Martin Tarlie - Bridging the Gap Between Financial Planning and Portfolio Management (S6E13)

In this episode I speak with Martin Tarlie, a Portfolio Manager at GMO spearheading their work on Nebo, a goals-based investment platform. Martin describes Nebo as, “bridging the gap between financial planning and portfolio management,” with a key innovation being the reformulation of risk from volatility to not having what you want/need when you want/need it. In other words, constraints on both wealth target and horizon. This reformulation of the core problem introduces a number of complications to the portfolio optimization process. For example, under classic power utility, lower volatility is always preferred. But if you’re an investor expecting significant shortfall with respect to your wealth targets, increased volatility may be something very much worth pursuing. We spend plenty of time in the weeds discussing topics such as: the limitations of dynamic programming via backwards indication, the term structure of return variance, ergodicity economics, and portfolio selection sensitivity to utility function choices. And while these are all important details, at the end of it all, what Martin stresses most is that it’s the reformulation of the problem being solved that ultimately leads to a more pragmatic solution for allocators. Please enjoy my conversation with Martin Tarlie. ====== Corey Hoffstein is the CEO and CIO of Newfound Research and portfolio manager of the Return Stacked® ETF Suite. Corey is an active researcher and his work has been published in the Journal of Indexing and the Journal of Alternative Investments. He is also the host of the popular quantitative investing podcast Flirting with Models. Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University. Follow Corey Hoffstein: ▶ Twitter: https://www.twitter.com/choffstein — Follow Flirting with Models: ▶ Apple: https://podcasts.apple.com/us/podcast/flirting-with-models/id1402620531 ▶ Spotify: https://open.spotify.com/show/1IXldCXztfTaZeHbtcDRQI Follow Return Stacked: ▶ Portfolio Solutions: https://www.returnstacked.com ▶ ETFs: https://www.returnstackedetfs.com

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