Odds on Open

Get 10% off on Fundamental Edge: https://www.fundamentedge.com/odds-on-open-podcastIn this episode of Odds on Open, Ethan Kho sits down with Brett Caughran, founder of Fundamental Edge and a former Portfolio Manager at elite Tiger Cub and Multi-Manager (MM) firms.As generative AI and agentic workflows commoditize the "desktop research" layer of investing, the bar for generating idiosyncratic alpha has never been higher. Brett breaks down the specific frameworks—including ETIC (Everything There Is To Know) and the Focus 5—that top-tier pods use to identify mispriced securities and isolate key drivers before they are priced in by the market.We dive deep into the market microstructure shifts caused by the rise of indexers and factor-based quants, explaining why increased volatility is a gift for fundamental investors with the stomach for Bayesian updating. Brett also provides a roadmap for the "New Junior Analyst," shifting the focus from manual model-cranking to high-leverage primary research and AI orchestration.00:00 Intro01:29 Frameworks for developing a differentiated variant perception05:16 Financial drivers vs. narrative cycles: The Focus 5 framework08:29 Analyzing the stock vs. business: Bayesian updating in public markets12:52 AI as an intellectual power tool vs. consensus "alpha slop"17:21 Accelerating the hunch-to-hypothesis pipeline with AI sniff tests21:52 The evolution of junior analysts: From data entry to primary research28:46 Why market microstructure and behavioral alpha prevent index efficiency34:48 New meta-skills: Debugging models and the expectations gap muscle38:44 Training junior analysts: Earning the right to use power tools44:34 High-value workflows: CEO credibility analysis and guidance tracking48:28 LLMs as orchestration tools for human primary research54:55 Teachable scientific process vs. revealed investment judgment57:54 Common threads across Multi-Managers, Single Managers, and Tiger Cubs59:49 Curiosity as a meta-skill and the art of system thinking

In this episode of Odds on Open, Ethan Kho sits down with Derek Pilecki, founder of Gator Capital Management, to deconstruct his 20%+ annualized track record in the financial sector. While many generalist PMs view financials as a "sleepy backwater" or overly complex, Derek explains how he extracts alpha from regional banks, brokerages, and insurance companies by identifying fundamental business changes before they are reflected in the tape.The conversation moves from the microstructure of bank underwriting in a post-Dodd-Frank regime to the practicalities of portfolio construction, including why Derek has expanded his concentration from 25 to 40 names and his strict discipline against "averaging down" on losers. We also dive into the private credit narrative, the actual risk of systemic leverage in non-bank financials, and how generative AI is shifting the valuation multiples of moaty info-service businesses like Morningstar and FactSet.00:00 Intro01:06 Derek's +21% annualized return track record02:50 Fundamental business change vs market noise in Robinhood05:25 Portfolio construction: Concentration limits and adding to winners09:09 Sourcing alpha and identifying three-year doubles in financials12:44 Developing edge through repetition and management team cycles14:16 Why the post-GFC regime fundamentally changed bank underwriting17:07 Assessing tail risk and leverage in the private credit market21:23 AI-driven market dispersion and identifying moaty businesses24:11 Why shareholder base turnover matters for timing broken charts25:57 AI disruption vs trust-based moats in financial services29:37 Integrating AI into fundamental research and SEC filing analysis32:31 Scaling regional bank positions and managing liquidity constraints35:39 Risk management: Permanent capital loss vs mark-to-market volatility37:12 Capacity constraints: Optimizing for returns over AUM scale44:14 Behavioral edge and avoiding the "degree of difficulty" trap50:39 Career risk and the reality of active money management54:18 Breaking into the industry via public stock write-ups

In this episode of Odds on Open, we analyze the technical architecture of the data science layer within fundamental hedge funds. Guest Matei Zatreanu, founder of System2, discusses the tension between generative AI and the search for outlier-driven alpha. We move beyond the hype of LLMs to discuss the practicalities of expert network automation, the causal mapping of second-order macro effects, and why the most successful PMs treat their investment process as a craft rather than a business operation. The conversation also explores the structural shift from single-manager funds to multi-manager platforms and the specific incentive alignment strategies used to retain quant talent in high-stakes environments.(00:00:00) Intro(00:00:53) Talent constraints and outlier detection in the data science layer(00:05:38) LLM customization: Differentiated alpha vs. the consensus echo chamber(00:10:18) Automating the mosaic: AI interview agents and qualitative data synthesis(00:20:33) Mapping causal relationships and second-order macro effects via graphs(00:26:33) Curiosity as the ultimate constraint for information-rich investors(00:31:43) Multi-manager platforms vs. the rise of independent single managers(00:37:58) Solving incentive alignment and analyst retention via internal fund-of-funds(00:44:03) Managing negative network effects and custom research one-offs(00:48:33) Whale hunting: High-ticket pricing and the billionaire value mindset(00:54:58) Zero-to-one incubation: Leveraging unique market access for business spin-outs(00:59:08) Romanian roots to billionaire circles: Mentorship and aiming high(01:07:48) PM as "Doctor": Why founders prioritize craft over business operations

This episode was filmed on Thursday, March 12, 2026.

Greg Newman, founder and CEO of Onyx Capital Group and the largest liquidity provider in oil derivatives markets, on what it actually looks like to run a market-making book when liquidity breaks down entirely. What most participants misunderstand about oil vol is that the outright price — Brent, WTI — is a proxy, not the market; the real information lives in time spreads, regional diffs, and niche contracts that only a handful of firms have visibility into. Why fair value discovery in a dislocated market requires abandoning automation, reverting to manual process, and using physical market participant behavior — refiners, producers, airlines — as a real-time signal rather than a lagged one.

Greg co-founded Onyx Capital Group in 2016 after a decade trading crude and refined products across increasingly niche oil derivatives contracts. Onyx built its position by stepping into the vacuum left by banks exiting commodities post-Volcker, becoming the dominant liquidity provider across European, Middle Eastern, and Asian oil markets with an estimated 20–50% market share in several key contracts. The firm now operates market-making desks across London, New York, Dubai, and Singapore, and has expanded into data services, a single-dealer platform, retail brokerage, and physical trade finance — building a vertically integrated oil markets infrastructure business from a pure prop-trading foundation.

In this episode we cover:
•⁠ ⁠Why trading oil outrights during the dislocation was a losing game — and where the real edge was
•⁠ ⁠Fair value discovery on Sunday night: how Onyx priced contracts when every historical model broke
•⁠ ⁠Physical market reflexivity: how refiners, producers, and airlines all become forced actors at key price levels
•⁠ ⁠Geopolitical signal extraction: options open interest and off-hours order flow as an information edge over Polymarket
•⁠ ⁠Regime-break risk: why government intervention in exchange mechanisms is the tail risk that keeps Greg up at night
•⁠ ⁠Countercyclical talent investment and why Onyx's worst years built its best crisis infrastructure
•⁠ ⁠From prop shop to platform: data, single-dealer, retail brokerage, and credit as extensions of liquidity edge
•⁠ ⁠Why Onyx is building toward a hedge fund — and why track record discipline is holding them back

Timestamps:
00:00 Intro
00:48 Oil market volatility: making sense of the dislocation
04:05 Outright vs. spread positioning: where the real edge was
05:10 How Onyx manages process when liquidity breaks down
10:18 Pricing fair value on Sunday night with no precedent
16:48 Physical market participants and the reflexivity of hedging behavior
20:22 Prediction markets as an information signal — and why Onyx stopped using them
25:26 Options flow as the real tell for informed geopolitical positioning
28:17 What it feels like running a global market-making book through a crisis
33:05 Regime-break risk: when exchange mechanisms themselves fail
36:25 Countercyclical investment in talent and infrastructure
42:20 From prop shop to liquidity infrastructure: building a durable valuation
48:50 Why Onyx is building a hedge fund — and what's holding them back
57:50 Media, brand, and market disruption as compounding assets
01:05:47 The most surprising thing after 14 years of building Onyx

Legendary poker champion, decision scientist, and author of "Thinking in Bets," Annie Duke deconstructs the mechanics of decision-making under uncertainty, shifting the focus from high-variance outcomes to the rigor of positive expectancy and robust process. Leveraging her background in professional poker and cognitive psychology, Duke explores how loss aversion and resulting—the cognitive trap of equating outcome quality with decision quality—can degrade a trader's edge and lead to suboptimal portfolio construction. The conversation moves beyond theory into the practical application of base rates, reference classes, and mental time travel to combat temporal discounting, providing a masterclass for quants, PMs, and analysts on how to refine their probabilistic worldview and neutralize the noise of short-term volatility.00:00 Intro01:12 Defining bets as resource allocation under uncertainty04:52 Positive expectancy vs. outcome-based evaluation06:11 Resulting: Why outcomes are not proxies for decision quality15:19 Calculating expected value in high-variance career paths18:55 Moving from implicit intuition to explicit decision modeling24:27 Using base rates and reference classes for startups30:26 Psychological traits of elite risk takers and traders31:33 How prospect theory and loss aversion distort risk45:12 Deconstructing gut feel and the role of intuition49:36 Evaluating optionality and impact in fast-moving environments57:13 Mental time travel: Tools for managing temporal discounting01:01:31 Quantifying the intersection of luck and hard work01:04:43 Internalizing a probabilistic worldview for long-term edge