Why Most Investors Won't Buy the Best Diversifier | Andrew Beer on Managed Futures

Summary

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Excess Returns Podcast Summary

Episode: "Why Most Investors Won't Buy the Best Diversifier | Andrew Beer on Managed Futures"

Date: December 10, 2025 | Guests: Andrew Beer (DBi)
Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler

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Episode Overview

In this episode, the hosts sit down with Andrew Beer, founder of DBi and a leading thinker in the alternative investment space, to demystify managed futures—an often misunderstood but historically reliable portfolio diversifier. The conversation covers the basics of managed futures, the statistical and practical reasons for their effectiveness as diversifiers, why so few investors and advisors embrace them, and the narrative challenges in making these strategies mainstream. Andrew shares his views on the move toward product complexity, the importance of simplicity, and gives actionable advice for both investors and advisors considering or using managed futures in client portfolios.

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Key Discussion Points & Insights

1. What Are Managed Futures? (03:38)

• Simple Explanation:
  Andrew likens managed futures to a "functioning crystal ball"—a way for investors to capture trends in global markets that other asset classes tend to miss.

  "It's kind of like a crystal ball. It's that simple. Whatever these guys are doing, the complexity underneath the hood is sometimes they get a clear view of what the world's going to look like in a year or two, and they invest and they make money on it." — Andrew Beer (04:19)

• Core Asset Classes:
  Managed futures strategies typically trend-follow across four main asset classes: equities, rates (bonds), commodities, and currencies. They often monitor hundreds of markets but may focus on the largest, most liquid trends.

• Trend Following in Practice:
  Trends arise from both new information (changes in fundamentals) and shifts in sentiment. Even in "efficient" markets, sometimes someone knows something first, and managed futures attempt to systematically identify and follow those price moves.

2. Why Add Managed Futures to Portfolios? (12:52)

• Powerful Diversification:
  Managed futures have "zero correlation" to stocks or bonds, especially valuable when traditional diversification breaks down (e.g., during crises like 2000-2003 dot-com bust, 2008 GFC, 2022 inflation shocks).

  "If you can bring something into a portfolio from a statistical perspective that has zero correlation to stocks and bonds and tends to do the best when the markets are at their worst... that is very, very powerful from a modeling perspective." — Andrew Beer (13:45)

• Sharpe Ratio Impact:
  Statistically, models suggest even a 20-25% allocation could be justified, although practical and behavioral reasons keep actual allocations much lower.

• Behavioral & Communication Barrier:
  Despite 50 years of evidence, most investors aren't motivated by a modest Sharpe ratio improvement—they want outcomes ("up 20% when everything else is down"), not technical explanations.

  "None of your clients are really going to care because... no one is going to give you a hug after 20 years for raising their Sharpe ratio by 0.05." — Andrew Beer (15:27)

3. The Complexity Challenge & Narrative Gap (16:30)

• Explaining 'Black Boxes':
  The industry’s focus on technical superiority and model sophistication is a barrier. Clients want to understand the "what" and see tangible results, not wade through jargon.

  "When you talk about what it actually does in the real world... that's what people care about... getting away from that complexity and getting to that is the key to this whole thing." — Host (Justin) (17:46)

• Faster Reaction to Macro Shifts:
  Managed futures can dynamically respond to fast-moving macro environments (e.g., the inflation pivot in 2021), a quality that slow-to-react model portfolios lack.

• Mainstreaming Alternatives:
  Fee sensitivity and the recent move toward model portfolios (including a "20% Alts bucket") create opportunities but also raise the importance of simplicity, low cost, and tax efficiency.

  "...If leverage buyouts were still called leverage buyouts, they wouldn't be the asset class that they are. But 'private equity'... sounds a lot safer. Junk bonds became 'high yield.' So I think the narrative component is critically important." — Andrew Beer (22:44)

4. Line Item Risk & Behavioral Issues (23:10)

• Perception vs. Reality:
  Because managed futures are uncorrelated, their returns often can't be "explained" by clients in terms of stocks or bonds. This unpredictability makes it uncomfortable unless properly set up in the context of asset allocation—"the space went down 4%, not my guy went down 4%." (27:43)

5. Simplicity vs. Complexity Wars (37:07)

• The "Rush to Complexity":
  As fees compress in alternatives, some managers try to add value (or justify fees) with more complex models and exotic markets—but Andrew is skeptical.

  "I think the dirty secret of this space is that people figured out a way to do this like 50 years ago and it just works better than a lot of the things that people have tried to innovate and bring to it." — Andrew Beer (37:22)

• Concentration Over Diversification (To a Point):
  Too many micro-bets don’t necessarily improve outcomes. The most effective strategies often hinge on big, liquid markets.

6. Fees & Access (32:11, 33:34)

• Fee Sensitivity:
  While 85 basis-point ETFs are competitive against expensive mutual funds, getting managed futures approaches into model portfolios dominated by ultra-low fee ETFs (≤20 bps) is still a leap. Making the product index-based, passive, and tax efficient is essential to broader adoption.

  "If you can make it more tax efficient, it opens up a whole new segment of the market..." — Andrew Beer (35:34)

7. Product Structure & Replication (48:34)

• Indexing and Replication:
  Andrew's firm focuses on creating index-like products that replicate core exposures of leading managed futures or hedge funds, with the aim of delivering most of the value (beta plus some alpha) in a liquid, low-fee, accessible format.

  "Our big innovation was that... we've been able to replicate [hedge fund returns]... but do it so efficiently, we'll give you nine or eight, not five." — Andrew Beer (53:28)

8. Real-World Example: Current Positioning (54:54)

• Managed Futures Positioning (as of recording):
  Recently, systematic "trend" models are positioned risk-on: long equities, bullish on gold and the yen, not worried about rising bond yields. Fundamental hedge fund managers are more cautious, shifting into Europe, watching macro risks.

9. The Path to Mainstream (60:41)

• How Managed Futures Go Mainstream:

  1. Show up in more model portfolios (industry is trending there).
  2. Improve the way they’re talked about—outcomes, not technical stats.
  3. Make them easy to buy and understand—simple vehicles, clear allocation.

  "If you believe in math, then you have to believe in this." — Recalling Meb Faber (61:26)

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Notable Quotes & Memorable Moments

• On Managed Futures as a 'Crystal Ball':
  "Sometimes the crystal ball can be very cloudy, right? So sometimes it can look more like a snow globe than a crystal ball." — Andrew Beer (05:42)

• On Wall Street Jargon and Client Mindset:
  "People want to be told about the outcomes and why it fits in their portfolio and why it's going to help them and how it's going to help them grow their assets and sleep at night." — Andrew Beer (17:35)

• On the Need for Simplicity:
  "Can we just make it as simple as buying a low cost ETF?... As a starter kit, can we have a simple plug and play solution that gets you essentially what you're looking for from a diversification perspective?" — Andrew Beer (31:15)

• On the Mainstream Future:
  "If we can kind of solve all those issues, then what you'll see is the space will... gradually just become a 3% allocation across more and more portfolios. 5% allocation, sometimes 10%..." — Andrew Beer (60:41)

• On Longevity:
  "It's very rare to have a strategy that's worked for 50 years." — Andrew Beer (61:33)

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Timestamps for Key Segments

• [03:38] — What are Managed Futures?
• [07:31] — Asset Classes & How Trend Following Works
• [12:52] — Why Add Managed Futures? Statistical perspective
• [16:30] — The Narrative Problem: Too much focus on complexity
• [18:24] — Real-world benefit vs. explaining the "how"
• [23:10] — Behavioral challenges: 'Line item risk'
• [27:43] — Framing managed futures as an asset allocation decision
• [32:11] — Fee sensitivity, product design, and market fit
• [37:07] — The "rush to complexity" trend
• [48:34] — Hedge fund replication made simple
• [54:54] — Manager positioning: What are the trend followers and fundamentals guys doing now?
• [60:41] — How managed futures go mainstream

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Summary & Takeaways for Listeners

• Managed futures are a time-tested diversifier, especially valuable when stocks and bonds falter.
• Adoption lags because they're complex to explain, behaviorally hard to "stick with," and too often sold via abstract technical stats—not practical benefit.
• The path to mainstream acceptance lies in new product design: simple, index-like, fee-conscious, and tax-efficient structures, paired with better narratives for the actual human investors using them.
• Andrew advocates for reframing managed futures in the client conversation, focusing on real-world outcomes and making their inclusion in portfolios as easy and intuitive as owning a broad index fund.

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Find Andrew Beer: LinkedIn, Company website: dbi.com

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Transcript

[A]

You're about to make a trade. Which u do you listen to? Is it get optioning those options.

Or.

[B]

Let'S do a little research.

[A]

Learn [e-mail] TradeSmart.

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[B]

It's very rare to have a strategy that's worked for 50 years. Whatever these guys are doing, the complexity underneath the hood is sometimes they get a clear view of what the world's going to look like in a year or two and they invest and they make money on it. Aren't those the guys who started shorting Treasuries in September of 2020? Like before inflation hit in the middle of COVID they could see something that nobody else could see. Those key events, those big ways in which you have an opportunity to make money, are things that traditional portfolios just have not been very good at giving you exposure to. If you can bring something into a portfolio from a statistical perspective, that has zero college in stocks and bonds and tends to do the best when the markets are at their worst. So the dot com crisis, the GFC in 2008, the return of inflation in 2022, that is very, very powerful from a modeling perspective.

[C]

Andrew, welcome back to Excess Returns.

[B]

I'm so happy to be back, guys. Thank you.

[C]

We're coming off of Thanksgiving. We're talking about cooking and speaking of cooking, you're doing some cooking in the Managed Futures ETF or Managed Futures Hedge fund replication space with a lot of your strategies. And we're going to work through some of those strategies today. But specifically you are involved with the IMGP DBI Managed Futures etf, which is ticker symbol dbmf. You also have another ETF out there that you advise on ticker symbol qalt. And then you recently announced, which we were talking about right before the podcast up started a new partnership with Simplify, which we'll talk to you about. So all good stuff and you're having a lot of success and a lot of adoption with the Strat, these alternative strategies that you've been on the forefront of. So, so congratulations to you.

[B]

Well, thank you, thank you. I hope we're just getting started. So it's but it's great to be back here to be Able to talk about it all.

[C]

Yeah. Awesome. Thank you. And so our audience, you know, is very wide ranging. And so I think what we'll start today is just with some of the basics. Maybe we don't spend too much time there, but it's good to do always a refresher with strategies that people might not be that familiar with. And you're a great person to explain that. And then we'll kind of get into some of the stuff that's important to you, some of the things you've been talking about, the rush to complexity with some of these strategies and maybe the hidden risks and things like that. And then also just how these types of approaches can work within a diversified portfolio and why they offer such a important ingredient when it comes to sort of different types of diversification. So, lots to cover with you in the next hour or so. But to start, let's just kind of have you explain, like, I'm in second grade or maybe I'm a sophomore in high school or whatever might be like, what, you know, how would you explain what managed futures actually is?

[B]

So it is, it is normally very hard to explain. So the moment, the moment you go into the weeds on it. So it is at its core, like, I think anybody looking at it would think, wow, this is a complicated strategy. You've got a bunch of quants who are building models and then looking at prices across all these different asset classes. And so one of the ways in which I talk about it is, so I'm not a quant, right? I have a long history in the hedge fund industry. I'm fine with numbers, but I don't program. I didn't go get a PhD in economics. So I think the question people often ask me is, okay, so you've got this strategy that from the outset looks like a black box. Like, how did you get comfortable with it?

And the way that I've gotten comfortable with it, which is just. And kind of the simplest explanation of it, is it's kind of like a crystal ball. It's that simple. That whatever these guys are doing, the complexity underneath the hood is sometimes they get a clear view of what the world's going to look like in a year or two, and they invest and they make money on it. And so just to give you an example, so we've been doing this now for about a decade. But if I was like a human manager talking about my portfolio and some of the successes we've had, or you guys are writing about it, or somebody was writing about, they would say, aren't those the guys who started shorting treasuries in September of 2020 before inflation hit? In the middle of COVID they could see something that nobody else could see. And then, oh, the dollar took off over the next couple of years as inflation came back. And they were right. Early, early and right contrary and early and right on those trades. You know, last year we were buying gold below 3,000.

So what people want when they think about these kinds of strategies is they want to hear that somebody was contrarian early and right. And that's where the big money is made. Now, the thing about this strategy is the way, this strategy, by the way, when I say a crystal ball, by the way, sometimes the crystal ball can be very cloudy, right? So sometimes it can look more like a snow globe than a crystal ball.

But every now and then you get a very clear view of what the future is going to look like. And for an allocator and for an investor, it's so important because those key events, those big ways in which you have an opportunity to make money are things that traditional portfolios just have not been very good at giving you exposure to. And so I think with this strategy that the most interesting thing about it is that, and look, we can go into the nuts and bolts of exactly what people do on it. I don't think it matters at the end of the day. I think what people care about when they're looking at my portfolio is good. I know what my stocks are going to do, I know what my bonds are going to do.

What can I add to my portfolio that's going to add something more than the cost of moving it away from my stocks or bonds? I think that's the nature of diversification. I, as an outsider, fell in love with the space 10 years ago because I thought, God, it's so unusual what this does. And if you can start to add it into people's portfolios, then you can make not a thousand people, a bunch of big pension plans or big family offices better off, but you can make millions of individual investors better off as a result of it. So that's about as high level as that can be. Which is basically what you care about, is something that can give you a view on the future and manage issues of strategy actually sometimes feels like a functioning crystal ball. Yeah.

[C]

So it sounds like the strategy has the ability to go to all different types of asset classes, which I just want you to spend a minute on maybe talking through what those other asset classes are, maybe the top ones that most managed future strategies are getting some exposure to and you know, how does it, what is the signal, what is the mechanism that strategies go about doing that? Like how are they selecting those various asset classes?

[B]

Sure. So, so, okay, if you think about kind of the broad investment world, you've got four major asset classes, right? Equities are easy. We all know about equities. Then you've also got rates. Okay, so again, we opened Bloomberg in the morning or whatever and we want to know like our, you know, is the 10 year treasury going up or down? You know, what's happening to my bonds in my portfolio? Then you move from there, you go into commodities, okay, well we care whether gold is going up or down, you know, whether oil is going up or down. These are kind of indicators of the macro world. And then the last one, which is a little bit more esoteric, particularly for Americans who tend to have a very dollar centric view of the world, is what's happening in the currency markets. Right. So equities, rates, commodities and currencies. Now what funds in this space do is they are often looking at 200 subsets of these markets. So yes, they may be looking at the S&P 500 for equities, but they also might be looking at the Nikkei for Japan or the Thai stock market or all sorts of different individual markets. In the same way, they may look at gold, but then also look at platinum and silver and all sorts of other things. And so years ago I started a commodity business. And what struck me about the commodity markets is that you have these people who know those markets better than any other. I mean, you can't believe how well they know these small segments of the markets. And they often had the great information edge. They knew something nobody else would do, would know. And so what happened is they would know that supply and demand were out of balance. They'd start buying something. So something would be at 10 for a long period of time and they'd be buying it up to 11. And a lot of people who owned it at 10 think, wow, great, it's gone up 10%, maybe I should sell some, maybe I should get out. And yet they're buying more at 11 and then it goes up to 12 and they're still buying more. And so what? Prices across these different asset classes can sometimes be a window into is that somebody knows something, somebody knows the world is changing and they're willing to keep buying something as it goes up or they keep selling something as it goes down. And in quant statistical world, those are called trends. So you Know, more people like it at 12 than they like it at 10. Okay? And they're, and they're still buying it. That's a trend, okay? And trends happen for two reasons. They either happen because the world is actually changing. Okay? You know, Nvidia is a very different company than it was three years ago, right? I mean, there is legitimate demand for more legitimate demand for what Nvidia is doing today than there was three years ago. But then there's also, the second factor is also sentiment. People are gaga, crazy about Nvidia and AI.

So information and sentiment will drive prices changes over time. It's the changes in information that's the crystal ball component of it. That's when in the summer of 2020 when treasuries, remember, 10 year treasuries were yielding 50 basis points and a lot of very serious people thought treasury yields were going to go negative. We were going to be in a world of global deflation for years to come.

But other people knew differently and they got down to 50 basis points. They started climbing back up to 70 basis points by September. That little window was enough of a signal for the people who invest in the space to basically make the argument, you know what, the deflation trade is over. It's time to be on the other side of it, the beginning of an inflation trade. So if you're in your second year business school class and you're taking a class on finance or whatever, they tend to say markets are perfectly efficient or reasonably efficient and past prices are not indicative of future performance. Usually that's true, but sometimes somebody knows something.

So that's what I found so appealing about the strategy. It's a way to basically tap into the a people who know these different local markets that are making bets now. It doesn't work all the time, obviously, and that's the, you know, that's the challenge of it. But when it works, it works unbelievably well.

[C]

One of the things that you're talking about is the importance and how these add sort of a level of diversification to a portfolio, particularly during maybe a time of stress or change or some disruption in the market or some trend that's happening. Do you have any. And I know there's, you know, thousands or tens of thousands of these managed futures type strategies. I mean, you run yours specifically, but just in terms of like the long term evidence of integrating and we're talking generally now, so it might not be even a question that's answerable, but is there any like, how would like a sharp ratio the risk adjusted return of a, you know, diversified, let's say 60, 40 portfolio. How would that be improved by integrating one of these strategies? Obviously there's different weightings you can have, but I'm just talking in general here, if you can comment on that and if the, if the evidence, and I think the evidence is pretty strong that, that these strategies can be extremely good in terms of offering diversification. Why do you think, you know, investors haven't sort of embraced or utilized more of these strategies so far in today's market?

[B]

No. So, so, so we fell in love with it from a statistical perspective.

And the two statistics that are very, very rare in a single strategy are that it has no correlation. It truly marches to the beat of its own drum. It has no correlation to either stocks or bonds for a long time. Stock and bonds again had either zero or slightly negative correlation during the great. So the 2000s, 2010s, you really didn't, I mean bonds were a fantastic diversifier against stocks. They just kind of steadily went up. With the great bond bull market, there's no volatility that ever went down.

But this decade, the past 10 years have been something of a disaster. You've had a negative Sharpe ratio for bonds for the Bloomberg AG and you've had a drawdown, not a 4% drawdown, but a 20% drawdown across the bond portfolios.

So if you can bring something into a portfolio from a statistical perspective that has zero college in stocks and bonds and tends to do the best when the markets are at their worst. So the dot com crisis, the, the, the GFC in 2008, the return of inflation in, in 2022 when that is very, very powerful from a modeling perspective. And so if you go to your financial advisor and you say just kind of run me a, an unconstrained portfolio, that's everything you have in my portfolio today, plus manage.

As a strategy managers be like 20, 25% like it's that valuable. The problem is it's a quantitative long, short term rebase flag box. It is a highly technical strategy run by quants who like to talk to other engineers about all of their quant, you know, like, like, like, like modeling improvements that they've made. And, and, and so you get, you kind of run into this wall where it's good for the portfolio, but it's hard to explain why somebody should be happy about that. And I always tell this story and I was asked to come to London two or three years ago and give a speech in front of the equivalent of reas in London. And I had 12 slides that went through all the diversification benefits of the strategy. And again, this has been, I mean, it's done this for 50 years. Right. So this is a structurally sound way of generating alpha, we kind of call it. And I got through false slides of all those diversification benefits and I, and, and my 13th slide is basically. And none of your clients are really going to care because I said no one is going to give you a hug after 20 years for raising their Sharpe ratio by 0.05. Right. The, the reality is you live client meeting to client meeting, client conversation to client conversation. And, and if you can't find a way to talk to them, if you can't explain the difference between, I don't know, you know, stocks and bonds or, or ETFs versus mutual funds or whatever, it's, it's, you know, how are you going to explain this strategy? And, and, and I think the people who are in this space I mentioned, kind of it's a space populated by engineers.

They're used to talking to allocators who are very technically sophisticated. They don't have to sell them on modeling and mean variance optimizers and efficient frontiers and things like that. They're already bought into it. And what they want to hear are, what are the cool new statistical things you've done in your models? And so a lot of the language around the space.

Is around, hey, we've got the best black box. And his black box. Well, it's, my black box is better than his black box. And then, then the other person goes, actually, my black box is better than his black box. I think it's a terrible way to look at the space because I don't think, I don't think anybody wants black boxes. So I think what they want is in 2022, you know, do you have a strategy that's early, contrarian and Right. And goes up 20% when everything else is down? Like that's what they want. And the next year when it doesn't work as well, they want an explanation as to, okay, so it's not going to do it every year, obviously, but how do I, you know there's going to be more crises like this? You know, 27 may be a terrible crisis, 26 might be a terrible crisis. We've still got December to work through. So. So, you know, people want to be told about the outcomes and why it fits in their portfolio and why it's going to help them and how it's going to help them grow their assets and sleep at night. And I am almost single handedly leading that charge in that I think this should and will become a mainstream allocation across portfolios. But it requires a real shift in how you talk about it.

[D]

It's funny because I've kind of been sitting in your seat because we use in all of our diversified portfolios that have stocks and bonds, they all have greenish futures now, we do it 100%. And when I'm talking to clients about it, I've learned that what I need to talk about is the what, like what this actually does in the real world. And what I need to not talk about is the how because I get into, oh, it's so cool, they could do this and they could do this and like all they're hearing is complexity, complexity, complexity, complexity. Like the clients are not that excited at all about that. But when you talk about what it actually does in the real world, the diversification benefits it provides and how it often at least can do well when the stock market's down, when you need it the most, like that's what people care about. And it's like getting away from that complexity and getting to that is the key to this whole thing.

[B]

Okay, completely. And if you think about like the Great Benefit. So a model, the fact that your clients are in model portfolios in the first place is a relatively recent invention, right? In the 1970s or 1980s or even 1990s, if you went to an advisor, they were often picking individual stocks for you and building bond letters. And so this whole idea of the value of diversification has been disseminated through the advisor community, the asset allocator community. And one of the core principles of it is don't overreact to flare ups in information, right? So liberation day happens, don't panic, don't dump all your stocks, whatever, because, and you've, you know, for most people, you've set it up structurally. So the way that we're going to manage that is we're not going to even look at the portfolio until once a quarter and then by the way, and when we make adjustments to it, we're going to make them slowly. And so I had this really funny experience with it in. Oh. And so the benefit of the strategy, just as it complements the rest of what you do, is that it actually can move fast and it can jump on things. I had this incredible experience in early 2021, January 2021, I wrote a little note about the possibility of the return of inflation. And I said basically, if you've got A model portfolio and inflation comes back, you've got a problem. And if you're in a 60, 40 portfolio, you got 40% of your bond of your assets in something that's if inflation comes back, it's going to get killed. Basically. I went out and talked to a lot of advisors about it. I was using an example of this great hedge fund manager named Stan Druckenmiller had talked about it.

And I said, look, the guy's got a really good track record for like 30 or 40 years of getting this kind of stuff right. And I said, what are you going to do about it? And most people said, well, nothing yet, nothing yet. Because we've seen these flashes and we've seen these head fakes and I remember talking to somebody at the end of 2021 about it. Now remember, end of 2021, people have been talking about inflation now for months and months and months and months, right? And they were dialing up their bond exposure at the end of 2021 because equities had gone up but bonds hadn't. And so in order to rebalance, they were selling their equities and adding more bonds. At the moment, inflation was coming back. So model portfolios are incredibly valuable to the average investor because you get diversification. You don't focus on the day to day vagaries of some tweet that's blow up the markets or some geopolitical event that causes these short term disruptions. But they do have the slowness does have a disadvantage only at specific times. And that's when the world changes a lot. When we go from a functioning financial system in 2006, early 2007 to basically having no financial system by the end of 2008. That 18 months was very, very, very hard for traditional allocators. And 2022 was like that.

So the value of a strategy is that when the world's going to change like that, even if it's a cloudy crystal ball, it's valuable to have in your portfolio. And so I think the way back to Justin's question, we all know the statistical benefits of the space and what fascinating thing is. So about three years ago I started to make this big pitch that this would just become.

As people are developing this now, there's like 20% alts bucket. It used to be just kind of stocks and bonds and now even people who are very, very late to the game are adding this 20% alts bucket question is what do you put into it? And my argument was 3% of the 20 will be managed Futures. And that was a very radical idea three years ago. Fidelity says it now, blackrock says it now. Invesco says it now. Like, like the big asset allocators, they're realizing the, the, the, the, the, the benefits of the strategy and they're adding it. But, and I think this is where you get back into the human element of it. You know, it's, it's, you need a narrative around it to explain to people how this is going to make their lives better. And, and I think that's been a real challenge for the space. And I'm, look, every day I'm trying to get a little bit better and, and, and find a way. Because without that, you know, look, if, if leverage buyouts were still called leverage buyouts, they wouldn't be the asset class that they are. But private equity, that sounds a lot better, a lot safer. Junk bonds became high yield. So I think the narrative component is critically important.

[D]

Yeah, that narrative gets the biggest challenge I've seen with clients, which is the idea of line item risk, which is people are so anchored on stocks and bonds. If anything's going up and down with stocks and bonds, they can kind of explain it. They could be like, oh, stocks went up or bonds went up. And that explains what this other thing is doing. You know, to your point before, there's zero correlation with this. So basically I can't use stocks and bonds to explain what this is doing. And that becomes a challenge during the periods. It can be a really, really great thing in 2022, but it can, it can be a challenge during the periods where it's just different and you sort of have to explain. Do you have any tips in terms of how you explain things during periods like that, in terms of getting people to stick with it?

[B]

Yeah, so, so it's actually part of the evolution of our business. Right. And so, so people understand how the background of the business. When we look at this space, my, my partners are great quants. And when we looked at the space, we thought, well, you know, we could, we could kind of do what these guys do. You know, we could build our own models and pursue it. The, the problem that we. There are two problems we have with it. One is that it, there was a lot of unpredictability. So it's like, it's like trying to pick the best stock in a particular area. Trying to pick the best model kind of had the same problem. So you could get it really right. You could get it really wrong. The, the second issue was that we thought it was very inefficient way to invest. Right? So if, if somebody called you tomorrow and said, I just spoke to 50 micro cap, you know, CEOs and, and they all think the economy is falling apart and, and they're desperately trying to sell their own stocks about it, your answer is not going to be like, oh well, I better go try to short those 50 micro cap companies. You're going to be like, get me out of the s and P500.

Because.

The tsunami is cresting over it. And so when we looked at the space, we thought, wow, incredibly valuable signal, this idea of this kind of crystal ball. The problem is that I don't need to 40 or 50 bets to bet that inflation is going up, to bet that gold is coming back to, to bet on the, these kind of big macro themes. So, so, so what we do is we basically look at the space overall by looking at the, the, the what the top managers in the space are doing and then condensing it down to this really simple portfolio of just 10, you know, major markets. So we care whether the S and P is going up or down, whether the ten year treasury, whether, you know, the yen, kind of big, those big things to, you know, gold and oil. And so the crazy thing about what we do is that it's so efficient relative to these hedge funds around fees and everything else is it does about 300 basis points a year better. And in a sense, rather than creating one of these active strategies, it's not my opinion, we just basically just build.

This model, this box basically that tells us what the weights are every week. We even changed it in 10 years that we started doing it. Now the next evolution of our business, which I think gets back to the question that you're asking Jack, is how do we take this from a strategy that feels risky, feels riskier than it is and make it something that feels less risky. And so a bit over a year ago we ended up creating an index around what we do. And so I just told you about the space that's really valuable. Now imagine a space that's really valuable but 300 basis points more valuable just through efficiency and they can be accessed in an ETF or other other client friendly vehicles. And so my belief is that, so for instance, when you invest in gold and gold goes down 4%, my guess is clients are not like we should be selling gold because it went down 4%. You know, even if, if, if tech stocks go down 10% or 20% again, it's, there's a belief that this should be part of My portfolio, it should stay in my portfolio. I don't have to stare at every day and decide when to get out before something bad happens. Right. So this perception of risk in this space is, is much higher, I think if you approach it as an asset allocation decision, not as a manager selection decision. And my recommendation would be you start with this index that we created, the index which has data back to 2002, and you say that's what we're trying to access here. And then you invest in a product, an ETF that tracks that index, and you use that index in your client reporting.

What you now have is, okay, the space went down 4%, not, my guy went down 4%. Because then everyone's like, what's wrong? Like is something you know, is like, are the cracks spreading underneath, underneath my feet. So, so I think, I think you get the narrative right and then you approach it as an asset class decision. And then if you offer a product that has keywords around it, index based, passive, low fee, tax efficient, right Then for most investors who are used to hearing that around.

GLD or things that are ways of getting exposure to these different asset classes and return streams, but in what feels and looks very client friendly, I think it helps people, you take all those three things together and it helps to open the asset class to people who otherwise might be averse to investing in it.

[D]

And it just takes time, you know, with people becoming familiar with it. Like one of the things I was thinking, one of the questions we were going to ask you about, which you just sort of got into, is this idea that if you look at the managed futures ETFs that are out there, their performance can be all over the charts in any given year. And so people don't. But like, then I think of myself as an equity investor and I'm like, you know what, the large cap growth guy and the small cap value guy, their performance is really, really different. So it's not really anything that's different. It's just because it's a new asset class. I think people have to get like comfortable with the same exact thing being wrapped around that, if that makes sense.

[B]

Yeah, well, so I think, I mean, I think one of the things that the space does so, so this kind of getting into the weeds a little bit, but the space overall.

People spend a lot of time and energy trying to talk about why their black box is different from the other black box. Right. And I'm like, I don't think people do that with like, if you bring in three large cap managers none of them kind of will sit and kind of spend as much time dumping on the other two managers as the, as, as, as people tend to do in this space. Because it's always, it's always, I made this modeling decision and they're fools for not doing it. It's kind of like the attitude in it. And so it's funny, I was actually just in a conference with a bunch of these guys and, and they're all sitting around the table and they're like fierce arguments going back and forth about these different modeling techniques. And my last comment to one was I said guys, I don't think this is good for the space. I think if you walk in again and they say, well, they're not trading Malaysian palm oil fools.

Fine, okay. You're talking to an institutional investor who's got a guy at a consulting firm on the other side of the table who loves this stuff and lives and breathes it. Fine. I'm much more interested in the person who's got, you know, a few million dollars of net worth and the zillions of people like that who could have this in their portfolio and have a better investment outcome in a year like 2022 or over the next 20 years by virtue of having this in their portfolio, which we know, we, we, we know, we know is valuable. And for that person, I just don't think it helps to, to, to dive into the weeds and. Because it just, I mean, try explaining to my sister like what a, you know, what a wheat futures contract is. I mean that is so far afield of her knowledge base and she's got a, you know, she's got a real investment portfolio. But again, it's, it's all about what it's like, why, why should I take X percent of my hard earned money and put it into this thing and be happy about it? So look, this, this is my, this is, I mean the, you know, the kind of, the broader business plan that I made that I laid out 10 or 15 years ago was for God's sakes, can we make investing in alts easy? Like, I mean so much brain damage goes into which funds and, and oh, it's really expensive, but is it worse than whatever? Can we just make it as simple as buying a low cost etf? And yes, do more complicated things if you want to, but as a starter kit, can we have a simple plug and play solution that gets you essentially what you're looking for from a diversification perspective.

And that I think the industry has never really been able to do. And that's sort of our vision of where we're trying to get to.

[D]

And in terms of this becoming mainstream, how important is the fee component? Because you talked about you have an index, you know there's going to be a product at some point that's going to be lower fee using that index in terms of getting your average person. Because one of the things I've definitely noticed is everybody is very, very fee conscious these days. Like they don't care if the, you know, after fees the thing is outperformed significantly. It's just like I'm, I'm going to pay low fees. So how important is that part of it in terms of making this mainstream?

[B]

So I think it depends on what you mean by mainstream and who you're talking to. So the part of the market that I spent a lot of time thinking about, so, you know, we, and for compliance and regulatory reasons, I can't talk very specifically about products that we're involved in managing.

But you know, we do sub advise a large managed Nature's ETF that has an 85 basis point expense ratio. Right. And.

It would be a great addition to lots and lots. Now it's an etf, right? And so what I set out to basically prove was that if you ask a typical allocator and you say, all right, if I can get into the hedge funds, it's going to give me this kind of return. If I can't get into the hedge funds, it's going to give me that minus a couple hundred. The mutual fund version is going to give me that minus 200. And the ETF version is not even worth investing in. And what I wanted to show is that actually we could do better than hedge funds in an ETF with transparency. We've done it.

The.

But okay, now imagine you have, you're, you're running a model business that 10 years ago you said, you know what, we think ETFs are a better mousetrap, they're more tax efficient, they're very low cost. Vanguard is in their setting pricing which is helping everybody. We're going to put together a portfolio for you that's going to be 60, 40 or a variant of it, of low cost ETFs. Now you look at that whole port. So now you've been sold, you and 100,000 other people have been sold that low cost index based ETFs that are more tax efficient are a way for you to grow your assets more reliably over time. Right. So vocal heads basically doing that. Now somebody comes along and says I can make it better with an 85 basis point active ETF that is a, you know, is basically a simpler, cleaner, prettier version of lots of black boxes. It's the conversation doesn't even start. And so, so, so I've been fascinated with this multi trillion dollar audience and Bloomberg's published great data on this, like the average, I mean 80% of ETFs or something are still below 20 basis points in expenses. So I'm always interested in, in, in seeing if there's a way to build products for what we call greenfield markets, you know, where nobody has exposure to it already. So I think for an audience like that, 85 basis points is a non standard but, but 20 or 35 gets interesting to them. I think if you can. A lot of those things are very, very tax sensitive. There are certain things you can do on, on. I mean again, there's this huge intersection between, you know, ETFs and kind of sophisticated derivatives and tax planning. If you make it more tax efficient, it opens up a whole new segment of the market. So on the other hand, there are other parts of the market where I think having an 85 basis point ETF when your competitors are 170 basis point mutual funds, you should clean up in that market. So it really depends on, I mean we think about kind of the, the retail, you know, your US wealth management landscape. It's a highly fragmented, highly balkanized world out there. And so what I've always said is, is, you know, you can be a niche product and figure out how to address certain subsets of that, of that market and still fight yourself with $50 billion. You know, close your eyes, exhale, feel.

[E]

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[D]

Is it this idea of the rush to complexity? And you wrote about this, you know how everybody, we talked about a little bit earlier how everybody's getting more and more complexity strategies. I mean, is that a response to the lower fee products becoming available now? Like I've got my edge has to be better than your edge. So everybody just gets more and more complicated.

[B]

Yeah, so, so I, I think the, look, I, I, I, I made it out of that, that conference with hedge fund managers alive, so I can now be a little bit bolder in my statement. Like I think the dirty secret of this space is that people figured out a way to do this like 50 years ago and it just works better than a lot of the things that people have tried to innovate and bring to it. So the way you think about it as an asset allocator is there's a beta here. It's not a beta like stocks, but there's a return stream here of the strategy which call it a beta, call it an alternative beta, call it a risk premium. And when I talk about kind of the inefficiency of doing it the old fashioned way.

I think what's happened is over the past 15 years you've had a, it was a relatively cushy business 15 years ago. It was hedge funds competing with hedge funds, competing with hedge funds for money from investors who didn't really care what they paid. And over the past 15 years.

You know, some asset managers, AQR kind of blazed a path on this by all of a sudden cutting fees and kind of trying to make it more client friendly. They call themselves the fair fee hedge fund guys, which applies in certain circumstances, maybe more than others.

And some other people started offering, you know, what considered lower cost mutual funds. And then banks came out with their own kinds of products and some firms started to cut their fees aggressively. So in a broader. And then we come along like we're kind of ruining the party. So in a broader world where these people feel pressure to justify higher fees.

The gut response has been to say, look at all these new things I'm doing that you can't do with simpler products. The terrible irony of it is I think a lot of those new things that they've introduced are actually hurting their investors. And so, so our history was that we launched this way of copying these big hedge funds. We beat them in 2016, 17, 18, 19, 2021 and 2010 and 22, and we underperformed them in 2023.

And so the hedge fund came out and said, ah, we knew like, it was only going to work for a period of time. It was only. We were waiting for it. It's now it's going to break. And they were kind of doing this little victory dance. And then we've done much better than them at 24 and 25. And so.

I think there is this existential crisis in this space is why would you pay up for complexity? Like for. Why are you trading 400 instruments, not 50?

Most other strategies, you want people to concentrate their bets where they can make the most money. Here there's almost this religion about let's touch as many markets as possible because they sound cool.

In this conversation, this roundtable I was on, there was a discussion about the. I think it was the South African sunflower seed market or something, or sunflower oil market. I was like, so I didn't know that even existed. Literally, I think the three of us could corner that market if we wanted to.

So.

Yeah, so look, I think, I think that's the way people responded. And I will tell you that there are allocators on the other side of the table who eat it up. It's what they want to hear. You know, they want to hear about all these new innovations stuff. Look, I take a step back and say, you know, somebody tells you all these innovations they're doing today, the question you ask is, why? Like, why did you do them three years ago, why did you do them five years ago? We've had the same technology, we've had the same information. Or are you doing it because something and what you did is broken?

So, yeah, look, I think it's been a very, very strange year. It's been a tough year for the space. You talk about a snow globe. I mean, Trump. And one of my quotes was, there's noisy and then there is Trump noisy as it relates to markets, his ability to kind of swing markets around it. I think the serotonin kick he gets from getting it has made it a very tough market to kind of tease out.

What'S really happening and whether the world is really changing or not.

But it's been an exceptional year for the simpler, more straightforward, more efficient approach.

[D]

I want to ask on the other side of that, because one of the things I struggled with when I first decided to use these is there are some products I won't name, but the goal all the way to the other side of the spectrum, which is basically, if I'm going to diversify your stock and bond portfolio with managed futures I won't even put the stocks and bonds in there. I will just put the other things we do. And so therefore if we have some sort of sell off that the managed futures don't catch up with, you're more diversified. Do you have any thoughts on that idea about like trying to eliminate those asset classes from a managed futures and how that plays into diversification?

[B]

You mean like getting rid of equities.

[D]

As a. Yeah, I'm saying basically equities and like There are some ETFs that are out there that don't use equities and bonds as an asset class within the managed futures program. As the idea that if, you know, if stocks and bonds are selling off and the managed futures don't get the trend right, you could be less diversified because they're all selling off. You know, you're, the managed futures is losing money while stocks and bonds are losing money.

[B]

So, so we, I mean this is sort of what I'm saying. Everybody has different ways of skinning it. Now, now, now what I whatever say I like about that. So simplify. Who you know is going to launch an ETF using an index, this index that we created.

They also have one, they have a 1.2 billion dollar fund called Little the ticker is actually CTA and I've never had as much ticker envy as when they launched that.

[D]

That's a great, yeah, that's a great.

[B]

Why didn't I think of that as a ticker in 2019? And and so they exclude true. The asset classes and it's worked amazingly well, you know, plus whatever it is that they're doing. And, and so like they were up 24% last year. I mean so but if you take a step back, that to me is the equivalent right of a, if somebody says to you I'm a large cap stock picker and I've got 90% overlap with the S&P 500. But I have a little more oracle than the next guy or a little less oracle than the next guy. That to me is like, it sort of raised the question, sorry, why am I paying you? I could do 90% of what you're doing at five basis points over here. Like why am I paying you? 80, 80 basis points or whatever you, whatever you want to charge me.

But then somebody comes to you and says, no, I'm very different. I'm in the large cap space and you may already have your, your, you know, S and P, your efficient S and P allocation, but I'm going to make big bets in, in in different areas. So that's, that's what we call alpha beta separation. Right. It's somebody who is. You can get your exposure to the space and you can, and then you can find, you can make bets on people that you think are going to bring a different source of return. I think all that stuff. So I think I'm all in favor of people coming up with different ways of approaching it.

The challenge is I have been looking at this space for a very long time, have absolutely no way of handicapping what's going to work well and what's not going to work well on a going forward basis. So I'll just give you one example. So in 2021, an allocator came to us and said, he looked in great detail in our historical numbers and said, you've never made money in commodities, sorry, in currencies, you've never made money. You know, I, what I want you to build this for me was. And just strip out the currency allocation because it's just been dead money for you. Okay. The very biggest winning trade, almost the day after that conversation, was in the currency markets for the next year. So it's a very, very humbling exercise with these strategies. So again, you can make all those calls. But what I think is going to happen is you're going to have people say, I want efficient strategy exposure, like the same way a Vanguard or something gave me efficient strategy exposure. But you as an allocator, if you have a view on it, you can add things around it. Maybe you feel very, very strongly about, like cta, for instance, has a lot of exposure to commodities and lots of different commodities, and you think that there are going to be major opportunities in those markets over time. You've got a great way of playing that in that so you don't have to do all or nothing.

The bigger challenge, I think, is when you have things that overlap very highly with this idea of this kind of core beta that what we do.

That's where I think it's being more challenging for people because they're looking at it and saying, okay, so it's a lot cheaper and it has a lot better numbers. Is it really worth it for me to be able to say, oh, look at this prestigious firm I'm investing with and paying a lot more money over time. And, and, and look at their, their fact sheet that, you know, tells me exactly how much money they're making or losing on heating oil. Again, there's a market for that. I just, I don't think that's the. I Don't think that that market's going to win over time.

[D]

And to your point, it's something like all of us there, since the space is a little bit newer to your average investor, we just have to be comfortable with like, we're very comfortable with many different approaches in the equity space. But you know, since managed futures is new, it's almost like people want to say this is the way you have to do it because it's like this new thing. But as we get more comfortable, I think people will, and they understand it better. People understand, to your point, there's a lot of different ways to do this. And you know, for certain people, one approach is going to work and for certain people, another approach is going to work.

[B]

And I think it really comes back to this, this.

You know, I, I think the thing that we as asset managers often have to remember is that for somebody on your side of the table, all these strategies are elective at the end of the day.

And so we've got to help you not just to make the statistical decision, but also to help frame how to talk about the context with your clients. So your clients appreciate it and they want, and they appreciate you for bringing it to them. And.

It'S ultimately about like, it's, it's such a human business and you know, we invest with people that we trust and we.

You know, and, and, and money is such a complicated matter for people that I just, I, I think that there is this, this wide open opportunity to take this strategy that again comes off as so complicated and, and hard to explain and it feels so risky to people. It's really not like, I mean, the worst drawdown over 25 years in the strategy is like 16%. Okay. I mean, which is still, it's not nothing. But I mean, remember, bonds went down 20% plus in 2022. Stocks go down 16% every couple of years. So it, it, a lot of it is about the messaging and talking to people and understanding, and, and kind of understanding what, what, you know, what they expect from you as an advisor and what people expect from their models over time.

[C]

Most of this conversation has been around managed futures, but I did want to just touch on another strategy that you're involved in and talk about it in the context of.

These alternative type strategies. And that's like hedge fund replication. So if you were to do exactly what you did with managed futures, like explain hedge fund replication sort of in a simplified Andrew Beer way, how would you go about doing that?

[B]

I think it's just, I think, I think what you're doing is you're looking across this big pool of smart money managers and trying to figure out their biggest and most important.

Bets on the world.

And it's the things we read about when you pick up the paper where it's, you know, are managers more positive on European equities today? You know, it's the, it's the hurt on the street columns on, in the Wall Street Journal, you know, is, is, is it the end of the American exceptionalism trade? You know, is the dollar going to be debased over time? And, and the thing is, you know, those are, we would call them sort of macro bets, but, but, but they're really, they're really investments designed to capitalize on big shifts in the world that are generally not being picked up by stocks and bonds. If the answer was only like, I think the S and P is going to go up 3% over the next five months, again, that's not that interesting. But how else are you going to get exposure to the yen going from 110 to 160? And since everything's incredibly confusing in currency land, that actually means a huge decline in the end, you know, or, or, or, or interest rates going up or down. Or.

You know, what if the, you know, what if there's a, something that causes a supply shock in, in, in the, in, in, in the crude oil markets and crude oil takes off. Like those are the big things we read about. And what replication is basically doing is, is shining an electron microscope in a sense on a lot of big hedge fund managers who do this for a living and say, great, okay, I get it. You invest in hundreds and hundreds of underlying positions. What are the big themes? One of the big themes. And replication is just the most reliable way we found to extract that data. Because if you call them, if you call one guy, he'll give you one view. You call another guy, he'll give you another view. This is just a way to kind of systematically identify it across a large pool of managers. And the reason it matters for the, when you're not a multi billion dollar family or family office or a pension plan, is that the portfolios, because they're simple, because they're very liquid, you can make them work in an etf. And one of the great frustrations of the advisor community has been.

Is somebody comes along and they say, look, we've got this incredible strategy, look how well it's worked for years and years and years. And don't worry, it's cost 200 basis points a year, but trust me, it's going to be worth it. Look how well it's done over time. And the moment you invest in it does terribly.

And so we, you know, and that's been about a lot of.

Hedge fund strategies where they're trying to bring them into the greater wealth management world. Which by the way, look, this is a cautionary, if you look at the space, it's a cautionary lesson about some of the ways which people are trying to bring private credit into ETFs. For instance, maybe bringing, you know, by the time they're bringing you private equity deals, maybe the best opportunities have passed. So, but that's the way the business works.

[C]

And is the selection process looking at just the largest managers or how are you figuring out what strategy to what firm, what strategy to look at? How's that happening?

[B]

So we, so we, since, since we don't know whether going to be the best ones going forward, we just look at the biggest and you know, we pick an area and we say, you know, let's take 20, 30, 40, 50 of the largest managers in the space. And, and, and the way replication works is, you know, in the same way you can analyze the price of a stock, well, we're just analyzing the returns of the funds to try to get a sense as to what's been driving those returns. And it turns out if you aim a very, very good statistical model at it, you can figure out what they're doing. You can kind of rip the lid off it. The other thing that makes it so, because we do these very, very liquid investable portfolios, you can put it into a daily liquid mutual fund, a daily liquid etf, a daily liquid usage fund if you're in Europe.

And the last thing is that, and this was sort of our big innovation was that because I used to talk about hedge fund fees over time, a lot over time. And I would say, like, look, you know, you're happy you got 5% a year. They were making 10. Okay. I mean, do you really feel like they should be taking five and you should be getting five at the end of the day? And what, what replication does, it turns that into practice. Because like in the manufacture space, in that example, we've been able to replicate 10, but do it so efficiently, we'll give you nine or eight, not five. In other parts, there's only this, by the way, replication works in very limited circumstances. And you have to kind of, that's our expertise is knowing when it works doesn't work. But you know, in other strategies, you're not going to get, you're not going to get all 10, but I might be able to get eight for you or get nine. But again, if I can do it efficiently and with liquidity, it can be a very, very powerful addition to, to a typical wealth management portfolio.

[D]

One of the interesting things I always like to ask you when we get to talk to you is you get to see, because you are replicating hedge funds and you are replicating managed futures, you get to see what all these guys in aggregate at least are doing behind the scenes. And that's not necessarily going to help us predict the market. But I am interested. There's always some interesting data in there as we look at the current market, like in terms of how these guys are positioned. And so I'm just wondering, as you look at that right now, is there anything that stands out to you that's interesting in terms of the positioning you see?

[B]

Sure. Well, look, and I think on the manager future side of the CTA side, some people call it, the fascinating thing has been.

That.

That they. So after Liberation Day, a typical macro strategist was basically having post traumatic stress disorder for about two months, right? It was, you know, it was the, the, the inflation hit is about to happen, the economy is about to go into recession. Okay. And then in the midst of all this, Trump starts a full frontal assault on the Fed and it's going to, this is going to drive, you know, like a, like the mother of all bond market tantrums. I mean this kind of period of hysteria. The fascinating thing to me about these cold rational models looking at price moves is that somebody knew that was overstated and you saw it in prices starting to go up. So since, you know, I would say the summer.

This tactical space has had a very, very much of a risk on view. So to be long equities expecting equity is going to continue up. Not at all worried about bond yields going up to bet that gold is going to continue its run because the dollar has actually been behaving well with the exception of against gold and for a while bitcoin.

And what else? Also the yen. Right. So these policies kind of play on the gen, which is a little bit esoteric. And so the tactical guys have been very risk on the more fundamental guys, the stock pickers.

These guys are kind of paid to worry about long term concerns.

And so they've been much more cautious this year. They haven't been negative, they haven't been bearish, not like they were in 2022, but they've definitely been more cautious and they have had some views about, you know, like shifting exposure to Europe, for instance, for the U.S. you know, like people can talk for years and years about how cheap Europe is and it's the great opportunity, it's the next great stock opportunity. I was like, and then they're disappointed, they do it again, they're disappointed, they do it again, they're disappointed. But you've seen these smart money investors actually start to look outside the US more for opportunities. And so it's been a fascinating watching these two different kinds of portfolios because some have been working well, like the fundamental guys have been getting it better other times, the protactical guys have been getting it at other. And they've actually kind of ended up in roughly the same place year to date, which is sort of ironic.

[E]

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[G]

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[D]

Yeah, and it's interesting like this. We may have a situation with international. We'll see where you've got the trend guys and the fundamental guys together. You know, the fundamental guys have been saying it for a while. The trend's positive now. You know, that could be a situation where everybody kind of joins in on the international push.

[B]

Well, and that does happen, right? I mean, so, you know, even, and that's one thing I think what people forget about with correlations when you're saying like, you know, it's, it's like there are asset classes that can be have low correlation to other things for a period of time and have high correlations in other periods of time. And I think that's what people are struggling with bonds right now is that bonds, you know, structurally were at negative correlation to equities for a very long period of Time. Once inflation gets above a certain level, stock and bond correlations tend to go positive. And so if you are using bonds as a diversifier against equities and the risk of equities that inflation comes back, that's going to hit both sides of your portfolio.

And so.

Again, it's hard for people to adapt to that change. You look back at the past 25 years and you say, okay, I've got 20 years with a certain correlation structure, five years, different correlation structure. Which do I want to make a bet on for the next 10 years?

Look, these are. Nobody has a perfect crystal ball, but what we're all trying to do is get some sort of a view on the future so that we can kind of figure out, at least in some ways, where the puck or multiple pucks are going and try to position our portfolios to be able to benefit from it. And you know, and as I think about this strategy, it's a lot of people focus it on it as a standalone strategy. You know, I'm going to stare at, I'm going to try to think about that. It's, it's a compliment. Like it, it makes everything else in your portfolio a little bit better because it fills a gap. And so look, I think, I think the, the, the way the strategy goes mainstream is you'll get a lot of big players will get behind it, which they're doing now. It'll just start showing up in asset allocation models. Two, we'll figure out a way to talk about it people so that people look at it in their portfolio. They're happy they have it.

Three, we will figure out, we will build investment vehicles that will make it easy to invest in. Now again, you're very skilled in this space and you're very knowledgeable in the space. 95% of the people that I talk to just want an easy answer to it. They don't want to spend a great deal of time worrying about 3 or 5% of their portfolio. They just want to figure out how to fill it in the easiest, most efficient way and then move on and worry about other parts of their portfolio. And, you know, and so, so if we can, if we can kind of solve all those issues, then what you'll see is the space will, I think, will gradually just become a 3% allocation across more and more portfolios. 5% allocation, sometimes 10% allocation, depending upon how much, how much protection you want in your portfolio.

[D]

Yeah, well, I remember when we had met favor on, he said, if you believe in math, then you have to believe in this, which I think is kind of true. No, they say, look, it's very rare.

[B]

To have a strategy to work for 50 years. Right. That's the other thing about it is you can find these great things and they come and go. But the incredible thing about this, when you get down to the nuts and bolts of what these guys are finding, it's the same truism. If people know something and the world is changing and they know it. It's like when we look at stock, insiders are selling their stock, you know, and it's a sign that the market is about to roll over. Like, it's. It's. We want to tap into that however we can. And we're just trying to create a very, very efficient way of tapping into this particular, you know, Cloudy Crystal Ball.

[D]

That might be my YouTube title, by the way. The Cloudy Crystal Ball.

[B]

Cloudy Crystal Ball.

[D]

That could work very well on YouTube. It's got. It's got some, you know, uncertainty in it. People like that whole thing.

[B]

Yep.

[D]

Well, Andrew, thank you so much for doing this. If people want to find out more about you and all the. Obviously, a lot of things you're up to we've talked about here, where can they go, please?

[B]

Yeah, so I'm on LinkedIn. You can look at me. I think it's still a picture of me and my dog.

But please reach out to me and look. I'm very open to connect with you on LinkedIn. And then if you have any specific questions about what we do, please just reach out to me. Just send me a message on LinkedIn. And I'm very, very good at responding to people. We have a website, DBI Co Noem. My firm is dbi. So we've got a bunch of material up there, but again.

If you connect with me on LinkedIn, you'll get a pretty good flavor of our view on the world.

[D]

Thank you again. We appreciate you taking the time.

[B]

Good. Thanks so much, Jack.

[C]

Thank you for tuning in to this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the XS Returns network at XCESS Returns. If you have any feedback or questions, you can contact us atexcessreturnspodgmail.com.

[B]

No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the firms of the hosts.

[F]

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[C]

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[B]

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[B]

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