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Ainslie Yuen sees a silver lining in the meltdown


Yuen met with The Australian Financial Review in the kitchen of digital asset group Trovio’s Sydney offices on a quiet Wednesday morning in January.

In her pursuit of all things interesting, complex and different, she seems to be revelling in the intense volatility of cryptocurrencies, a new and wild frontier of capital markets.

Quant quest

“It’s a whole new universe with new metrics,” she says about cryptocurrencies, admitting that the absurdities of meme coins such as Doge and Shiba had her scratching her head at first.

“It’s important for us to not put money into things that are dying or just a fad,” she says.

As Yuen prepares for another year trying to ride the bucking bronco of digital assets, it seems little can surprise her. She’s seen it all on a career journey that’s taken her to San Francisco and New York with detours to Cambridge and Paris.

Yuen’s undergraduate degree was in physics and engineering, motivated by a desire to understand how things worked. At the time, engineers were in high demand in Silicon Valley, so she headed to the US to work for a start-up.

But as much as she enjoyed working as an engineer, the work wasn’t all that interesting.

So, she set off to pursue her PhD at the 580-year-old King’s College at Cambridge University. Her interest in finance was piqued when she read how its endowment fund had lost money in the 1998 South-East Asian crisis, and she wondered if she could apply herself to prevent a situation like that.

Her PhD thesis involved using “interesting tools” to look at financial data – applying fractal analysis to analyse intraday price moves of US equities.

To learn more about finance, there was only one logical place to go – Goldman Sachs.

The bank, she said tended to collect PhDs from a variety of disciplines, and so it seemed like a natural fit.

Yuen landed up on the multi-asset prop desk at the US bank. She applied her quantitative skills to build tools and analyse the unusual mix of assets that the bank bought: from planes to satellites to credit card portfolios.

But life in New York become tougher after the global financial crisis when Goldman’s solvency was under threat and Yuen’s friends were laid off. The cold winters made her homesick, and so she quit, telling her boss she was returning to the sunshine of Australia to open a pâtisserie.

“I had spent years doing mathematics and science and things. I wanted to do creative and fun things,” she said.

That took her to Paris to study to become a pastry chef – an experience she describes as “intense.”

Yuen never opened that pâtisserie – commercial rents in Sydney were too uneconomical – but she did set up a business that made furniture covers.

“It was nice to have my products in shops in the United States,” she says before adding that “sales is really, really hard”.

But at some point, she decided it was “time to get real” so she explored jobs in finance, and she rediscovered her passion for quantitative analysis, which was fashionable again.

“There were new buzzwords like machine learning and data science – so it had all progressed and become beautiful.”

Crazy coins

Her return to the financial realm took her to Australian credit fund Coolabah Capital and asset consultant Lonsec before she found her way to Pendal as part of the quantitative analysis team.

Yuen then followed Pendal’s Vimal Gor to Trovio and is now a portfolio manager at the digital asset fund. It’s fair to say that analysing and trading cryptocurrencies never seemed like her destiny.

She says she first heard of bitcoin from her roommate back in 2010, but it sounded like a gimmick. Another friend told her how they were talking to the European Central Bank about blockchain.

If that wasn’t enough of a signal to get involved, there were the advertisements on buses.

“I should have listened to them. But here I am now,” she says.

Needless to say, trading cryptocurrencies is a different ball game to traditional financial markets. While stocks tend to take the proverbial staircase up and the elevator down, ie, a gradual rise in price and then a sudden fall, crypto assets don’t tend to trade linearly.

The apparent network effect means the value ascribed to them is more asymmetric, and so they can go up fast, but down fast too.

So, is this the ultimate application of technical analysis?

“I wouldn’t call it pure technical. Some of it is behavioural – observations of what people are doing,” she says.

Crypto is also a new frontier for data analysis with limited data sets from a variety of sources.

Few find data analysis glamorous, but those among us that do, take note. A lot of time and effort is devoted to cleaning data that comes from different and at times unreliable sources before it can be analysed.

Sifting through the garbage

“It’s annoying, but it has to be done. If your data is garbage on the input, it’s garbage on the output,” she says.

Sifting through the garbage is particularly important in cryptocurrencies where all sorts of weird, wacky and dubious coins find their way into exchanges.

“The craziest ones we have excluded. We have an algorithm that picks the ones we think are more interesting, and then we go and analyse it – and where the value might come from and whether there will be a network effect in the future.”

Of course, the year 2022 has been the annus horribilis for crypto assets. The implosion of the Terra stablecoin that took out a range of participants in the crypto market seems like a distant memory after FTX empire of the former prince of crypto Sam Bankman-Fried unravelled.

The pain of crypto’s plunge has been felt by top venture capital funds to speculators young and old. But Yuen sees a silver lining in the events of last year.

“It means the bad players are being shaken out which is a good thing”

“The regulators will finally step up and sort it out and then institutional money will flow in. That’s how we see it.”

She is convinced digital assets and blockchain technology are in their early stages.

“It’s actually really fundamentally useful. In some form, it will prevail and make things better.”

The triumph of efficiency is how she says the world works. But if Yuen had to summarise what she’s learnt along the journey it’s this: be adaptable.

“Markets are always changing, and the world is changing rapidly. You need to be able to adapt and learn and try new things.”

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