Thinking in practice.

PUBLISHED OPINION · REALCLEARWORLD · 21 SEPTEMBER 2021

We Need to Save Lebanon

Coauthored with Bill Cassidy

In this opinion piece, Bill Cassidy and I discuss Lebanon’s political and economic crisis and make the case for international support for the Lebanese people, accountability for corruption, and action to protect the country’s independence.

Published in September 2021; reflects the circumstances and views at the time.

PUBLISHED OPINION · RASEEF22 · 24 JANUARY 2020

Lebanon Should Default On Its Debt Service and Save Its Army Instead

By Marc H. Malek

In this essay, I argue that Lebanon should prioritize army salaries and essential state functions over debt servicing as it confronts a fiscal and banking crisis. I make the case for economic and political reform, the recovery of misappropriated public funds, and preserving the institutions needed for a sustainable recovery.

Published in January 2020; reflects the circumstances and views at the time.

ARCHIVED ANALYSIS · DECEMBER 2019 REVISION

Lebanon’s Dire Fiscal State

By Marc H. Malek

This six-page essay examines the links between Lebanon’s sovereign debt, the banking system, and the livelihoods of its people. Written during the 2019 crisis, it traces the growth of public debt and the risks that a government default could pose to banks, depositors, public-sector salaries, and the armed forces.

I argue for preserving essential state functions while pursuing international assistance, a government led by specialists, economic reform, and the recovery of misappropriated public funds. The original document includes debt, market, and banking charts that informed the analysis.

Restored from my website archive. The PDF is titled “A Short Analysis of the current Lebanese Fiscal and Economic Situation.” This version was revised in December 2019; its figures, forecasts, and proposals reflect that historical context.

01 / INVESTMENT PHILOSOPHY

The five-minute test

My approach to quantitative model development begins with an explanation of why an investment opportunity should exist. A profitable backtest alone does not give me sufficient conviction to allocate capital. I need to understand the economic relationship, behavioral tendency, or market mechanism behind the returns.

Within our research group, we had an informal rule: if a researcher could not explain a model to a reasonably intelligent person and make its underlying logic understandable within five minutes, we did not want it in the portfolio.

The mathematics and implementation could be sophisticated. The investment rationale had to be clear.

The rule forced us to identify the source of return and explain why we expected it to persist. It also made ideas accessible to colleagues with different expertise, allowing the group to question their assumptions.

This requirement is practical. If I do not understand why a model makes money, I cannot judge the environments in which it should perform well or badly. That makes it difficult to decide how much risk to allocate, interpret disappointing results, or recognize behavior that calls the investment rationale into question.

Data and statistical testing remain essential. An economic explanation does not remove the need for evidence, and a good historical fit does not remove the need for an explanation. Research must connect the two—and carry that understanding into implementation, portfolio construction, and live monitoring.

Adapted from my Investment Philosophy and Leadership Record, September 2026.

02 / PORTFOLIO CONSTRUCTION

Risk has an environment

Our work on the risk environment, which led to the creation of the Conquest Risk Index in 2004, fundamentally changed how we managed money. It moved us from relatively static allocations among underlying strategies and models toward a framework in which allocations responded to prevailing conditions.

Our mandate emphasized performance during risk-averse periods. With static allocations, adding strategies designed for favorable conditions created a difficult choice: they could broaden our sources of return, yet their losses during stress could dilute the portfolio’s central purpose.

CRI gave us a framework for making the risk environment an input into portfolio construction. In risk-averse conditions, we increased allocations to conditional long-volatility, short-term trend-following, and momentum strategies. In risk-seeking conditions, we redirected risk toward Conquest Risk Capture, which we added in 2007.

A strategy no longer needed to justify the same allocation across all environments to earn a place in the portfolio.

The value of diversification cannot be understood solely through full-period average correlations. I want to know how strategies behave when liquidity contracts, volatility increases, trends reverse, or risk appetite expands. Those are the conditions in which the portfolio’s combination of exposures matters most.

Understanding the environment does not eliminate uncertainty or guarantee outcomes. It provides a framework for allocating risk with a clearer view of the conditions under which different return sources may help or hurt. Research into when and how to allocate risk is as important as research into individual trading signals.

Adapted from my Investment Philosophy and Leadership Record, September 2026.

03 / LEADERSHIP

Beyond the founder

My responsibility as a leader is to build an organization whose capabilities can expand beyond my own. The enduring value of a research team lies in its ability to generate new ideas, challenge existing models, and improve the process over time.

Technical ability is essential. But I also look for scientific curiosity, independent thinking, and the judgment to distinguish a plausible investment idea from an attractive historical pattern. Those qualities require sustained development.

A shared research discipline does not require identical perspectives. My own background was concentrated in foreign exchange, derivatives, fixed income, and global macro. As Conquest developed, I deliberately added people with stronger expertise in areas where mine was less extensive, including equities.

Each hire should expand the questions an organization can investigate.

I want knowledge to be shared, constructive disagreement to be encouraged, and younger researchers to develop independent judgment. Their role should extend beyond implementing someone else’s ideas. They need the opportunity and expectation to become original contributors.

The same discipline applies to the business. Resources devoted to research, technology, talent, operating infrastructure, and commercial development compete with demands for current profitability. These investments determine the organization’s capacity to remain competitive as its products mature.

Hiring strong people is the beginning. The harder task is building an environment in which they become more capable together. My measure of success is whether the organization can keep producing useful investment capabilities as its people take on greater responsibility.

Adapted from my Investment Philosophy and Leadership Record, September 2026.