ALO35: Why Macro Investing Is Becoming More Systematic ft. George Patterson

**George Patterson** (0:01)
You're always have to ask yourself, are the assumptions behind the model still valid? Has there been a regime shift in the data? That's the kind of thing we worry about every day when we're using models.
We still see like an overall positive macro environment for risk assets, but in many ways, the US economy has been surprisingly resilient despite all of the challenges that have impacted it.

**SPEAKER_2** (0:27)
Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.
In each episode, we go deep with some of the world's most thoughtful minds in investing, economics and beyond to understand how they think, how they prepare and how they decide, and the experiences that shaped how they see the world. No noise, no short cuts, just real conversations to help you think better and invest with confidence.

**Alan Dunne** (1:00)
Welcome back to Top Traders Unplugged. My name is Alan Dunne and today I'm delighted to be joined by George Patterson. George is a Managing Director and CIO at PGIM Quant Solutions.
He oversees all portfolio management and research for Quant equity and multi-asset teams. He's in the markets for many years now. Previously, he was at Axioma, identifying buy side trends and market opportunities. He was CIO for Quant Investments at Bank of Montreal, Global Asset Management and earlier in his career, was co-founder of Menta Capital, a Quant equity hedge fund. His background is in physics. He has a PhD in physics and spent time at NASA earlier in his career. So George, great to have you with us. Great to have a proper rocket scientist to chat to. How are you?

**George Patterson** (1:53)
Very good. Thank you for a great opportunity to be here.

**Alan Dunne** (1:55)
Good stuff. Well, I gave our listeners the highlights from your career. But as I mentioned, you started off in physics and then you worked at NASA. What got you interested in that and then how did you make the leap into finance?

**George Patterson** (2:11)
You know, I was always interested in physics from a very young age. It was just an area that I thought brought together math and science. And there was a lot of technology involved in how you do experiments. And it just for me, it was the combination of many different fields. I was always very interested. I enjoyed it. However, I knew I was not going to have a traditional academic career. I knew I wanted to do something in industry. And I didn't really know what it was.
And it's kind of really by luck, I found some colleagues that understood my skill set and what I could offer. Most investment firms were not interested in hiring a physics PhD. But there was a group, it was at Barclays Global Investors in the mid-90s, and they looked at me and they said, yeah, we think we can figure out what to do with you. And that was really where I cut my teeth.

**Alan Dunne** (3:12)
Interesting. And you think, I mean, I come from an economics background, so kind of view markets from that kind of perspective. And then I guess people with a quant background, I mean, do you take a different lens when you're looking at price movement, price returns and financial markets?

**George Patterson** (3:31)
So I'm a strong believer in having like a multidisciplinary team. So I think, I'd say when I was early in my career, I was very focused on the pure quantitative aspects and what did the model say, but over the years I've come to realize that you really have to kind of combine many different views, right? Quantitative is a very useful tool, but you also have to pay attention to what's going on in the market.
So really, my goal, and particularly with my team, is to have people with economics and finance backgrounds, but also computer science, mathematics, different fields because people bring different insights to the problem. So that's one of the things we try and combine at PGIM Quantitative Solutions.

**Alan Dunne** (4:13)
Very good. Well, give us a sense on PGIM Quant Solutions in terms of the size and scale. I know there's kind of two elements to it. There's the quant equity and the multi-asset size.
In terms of assets under management or the toxic lines to deal with?

**George Patterson** (4:28)
Sure. So we're the Quantitative Solutions Group within PGIM.
We're actually one of the early pioneers in this space. We just celebrated our 50-year anniversary, and actually many of our track records go back 25, 30, even 40 years. So we really were a pioneer in this space in many ways. The business actually originally started with multi-asset and focusing on systematic applications of multi-asset, which obviously has evolved over the years. That's roughly 50 percent of our $110 billion. Then quantitative equity, which is much more along the lines of benchmark, relative strategies, typically with tracking error anywhere between 2 and 4 percent.