Jon Havice, Founder and CIO, DGV Solutions

**Jon Havice** (0:30)
If you can get premiums in the wake of the hurricane, you make that up over time.

**Dean Curnutt** (0:36)
Hello, this is Dean Curnutt, and welcome to The Alpha Exchange, where we explore topics in financial markets associated with managing risk, generating return, and the deployment of capital in the alternative investment industry.
My guest today on The Alpha Exchange is Jon Havice. He is the founder and CIO of DGV Solutions, a firm managing money on behalf of institutional investors, many of which are endowments and foundations. Jon, it's a pleasure to welcome you back to the podcast.

**Jon Havice** (1:11)
Dean, it's great to be back.

**Dean Curnutt** (1:13)
Just check my notes here, you appeared in December of 2019

**Jon Havice** (1:17)
Wow.

**Dean Curnutt** (1:18)
A lifetime ago in markets and the world.
We've kept in touch plenty along the way, so it's going to be excellent to explore some of your current thinking and what DGV is doing in terms of managing risk on behalf of clients and seeking to generate uncorrelated returns. Tell us just a little bit about DGV. You founded it in 2014 after a long tenure in the derivative space. Just give us a little bit of background on the firm.

**Jon Havice** (1:46)
Yeah. So I founded DGV in 2014
What I had done for the few years prior to that, I was the Chief Investment Officer of a consulting firm. That has now been rolled up into Mercer Global Consulting. And I think one of the learnings that I had there, having spent the first 10 years of my career on Wall Street, trading derivatives and currencies, commodities, short-term rates, and then 12 years running hedge funds, and then taking this role as a consultant where we advise healthcare systems, endowments, foundations, retirement plans, etc.
Taking this more holistic view of how do you allocate capital, asset allocation, and some of the levers you have to pull in that. Most of these institutional portfolios are very sophisticated now. They use hedge funds and private capital programs, etc. And I thought there were some things that maybe the market wasn't serving as well as what maybe I could do. And so that was the founding of DGV, is could we offer liquid, attractive investment exposures that maybe look like hedge funds, but if you implemented those systematically, you didn't need big teams of people, you didn't need 1200 people to do them. In this business, if you have low head count, you can offer your products at a very reasonable price. And we've been true to that mantra since day one.

**Dean Curnutt** (3:11)
You spent a number of years at O'Connor, famous shop for impounding DNA in terms of derivatives into folks that were a part of that firm. And you spent time in the 90s in FX vol markets, which were wild relative to what they are now. You had the ERM, you had Tybot, the tequila crisis in 94, just event after event. Just tell us a little bit about that period.

**Jon Havice** (3:39)
It was great. A great firm to learn from. So many mentors at O'Connor that are some still in the market, some have retired, some are at some of the highest seats on Wall Street today and in the Endowment and Foundation universe as well. And so incredible learning platform.
I started as a floor trader in Philadelphia trading currency options. And then I moved to Chicago and traded on the Chicago Mercantile Exchange in 1994
O'Connor was acquired by Swiss Bank Corporation and it was sort of a reverse takeover of Swiss Bank's trading operations. The O'Connor people spread out all over the globe. I ended up going to London and trading currency derivatives there. And over that time, the O'Connor people ultimately took over the precious metals book at Swiss Bank, took over the commodities business.
Swiss Bank and UBS merged in 1998 And in more recent years, Credit Suisse was folded into the mix. So we've gone from three giant Swiss Banks 35 years ago to just one remaining, and it's UBS today. But yeah, in the currency markets, it's the ultimate macro trade. It's where interest rates, effects obviously collides, all global capital flows and comes through that. But it's the closest thing to a continuous market. That market opens up New York time at about 4 p.m. New York time. When New Zealand opens up on Sunday evenings, and it doesn't close until 5 p.m. New York time on Fridays. And so none of this 930 a.m. opening bell, 4 p.m. closing bell, it just runs around the world. So a great continuous market. And for the most part of it, it's operated really well over time. I mean, there have been times when pegs got involved, the currency crisis, the ERM, or the convergence of the euro and things, the British pound, and sometimes those break and you have sort of a, I don't want to say jump to default, but you have a non-linear move in currencies. But for the most part, they're pretty orderly in the way they move. You can focus on derivative risks and Greek risks and less about, oh, there's gonna be some corporate action, there's gonna be a cash takeover and things like that. So yeah, that's how I spent the first decade of my career. It was great fun.