WEBVTT - At the Money: Seeking Uncorrelated Returns

0:00:02.480 --> 0:00:17.680
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. I gave a to

0:00:17.880 --> 0:00:22.840
<v Speaker 1>the polls man blew it in his side. Lots of

0:00:22.920 --> 0:00:29.560
<v Speaker 1>asset classes promise uncorrelated returns, put very few deliver. One

0:00:29.600 --> 0:00:33.879
<v Speaker 1>that does is manage futures. Sure, they're expensive and the

0:00:33.960 --> 0:00:38.440
<v Speaker 1>trading is somewhat spiky, but when all correlations go to one,

0:00:39.240 --> 0:00:42.400
<v Speaker 1>meaning everything is trading and lockstep, like we saw during

0:00:42.400 --> 0:00:46.400
<v Speaker 1>the Financial crisis or the first couple of months of COVID,

0:00:47.240 --> 0:00:51.159
<v Speaker 1>managed futures seem to be the rare diversifier that works

0:00:52.240 --> 0:00:56.680
<v Speaker 1>to help us unpack how to get additional diversification in

0:00:56.760 --> 0:01:00.800
<v Speaker 1>your portfolio. Let's bring in Andrew Bier. He's a hedge

0:01:00.800 --> 0:01:05.680
<v Speaker 1>fund veteran and founder of Dynamic Beta Investments, a firm

0:01:05.800 --> 0:01:11.440
<v Speaker 1>focused on hitge fund replication strategies delivered through low cost

0:01:12.200 --> 0:01:17.240
<v Speaker 1>liquid vehicles like atfs and mutual funds. His ETF DBI

0:01:17.560 --> 0:01:23.120
<v Speaker 1>managed future strategy tries to replicate the price heer managed

0:01:23.200 --> 0:01:26.679
<v Speaker 1>futures portfolio. So, so Andrew start us out with just

0:01:26.760 --> 0:01:32.080
<v Speaker 1>the elevator pitch. What problem does DBI manage future strategy

0:01:32.120 --> 0:01:36.360
<v Speaker 1>and that's ATF ticker DBMF. What does that solve for

0:01:36.560 --> 0:01:38.840
<v Speaker 1>the traditional sixty forty investor.

0:01:39.480 --> 0:01:41.280
<v Speaker 2>Sure. So, so, first of all, thank you very much

0:01:41.319 --> 0:01:45.360
<v Speaker 2>for having me on so the so you know, so

0:01:45.760 --> 0:01:50.600
<v Speaker 2>diversification has changed a lot this decade. In the twenty tens,

0:01:51.080 --> 0:01:53.880
<v Speaker 2>you really didn't need anything other than stocks and bonds,

0:01:54.360 --> 0:01:57.160
<v Speaker 2>and but things have changed, you know, since inflation started

0:01:57.160 --> 0:02:00.280
<v Speaker 2>to come back, stocks have tended to move up down

0:02:00.280 --> 0:02:02.600
<v Speaker 2>with bonds and did not protect in twenty twenty two.

0:02:04.080 --> 0:02:07.600
<v Speaker 2>And so what you see across the wealth management space

0:02:07.680 --> 0:02:10.239
<v Speaker 2>is basically saying sixty forty worked for a long time,

0:02:10.280 --> 0:02:13.080
<v Speaker 2>but now we need something else. And what is that

0:02:13.160 --> 0:02:16.800
<v Speaker 2>something else? It's generally something that is a low correlation

0:02:16.960 --> 0:02:20.120
<v Speaker 2>to ideally to both stocks and bonds, and can also

0:02:20.240 --> 0:02:24.000
<v Speaker 2>deliver positive performance when you need it the most. And

0:02:24.080 --> 0:02:26.480
<v Speaker 2>so we looked, you know, we were looking around for

0:02:26.560 --> 0:02:29.680
<v Speaker 2>something like that about ten years ago and we zeroed

0:02:29.720 --> 0:02:33.720
<v Speaker 2>in on this space. It's a niche area of the

0:02:33.760 --> 0:02:38.040
<v Speaker 2>overall hedge fund business, but it's been around for fifty years.

0:02:37.320 --> 0:02:40.799
<v Speaker 2>It's battle tested through all sorts of market environments, and

0:02:40.880 --> 0:02:43.280
<v Speaker 2>you find something that actually meets those criteria but did

0:02:43.320 --> 0:02:46.519
<v Speaker 2>well during the dot Com crisis, did well during the GFC,

0:02:46.960 --> 0:02:49.360
<v Speaker 2>and then after we'd invested it was up twenty percent

0:02:49.400 --> 0:02:53.120
<v Speaker 2>during twenty twenty two. But from our perspective, it's like,

0:02:53.160 --> 0:02:55.799
<v Speaker 2>that's great if you're an institutional allogator, But how do

0:02:55.880 --> 0:02:59.359
<v Speaker 2>we get the great benefits of the strategy and package

0:02:59.360 --> 0:03:01.720
<v Speaker 2>it for a way that you know, my sister or

0:03:01.800 --> 0:03:05.359
<v Speaker 2>my cousin or something can put into their portfolios as well?

0:03:05.960 --> 0:03:11.919
<v Speaker 1>Really interesting? So since twenty twenty two, the asset class

0:03:12.000 --> 0:03:14.880
<v Speaker 1>we've all been probably hearing the most about has been

0:03:15.360 --> 0:03:20.760
<v Speaker 1>private credit, private debt, private equity. Hey, it's a great diversifier.

0:03:21.720 --> 0:03:25.280
<v Speaker 1>To be blunt, I get the sense that debt and

0:03:25.400 --> 0:03:28.639
<v Speaker 1>credit are going to move if we have a recession,

0:03:28.680 --> 0:03:31.160
<v Speaker 1>if markets sell off twenty thirty percent. Is there any

0:03:31.200 --> 0:03:34.760
<v Speaker 1>reason to think that sort of diversifier is not going

0:03:34.800 --> 0:03:35.560
<v Speaker 1>to do the same thing?

0:03:37.040 --> 0:03:40.720
<v Speaker 2>So what's interesting about it? So there's been a lot

0:03:40.760 --> 0:03:43.680
<v Speaker 2>of debate about how these guys happen to make money

0:03:44.120 --> 0:03:47.120
<v Speaker 2>during these big moments in the markets where it feels

0:03:47.120 --> 0:03:50.080
<v Speaker 2>like nothing is working. And it's funny because people talk

0:03:50.240 --> 0:03:53.520
<v Speaker 2>about sometimes people use a term called trend following or

0:03:53.560 --> 0:03:57.360
<v Speaker 2>momentum associated with the strategy. To me, it's totally wrong

0:03:57.880 --> 0:04:01.040
<v Speaker 2>that when the strategy generates those kinds of returns. It's

0:04:01.040 --> 0:04:05.280
<v Speaker 2>because they are early contrarian and right in a big way.

0:04:06.040 --> 0:04:09.040
<v Speaker 2>And so you know, if you think about if somebody

0:04:09.080 --> 0:04:10.920
<v Speaker 2>came to you and said, here's a strategy. Here was

0:04:10.960 --> 0:04:13.360
<v Speaker 2>a person who had been buying gold below three thousand,

0:04:13.960 --> 0:04:18.200
<v Speaker 2>who was you know, betting on rising interest rates as

0:04:18.279 --> 0:04:22.159
<v Speaker 2>far back as twenty twenty September twenty twenty, you know

0:04:22.240 --> 0:04:26.280
<v Speaker 2>that saw in advance the rise in the dollar relative

0:04:26.320 --> 0:04:28.960
<v Speaker 2>to the Japanese end these kind of big trades out there.

0:04:28.960 --> 0:04:31.560
<v Speaker 2>Because the world is changing in some way, that's what

0:04:31.600 --> 0:04:33.919
<v Speaker 2>the strategy has historically been able to pick up on.

0:04:34.279 --> 0:04:37.680
<v Speaker 2>And so I believe that structurally we are likely to

0:04:37.720 --> 0:04:40.440
<v Speaker 2>see more of those things over the next several years.

0:04:40.839 --> 0:04:43.200
<v Speaker 2>And this is one of those strategies that has proven

0:04:43.279 --> 0:04:46.200
<v Speaker 2>its ability to reposition to take advantage of those big

0:04:46.279 --> 0:04:47.000
<v Speaker 2>changes in the world.

0:04:48.040 --> 0:04:54.400
<v Speaker 1>Really really interesting. So you mentioned trend or momentum define

0:04:54.520 --> 0:05:00.760
<v Speaker 1>managed futures without Wall Street jargon. What does dBm actually

0:05:00.839 --> 0:05:03.360
<v Speaker 1>mean by exposure to trends?

0:05:03.880 --> 0:05:08.200
<v Speaker 2>Okay, So I'll start with the definition of the strategy overall,

0:05:08.560 --> 0:05:11.400
<v Speaker 2>which is basically, you know, what I mentioned is that

0:05:11.440 --> 0:05:14.520
<v Speaker 2>they're trying to detect big changes in the world. The

0:05:14.560 --> 0:05:16.599
<v Speaker 2>way I think about that as a hedge fund person

0:05:17.320 --> 0:05:20.400
<v Speaker 2>is that somebody knows something that the world is changing

0:05:21.040 --> 0:05:24.000
<v Speaker 2>and they're acting on it with you know, buying or

0:05:24.000 --> 0:05:26.680
<v Speaker 2>selling different asset classes. Like if you know the world

0:05:26.720 --> 0:05:28.599
<v Speaker 2>is changing in a big way, people tend to act

0:05:28.600 --> 0:05:32.359
<v Speaker 2>on it with their portfolios, and so managers is a

0:05:32.360 --> 0:05:34.920
<v Speaker 2>strategy will often look at lots and lots and lots

0:05:34.960 --> 0:05:36.920
<v Speaker 2>of the price moves across lots and lots of different

0:05:36.960 --> 0:05:41.000
<v Speaker 2>markets to pick up these kernels of information that's something

0:05:41.040 --> 0:05:45.360
<v Speaker 2>big is changing. So if you take last year where

0:05:45.360 --> 0:05:47.640
<v Speaker 2>our course strategy was up fourteen percent, it was in

0:05:47.680 --> 0:05:50.320
<v Speaker 2>part by being early in the fact that you know,

0:05:50.400 --> 0:05:53.719
<v Speaker 2>the run at hot Tratee was it was continuing to

0:05:53.760 --> 0:05:55.880
<v Speaker 2>have a long position in gold when gold went through

0:05:55.960 --> 0:05:59.680
<v Speaker 2>its melt up, and so you know, outside of I

0:05:59.680 --> 0:06:01.520
<v Speaker 2>think a lot of people in the space like to

0:06:01.520 --> 0:06:04.359
<v Speaker 2>talk about how the sausage is made. Our view is

0:06:04.400 --> 0:06:07.800
<v Speaker 2>actually what's much more interesting for the end investor and

0:06:07.839 --> 0:06:10.640
<v Speaker 2>for allocators is what is how does this actually help you?

0:06:11.279 --> 0:06:14.200
<v Speaker 2>And why should somebody looking at this in their portfolio

0:06:14.279 --> 0:06:15.599
<v Speaker 2>be glad that it's there.

0:06:17.200 --> 0:06:21.520
<v Speaker 1>It makes makes a lot of sense. I guess one

0:06:21.520 --> 0:06:26.479
<v Speaker 1>of the things that make this space so interesting is yeah,

0:06:26.520 --> 0:06:31.279
<v Speaker 1>it's a good diversifier, but most traditional investors don't really

0:06:31.279 --> 0:06:34.960
<v Speaker 1>pay attention to it. You've called managed futures the best

0:06:35.000 --> 0:06:38.920
<v Speaker 1>diversifier no one buys. Explain why that is.

0:06:39.480 --> 0:06:43.280
<v Speaker 2>Well, I'm convincing people. I'm changing hearts and minds one

0:06:43.320 --> 0:06:46.440
<v Speaker 2>at a time. So a lot of the people in

0:06:46.480 --> 0:06:50.760
<v Speaker 2>this space love to talk about the technical aspects. So

0:06:50.760 --> 0:06:54.640
<v Speaker 2>this underlying strategies are very very technical. They're quantitative models

0:06:54.760 --> 0:06:58.760
<v Speaker 2>looking at derivative contracts on Sunday's hundreds of underlying instruments,

0:06:59.800 --> 0:07:02.320
<v Speaker 2>and so it's a little bit like they love to

0:07:02.360 --> 0:07:06.760
<v Speaker 2>talk shop with each other about what they're doing. Part

0:07:06.800 --> 0:07:09.479
<v Speaker 2>of our success as a business is I don't come

0:07:09.480 --> 0:07:11.440
<v Speaker 2>at it from that direction. I come at it from

0:07:11.480 --> 0:07:15.160
<v Speaker 2>the perspective of why will this make my portfolio better?

0:07:15.240 --> 0:07:17.880
<v Speaker 2>By which I mean help to grow assets and help

0:07:17.880 --> 0:07:21.720
<v Speaker 2>me sleep at night. And so if you look at it,

0:07:21.760 --> 0:07:23.640
<v Speaker 2>I'm making progress. So when I got into the DP,

0:07:23.840 --> 0:07:26.320
<v Speaker 2>when I got into the ETF space, there was only

0:07:26.320 --> 0:07:29.600
<v Speaker 2>about three hundred million. This is in twenty nineteen. There's

0:07:29.720 --> 0:07:34.640
<v Speaker 2>maybe close to five billion today. And in part and

0:07:34.680 --> 0:07:37.640
<v Speaker 2>we've been really driving that that this is something that

0:07:38.120 --> 0:07:39.840
<v Speaker 2>and I think if you look five years out from

0:07:39.920 --> 0:07:43.680
<v Speaker 2>now and you sit down with an advisor and they'll say, hey,

0:07:43.680 --> 0:07:45.680
<v Speaker 2>what's that three or five percent position there, and they'll

0:07:45.680 --> 0:07:49.640
<v Speaker 2>say it's Manu futures. It's one of these strategies. And

0:07:49.680 --> 0:07:52.960
<v Speaker 2>you'll say, well, what's it there for? And they'll say, well, look,

0:07:53.000 --> 0:07:55.320
<v Speaker 2>every now and then, the world changes a lot, and

0:07:55.360 --> 0:07:58.120
<v Speaker 2>we want a nimble, flexible strategy that can take advantage

0:07:58.120 --> 0:07:59.720
<v Speaker 2>of it in the way that the other ninety seven

0:07:59.720 --> 0:08:01.400
<v Speaker 2>percent if your portfolio is not likely to.

0:08:02.040 --> 0:08:06.600
<v Speaker 1>So so let me re revisit that information in a

0:08:06.800 --> 0:08:14.280
<v Speaker 1>slightly different question. Whenever I'm speaking to clients or potential clients,

0:08:14.880 --> 0:08:18.000
<v Speaker 1>the question is always we have this problem? How do

0:08:18.040 --> 0:08:20.440
<v Speaker 1>we solve for this? So really the question I want

0:08:20.440 --> 0:08:25.320
<v Speaker 1>to ask you is what problem in the traditional managed

0:08:25.360 --> 0:08:31.400
<v Speaker 1>future space convinced you that a replication based ETF like

0:08:31.480 --> 0:08:35.480
<v Speaker 1>DBMF really needed to exist. What's the problem you're solving

0:08:35.559 --> 0:08:37.960
<v Speaker 1>for for the average ETF investor?

0:08:38.760 --> 0:08:40.880
<v Speaker 2>So I would start with the Actually, I would first

0:08:40.920 --> 0:08:43.640
<v Speaker 2>ask the broader questions, what's problem are we solving for

0:08:43.679 --> 0:08:49.800
<v Speaker 2>people in their portfolios? Right? And the modern wealth management business,

0:08:50.040 --> 0:08:53.679
<v Speaker 2>just like the institutional investment business, just like sixty forty portfolios,

0:08:53.760 --> 0:08:59.560
<v Speaker 2>is based upon two fundamental ideas. One is diversification is

0:08:59.559 --> 0:09:05.840
<v Speaker 2>a positive and two is have long term views for

0:09:05.920 --> 0:09:09.960
<v Speaker 2>your asset allocation models and don't change them often. It's

0:09:10.000 --> 0:09:12.240
<v Speaker 2>the latter part and the latter part, and that has

0:09:13.080 --> 0:09:17.480
<v Speaker 2>a generation of investors has not gotten headfaked by Liberation

0:09:17.600 --> 0:09:19.960
<v Speaker 2>Day and all these moves in the market because they've

0:09:19.960 --> 0:09:23.840
<v Speaker 2>been trained don't panic and don't overreact, and that works

0:09:23.880 --> 0:09:28.240
<v Speaker 2>eighty percent of the time. Bad By the way, eighty

0:09:28.240 --> 0:09:30.600
<v Speaker 2>percent isn't bad, right, and which is why that should

0:09:30.600 --> 0:09:34.760
<v Speaker 2>be ninety five percent of your portfolio twenty percent of

0:09:34.800 --> 0:09:39.200
<v Speaker 2>the time. The world changes and by design, they will

0:09:39.200 --> 0:09:42.360
<v Speaker 2>be slow to adapt. So where are we right now? Right?

0:09:42.400 --> 0:09:47.480
<v Speaker 2>The US dollar is getting debased in some fashion, right,

0:09:47.600 --> 0:09:51.880
<v Speaker 2>there is this potential loss of confidence in US assets

0:09:51.920 --> 0:09:56.800
<v Speaker 2>at a time where everyone is massively overexposed to US assets.

0:09:57.840 --> 0:10:01.160
<v Speaker 2>That could play out over five or seven years, but

0:10:01.320 --> 0:10:06.719
<v Speaker 2>most allocators will not change until the horses have left

0:10:06.760 --> 0:10:09.679
<v Speaker 2>the barn, so to speak. And so that's what it's

0:10:09.679 --> 0:10:13.280
<v Speaker 2>trying to solve. From a portfolio perspective, what we were

0:10:13.320 --> 0:10:16.440
<v Speaker 2>trying to solve is it's a great strategy. It's just

0:10:16.880 --> 0:10:21.120
<v Speaker 2>too damn expensive the way people run it. And it's

0:10:21.160 --> 0:10:24.320
<v Speaker 2>not just what are their management fees and incentive fees,

0:10:24.520 --> 0:10:29.360
<v Speaker 2>it's also they run these Rupe Goldberg like portfolios that

0:10:29.480 --> 0:10:33.839
<v Speaker 2>trade every day, hundreds of times a day. And when

0:10:33.840 --> 0:10:36.240
<v Speaker 2>we looked at it, we said, look, we love the

0:10:36.840 --> 0:10:39.480
<v Speaker 2>signal that they're picking up on. But if we can

0:10:39.520 --> 0:10:43.319
<v Speaker 2>do that in a simple portfolio that is much more liquid,

0:10:43.480 --> 0:10:46.320
<v Speaker 2>we can save hundreds of basis points of implementation costs

0:10:46.400 --> 0:10:48.200
<v Speaker 2>and take more of the value and pass it back

0:10:48.240 --> 0:10:48.760
<v Speaker 2>to clients.

0:10:49.480 --> 0:10:52.319
<v Speaker 1>So let's talk about that a little bit and use

0:10:52.360 --> 0:10:59.880
<v Speaker 1>some real life examples. How does either DBMF or FUN

0:11:00.400 --> 0:11:04.079
<v Speaker 1>like it in the period before DBMF was trading, How

0:11:04.080 --> 0:11:07.719
<v Speaker 1>does it behave in periods like the dot com implosion

0:11:07.800 --> 0:11:10.959
<v Speaker 1>or the GFC or COVID.

0:11:11.120 --> 0:11:14.800
<v Speaker 2>Well, well, COVID, well, I would say so COVID. COVID was.

0:11:14.960 --> 0:11:17.280
<v Speaker 2>So when the strategy does the best is when when

0:11:17.320 --> 0:11:19.560
<v Speaker 2>I say the world is changing, and COVID was a

0:11:19.640 --> 0:11:21.920
<v Speaker 2>very strange thing, and that the world changed in three

0:11:21.960 --> 0:11:26.360
<v Speaker 2>weeks basically, and then so it's not really designed for

0:11:26.440 --> 0:11:28.800
<v Speaker 2>that kind of a flash move, but still it preserved

0:11:28.840 --> 0:11:32.360
<v Speaker 2>capital as a strategy during March when when things were

0:11:32.360 --> 0:11:37.080
<v Speaker 2>getting getting hammered, the where it thrives in its period

0:11:37.080 --> 0:11:40.600
<v Speaker 2>like twenty twenty two, Inflation's coming back. And I'll tell

0:11:40.600 --> 0:11:42.719
<v Speaker 2>you a great stories that I was. I wrote a

0:11:42.720 --> 0:11:45.120
<v Speaker 2>paper on inflation coming back in early twenty twenty one,

0:11:45.760 --> 0:11:47.480
<v Speaker 2>and I was talking about to people all year long,

0:11:47.960 --> 0:11:50.959
<v Speaker 2>and I said, if if inflation comes back, and Powell

0:11:50.960 --> 0:11:52.920
<v Speaker 2>came out and said, it's, you know, probably not coming back.

0:11:52.920 --> 0:11:56.360
<v Speaker 2>It's transitory or something. But I get to December and

0:11:56.400 --> 0:11:59.120
<v Speaker 2>I'm sitting down with a guy who says, I totally

0:11:59.200 --> 0:12:02.240
<v Speaker 2>agree with you. I think inflation is coming back. And

0:12:02.280 --> 0:12:04.439
<v Speaker 2>I said, how are you rebouncing your portfolio? And I said,

0:12:04.440 --> 0:12:07.840
<v Speaker 2>I'm selling my stocks and buying bonds because he was

0:12:08.000 --> 0:12:12.000
<v Speaker 2>benchmarked to sixty forty and stocks had gone up more

0:12:12.040 --> 0:12:16.800
<v Speaker 2>than bonds. So I think it's important as allocators to

0:12:17.360 --> 0:12:19.520
<v Speaker 2>recognize that there are going to be times like this

0:12:19.840 --> 0:12:23.319
<v Speaker 2>when the standard playbook that we have from an asset

0:12:23.360 --> 0:12:26.839
<v Speaker 2>allocation perspective is not designed to pick up on that.

0:12:27.720 --> 0:12:30.480
<v Speaker 2>And here's a strategy. So the overall strategy in twenty

0:12:30.480 --> 0:12:32.600
<v Speaker 2>twenty two, when stocks and bonds were both down fifteen

0:12:32.600 --> 0:12:34.800
<v Speaker 2>to twenty percent, of the strategy went up twenty percent overall,

0:12:35.480 --> 0:12:37.400
<v Speaker 2>and by being a bit more efficient, we went up

0:12:37.440 --> 0:12:38.040
<v Speaker 2>a bit more than that.

0:12:38.880 --> 0:12:44.920
<v Speaker 1>Huh. Really really kind of interesting. So let's talk about

0:12:45.000 --> 0:12:49.160
<v Speaker 1>the managed futurey TF. What markets does it trade, what

0:12:49.200 --> 0:12:52.720
<v Speaker 1>positions does it hold? Like I typically think when I

0:12:52.720 --> 0:12:56.640
<v Speaker 1>hear trend following, I think Michael Kovil's trend following book,

0:12:56.679 --> 0:13:00.839
<v Speaker 1>and I think primarily of Kamadalies if you watching gold

0:13:00.920 --> 0:13:05.640
<v Speaker 1>or silver these days. But it's a little more broad

0:13:05.679 --> 0:13:09.160
<v Speaker 1>than that. Tell us the assets DBMF actually trades.

0:13:09.600 --> 0:13:12.920
<v Speaker 2>Yeah, So what is extraordinarily irritating to people in the

0:13:12.920 --> 0:13:14.720
<v Speaker 2>industry is that we do much better than them with

0:13:14.720 --> 0:13:18.000
<v Speaker 2>only ten instruments, and the ten instruments that we trade

0:13:18.120 --> 0:13:22.640
<v Speaker 2>are the biggest obvious instruments. So S and P. Five hundred.

0:13:22.800 --> 0:13:24.720
<v Speaker 2>This is all futures contracts, by the way, right.

0:13:24.640 --> 0:13:28.200
<v Speaker 1>So the index not not individual stocks exactly.

0:13:28.280 --> 0:13:31.040
<v Speaker 2>So S and P five hundred, non US developed markets,

0:13:31.120 --> 0:13:35.840
<v Speaker 2>emerging markets for equities, that's it. In fixed income, so

0:13:35.880 --> 0:13:38.160
<v Speaker 2>the second asset class is fixed income two years, ten years,

0:13:38.160 --> 0:13:42.480
<v Speaker 2>thirty year treasuries. In commodities, we only trade gold and oil, and.

0:13:42.600 --> 0:13:46.160
<v Speaker 1>Gold and oil. The assumption is other precious metals will

0:13:46.200 --> 0:13:52.880
<v Speaker 1>track gold, and oil is its own thing. No agricultural products.

0:13:52.559 --> 0:13:55.960
<v Speaker 2>We don't because the markets are we don't think. In

0:13:55.960 --> 0:13:58.559
<v Speaker 2>other words, one I would say, just the last categories.

0:13:58.600 --> 0:14:00.760
<v Speaker 2>In currencies, it's the zero in the end. So it's

0:14:00.800 --> 0:14:02.960
<v Speaker 2>four ascid classes and we can go uroo yen, but

0:14:03.080 --> 0:14:06.600
<v Speaker 2>not the dollar, well against the dollar against gotcha, all.

0:14:06.600 --> 0:14:09.200
<v Speaker 1>Right, So always relative with currency.

0:14:09.440 --> 0:14:12.280
<v Speaker 2>Yeah, and so look what we our research showed early

0:14:12.320 --> 0:14:15.959
<v Speaker 2>on is that it's it's like, what's the political expression.

0:14:15.960 --> 0:14:19.080
<v Speaker 2>It's the economy stupid, it's the big trade stupid that

0:14:20.480 --> 0:14:23.080
<v Speaker 2>in twenty twenty two to be up twenty percent, you

0:14:23.120 --> 0:14:26.320
<v Speaker 2>want to be long crude oil in February. You want

0:14:26.360 --> 0:14:28.080
<v Speaker 2>to be short the end when it goes from one

0:14:28.160 --> 0:14:30.360
<v Speaker 2>hundred and ten to one hundred and sixty. And you

0:14:30.400 --> 0:14:33.080
<v Speaker 2>want to be short treasuries when interest rates go up.

0:14:33.760 --> 0:14:35.960
<v Speaker 2>And a lot of the narrative in the space, as

0:14:35.960 --> 0:14:38.560
<v Speaker 2>you say, is exactly that, you know, look look at

0:14:38.800 --> 0:14:41.280
<v Speaker 2>look at copper moves, you know, look at look at

0:14:41.280 --> 0:14:43.520
<v Speaker 2>look at the spike and copper, the palladium or the

0:14:43.520 --> 0:14:47.280
<v Speaker 2>other things. It sounds good if you're an institutional investor

0:14:47.320 --> 0:14:50.400
<v Speaker 2>who cares about this stuff, but it doesn't. It doesn't

0:14:50.480 --> 0:14:52.400
<v Speaker 2>it's not big enough to make it, make it make

0:14:52.480 --> 0:14:55.840
<v Speaker 2>an impact on the P and L and so so

0:14:55.880 --> 0:14:58.240
<v Speaker 2>our research is very powerful, and it basically showed that

0:14:58.840 --> 0:15:02.600
<v Speaker 2>if these guys make ten in theory as a hedge

0:15:02.600 --> 0:15:05.840
<v Speaker 2>fund investor, you're luckly to get five. I can give

0:15:05.880 --> 0:15:08.840
<v Speaker 2>you ten with a simpler and much more efficient portfolio

0:15:09.000 --> 0:15:11.640
<v Speaker 2>and give you eight or nine and put it into

0:15:11.640 --> 0:15:14.000
<v Speaker 2>an ETF where you can see every single position every

0:15:14.040 --> 0:15:16.360
<v Speaker 2>single day. Yeah, so, I mean so the basic idea

0:15:16.400 --> 0:15:17.880
<v Speaker 2>is I wanted to show that we could beat hedge

0:15:17.880 --> 0:15:22.680
<v Speaker 2>funds at their own game in but do it within

0:15:22.760 --> 0:15:25.040
<v Speaker 2>an ETF, which no one had ever done before.

0:15:24.880 --> 0:15:27.000
<v Speaker 1>So you don't have the drag of two and twenty.

0:15:27.200 --> 0:15:30.040
<v Speaker 1>The cost structure is a little less or or a

0:15:30.120 --> 0:15:35.240
<v Speaker 1>whole lot less. Maybe it's about what the typical ETF is.

0:15:35.680 --> 0:15:39.560
<v Speaker 1>So this has turned out to be a very successful product.

0:15:39.640 --> 0:15:44.600
<v Speaker 1>It's now DBMF is now the largest managed futures ETF.

0:15:44.960 --> 0:15:48.280
<v Speaker 1>A couple of questions, at what point do you begin

0:15:48.360 --> 0:15:51.760
<v Speaker 1>to run into capacity constraints for the strategy? Do you

0:15:51.760 --> 0:15:55.800
<v Speaker 1>have any issues with liquidity or slippage or even market impact?

0:15:56.280 --> 0:15:58.080
<v Speaker 1>Like how big can this get?

0:15:59.240 --> 0:16:01.280
<v Speaker 2>It was designed to as big as we needed to get.

0:16:02.200 --> 0:16:05.040
<v Speaker 2>So because of the instruments that we're trading, these are

0:16:05.040 --> 0:16:09.000
<v Speaker 2>the deepest and most liquid instruments that are traded globally,

0:16:09.440 --> 0:16:13.200
<v Speaker 2>and we trade everything in the US, and so our

0:16:13.320 --> 0:16:16.480
<v Speaker 2>market impact is essentially zero. I came from I started

0:16:16.520 --> 0:16:20.160
<v Speaker 2>a commodity business, and one of the things that I

0:16:20.160 --> 0:16:23.640
<v Speaker 2>think people have overlooked is is complexity often has a

0:16:23.720 --> 0:16:27.480
<v Speaker 2>real cost. It sounds great to say I'm trading some

0:16:27.800 --> 0:16:32.640
<v Speaker 2>esoteric market someplace when things go bad, like in the

0:16:32.680 --> 0:16:35.400
<v Speaker 2>week after Liberation Day, the people who are trading those

0:16:35.440 --> 0:16:38.560
<v Speaker 2>markets are waiting to see your order come in. Okay,

0:16:39.600 --> 0:16:42.760
<v Speaker 2>you are making their year on the days. And so

0:16:44.760 --> 0:16:47.000
<v Speaker 2>I come from a school that it's got to be

0:16:47.040 --> 0:16:51.240
<v Speaker 2>that simple, straightforward, efficient is going to win most of

0:16:51.280 --> 0:16:53.360
<v Speaker 2>the time. And what we've shown is we can beat

0:16:53.640 --> 0:16:55.600
<v Speaker 2>some of the most sophisticated hedge funds in the world

0:16:55.680 --> 0:16:58.160
<v Speaker 2>with this by three or four hundred basis points a

0:16:58.280 --> 0:17:02.000
<v Speaker 2>year through efficiency. But then I can also deliver in

0:17:02.080 --> 0:17:04.280
<v Speaker 2>something that my sister can onn So.

0:17:04.240 --> 0:17:10.600
<v Speaker 1>To wrap up, people who are concerned about correlations just

0:17:10.920 --> 0:17:15.400
<v Speaker 1>becoming one in any sort of crisis and want diversification

0:17:15.680 --> 0:17:23.320
<v Speaker 1>should consider manage future's exposure, and the most efficient, least

0:17:23.359 --> 0:17:27.399
<v Speaker 1>costly way to do that is through an ETF like

0:17:27.840 --> 0:17:33.440
<v Speaker 1>DBMF by Andrew Bieren DBI. I'm Barry Rudults. You're listening

0:17:33.440 --> 0:17:39.879
<v Speaker 1>to Bloomberg's At the Money. I'm sorry, but my letter

0:17:40.000 --> 0:17:40.840
<v Speaker 1>keeps coming