About Heartland Trust Company and Dustin Sobolik
Steve Halverson founded Heartland Trust Company in 1990 as an independent trust company, the first of its kind in North Dakota. The company’s focus is to provide traditional trust and investment services to clients in the tri-state area without interference from a “corporate” parent company.
Dustin Sobolik joined Heartland Trust Company (“Heartland”) in 2015 and now serves as the Director of Investments. He oversees manager selection and portfolio construction. When he is not at work, he spends time travelling and working in his garden.
Challenge
Heartland’s largest challenge was finding a differentiated way to analyze risk in detail. To elaborate, Sobolik explains: “It is difficult to access robust software for scenario and stress testing, especially during tail risk events. The conventional sources to measure risk and scenario tests for retail wealth managers like ourselves are either deficient or wholly cost-prohibitive. Other industry offerings have limited capabilities and challenging interfaces.”
Solution: Heartland has partnered with Venn by Two Sigma to help with several key workflows:
- Data visualisation and screening
- Scenario and stress testing
- Manager selection and private funds
"Venn provides a much more nuanced view on the risk that goes beyond traditional modern portfolio theory statistics. A thorough review of the factor lens helped me develop an intuitive understanding of risk premia and how we could incorporate it into our portfolio models."
Data visualisation and screening
"Venn has revolutionised our portfolio construction. I do not think anyone should underestimate excellent data visualisation. We used to rely on a lot of free services for factor regressions, but they were not terribly conducive to studying factors in detail, much less screening for them."
By using Venn’s Factor Lens and Data Library, we are able to easily identify and use negatively correlated risk premia to offset one another. The classic pair trade is value and momentum, but Venn has enabled us to identify a number of other structural trades spanning multiple asset classes that should enable us to drive persistent excess return going forward. It’s also enabled us to source some of those factors from unconventional sources.
Scenario and stress testing
"At the very least, our existing processes needed to be supplemented by robust scenario and stress testing. Venn allows us to do this and more."
Manager selection and private funds
"Certain prominent fund managers have asserted that private valuations can amount to ‘volatility laundering’ and despite the hyperbole, I am inclined to agree with them. Private products are becoming more prevalent on the advisory side and we needed a software that could analyse them effectively. The ability to desmooth and interpolate returns gives us a much more accurate picture of the risks our clients are taking."
Further, in public funds, we are able to analyse a fund manager’s true ‘alpha’ after controlling for other factors.
Results and what’s next
Overall, Heartland has leveraged Venn to implement key workflow improvements. Looking ahead, Sobolik will continue to focus on ways to outperform their benchmarks.
"From an investment standpoint, we are always looking for structural ways we can outperform our benchmarks. However, if we zoom out and look at our business as a whole, we just want to find new ways to better serve and delight our clients."
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