Interview, Fireside Chat
Searching for Signals: BlackRock’s Raffaele Savi on the Future of Systematic Investing
- Leadership and Scope: Raffaele Savi serves as Global Head of BlackRock Systematic, leading quantitative teams across fixed income, equity, and factor investing with over $317 billion in assets under management (AUM); he holds a seat on the firm's global executive committee.
- Legacy Milestone: BlackRock's systematic investment team is celebrating its 40th anniversary, having launched its first strategies in August 1985, with Savi having personally led the team for the last 20 years.
- Career Trajectory: Savi transitioned from an electrical engineering background in Italy—where he began writing derivatives dissertations with coding components in the early 1990s—to joining Barclays Global Investors (BGI) in 2006, citing both professional alignment with pioneers like Richard Grinold and personal circumstances (relocating to London for his American wife) as key drivers.
- Strategic Evolution: The firm's approach has shifted from early "first-generation" factor investing (reliant on long-term risk premiums) to "second-generation" strategies integrating big data, machine learning, and predictive analytics to navigate crowding and crisis environments.
- AI Pillars: Savi identifies three core roles for Artificial Intelligence in the industry:
- Scale: Leveraging the "bitter lesson" that doubling data and compute often outperforms sophisticated model adjustments, driving success through massive data ingestion.
- Generative Capability: Utilizing Large Language Models (LLMs) as interactive, universal tools that broaden applicability beyond signal generation to risk modeling, allowing domain experts without coding skills to participate in the investment process.
- Safety Engineering: Using AI not as a "crystal ball" for prediction, but to build portfolio resilience and safety layers against unpredictable shocks, prioritizing client outcomes over pure alpha generation.
- Market Expansion: AI is enabling systematic investing to expand into illiquid asset classes (private equity, credit) by extracting signals from non-tabular data sources such as product reviews, search trends, social media, and human capital networks.
- Future AUM Impact: Savi forecasts significant growth in systematic private markets over the next decade, driven by the ability to build optimal public-private portfolios and risk models that account for liquidity profiles across asset classes.
- Recent Market Drawdown Analysis: In a July 2025 context, systematic investors faced a peak-to-trough drawdown of up to 40% caused by:
- A surge in high-volatility names driven by unconnected fundamental beats, meme stocks, and deregulation hopes.
- Forced selling and short-covering as quantitative firms adjusted leverage and risk limits to maintain long-term alpha targets.
- Mechanical degrossing triggered by absolute returns declines, which amplified volatility despite relatively small individual position adjustments.
- Risk Philosophy: Savi advocates for a "dynamism" over dogmatism in risk management, quoting Richard Grinold's principle that "the best way not to gain 20 pounds is not to win five pounds," emphasizing the protection of the portfolio's ability to operate in future markets over short-term avoidance of drawdowns.
- Talent and Culture: Savi attributes success to a hybrid team composition blending "East Coast" financial/economic expertise with "West Coast" hard sciences (computer science, physics, math), noting that the most successful investors combine high cognitive ability with radical open-mindedness.
- First Model: Savi built his first risk model in the mid-1990s using FORTRAN, MATLAB, and C++, creating the infrastructure from scratch due to the lack of open-source tools at the time.
- Core Strength: Savi identifies his primary strength as active listening and synthesizing insights from his team rather than individual genius, rejecting the "lone hero" myth of investing.
- Key Advice: He cites the principle that "discipline is the necessary twin of insight," noting that while he loves ideas, strict discipline in execution and finishing tasks has been the critical differentiator in his career.
- Industry Influence: Savi credits Grinold and Kahn's Active Portfolio Management (1985) as a foundational text that democratized systematic investing principles, creating a legacy where competitors and peers often acknowledge the utility of shared, public methodologies.
- Optimistic Outlook: Despite global anxieties, Savi expresses high optimism for the future, citing the intelligence, kindness, and creativity of the sub-30 demographic as the primary drivers for a positive societal trajectory.