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Speaker 1: Welcome to Trillans. I'm Joel Webber and I'm Eric bel Tunis. Eric,

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Speaker 1: the sixty portfolio is really the bedrock of investing has

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Speaker 1: taken a ton of arrows, but we're gonna spend some

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Speaker 1: time today talking about maybe how can be even better. Yeah,

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Speaker 1: there's a couple of smart guys who I largely met

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Speaker 1: on Twitter, but they have ETFs invest in ETFs have

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Speaker 1: mutual funds there in the asset management world. But they

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Speaker 1: have really done something that I think we'll find an audience,

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Speaker 1: which is everybody loves sixty. I mean it's a smash hit.

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Speaker 1: Look at any Advisor PORTFOLI it's usually some derivative of sixty.

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Speaker 1: And yet everybody is worried about the sixty and the

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Speaker 1: forty both falling at the same time, right because they

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Speaker 1: both went up for the same time. So how do

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Speaker 1: you hedge against that and yet keep your sixty forty

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Speaker 1: because no one wants to let go of that because

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Speaker 1: every time people try to hedge, they've been they would

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Speaker 1: lose money because the market rebounds almost every single time.

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Speaker 1: Yet there could be a time when it doesn't. So

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Speaker 1: how do you like have your cake and need it too?

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Speaker 1: And these these two guys have have seemingly come with

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Speaker 1: a way to do this that involves a model portfolio,

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Speaker 1: which is a whole another trend. Model portfolios are very popular.

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Speaker 1: UM that invests in ETFs and mutual funds, that tries

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Speaker 1: to allow advisors to have it all. And um, it's

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Speaker 1: really fascinates called return stacking and I'm excited to dive

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Speaker 1: into it. So joining us on this episode Corey Hofstein,

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Speaker 1: Newfound Research Chief investment Officer and Rodrigo Gordio, Resolve President

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Speaker 1: and portfolio manager. You can read more about their research

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Speaker 1: at return stacking dot com or follow along at return

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Speaker 1: Stacking dot Live, this time on Trilliance return Stacking Corey Rodrigo,

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Speaker 1: Welcome to Trillions. Thank you so much for having us

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Speaker 1: excited to be here, thanks to Okay, Corey, I want

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Speaker 1: to start with you. How did you guys find each other?

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Speaker 1: Because you guys don't even like officially worked together, right,

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Speaker 1: Like this kind of unusual to have two different firms

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Speaker 1: that collaborate like this. Yeah, this is definitely a little

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Speaker 1: weird to have two in theory competing asset managers work

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Speaker 1: on research and launch product together. But this was really

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Speaker 1: born out of a mutual respect. For years and years

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Speaker 1: and years, Rodrigo and his team have been publishing research

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Speaker 1: that I've read and really enjoyed, and I hope they

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Speaker 1: would say the same about my team and the research

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Speaker 1: that we've written. We ended up getting introduced to one

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Speaker 1: another through that mutual respect for research, and then ultimately

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Speaker 1: found that we had a large number of clients in common,

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Speaker 1: or clients who would learn about one of us and

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Speaker 1: ask about the other, and ultimately found that a lot

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Speaker 1: of the approaches we were taking in from a philosop

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Speaker 1: topical perspective, we're very much aligned, but from an actual

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Speaker 1: product perspective, we're very complementary. And so it really made

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Speaker 1: natural sense for us to work together on a lot

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Speaker 1: of things. And Rodrigo, what, what was the thing that

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Speaker 1: they did that you were like, Oh, man, that's really good.

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Speaker 1: I wish I had thought of that. Oh my god,

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Speaker 1: I mean it's you know what, Like like Corey said,

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Speaker 1: we constantly found ourselves talking about similar topics, and as

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Speaker 1: you know, when you're talking about complex issues, you try

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Speaker 1: to create a language around them when the average investor

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Speaker 1: can understand. I've always been envious of you know, we'll

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Speaker 1: go out and we'll talk about ensemble methods for quantitative investing,

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Speaker 1: and then Corey would say timing luck is a thing.

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Speaker 1: So it's just a much much better language. Often like

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Speaker 1: you're looking at them like that's this, We're talking about

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Speaker 1: the same thing. But his language was just so much

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Speaker 1: more beautiful and accessible than we often often struggle with

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Speaker 1: that a resolved So that's I think that's what I've

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Speaker 1: always been envous a. Corey is a fantastic writer and communicator. Okay,

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Speaker 1: so what's the product that you guys have come to

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Speaker 1: market with? Calling it a product, it's interesting what we

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Speaker 1: what we came up with, uh, and we started noodling

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Speaker 1: this over the summer of was the concept of these

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Speaker 1: new funds that had come out in the market, including

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Speaker 1: our funds. So Corey has gone through a bit of

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Speaker 1: evolution and in the product lined up. Even though he's

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Speaker 1: been talking about capital efficiency for years and using capital

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Speaker 1: efficiency for years in many respects, the product that he

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Speaker 1: launched or relaunched in November was able to create give

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Speaker 1: you some unique alpha's and unique bade us stacked on

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Speaker 1: top of each other using capital efficiency. We had been

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Speaker 1: doing that for ten years in our fun but it

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Speaker 1: was tough for us to communicate that to the audience.

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Speaker 1: And then we started seeing et F providers like wisdom

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Speaker 1: Tree and Standpoint and not Standpoint Simplify also come up

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Speaker 1: with stacking ideas, and well like, how do we how

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Speaker 1: do we use these new products that have never existed

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Speaker 1: before in the retail space, how do we put them

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Speaker 1: together in such a way that we can get people

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Speaker 1: to do better to create much more robust portfolios. And

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Speaker 1: so we started thinking about it, and we we came

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Speaker 1: up with again language right this idea. Instead of calling

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Speaker 1: it capital efficient or leverage or or structural alpha, we

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Speaker 1: named it return stacking, and we did it in such

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Speaker 1: a way that was the most accessible to the average investor,

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Speaker 1: even foundations and small corporations. And so in the summer

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Speaker 1: we started noodling this and we decided to write a

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Speaker 1: paper about the idea of stacking returns how to improve

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Speaker 1: a sixty forty portfolio through these new products and putting

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Speaker 1: them together in unique ways. And that led to then

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Speaker 1: a demand for some sort of solution, which led to

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Speaker 1: this index that has a bout of bts and mutual

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Speaker 1: funds that we've structured together to create uh profile that

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Speaker 1: we're gonna I'm sure to talk about the rest of

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Speaker 1: this podcast. Let me jump in here, um and really

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Speaker 1: get down to this stacking issue. And I want to

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Speaker 1: go back a couple of years with you, Cory. There's

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Speaker 1: a product that was launched called nt SX, which is

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Speaker 1: the wisdom Tree US Efficient Core e t F. It

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Speaker 1: used to be called the nine sixty and that was

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Speaker 1: born out of a Twitter conversation with you and a

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Speaker 1: couple other people. And this was interesting to me at

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Speaker 1: the time because, um, I was on Twitter and I

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Speaker 1: thought it was interesting. It was one of the first

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Speaker 1: e t s that was born out of people just

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Speaker 1: talking about something wisdom Tree launched that. I was skeptical.

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Speaker 1: I thought advisors just don't want to They typically don't

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Speaker 1: like to have all the asset classes together. They want

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Speaker 1: to pick the pieces. But it's got a billion dollars

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Speaker 1: and it's a success and they've launched. I think other

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Speaker 1: versions of it explain to me the sixt what and

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Speaker 1: I think this is essentially what return stacking is, and

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Speaker 1: this is one of the e t s you use

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Speaker 1: in your model. So I guess walk us through how

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Speaker 1: this fun gets the exposure and how it gets the

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Speaker 1: extra how it stacks, and I think that will be

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Speaker 1: a metaphor for the bigger model, right absolutely so. As

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Speaker 1: you mentioned this e t F that was launched by

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Speaker 1: Wisdom Tree, Jeremy Schwartz at wisdom Tree was really the

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Speaker 1: driver behind. That was born out of a conversation that

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Speaker 1: was taking place on Twitter between me and to actually

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Speaker 1: anonymous Twitter accounts non related sense who has unfortunately since

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Speaker 1: passed away, and another Twitter user named Jake and Jeremy

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Speaker 1: Sawton thought it was a really unique innovative idea and

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Speaker 1: was able to breathe life into it. The core concept

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Speaker 1: is to take a sixty forty portfolio and lever it

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Speaker 1: up one point five times, and that's going to give

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Speaker 1: you a N sixty. Now how is that done in practice? Well,

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Speaker 1: what happens is for every dollar you invest in the fund,

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Speaker 1: the fund is gonna take ninety cents and invest it

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Speaker 1: in the SMP five and it's gonna leave ten sense

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Speaker 1: aside in cash or cash equivalence very short term US

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Speaker 1: treasuries for example, as collateral to then buy a ladder

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Speaker 1: of US Treasury futures, It's going to be a blend

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Speaker 1: of two year, five year, ten year, and twenty plus

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Speaker 1: year US Treasury futures percent in each and that will

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Speaker 1: give you sixt notional exposure. So you got ninety in

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Speaker 1: the SMP plus sixty using treasury futures. Now we could

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Speaker 1: stop there and say, well, that is stacking. What we've

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Speaker 1: done is we've stacked treasury returns on top of equity returns,

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Speaker 1: which may or may not be a just a very

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Speaker 1: interesting solution as an alternative to someone who's very equity heavy.

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Speaker 1: Clifford ass At, a q R. Wrote a paper twenty

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Speaker 1: five thirty years ago called why not just equities? And

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Speaker 1: he showed actually, a levered sixty forty over the long

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Speaker 1: run does much better than just equities. Jeremy Schwartz recently

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Speaker 1: published an update to that for plus years about a sample.

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Speaker 1: But I think where this gets really interesting is to say,

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Speaker 1: let's actually not use it as an alternative to equities.

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Speaker 1: Let's use it as an alternative to a sixty forty.

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Speaker 1: And by that I mean if I just invest sixty

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Speaker 1: six percent of my capital in this levered sixty forty,

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Speaker 1: then I get equivalent exposure to what investing a hundred

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Speaker 1: percent of my capital in a sixty forty would have

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Speaker 1: given me. But I'm left with thirty three of my

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Speaker 1: capital left over that I can do whatever I want with.

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Speaker 1: And then it becomes a very interesting question of what

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Speaker 1: do you do with that leftover capital, which then in

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Speaker 1: effect is going to be a return stacked on top

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Speaker 1: of that six return profile. So we're able to retain

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Speaker 1: the sixty forty that everyone wants and loves, but use

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Speaker 1: a bunch of leftover capital to potentially stack something diversifying

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Speaker 1: in return generating on top. So this fund is and

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Speaker 1: we're gonna get to the bigger model first, but this fund,

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Speaker 1: essentially UH is up about seventy since launching. Would you

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Speaker 1: would you say it? Would you compare this to a

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Speaker 1: balance like a balanced fund or the SMP. What's the

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Speaker 1: right benchmark here? Well, my guess is it's probably benchmark

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Speaker 1: to the SMP. I would argue that's not a great benchmark.

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Speaker 1: The reason I love the phrase return stacking, which I

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Speaker 1: have to give all credit to Rodrigo for coming up with,

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Speaker 1: though I do plan over time to whitewash history and

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Speaker 1: take that from him. Actually on the term, I wrote

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Speaker 1: this book back in the day called The Institutional E

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Speaker 1: T F Toolbox, which is available on Amazon in case

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Speaker 1: you're curious anyway, I interviewed some institutions and I think

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Speaker 1: they refer to this as portable alpha. So are you

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Speaker 1: sort of rebranding it or is there a difference between

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Speaker 1: portable alpha and return stack. There's a slight difference. Uh.

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Speaker 1: Portable alpha really from an institutional perspective. Back in the

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Speaker 1: two tho era was all about stacking alpha on top

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Speaker 1: of your exposure. So if you look at something like

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Speaker 1: an nts X, which is just SMP beta plus bond beta,

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Speaker 1: well that's not really portable alpha. I might call that

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Speaker 1: portable beta. Right You're you're porting beta on top of beta.

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Speaker 1: There's no alpha there. The return stacking concept is more

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Speaker 1: generic than portable alpha because it's a question of what

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Speaker 1: do you do with the extra capital you free up?

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Speaker 1: That capital efficiency you create and you could go out

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Speaker 1: and buy alpha strategies, which then it does, I think,

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Speaker 1: become very similar to portable alpha. But a lot of

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Speaker 1: the nuance comes into how are you actually generating that

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Speaker 1: capital efficiency, how much does it cost you, where is

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Speaker 1: it coming from? And that's sort of a difference in

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Speaker 1: terms of how portable alpha used to work versus what

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Speaker 1: we're doing here. Everything that clos has talked about has

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Speaker 1: allowed an investor to increase portfolio real estate. Right. An

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Speaker 1: institutional investor has a vast, a wide expanse of real

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Speaker 1: estate that they could create. They get a hundred dollars,

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Speaker 1: they could invest a thousand dollars if they want to,

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Speaker 1: through derivatives, through borrowing and the like. Retail investors, retail advisors,

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Speaker 1: a lot of small pensions and institutions are stuck with

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Speaker 1: a hundred cents on the dollar. You give them a

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Speaker 1: hundred dollars, they only have that to spend, and that's

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Speaker 1: because they don't necessarily have access to leverage, have access

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Speaker 1: to derivatives, has the expertise to do it, don't want

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Speaker 1: to do it all of a sudden. In the last

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Speaker 1: two years, with products like ours in nts X, you

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Speaker 1: now are able to buy instead you want sixty forty,

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Speaker 1: you only have to spend sixty seven dollars of your

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Speaker 1: hundred to get sixty forty returns for the year, And

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Speaker 1: now you've created thirty three dollars of portfolio real estate. Right.

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Speaker 1: And what the reason we started with return stacking the

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Speaker 1: language stack returns is that if you do it right,

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Speaker 1: if you choose the right thing to put onto your

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Speaker 1: thirty three percent you're getting, you're gonna get that six return,

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Speaker 1: and whatever you make in that extra thirty three dollars,

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Speaker 1: that return is going to stack on top the six forty.

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Speaker 1: So this the paper is is about, you know, how

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Speaker 1: to stack returns in a low return environment, because I

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Speaker 1: think that's what everybody's worried about sixty forty, like Eric said,

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Speaker 1: where they're terrified of getting away. You know, they know

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Speaker 1: that it might be low returns in the future of

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Speaker 1: sixty forty. They know there might be higher correlations, but

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Speaker 1: they're terrified and moving away from it. This this allows

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Speaker 1: investors to both have their cake and eat it two

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Speaker 1: through stacking something thoughtful on top. Right. Okay, so I

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Speaker 1: want to talk about the thirty three dollars a little

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Speaker 1: bit more, but before we do that, let's just talk

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Speaker 1: about the the bigger model, because you're you're adding a

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Speaker 1: few other things into that, right, correct? Yeah, So what

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Speaker 1: are those and how do how does it all work? Yeah?

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Speaker 1: So the idea. First, the paper goes through a simple

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Speaker 1: example like we just discussed, right, But then we say

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Speaker 1: a lot, very few investors will actually buy a single

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Speaker 1: et F and then have that be their portfolio and

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Speaker 1: then stack you know, whatever they want to do on that.

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Speaker 1: But it's time out real quick, and let's just hone

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Speaker 1: in on that. This is crucial because a lot of

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Speaker 1: people ask me, why isn't there just one e TF

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Speaker 1: for everything? Or you know and or why don't ask

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Speaker 1: the dellocation which holds like balanced ETF are weren't they

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Speaker 1: more popular? And advisors just are the word us, the

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Speaker 1: word terrified. They're terrified of having one line item that

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Speaker 1: they want to have more in there. And so I

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Speaker 1: guess just just I just want to stop there for

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Speaker 1: one second and also address that because Joel, you had

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Speaker 1: that idea for why isn't there a hole inch alata ETF.

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Speaker 1: Ironically it probably wouldn't sell that much because advisors want

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Speaker 1: to be the deciders. They want the pieces in there.

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Speaker 1: So I'll pass it back to Rodrigo, who obviously is

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Speaker 1: making the pieces. Well, this is this is from years

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Speaker 1: of interacting with advisors, right There's it's really a tough

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Speaker 1: to get through your compliance that you're gonna put sixties

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Speaker 1: six cents on the dollar in a single service provider.

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Speaker 1: It's just not a thing. And then from a optics

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Speaker 1: respective with clients. Let's say you have a single company

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Speaker 1: that has five beautiful et s. It's very rare to

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Speaker 1: find the advisor that's okay with giving it all to

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Speaker 1: a single provider. And so you you certainly want to

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Speaker 1: have manager diversity. You want to have you want to

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Speaker 1: minimize the risk there from one single manager blown up

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Speaker 1: or not doing well. But if you're looking at return stacking,

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Speaker 1: then you only had one product to play with, it

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Speaker 1: would be a problem. What we found, which was very refreshing,

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Speaker 1: is that as you start digging in, you find that

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Speaker 1: there were, at the time of writing the paper, we

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Speaker 1: found ten very clear return stacked funds, and they were

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Speaker 1: stacking different things. Some were stacking equity beta on top

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Speaker 1: of bond beta. Some were stacking s p y and

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Speaker 1: then you know, fifty cents of spy and a hundred

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Speaker 1: cents of trend manu futures trend, another one with sacking

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Speaker 1: global equities with managed futures trend. We were stacking global risparity,

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Speaker 1: and then on top of that global macro like rules base,

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Speaker 1: Global macro cory was active equity on top of active

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Speaker 1: bonds and tail protection wrapped around that. So all of

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Speaker 1: a sudden you start finding these really exciting products that

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Speaker 1: you can now put together in a way that makes

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Speaker 1: that creates an exposure of six equities bonds, and then

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Speaker 1: what we stacked on top was thirty cents of systematic

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Speaker 1: um trends that's just like managed future trends or ct

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Speaker 1: A s, and then another thirty percent of global macro

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Speaker 1: or systematic global macro. And the difference between CTA and

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Speaker 1: global macro they're both futures based. One does pure trend

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Speaker 1: the other one uses value factor, the momentum fact, the

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Speaker 1: momentum trend factor, the carry factor, some use seasonality, some

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Speaker 1: use me in reversion, right, so it's just a bit

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Speaker 1: more diversive. We jump in here. So, uh, what what

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Speaker 1: you just went over was hedge fund strategies or alts,

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Speaker 1: And they're called alts because they're alternative the stocks and

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Speaker 1: bonds and they don't have they have very low correlation

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Speaker 1: to that category. There are et s, net Corey, but

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Speaker 1: they totally ignored because they just don't really do much

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Speaker 1: compared to stocks and bonds in the last ten years.

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Speaker 1: But I think there is a knowledge that they when

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Speaker 1: the market does sell off, those hedge fund ish kind

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Speaker 1: of strategies rise to the top. They tend to be

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Speaker 1: the top performers when the both the sixty and the

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Speaker 1: forty or down. I've seen it happen. It's only little

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Speaker 1: windows because then the FED steps in and everything goes

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Speaker 1: up again. But is that why you're using your thirty

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Speaker 1: three cents on that instead of in the NTSX situation

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Speaker 1: more treasuries because you're like, we already had that covered.

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Speaker 1: Now let's get some alts in there just in case

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Speaker 1: the world goes to hell. That will help you on

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Speaker 1: the protection side. That's the idea here, just to try

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Speaker 1: to simplify it. The nail on the head that at

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Speaker 1: the end of the day, there are these really interesting

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Speaker 1: and attractive alternative strategies from a diversification perspective. The problem

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Speaker 1: is most allocators have been stuck with this either or

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Speaker 1: problem over the last decade that to introduce these diversifiers

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Speaker 1: they have to sell stocks or bonds. So you look

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Speaker 1: at something like managed futures, which had a total return

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Speaker 1: the stock gain Managed Future ct A index I think

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Speaker 1: at a total return of between twenty and for the

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Speaker 1: entire last decade. Right, So if you sold stocks or

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Speaker 1: bonds to buy managed futures, you were very disappointed in

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Speaker 1: the total return, but it is a phenomenal diversifier historically,

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Speaker 1: particularly during periods of inflation fear. So if you can

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Speaker 1: have your sixty forty and then stack those extra managed

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Speaker 1: futures are alternative returns on top. Not only are you

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Speaker 1: potentially earning the extra return, but you are whole fully

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Speaker 1: making your portfolio more resilient by adding a diversifier that

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Speaker 1: particularly attacks what a sixty portfolio is weak two, which

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Speaker 1: is inflation risk that tends to cause stock and bond

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Speaker 1: correlations UH to turn positive. Okay, I like this, although

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Speaker 1: I will just question the fact that you know, plus

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Speaker 1: thirty three plus all this other stuff does not equal

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Speaker 1: one hundred. So there's some really basic math that I

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Speaker 1: want to take you guys up one but as a joke.

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Speaker 1: But I do want to just talk about this thirty

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Speaker 1: three and sort of the competition there, because it sounds

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Speaker 1: like there's a lot of very technical things that are

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Speaker 1: happening there that a normal retail investor isn't going to understand.

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Speaker 1: You're you're probably catering to an advisor more than anything there.

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Speaker 1: And I'm also just you know, genuinely curious here, like

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Speaker 1: how are you supposed to figure out what you're supposed

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Speaker 1: to do with that thirty three? I mean there there's

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Speaker 1: probably a version of that that I should put in

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Speaker 1: crypto even right, Sure, look, there's it's not necessarily I mean,

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Speaker 1: the index is meant to be prescriptive, but the paper

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Speaker 1: is not right. So what you do with that thirty

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Speaker 1: three cents? A lot of it has to do with

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Speaker 1: your own values, right. For example, if you're a value manager,

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Speaker 1: if you truly believe in buying cheap then all this time.

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Speaker 1: You know, if you're like Warren Buffett that leaves some

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Speaker 1: cash on the sidelines and waits for the opportunities, you

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Speaker 1: can't do that as an advisor. Investors have a hard

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Speaker 1: time staying in cash until value comes up again they

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Speaker 1: can snatch things up. You know, a few people can

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Speaker 1: actually accomplish that. But again, having your cake and eating

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Speaker 1: it too. Now you get full exposure to sixty by

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Speaker 1: only investing sixty seven cents, you have thirty three dollars.

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Speaker 1: It's on the sidelines. March happens. If you're a value guy,

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Speaker 1: you can you can pick up a lot of cheap stocks, right,

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Speaker 1: And because you can buy you really, like you said,

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Speaker 1: adding it, it's you're getting a hundred cents plus another

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Speaker 1: thirty three cents, a hundred percent exposure thirty three cents.

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Speaker 1: We're in cash. Now you've invested it in March twenty,

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Speaker 1: you've bought all the chief stocks. You stacked a bunch

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Speaker 1: of return. So that's one way of return stacking. Right.

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Speaker 1: The problem is that once you're there, now you're exposed

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Speaker 1: not sixty forty, but you're now exposed ninety forty. You're

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Speaker 1: you're very, very heavily intequities, and that becomes a long

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Speaker 1: term problem in our view, Right, So what we tend

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Speaker 1: to espouse and lean on if what are you gonna

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Speaker 1: do with that thirty three You want to do things

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Speaker 1: that can thrive when equities and bonds don't thrive. And

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Speaker 1: I think you, guys. I was just listening to a

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Speaker 1: podcast of Years with Gina Martin Adams, your your boss,

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Speaker 1: Eric uh and she was talking about you, guys. Talked

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Speaker 1: about a bunch of very interesting things, one of which

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Speaker 1: was inflation and the fact that when we've seen periods

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Speaker 1: of inflation and rising rates, we've seen bonds and equities

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Speaker 1: not only lose money, but lose money at the same time.

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Speaker 1: The correlations went up, so what does well, what can

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Speaker 1: you do for that? Other one of the things you

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Speaker 1: could explore is a diverseified commodity index, right. Another thing

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Speaker 1: you could explore are these c t A s and

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Speaker 1: global macro funds that can both make money and inflation markets,

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Speaker 1: and then when the inevitable FED comes to break the

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Speaker 1: back of inflation, it can also profit from downward deflation,

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Speaker 1: which they did beautifully in the two thousand's right. So

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Speaker 1: that's that's kind of what some of the things that

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Speaker 1: you can do with that three cents it would be.

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Speaker 1: It depends on just how I guess your tolerance for risk,

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Speaker 1: But it seems to me it would be kind of

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Speaker 1: dangerous to put it into something like crypto, which has

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Speaker 1: acts like a high beta stock. If that goes down,

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Speaker 1: then you're down. Then you're all all hundred and thirty

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Speaker 1: three is down. Where you want the thirty three largely

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Speaker 1: to offset the potential for the six going down, I

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Speaker 1: would guess. But I guess you could go all out

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Speaker 1: and add on to from from my value, that would

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Speaker 1: be my preference, But everybody has a different set of values, right,

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Speaker 1: I think I think when someone hears this, they go well,

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Speaker 1: you're just leveraged, and that's we know how that ends.

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Speaker 1: But I think that's the main point is if you

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Speaker 1: use your leverage to add on more of the same

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Speaker 1: thing you just bought, clearly that's where it gets dangerous.

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Speaker 1: But if you buy something that can offset or work

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Speaker 1: against or go up when the other parts go down,

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Speaker 1: that seems like a responsible way to leverage, which I

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Speaker 1: could see appealing to advitor people who are probably worried

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Speaker 1: about those kind of things. I mean, there's a lot

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Speaker 1: of target outcome ets have become popular for the same

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Speaker 1: reason they sculpt your returns, they give you some sleep

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Speaker 1: at night feeling because they use options in a certain

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Speaker 1: way to limit your downside. People are very quick to

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Speaker 1: point out that almost every major financial catastrophe, both globally

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Speaker 1: as well as every hedge fund that's blown up, has

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Speaker 1: been due to leverage, which is pretty much true. But

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Speaker 1: it's also been due to concentrated leverage. Right, there's a

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Speaker 1: very big difference between diversified leverage and concentrated leverage. Right.

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Speaker 1: If I said, let's take this sixty already in layer

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Speaker 1: on top very very short term, very high quality investment

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Speaker 1: grade bonds, that's very different than saying let's take this

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Speaker 1: sixty forty and layer on top thirty three cents of

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Speaker 1: bitcoin and ethereum. Right, those return profiles are going to

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Speaker 1: be very different, and the risk you're taking is different,

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Speaker 1: even though the quote unquote notional leverage to thirty three

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Speaker 1: cents is the same. And so again we think it's

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Speaker 1: really crucial when you're taking this return stacking concept and

432
00:24:30,760 --> 00:24:33,280
Speaker 1: considering it to think about what are you trying to

433
00:24:33,600 --> 00:24:36,560
Speaker 1: stack on top of your portfolio? And for us it

434
00:24:36,680 --> 00:24:39,879
Speaker 1: was really important in the paper to consider, Okay, everyone

435
00:24:40,119 --> 00:24:43,480
Speaker 1: we know is already starting with the sixty basis, how

436
00:24:43,520 --> 00:24:45,920
Speaker 1: can we make sure we're not just tacking on more risk?

437
00:24:46,000 --> 00:24:49,520
Speaker 1: How can we really try to attack the core risks

438
00:24:49,600 --> 00:24:52,520
Speaker 1: facing a sixty forty today? How can we help reduce

439
00:24:52,600 --> 00:24:55,280
Speaker 1: that risk? And let me give you a perfect contemporaneous

440
00:24:55,320 --> 00:24:58,639
Speaker 1: example for year today. I was just looking at up

441
00:24:58,720 --> 00:25:01,480
Speaker 1: right now. So year today smps down four or four

442
00:25:01,480 --> 00:25:06,400
Speaker 1: and a half percent. Right, the supposed protective layer, which

443
00:25:06,480 --> 00:25:12,040
Speaker 1: is UH sovereign U S treasuries, the TLT is down

444
00:25:12,160 --> 00:25:16,040
Speaker 1: around six percent. So both equities and bonds are down together,

445
00:25:16,160 --> 00:25:18,760
Speaker 1: much like Gina had said, might happen an inflation regime.

446
00:25:19,359 --> 00:25:23,040
Speaker 1: What is DBC doing the Deutsche Bank Commodity Index fund direction?

447
00:25:23,040 --> 00:25:26,680
Speaker 1: And I think it is UM it's up six percent? Right,

448
00:25:27,720 --> 00:25:30,600
Speaker 1: What are managed futures funds doing? They're up a couple

449
00:25:30,600 --> 00:25:33,679
Speaker 1: of percent. This is exactly the type of diversification you

450
00:25:33,720 --> 00:25:38,400
Speaker 1: need to protect against the blind spots of UM. So anyway,

451
00:25:38,480 --> 00:25:41,080
Speaker 1: these are these are the reasons that it's for us,

452
00:25:41,080 --> 00:25:44,320
Speaker 1: it's at a timely period for us to be discussing

453
00:25:44,840 --> 00:25:48,240
Speaker 1: the stacking concept. It just allows clients to not have

454
00:25:48,320 --> 00:25:50,960
Speaker 1: to if we're wrong, if Corey and I or any

455
00:25:51,000 --> 00:25:53,359
Speaker 1: any gena is wrong about our our future predictions of

456
00:25:53,400 --> 00:25:56,200
Speaker 1: correlation of equities and bonds, then they can get their

457
00:25:56,200 --> 00:25:59,600
Speaker 1: six return and if we're right, they can protect some

458
00:25:59,680 --> 00:26:01,480
Speaker 1: of that. One of the one of the things is

459
00:26:01,520 --> 00:26:03,879
Speaker 1: that you're sort of optimized for these moments of time

460
00:26:04,119 --> 00:26:07,800
Speaker 1: where things might move in lockstep. Right, So, how long

461
00:26:07,840 --> 00:26:13,600
Speaker 1: of a window does this approach? Last four how long

462
00:26:13,640 --> 00:26:17,160
Speaker 1: of a window does this approach as in your your

463
00:26:17,240 --> 00:26:20,480
Speaker 1: view or your positing that these events like we've seen

464
00:26:20,520 --> 00:26:23,439
Speaker 1: the last month are few and far between, and so

465
00:26:23,720 --> 00:26:28,640
Speaker 1: you know, how how much of a benefit is it really? UM? Well,

466
00:26:28,720 --> 00:26:30,800
Speaker 1: this is assuming this is again, I'm just going back

467
00:26:30,800 --> 00:26:33,399
Speaker 1: to Gina's conversation. You think this is few and far between,

468
00:26:34,119 --> 00:26:37,399
Speaker 1: but in fact, if you look back in the seventies,

469
00:26:38,359 --> 00:26:42,080
Speaker 1: bonds and equities were highly correlated most of the time

470
00:26:42,320 --> 00:26:46,960
Speaker 1: for over a decade. Right, So just because we haven't

471
00:26:46,960 --> 00:26:50,600
Speaker 1: seen that in a rising rate environment a falling rate environment,

472
00:26:50,720 --> 00:26:52,879
Speaker 1: doesn't mean we are not going to see it for

473
00:26:52,920 --> 00:26:56,560
Speaker 1: a decade or more in the future. Um So, I

474
00:26:56,560 --> 00:26:57,720
Speaker 1: don't know if you have anything to add to the

475
00:26:57,760 --> 00:27:00,320
Speaker 1: correlation between bos necros or not. Yeah, let's let's assume

476
00:27:00,320 --> 00:27:03,000
Speaker 1: we're wrong. That's always the best place to go. When

477
00:27:03,000 --> 00:27:05,639
Speaker 1: you're an asset manager. You should probably assume that whatever

478
00:27:05,720 --> 00:27:08,520
Speaker 1: narrative you're telling is wrong. What I would point to

479
00:27:08,720 --> 00:27:13,639
Speaker 1: is in the last decade, right where this certainly wasn't true.

480
00:27:13,800 --> 00:27:17,640
Speaker 1: I mentioned that c T A s, which dramatically underperformed

481
00:27:17,680 --> 00:27:21,320
Speaker 1: stocks and bonds still had a positive return. Right. So

482
00:27:21,400 --> 00:27:24,119
Speaker 1: let's say we're wrong and the next decade is just

483
00:27:24,200 --> 00:27:28,160
Speaker 1: like the last, and stocks and bonds have negative correlations.

484
00:27:28,760 --> 00:27:33,120
Speaker 1: It's a wonderful diversifier. Well, if we stack commodity trend

485
00:27:33,119 --> 00:27:36,880
Speaker 1: advisors managed futures on top of the sixty forty it's

486
00:27:36,960 --> 00:27:39,560
Speaker 1: still hopefully not a problem because that tends to exhibit

487
00:27:39,560 --> 00:27:42,400
Speaker 1: an absolute return profile. It's actually one of the reasons

488
00:27:42,760 --> 00:27:46,520
Speaker 1: in the paper we didn't stack raw commodities, because what

489
00:27:46,600 --> 00:27:49,520
Speaker 1: you find is that while commodities tend to do well

490
00:27:49,720 --> 00:27:53,600
Speaker 1: during periods of high inflation shocks, they tend to do

491
00:27:53,680 --> 00:27:57,960
Speaker 1: quite poorly during disinflationary periods, and so what we wanted

492
00:27:58,000 --> 00:28:00,840
Speaker 1: to stack on top was something a little bit more

493
00:28:00,880 --> 00:28:05,320
Speaker 1: absolute return. So if that things do revert back to

494
00:28:05,359 --> 00:28:08,080
Speaker 1: how they were over the last decade, and these fears

495
00:28:08,119 --> 00:28:11,320
Speaker 1: about inflation go away, and correlations go back to being

496
00:28:11,400 --> 00:28:14,720
Speaker 1: negative and nice, and diversification between stocks and bonds, what

497
00:28:14,760 --> 00:28:17,480
Speaker 1: we're stacking on top is hopefully not a drag on

498
00:28:17,560 --> 00:28:21,240
Speaker 1: the portfolio. So to your point, Joel, it's it's ultimately

499
00:28:21,280 --> 00:28:24,119
Speaker 1: hopefully not an issue either way. What we're trying to

500
00:28:24,160 --> 00:28:32,840
Speaker 1: stack on top is supposed to be absolute return. The

501
00:28:33,000 --> 00:28:35,680
Speaker 1: drag issue is that's what There's been a bunch of

502
00:28:35,720 --> 00:28:39,320
Speaker 1: downside hedge dtfs. Some have used a little VIX futures,

503
00:28:39,360 --> 00:28:43,080
Speaker 1: which can be awesome when VIX is up, but man,

504
00:28:43,120 --> 00:28:47,360
Speaker 1: they drag and they really just corrode your returns. Phdges

505
00:28:47,440 --> 00:28:49,480
Speaker 1: that e t F. I mean it was underformed SMP

506
00:28:49,600 --> 00:28:52,800
Speaker 1: by like over like three or four years because of

507
00:28:52,800 --> 00:28:57,440
Speaker 1: that that drag um. So I this is I think

508
00:28:57,480 --> 00:29:00,640
Speaker 1: what also makes the alts probably the sweet spot, right,

509
00:29:00,720 --> 00:29:03,160
Speaker 1: because I also was wondering why not just use your

510
00:29:03,160 --> 00:29:06,320
Speaker 1: THT on t LT. I have noticed t LT, which

511
00:29:06,320 --> 00:29:09,800
Speaker 1: is twenty of your treasuries, has a real nice um

512
00:29:10,160 --> 00:29:14,600
Speaker 1: record of off setting stock declines. But are you worried

513
00:29:14,640 --> 00:29:17,000
Speaker 1: that even long dated treasuries could go down at some

514
00:29:17,040 --> 00:29:20,920
Speaker 1: point to or um? I guess you ever think about

515
00:29:20,960 --> 00:29:23,640
Speaker 1: just using long dated treasuries instead of alts or adding

516
00:29:23,680 --> 00:29:28,240
Speaker 1: some of that in there. Okay, I think Corey can

517
00:29:28,280 --> 00:29:30,800
Speaker 1: speak to this better because that's kind of his his

518
00:29:30,920 --> 00:29:34,920
Speaker 1: first four into this return stacking concept. So Corey, why

519
00:29:34,920 --> 00:29:36,160
Speaker 1: don't you take it? And then I have some thoughts

520
00:29:36,200 --> 00:29:38,480
Speaker 1: on that. Yeah, I mean I think the big risk

521
00:29:38,880 --> 00:29:41,520
Speaker 1: eric for us when we're considering this return stacking concept

522
00:29:41,720 --> 00:29:45,760
Speaker 1: is what are the core economic risks that sixty already has?

523
00:29:45,880 --> 00:29:49,160
Speaker 1: So if we start to take that extra capital and

524
00:29:49,200 --> 00:29:53,320
Speaker 1: allocated to long dated treasuries, you probably get a profile

525
00:29:53,560 --> 00:29:56,320
Speaker 1: that's a little bit more balanced from a risk contribution

526
00:29:56,360 --> 00:30:00,240
Speaker 1: between stocks and bonds. But you're still introducing a lot

527
00:30:00,240 --> 00:30:04,600
Speaker 1: more of that inflation sensitivity risk. Right, So again talking

528
00:30:04,680 --> 00:30:07,200
Speaker 1: year to date, we are seeing that equities and long

529
00:30:07,320 --> 00:30:11,280
Speaker 1: dated treasuries are both down at the same time and

530
00:30:11,360 --> 00:30:15,840
Speaker 1: exhibiting positive correlation to one another. So adding more treasuries

531
00:30:16,480 --> 00:30:20,360
Speaker 1: to the portfolio doesn't really do anything to solve the

532
00:30:20,400 --> 00:30:25,880
Speaker 1: potential inflation risk that's inherent in the portfolio that's so popular.

533
00:30:26,360 --> 00:30:29,400
Speaker 1: So if we go back and rewind the clock twenty years,

534
00:30:29,480 --> 00:30:32,200
Speaker 1: that would have been a brilliant trade. But what we're

535
00:30:32,200 --> 00:30:35,280
Speaker 1: trying to do is set us up today not knowing

536
00:30:35,280 --> 00:30:37,120
Speaker 1: what the future is gonna look like, not having a

537
00:30:37,160 --> 00:30:40,520
Speaker 1: crystal ball, and trying to develop the most resilient portfolio

538
00:30:40,600 --> 00:30:43,800
Speaker 1: we can while still having that core sixty forty exposure

539
00:30:43,840 --> 00:30:48,800
Speaker 1: that clients and allocators want. One thing is advisors, especially

540
00:30:48,840 --> 00:30:51,000
Speaker 1: for the fee based advisors, which is where they get

541
00:30:51,000 --> 00:30:54,480
Speaker 1: a percentage of the assets that swept over the country.

542
00:30:54,680 --> 00:30:56,600
Speaker 1: Used to be they get a commission for the mutual fund.

543
00:30:56,640 --> 00:30:58,680
Speaker 1: Now they get a percentage of fees. That's turned them

544
00:30:58,720 --> 00:31:03,240
Speaker 1: all into like host obsessed people. They they that's why

545
00:31:03,280 --> 00:31:06,080
Speaker 1: all the money goes to everything below ten bibs. Here

546
00:31:06,120 --> 00:31:10,360
Speaker 1: you have this portfolio I would say it's probably all

547
00:31:10,440 --> 00:31:13,120
Speaker 1: in at the level of maybe an active mutual fund

548
00:31:13,120 --> 00:31:14,600
Speaker 1: back in the day, like it looks like it might

549
00:31:14,600 --> 00:31:17,800
Speaker 1: be seventy or eighty. Maybe I'm wrong there, but let's

550
00:31:17,840 --> 00:31:20,840
Speaker 1: just say you need to now explain why they want

551
00:31:20,840 --> 00:31:24,520
Speaker 1: to replace something that's ten with that. And so you

552
00:31:24,520 --> 00:31:26,760
Speaker 1: got I think you have your hands full. Your case

553
00:31:26,840 --> 00:31:28,480
Speaker 1: is very compelling, though, I guess can you talk a

554
00:31:28,520 --> 00:31:31,160
Speaker 1: little bit about how that's going. Yeah, I mean, let's

555
00:31:31,600 --> 00:31:35,239
Speaker 1: go back to what the word return stacking means. If

556
00:31:35,240 --> 00:31:39,720
Speaker 1: we're not stacking returns, it's not worth it. Right. This

557
00:31:39,800 --> 00:31:43,240
Speaker 1: is this is the key thing. In the last decade,

558
00:31:43,880 --> 00:31:47,680
Speaker 1: it has been very easy as a domestic advisor an

559
00:31:47,720 --> 00:31:49,840
Speaker 1: investor to make money and the things that you are

560
00:31:49,880 --> 00:31:53,800
Speaker 1: comfortable with and no it is s P Y and

561
00:31:54,000 --> 00:31:56,160
Speaker 1: I e F for t lt so bonds and equities

562
00:31:56,200 --> 00:32:00,760
Speaker 1: domestic have had a sharp ratio in theele of its history.

563
00:32:01,280 --> 00:32:04,840
Speaker 1: It is some of the best returns we've ever seen. Ever,

564
00:32:05,520 --> 00:32:09,120
Speaker 1: so when you look at your options bonds and equities,

565
00:32:09,160 --> 00:32:12,800
Speaker 1: you can get dirt cheap ETFs and the regulators are

566
00:32:12,840 --> 00:32:15,680
Speaker 1: coming in and creating complex language that might maybe have

567
00:32:15,800 --> 00:32:18,600
Speaker 1: forced advisers to do that so I understand where everybody's

568
00:32:18,640 --> 00:32:21,480
Speaker 1: coming from. We're trying to get people to see is

569
00:32:21,520 --> 00:32:24,520
Speaker 1: the next decade. The next decade is going to require

570
00:32:24,920 --> 00:32:27,440
Speaker 1: something beyond the mestay equities and hans. In my opinion,

571
00:32:27,640 --> 00:32:29,720
Speaker 1: you're gonna have to deal with inflation. You're gonna have

572
00:32:29,760 --> 00:32:33,160
Speaker 1: to deal with inflation and deflation and back to reflation again.

573
00:32:33,200 --> 00:32:36,360
Speaker 1: There's gonna be a lot of volatility. For that, you

574
00:32:36,400 --> 00:32:38,520
Speaker 1: need active management, which has been out of favor for

575
00:32:38,560 --> 00:32:42,720
Speaker 1: ten years. That active management that we are proposing goes

576
00:32:42,800 --> 00:32:46,520
Speaker 1: on top of these betas and stacked betas and stacked

577
00:32:46,520 --> 00:32:51,720
Speaker 1: alphas need to provide enough value whereafter fees the stack

578
00:32:51,800 --> 00:32:54,440
Speaker 1: is still above sixty. And so if you look at

579
00:32:54,480 --> 00:32:57,960
Speaker 1: if you read the paper, we take fees off of everything,

580
00:32:58,400 --> 00:33:02,400
Speaker 1: you'll see that in most years from seven to today,

581
00:33:02,720 --> 00:33:06,760
Speaker 1: the the index of the approach stacks returns on top

582
00:33:06,880 --> 00:33:10,280
Speaker 1: after fees, transaction costs and slippage, the index is the

583
00:33:10,320 --> 00:33:13,120
Speaker 1: same thing you. I think we come in at one

584
00:33:13,160 --> 00:33:16,120
Speaker 1: point to nine m e R or E ER sorry

585
00:33:16,240 --> 00:33:19,480
Speaker 1: MR as a Canadian term expense ratio. That seems like

586
00:33:19,520 --> 00:33:22,680
Speaker 1: a lot, But then you look at the index and

587
00:33:22,720 --> 00:33:25,400
Speaker 1: it's sixty forty returns and then on top of that

588
00:33:25,520 --> 00:33:27,640
Speaker 1: for the last three for the last year and a bit,

589
00:33:28,080 --> 00:33:33,040
Speaker 1: it's been three stacked on top in spite of those fees. Right,

590
00:33:33,080 --> 00:33:36,600
Speaker 1: So this is out of all the types of active management,

591
00:33:36,680 --> 00:33:40,440
Speaker 1: this is the most straightforward. Do you care about your

592
00:33:40,480 --> 00:33:44,080
Speaker 1: fees if the returns are being stacked every year? Right?

593
00:33:44,840 --> 00:33:46,680
Speaker 1: I could be terry. What if I get an indext

594
00:33:46,680 --> 00:33:50,840
Speaker 1: and and average five if the returns are above sixty forty,

595
00:33:51,560 --> 00:33:55,360
Speaker 1: that's that's all you care about? Right? So I think

596
00:33:57,000 --> 00:34:00,000
Speaker 1: for for the equity part of the portfolio, you're using

597
00:34:00,160 --> 00:34:03,480
Speaker 1: something equivalent to the SMP, Right, isn't that the NTSX part?

598
00:34:03,840 --> 00:34:08,239
Speaker 1: Well yeah, as and yes, where NTSX is SMP, but

599
00:34:08,320 --> 00:34:10,839
Speaker 1: they're fun provide active but it's not what people think

600
00:34:10,840 --> 00:34:13,520
Speaker 1: of where we're picking stocks. This is a whole different

601
00:34:13,600 --> 00:34:18,120
Speaker 1: level of active. This is an asset allocation active. Well,

602
00:34:18,400 --> 00:34:23,160
Speaker 1: you got your you have access to very, very cheap leverage,

603
00:34:23,400 --> 00:34:25,440
Speaker 1: and that's the magic here. Let's start with that. What

604
00:34:25,719 --> 00:34:29,759
Speaker 1: is different. NTSX provides us a hundred and fifty percent

605
00:34:29,840 --> 00:34:34,320
Speaker 1: exposure to a balance fund you can't with the cheapest

606
00:34:34,360 --> 00:34:37,160
Speaker 1: possible leverage you can get your hands on retail investors

607
00:34:37,160 --> 00:34:39,040
Speaker 1: and advisors have not historically been able to get that,

608
00:34:39,080 --> 00:34:44,880
Speaker 1: So that already is amazing structural alpha okay, and NTSX

609
00:34:44,960 --> 00:34:47,120
Speaker 1: is twenty BIPs, which is which is on the low

610
00:34:47,120 --> 00:34:50,040
Speaker 1: sides for right and then. But if you want that

611
00:34:50,440 --> 00:34:54,440
Speaker 1: other protection, that active long short trend c t A,

612
00:34:54,680 --> 00:34:59,560
Speaker 1: that active long short managed futures that requires daily trading,

613
00:34:59,719 --> 00:35:03,959
Speaker 1: a team reconciliation, you're not going to find very cheap

614
00:35:04,000 --> 00:35:06,879
Speaker 1: exposure to those things. But we believe that absolutely turn

615
00:35:07,040 --> 00:35:10,040
Speaker 1: concept is important, and we found products that have the

616
00:35:10,120 --> 00:35:13,360
Speaker 1: cheap spy and then stack on top of that in

617
00:35:13,360 --> 00:35:15,920
Speaker 1: that structural outlet, stack on top of that that that

618
00:35:16,040 --> 00:35:19,799
Speaker 1: trend and and active futures mandates. So it's a bit

619
00:35:19,800 --> 00:35:22,720
Speaker 1: about it, just real quick again, just for anyone listening

620
00:35:22,719 --> 00:35:26,080
Speaker 1: who thinks hedge funds, there's this sort of drumbeat of

621
00:35:26,120 --> 00:35:28,560
Speaker 1: like how hedge funds can't beat the SMP, but you're

622
00:35:28,560 --> 00:35:32,240
Speaker 1: bringing up absolute return. And for the institutional minded person,

623
00:35:32,360 --> 00:35:35,759
Speaker 1: hedge funds are not being the SMP. Really isn't what

624
00:35:35,800 --> 00:35:38,080
Speaker 1: most of them do. So when you say hedge fund,

625
00:35:38,120 --> 00:35:42,239
Speaker 1: you're thinking something has uh hedges off a lot of

626
00:35:42,239 --> 00:35:44,880
Speaker 1: the risk and ends up having like the same volatility

627
00:35:44,920 --> 00:35:48,200
Speaker 1: as like as like bonds. Right, it's very low right

628
00:35:48,480 --> 00:35:50,919
Speaker 1: in the ballpark of say, I don't know, maybe half

629
00:35:50,960 --> 00:35:56,160
Speaker 1: of the SMP is that fair historically that's that's true. Um,

630
00:35:56,320 --> 00:35:59,680
Speaker 1: I think zero coraline. You're looking at this managed futures,

631
00:35:59,719 --> 00:36:03,279
Speaker 1: which have a unique profile really like they are. I

632
00:36:03,320 --> 00:36:05,720
Speaker 1: think they're a category apart from this hedge fund category.

633
00:36:05,719 --> 00:36:08,160
Speaker 1: I think hedge funds are generally long short equities where

634
00:36:08,160 --> 00:36:10,760
Speaker 1: you're trying to hedge out the beta and just capture

635
00:36:10,840 --> 00:36:15,080
Speaker 1: that differential alpha and that will have very very low correlation,

636
00:36:15,239 --> 00:36:18,560
Speaker 1: very low correlation, very low volatility, and single digit returns

637
00:36:18,600 --> 00:36:20,959
Speaker 1: that you stack on top. When we talk about long

638
00:36:21,040 --> 00:36:24,000
Speaker 1: short c t a s and long short systematic global

639
00:36:24,040 --> 00:36:27,640
Speaker 1: macros were now like even in the ets available, we're

640
00:36:27,680 --> 00:36:30,880
Speaker 1: looking at the volatilities between eight and twelve, which is

641
00:36:30,920 --> 00:36:35,680
Speaker 1: now similar to like uh, you know eight twenty sorry, uh,

642
00:36:35,840 --> 00:36:39,320
Speaker 1: fifty fifty bond equity portfolio to sixty forty bond equity portfolio.

643
00:36:39,360 --> 00:36:41,720
Speaker 1: Is that type of level of risk, and that's crucial

644
00:36:41,719 --> 00:36:44,880
Speaker 1: because you want volatility as long as it's lowly correlated

645
00:36:44,960 --> 00:36:47,960
Speaker 1: and and from my point of view, managed futures and

646
00:36:48,040 --> 00:36:50,040
Speaker 1: c t a S out of all the hedge funds

647
00:36:50,040 --> 00:36:53,320
Speaker 1: out there are the least correlated long term to a

648
00:36:53,360 --> 00:36:56,359
Speaker 1: sixty forty portfolio. We keep going back to this core

649
00:36:56,440 --> 00:36:58,600
Speaker 1: concept of what are you stacking on top? What you

650
00:36:58,640 --> 00:37:00,600
Speaker 1: stacking on top, and what we're trying to stack on

651
00:37:00,640 --> 00:37:05,080
Speaker 1: top are these absolute return alternatives that have historically been

652
00:37:05,160 --> 00:37:08,319
Speaker 1: very disappointing when you have to sell equities to buy

653
00:37:08,360 --> 00:37:10,400
Speaker 1: them right when you have to make this either or decision.

654
00:37:10,480 --> 00:37:13,279
Speaker 1: The whole return stacking and concept is about turning this

655
00:37:13,320 --> 00:37:17,399
Speaker 1: into a conversation about saying and instead of or, we're saying,

656
00:37:17,440 --> 00:37:20,719
Speaker 1: can we get the sixty forty and these hedge fund

657
00:37:20,719 --> 00:37:24,520
Speaker 1: type exposures rather than six or the hedge fund and

658
00:37:24,560 --> 00:37:27,640
Speaker 1: I think in that sense it totally changes the conversation.

659
00:37:28,239 --> 00:37:29,759
Speaker 1: I do just want to make one really quick point

660
00:37:29,760 --> 00:37:32,560
Speaker 1: about the fees. Two quick points. First, I will say,

661
00:37:32,600 --> 00:37:35,160
Speaker 1: with all the new products coming to market, again, if

662
00:37:35,200 --> 00:37:37,879
Speaker 1: you read the paper, you can do this in a

663
00:37:37,920 --> 00:37:40,480
Speaker 1: low fee way. It's just going to change what you

664
00:37:40,520 --> 00:37:43,080
Speaker 1: can necessarily stack on top. Or you could do this

665
00:37:43,160 --> 00:37:45,200
Speaker 1: with all E T f s, or you could do

666
00:37:45,280 --> 00:37:47,520
Speaker 1: this with E T S mutual funds and go out

667
00:37:47,520 --> 00:37:50,319
Speaker 1: and buy hedge funds as a compliment as well. You

668
00:37:50,360 --> 00:37:52,680
Speaker 1: can take this concept and apply it to whatever fees

669
00:37:52,719 --> 00:37:55,120
Speaker 1: you want. I think what is important Eric, you talked

670
00:37:55,120 --> 00:37:56,880
Speaker 1: about having your cake and eating it too. With the

671
00:37:56,920 --> 00:37:59,920
Speaker 1: sixty forty, I think of return to stacking is take

672
00:38:00,080 --> 00:38:02,800
Speaker 1: the cake and putting some icing on top. Then the

673
00:38:02,920 --> 00:38:05,880
Speaker 1: question is how much of that icing does the fees

674
00:38:06,360 --> 00:38:09,759
Speaker 1: Ultimately your road and as long as there's icing left over,

675
00:38:10,280 --> 00:38:12,600
Speaker 1: I'm not sure it really matters that there are higher

676
00:38:12,640 --> 00:38:14,560
Speaker 1: fees there. You just need to make sure that they're

677
00:38:14,600 --> 00:38:20,240
Speaker 1: still icing there. Okay, so really interesting time to introduce

678
00:38:20,239 --> 00:38:23,239
Speaker 1: this concept to people too. I'm curious if we had

679
00:38:23,280 --> 00:38:26,440
Speaker 1: you back on in the future, when are we going

680
00:38:26,520 --> 00:38:30,840
Speaker 1: to know if you guys hit it? When are you

681
00:38:30,880 --> 00:38:34,560
Speaker 1: gonna know? Um, Look, we've the index has been it

682
00:38:34,560 --> 00:38:39,440
Speaker 1: goes back to November twenty twenty. Go to return stacking

683
00:38:39,480 --> 00:38:43,120
Speaker 1: dot live to see the results. You know it's there.

684
00:38:43,160 --> 00:38:45,279
Speaker 1: I think year today we are stacking in s your

685
00:38:45,320 --> 00:38:48,960
Speaker 1: fifty basis points on top. I think I personally from

686
00:38:49,080 --> 00:38:52,000
Speaker 1: um just from my macro view, which is always wrong.

687
00:38:52,640 --> 00:38:56,160
Speaker 1: I think we're gonna be in an inflationary volatility environment,

688
00:38:56,200 --> 00:39:00,000
Speaker 1: which means eighteen months of massive alatility three to six

689
00:39:00,120 --> 00:39:04,160
Speaker 1: months of downward deflation, and you're gonna have to navigate

690
00:39:04,239 --> 00:39:06,520
Speaker 1: that in a way where bonds and equities are gonna

691
00:39:06,520 --> 00:39:08,960
Speaker 1: act very differently than they have in the past. And

692
00:39:09,000 --> 00:39:12,560
Speaker 1: one thing I'll just we've been talking about how problematic

693
00:39:13,040 --> 00:39:16,320
Speaker 1: investing in UM in alts and especially in managed futures

694
00:39:16,320 --> 00:39:17,879
Speaker 1: have been to the last decade because of their single

695
00:39:17,920 --> 00:39:21,480
Speaker 1: digit returns. From two thousand to two thousand eleven, the

696
00:39:21,520 --> 00:39:25,120
Speaker 1: peak of the last commodity cycle, c t A s

697
00:39:25,120 --> 00:39:27,319
Speaker 1: and managed futures were doing double digits every year, So

698
00:39:27,360 --> 00:39:30,680
Speaker 1: the stacking goes way up. In an environment like that.

699
00:39:31,360 --> 00:39:35,319
Speaker 1: I would say, if we're back in three years and

700
00:39:35,560 --> 00:39:39,120
Speaker 1: my tradition comes through, we're going to be very very

701
00:39:39,160 --> 00:39:42,440
Speaker 1: much ahead. Worth mentioning, we've we've talked about this paper

702
00:39:42,480 --> 00:39:45,440
Speaker 1: throughout the conversation. You can find that at return stacking

703
00:39:45,480 --> 00:39:48,520
Speaker 1: dot com, Rodrigo. Where do you find find more about

704
00:39:48,520 --> 00:39:52,600
Speaker 1: the model? A return stacking dot live? Is it where

705
00:39:52,600 --> 00:39:54,120
Speaker 1: you can get to see it? And now I want

706
00:39:54,120 --> 00:39:56,040
Speaker 1: to ask a question that we always ask at the

707
00:39:56,080 --> 00:39:59,520
Speaker 1: end of jillions. What's your favorite et F ticker other

708
00:39:59,560 --> 00:40:05,520
Speaker 1: than around favorite e t F ticker other than my own? UM?

709
00:40:05,560 --> 00:40:10,239
Speaker 1: I am going to have to say t y A

710
00:40:10,719 --> 00:40:14,279
Speaker 1: from Simplify because it just it does such a good

711
00:40:14,320 --> 00:40:17,920
Speaker 1: job of increasing that portfolio real estate that everybody needs

712
00:40:18,480 --> 00:40:21,600
Speaker 1: to do some of that return sack. And we got Corey. Well,

713
00:40:21,640 --> 00:40:25,719
Speaker 1: so I'm gonna answer this two ways. One, what's my

714
00:40:25,719 --> 00:40:28,640
Speaker 1: my favorite e t F is nts X. That is

715
00:40:28,680 --> 00:40:31,240
Speaker 1: hands down my favorite et F that's ever been launched.

716
00:40:31,239 --> 00:40:33,399
Speaker 1: It's a super simple concept, but I think it's got

717
00:40:33,400 --> 00:40:36,799
Speaker 1: so much power. My favorite e t F ticker that's

718
00:40:36,840 --> 00:40:38,879
Speaker 1: been launched has got to be the new one from

719
00:40:38,880 --> 00:40:43,520
Speaker 1: Simplify c y A, which is their tail hedging Cover

720
00:40:43,640 --> 00:40:46,759
Speaker 1: your assets perhaps is the way we'll put it all. Right,

721
00:40:46,800 --> 00:40:50,160
Speaker 1: there you go, Corey Rodrigo, thanks for joining us in Trillions.

722
00:40:50,480 --> 00:40:57,279
Speaker 1: Thank you very much for having us guys. Thanks for

723
00:40:57,320 --> 00:40:59,960
Speaker 1: listening to Trillions. Until next time. You can find us

724
00:41:00,000 --> 00:41:04,160
Speaker 1: the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify, and

725
00:41:04,160 --> 00:41:06,480
Speaker 1: wharver else you like to listen. We'd love to hear

726
00:41:06,520 --> 00:41:09,279
Speaker 1: from you. We're on Twitter. I'm at Joel Webber Show,

727
00:41:09,719 --> 00:41:13,400
Speaker 1: He's at Eric Falcinas. This episode of Trillions was produced

728
00:41:13,400 --> 00:41:16,239
Speaker 1: by Magnus and Rickson. Francesca Levie is the head of

729
00:41:16,239 --> 00:41:18,040
Speaker 1: Bloomberg Podcasts by