Transcript
A (0:00)
Forbes recently ranked you number one RIA four years in a row. You had $65 billion in AUM after your recent merger. How do you still generate alpha at size?
B (0:09)
Ultimately, I think of the objective of a great portfolio is to deliver your desired rate of return as consistently as you can. And so if you're going to try to earn high returns, the way to do that more consistently is not to put most of your portfolio in one line item. And effectively that's what most investors do. They have a large concentration in U.S. stocks. And sure, you can maybe find somebody to add a little bit of alpha to that by picking the right US Stocks, but that's not going to make that much of a difference ultimately in your results. Ultimately, your consistency is going to come from having lots of return streams in your portfolio beyond just US Stocks that can offer you a similar return but be different. So zig and zag at different times from how the US equity market is zigging and zagging. And that that requires you to augment your perspective and incorporate things within public markets that are different, whether that's different types of fixed income or credit or commodities, other inflation hedges or to incorporate thoughtfully, alternative return streams could be hedge strategies. In the hedge fund world, it could be private assets, private real estate, private equity, private credit, things that are uncorrelated, like health care royalties or life settlements. The last thing I would say is that most advisors don't spend that much time thinking about taxes. You can, after you've designed that portfolio, do a lot to enhance it. After tax outcomes.
A (1:26)
What are the first principles that comes to building a taxable investor portfolio?
B (1:31)
Whether you're taxable or not taxable, it's trying to incorporate as much diversification as you can into a portfolio and figure out the right allocation to meet your needs. But then there's a, a, a very important step in the process, which is understanding the tax consequences of every single line item you've incorporated. And the that may be just being attentive. It may require you. For example, let's say there are certain uncorrelated hedge fund strategies you want to allocate to. There are certain of those that are much more tax efficient than others. And so you can use that in your diligence. So part of our diligence when we're looking at a strategy is to say what is the tax leakage in this strategy? And then what is the after tax return? And we want to evaluate that after tax return versus other alternatives, thinking about not just the level of return, but also the Diversification and risk aspects of that. So there's just a part of our diligence process that has to address tax and understanding every single line item, it is going to push you towards more tax efficient line items in the construction. So things like equities, you know, passive equities for example or, or even implementing tax efficient strategies like tax loss harvesting are things you can do in the equity category. But I would say at the high level, start with the allocation, be very disciplined about, understand the tax consequences of every line item and then you can implement additional strategies to make that overall portfolio more tax efficient.