [15:40] - Factors that influence David's investment decisions.
  • [20:12] - His perspective on high yield as an asset class.
  • [24:03] - How he manages the tail risk of high yield assets.
  • [28:07] - Are high yield bonds a good inflation hedge? 
  • [30:19] - What investors need to know about investment grade bonds.
  • [31:38] - SPACs: What they are and why investors and financial advisors should care.
  • [40:03] - How investors are allocating to SPACs.
  • [45:44] - What the true risk-free rate is for most investors.
  • [48:04] - The qualifications of a good portfolio manager.
  • [53:44] - How David personally invests his money.
  • [56:46] - What David does to maintain his mental and physical health.


Quotes

[20:58] - "I think people have a core belief, a DNA of what makes them comfortable. And they only invest the best when they do things they are comfortable with. When you're not making money on things you're not comfortable with, it's just not a good psychological environment." - David Sherman

[25:44] - "Most high yield doesn't have a long tail risk. Most high yield is five years or less in maturity. You can say that's a lot of tail risk but that's not nearly what it used to be. A lot of high yield and leveraged loans have certain covenants like change of control provisions if a company gets acquired which investment grade bonds don't, typically." - David Sherman

[52:47] - “People underperform and outperform at various times depending on the economic environment or on the product cycle. And certain products are more opportunistic at certain times. There are a lot of good distressed investors, there’s just not a lot of good product right now. I would much rather have a mediocre distressed investor with a lot of product that's cheap, who's disciplined, than a great distressed investor who's clever by half who is a little less disciplined and there's not enough product." - David Sherman


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0540-OPS-3/29/2022

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