Removing human bias from an concentrated market

Mast Investments discusses how systematic investment methods aim to minimize human biases while capitalizing on market concentration and growth trends brought about by technology. One major challenge faced by the largest platforms is retaining talent as they expand. With more capital comes greater responsibility, but also a desire for investment professionals to have control over their intellectual property.

Yung-Shin Kung, CIO of Mast Investments, took this approach. He spent over 30 years focusing on liquid alternative strategies at Credit Suisse and UBS before departing in 2024. The decision stemmed from a wish to stay ahead in the industry and execute with speed and clarity. Kung observed that the assumption that technology would provide more data over time proved incorrect.

Instead, data has become less accessible and more expensive, particularly clean data. This situation gives Mast Investments an advantage as a manager with a unique, proprietary dataset gathered over three decades. Kung believes that removing human biases is crucial, noting that many market developments are driven by a post-COVID growth cycle focused on technology and market concentration.

Concentration leads to several potential losers, so identifying pockets of growth is vital, and the firm has the flexibility to adapt to changing conditions. Additionally, Mast Investments is a significant holder of ETFs, appreciating their various roles for investors. ETFs provide clear fees and liquidity, negating hedge fund investment liquidity problems.

They are backed by exchanges and have lead market makers to support liquidity. In the future, Kung still considers alternatives to be a core part of an investor's portfolio, emphasizing the importance of diversification. Diversification offers uncorrelated returns and a reasonable return profile, making it an essential role in a portfolio where traditional assets may be increasingly correlated and sensitive to economic headwinds.

Kung does not view alternatives as a hedging strategy but rather as a foundational strategy for a well-diversified portfolio.