What if the Federal Reserve raises rates faster or lower than expected?
What if China’s growth slows more than expected?
What if Venezuela defaults?
What if Russia and U.S. relations weaken further — or strengthen?
What if the ISIS crisis worsens?
What if there is another terrorist attack on U.S soil?
Luis Maizel, co-founder and senior managing director at LM Capital Group, is a “what if” scenario planning expert who utilizes proprietary, in-depth research to analyze the outcome of numerous potential scenarios — like the questions above.
Scenario planning — in addition to LM Capital’s quantitative risk tools — acts as a comprehensive risk management platform and allows for proactive response to unforeseen events.
“When I started LM [Capital], I said, ‘It makes a lot of sense to be proactive instead of reactive,’” Maizel told ThinkAdvisor. “If you can plan on a situation ahead of time, you can look at alternatives, you can look at possible reactions by the markets, and you can take a stance that as soon as the event happens you react to it and you don’t wait to see what happens but you are part of the action.”
Maizel, who is also a Mexican-born, Harvard-educated economics professor, founded LM Capital in 1989 to provide active fixed income management to institutional investors using a global macroeconomic approach. Today, LM Capital, which is headquartered in San Diego, has about $5 billion in firmwide assets under management.
Maizel said he and his team always have 40 or 50 life scenarios planned.
“Being a smaller shop, anybody listens to something on the radio will come into the office and say ‘do we have this as a scenario, or how would we react to it?’” he said.
Maizel gave ThinkAdvisor several examples — some current and some past — of scenarios that his firm has planned responses for.
“We have today’s scenarios for another 9/11 … we have scenarios for one of the big-money banks going under,” he said. “It’s mostly bad situations.”
In 1996, LM Capital was looking at a very different scenario. Boris Yeltsin, then the president of Russia, was having heart surgery in 1996, and they thought he would not make it.