[i3] Podcast Episode 54: Professor Deep Kapur - Video

This podcast was originally published on 3rd February 2021 here: https://i3-invest.com/podcasts/episode-54-professor-deep-kapur/. It's also available Soundcloud, iTunes, Google Play, Spotify, and Amazon Music.

Professor Deep Kapur is Director at the Monash Centre for Financial Studies in Melbourne, Australia. He is also a member of the investment committee of pension fund REST. Professor Kapur has had a varied career, spanning asset consulting, investment banking and academia.
In this podcast, we speak about the lessons learned from the various crises since the 1980s, his experience running a machine learning-based FX strategy in the 90s and the current application of these techniques in pension funds. He also explains why Lehman Brother should never have been allowed to fail.

Transcript: Machine Learning, Crises and Tail Risks

01:00 Starting out as a finance journalist in Bombay
04:00 Interviewing Ratan Tata.
05:30 Working across the Bombay Stock Exchange
07:30 Moving to Salomon Brothers
09:30 Every response to a [new] crisis is different
10:30 “When a systemically important bank goes down, then capitalism can’t function”
12:00 Letting Lehman Brothers fail was a complete mistake
14:00 In academia, the pendulum has swung too far away from the real world
15:00 Impact of pandemic on the university
17:42 Impact of the pandemic on markets
20:00 Last year has brought to the fore that risk management can not be a second class citizen.
20:30 You have been involved in machine learning for a long time. What is different today compared to when you started out in this field?
23:00 If machine learning deals with a lot of short term data, does a long term investor have any business applying these techniques?
25:00 “You might not want to run machine learning strategies, but you could use it as a research assistant”.
27:00 How to build safeguards around systems that recognise patterns that humans can’t see.
30:30 “You can’t back test the future” (good for preview)
30:50 “The use of AI to assist decision making will explode, [but] machine learning where the computer makes the decisions and implements everything… I don’t think it will take over the world.”
32:00 What areas does the Monash Centre for Financial Studies focus on?
33:30 Blockchain and its applications.
36:00 Why would an institution be interested in a crypto? You would have to buy the story.
37:40 I think [Bitcoin] is a good hedge against the risk of paper money debasement.
39:45 I’m overseeing the launch of a venture capital accelerator and our faculty and students would be available to provide assistance to these early stage companies.

About the [i3] Podcast
The [i3] Podcast is a conversation with some of the leading institutional investors around the world, discussing their philosophy towards investing, in particular towards portfolio construction and investment strategy. The [i3] podcast is available on iTunes, Google Podcast, Spotify, Stitcher or your favourite podcast platform.
https://i3-invest.com/podcasts/