Not every conversation in the hedge fund world needs to revolve around trend signals, Sharpe ratios, or manager due diligence. In HedgeNordic’s ongoing Quirky Questions series, we dig beneath the surface to reveal the personalities behind the portfolios. In this edition, we speak with Alexander Mende, CIO at RPM Risk & Portfolio Management, who has spent two decades navigating the CTA and managed futures universe with a scientist’s eye and a skeptic’s instinct. But when he’s not poring over performance metrics or evaluating emerging managers, Mende is commanding a very different kind of stage as the frontman of a Ska Punk band. We sat down with him to explore the unexpected harmonies – and the occasional dissonance – between algorithmic investing and punk-rock authenticity.

• You are a scientific minded, risk-focused investment professional and the front man of a Ska Punk band. Are those two worlds more alike than they seem?

Generally speaking, yes as math (or rather quantitative analysis in my case) and music both involve logical thinking, spaciotemporal processing, and pattern recognition, areas where both brain hemispheres interact. Specifically comparing CTAs and Ska Punk, among the “cool bands” the Ska Punk people are always frowned upon as weird and nerdy… This feeling of being the odd man out, also applies to CTAs, compared to the broader Hedge Fund industry. In that sense, I think, the two “scenes” have something in common. On the other hand, in life, the two worlds almost never overlap. For me being out on tour with the band is like taking a mental vacation from the world of finance.

• Do the instincts and experiences that help you lead on stage ever show up in a business meeting or vice versa?

Unfortunately, not a lot. Of course, you have to be able to read people and I hope that my presentations are a bit less boring than your average pitchbook, but (hopefully) in business meetings everybody is sober. This is generally not the case with a Ska and Punk audience I have to admit. Handling a drunken crowd is a totally different animal than 1-on-1 manager meetings. On the other hand, we have a few songs with economic topics which is probably not that common for a Punk band.

• Which gets the bigger reaction and disbelief, your Punk audience learning that you manage money for a hedge fund, or telling investors that you front a Ska Punk band? Which audience do you think is less forgiving of the other side?

So far, I have always received positive feedback from people in the financial industry. You would be surprised how many among us play an instrument or are involved with music. Maybe not as serious as me but, nevertheless. Revealing my “other identity” to people in the alternative music scene always gets me one of two reactions: Either they are impressed that I managed to pull off a PhD and have a fulltime job while doing music at the same time (and immediately want financial advice) or they are appalled by the fact that the lead singer of a left-leaning Ska Punk band is working for the “dark side”, especially in Germany. Remember, how ex-Vice Chancellor Franz Müntefering called all Hedge Funds locust? I think this reaction is mainly due to ignorance. First of all, terms like good or bad, evil or benign don’t really apply to finance if you disregard actual fraud, that is. Furthermore, you cannot lump multi-national banks, Hedge Funds, and CTAs together. Story of my life… In fact, I think (and I always try to educate people at shows) that CTAs are a necessary corrective in the financial markets. If anything, we are the “good guys”.

• Germany and Sweden took very different approaches to handling the COVID pandemic. Living between those two cultures, what stood out to you as a lesson in risk management that you could translate to your role at RPM?

In Sweden, wearing a mouth-nose-cover was voluntary and only “recommended” by the Health Agency. Thus, basically nobody wore one. In Germany, however, it was obligatory. I’m not a virologist, but if you want something to be implemented and carried out, you need to impose rules, and those rules need to be enforced. That’s why we prefer strict risk measures such as stop losses over “the system will regulate itself”, both when it comes to manager selection as well as to our own manager allocations.

• When looking at emerging managers, is there a trait or signal you’ve learned to trust that rarely shows up in a pitchbook? And on the flip side, what’s one early red flag you no longer ignore, and one early quirk that unexpectedly turned out to be a strength?

In my 20-year experience, the (main) people behind the strategy should always be a little bit weird (not too weird though) or have an odd hobby or something like that. I believe that this ensures a minimum level of strategy uniqueness. Being nerdy (and quantitative) is good, too. Generally speaking, you also need to get along with the people you are going to invest with. Otherwise, there lie troubles ahead… A red flag is when the guys can’t explain their own strategy to us.

• What is the weirdest thing you ever saw or experienced on an on-site due diligence meeting?

The golden plated ceiling decoration at a London-based discretionary commodity manager was a bit over the top, I think. Other than that, I only remember being nearly mauled by two huge black dogs in a former recording studio in Upstate New York. No, not really, but I’m afraid of dogs. So, for me this was a near-death-experience.

• After all the due diligence you’ve done over the years, is there one manager you passed on that, in hindsight, turned out to be the one that got away? What made them easy to overlook at the time, and what did they prove later?

When it comes to manager selection, there are a lot of Would-haves and Could-haves over a 20-year period. There are quite a few managers that I still receive monthly performance updates from, that I wish we had been invested with. However, most of the investments that didn’t materialize where due to reasons out of my hand like, for example, managers coming to realize that they didn’t want to have separately managed account investments after all (favorably at the end of a weekslong due diligence process), and RPM only invests via SMAs, the money to be invested wasn’t worth the due diligence effort, or that we couldn’t agree on the fees to be paid. There are also 2-3 examples of AUM growing so fast that the programs were closed or too big for us (we mainly invest in smaller managers with shorter track records) before we were able to start the due diligence process. Especially in the commodity space, there are many discretionary managers with unique approaches that keep delivering strong returns, but we shy away from discretionary trading because performance patterns are simply not repeatable in our view. If I have to think of one manager decision which I regret even today, is that we did not invest with a NC-based global macro manager back in 2013 but went for a Dutch systematic fundamental program instead. It was a close call though. That’s the “one that got away” I guess…

• You hold a PhD in Economics from Leibniz University in Hanover, Germany, and have taught finance courses at Ghent University. Do you ever find yourself learning from the next generation of Finance professionals, and have any traits or insights from your students made their way into your thinking as a CIO?

Always! Since I joined RPM, we have been teaming up with many different universities, most notably abovementioned Ghent University, where my former fellow PhD student is now a Finance professor. Many of our internal indicators were developed together with the students. Right now, we’re implementing a forecasting tool for Managed Futures’ performance based on macro, market, and our proprietary data.