Alternative ETFs Finally Get Their Moment in the Sun

and that's good and that's why you use bonds. But this year they're both down, and to me, that has opened the door to alternatives, which is literally what the name is. And I define alternatives as investment strategies that have non correlated return streams to stocks and bonds, so like they might have zero correlation or just a very small correlation, and therefore they can sometimes go up or go down less than the sixty and the forty, and

they typically are lower vault. And in that category exists a lot of hedge fund strategies. So contrary to popular belief, um not all hedge funds are trying to like crush the market. A lot are trying to deliver something that might be UM have a higher sharp ratio, which means a decent return stream but at lower vall and with non correlative return. So that category has grown a ton this year. It's still small at five point one billion,

but the percentage growth is big. And it's been waiting maybe fifteen years for this moment because stocks and bonds have just gone up easily, and it hasn't really been like something people search for, because why bother if you're sixty and forty is doing fine. There's a whole different ball game now, and so I think alternatives are having somewhat of a moment. So we're gonna talk about hedge funds strategies in an e t F rapper this time

joining us. It's gonna be Andrew Beer of Dynamic Beta, Bob Elliott of Unlimited, and Cathy Burton, hedge fund reporter with Bloomberg News, this time on Trilliance Hedge Funns. Andrew, Bob, Cathy, Welcome to Trallians. Thank you so much, thanks for having us. Okay, Andrew, I want to start with you, UM, why hedge fund strategy and an ETF wrapper? Why do this at all? So Eric mentioned this idea that we've been waiting fifteen years for this moment. I've actually been working fifteen years

for this moment. So I've been doing this incredibly long time. Uh. You know, we we knew that this breakdown of stocks and bonds would come at some point. You know, what we're living through in the two thousand tens was very

very unusual. And you know, about seven or eight years ago, we started to focus on the strategy that we thought actually had the most diversification bang for the buck if you're starting with a portfolio, and it's a strategy called managed futures, And the easiest way to describe managed futures is it's like flood insurance where you get paid to wait. That's all you need to know about it from from

a portfolio perspective. And so we saw it as one of these areas where you know, previously it had done really really well during the dot Com crisis, it had done really really well during the Great Financial Crisis, and the question was would it do well in another big crisis like that? And now the strategy is up overall around thirty percent this year, and we've been very, very fortunate to manage an et F that's in that area,

Drill down what is it, what's in the portfolio? If I pull up the holding screen, what am I going to see? And it's active? So what are you doing? And by the way, the ticker d d m F right, yes, sir, so yeah, so so what what these strategies do is basically there are a bunch of hedge funds that are looking for trying to determine whether an asset is going to go up or down. Is oil, if oil has been going up, is going to keep going up? If rates have been going up, are they going to keep

going up? If equities are going down, and are they gonna keep going down? And so the way that they express this is through financial derivitist called futures contracts, because these are very very efficient ways to bet on things going up or down. And so what we do in DBMF is we basically try to piggyback off of the core trades that these largest hedge funds are doing. So when they're betting that oil is going up, we simply expres us. It's the same way through a futures contract.

If their betting rates are going to keep going up, we do the same thing, but also through things like treasury futures. So when you look at DBMF, what you basically see as a big pile of cash and cash like instruments and then a handful of derivative contracts through which we express those views. Okay, Bob, what are you doing? That's different because and you have a you came from Bridgewater, right, so I'm curious. You know that's a world's biggest hedge fund,

Like what did you pick up there? And what are you doing with your tick HfN D well I I spent the first twenty years of my career basically in two and twenty institutions in two and twenty for those not in the two and twenty being UH. The typical fee structure of a hedge fund so management fee two percent of AUM management fee performance. And what I saw over time was that UM hedge funds UH and two

and twenty managers generate great returns. They're they're very good at delivering alpha or sort of returns above of standard index investing. But what they do is they end up charging so many fees that the investor who invest in

those products is typically worse off. Plus they're always in structures that are uh typically unaccessible to the everyday investor, and so that got me to thinking about whether there was a way to sort of bring a kind of low cost indexing idea that obviously is totally changed stocks

and bonds, but bring it to the hedge fund space. Now, the goal they're being to track the gross of fees returns of the total hedge fund industry and all the different strategies that make up that so not includes things like equity long short, fixed income, arbitrage, global macro managed futures is andrew is highlighted, and basically create an index replication that looks like the hedge fund industry in the same way you might buy an index an index of

the SP five under it, or an index that covers the global bond market. And so that's really what HfN D is all about, is is creating that index like product for the hedge fund space. Okay, Kathy, you've been covering hedge funds for a really long time. This feels

like an existential crisis almost. It's like these guys have hedge fund industry has this magic formula that only they know they can charge a significant amount of money for have institutional clients with gigantic pools of money that they can drop on. But you know, an et F strategy, this opens the door, like I can invest like a hedge fund now, right, So how does this going over within the hedge fund community? Well, I think right now

it's still a pretty small part. But it is a bit more of a threat, I would say, because there although there's some funds that are doing very well this year, uh, there are a lot that have not been able to take advantage of you know, to be short when the market drops. They've just done a pretty poor job overall. So I feel like it is a bit of a moment where we might see more people and just give us the lay the land of the hedge fund world right now, Um, I don't look at it every day,

lest I heard it's about three trillion. Has that assets been going up or down? We talk about active mutual funds a lot on here, and they're seeing like eight billion outflows this year. How are hedge funds holding up through the whole sort of rise of passive? I mean, are they maintaining their niche? Our institutions still like is in love with them? Are they maybe forcing their fees down. Are they also getting like some fee compression. What's the

state of things over there? Uh, it really varies. I would say overall fees have come down, but for certain funds that have done well, the fees have actually gone up in some instances. Overall, the assets have more or less kind of stabilized at that three trillion dollar level. Uh. Certainly, a lot of strategies like long short equity have lost assets, both because of the market fall and people pulling money.

But at the same time, other some of the largest funds have made money this year, so that's helped bring assets up a little bit. So that's the stabilizing aspect of it. Both. You guys are looking to democratize hedge funds in general. I get it. It's clear. Here's the thing and what I you know, I've learned about institutions. I feel like they they want exclusivity. They almost think the e t F is like the the public pool down the street. I want the private pool in my

backyard or at least the country club. I'm not I I need to do better things than that. And then on the flip side, you have advisors who may not even understand hedge funds enough to use them. So I sometimes think alts might get caught in the middle of both of those worlds, or have challenges selling two institutions who want exclusivity and advisors who may not totally even understand what you're talking about and get scared of under performance.

So back to the point about fees, right, So, so the hedge fund industry is not going away, right In fact, and and and the hedge fund industry serves a very very valuable function for those institutional investors their products. They can assemble their own cars from hundreds of different you know parts, basically to meet their particular risk reward criteria. And most frankly, as much as they talk about it, they really don't care how much they're paying fees. Right,

It's just them. Yes, fees have come down, but relative to the net A feed performance of hedge funds, they obviously haven't come down very much, and they're going up in certain circumstances. Our business plan is very different. Right, You've got six or seven trillion dollars of et F assets out there. You have a fifteen year history of pretty bad products, hedge fund products being put into ETFs.

One of our competitors launched in the beginning of two thousand eleven, it's down over eleven years, where the hedge funds that it's supposed to be mimicking are up over that period of time. One of Bob's competitors has delivered two percent per anum since two thousand seven or two thousand eight, or to actually the beginning of two thousand nine. So when you talk about democratization, if these are your options for democratization, don't bother. And that was the lesson

of the two thousand tents. Let's talk about the competitors. I want to bring up the tickers, but there are some hedge fund ETFs that have an equity bias in them. They're only partially hedged, and I think that was to try to sell them to advisors in the up times that so that you still got you got that like Beta kick, but now Beta is bad and it's maybe making the actual hedge working less. Is that what you're talking about here, whereas yours are more all in hedge.

But it's also the complexity of it. Our our mission as advisor education right and in fact, in fact when we built are the two ETFs that we run the ideas that they're supposed to be incredibly simple and elegant building blocks for advisors who want to use them in

their portfolio. They're supposed to understand how they work underneath the hood and what it is we're trying to achieve, and we have to build a better language around it because we have to be able to explain it in a way not where somebody gets off the phone understanding what we're talking about, but three weeks later, not having thought about it for three weeks. They've got to be able to sit down with their client who knows nothing about the space and be able to communicate the value

proposition why it's there. And so our view has been that there have been a lot of hedge fund like products that have been put into et f rappers that

never should have been there. Some of them are designed to as you say, they are almost in a Noman's land between the really really dynamic, thematic type products that people buy and sell every day on a regular basis and the asset allocators who want something where they can say I want this strategy, and I want it in a predictable, simple, straightforward way that I can explain to my clients. I think one of the most interesting things when I talk to advisors is nearly every advisor I

talked to is looking for alternatives. They appreciate and recognize the challenges that SIXT has had will have on a forward looking basis, and so they need to have something that gives their clients something better, frankly, than they can do on their own to just invest in in index investing. And the problem those advisors face is when they look at alternatives, they structures that are very unpalatable. So they see traditional LP positions that are highly concentrated, they see

those positions that are very tax and efficient. Are those structures are very tax and efficient? And they say to themselves, this is a hard way. It is hard to get access to alternative investment products. And so I think what they're looking for the problem is clear in terms of the need for alternatives and the desire for a simplified,

tax efficient structure that the e t F provides. And so they're looking for institutional quality, world class investors coming to the e t F market offering those sorts of products. And I think, you know, Andrew and I both have that sort of pedigree and experience that we know how institutional quality hedge fund strategies work and can put those into the package that that is much more accessible to

investors and advised. So I'm curious when you're talking to your advisors, the the idea of a non correlated asset very appealing. Obviously, how do you break down how you achieve that? We've heard, we've heard how how Andrew does it? But how do you do it? Well? What we do is we use machine learning techniques to basically look over

the shoulder of the asset managers. There's a lot of information that you can see in uh in what managers are doing from their pattern of returns, and that's reported regularly their teams basically right, No, not their teams thirteen have to have some issues because they only give you a very small slice, a small picture into what they're doing. If you're sophisticated hedge funds, you're doing a lot more

than what's in that their team f report. And so instead, what we do is we look at the pattern of returns, and having built proprietary hedge fund strategies across various hedge fund styles, we can look at those pattern of returns. We can compare it to a plausible set of exposures that they might have on or might drive their returns at any point in time, and basically solve for what's that portfolio look like that is generating the returns that

we're seeing. So you're like reverse engineering or portfolio using machine learning exactly exactly. And one of the things that's very important is you can obviously solve for any particular point in time with a regression that will give you answers that who knows exactly whether it's right or wrong.

What we do with frankly machine learning techniques that didn't exist ten or fifteen years ago, what we're able to do is solve for the path of of positions that that hedge fund manager might have on through time, which then helps us understand more effectively what positions they have on now. And that's what we use to inform what we put on in terms of the assets back in the e t F. So it's really really what we're trying to do is sort of infer the wisdom of

the whole hedge fund community. Are they long growth stocks or short growth stocks? Do that? Are they long bonds or are they short bonds? Were trying to infer that from the aggregate hedge fund community and then put that together in something that's simple and easy to access for the everyday investors. How do you decide who's in and

out at that index? We look at everybody. Uh. One of the great lessons I think many institutional investors have learned, particularly the most sophisticated, is that it's very hard to predict exactly which manager is likely to be successful and

which one isn't. The most successful and sophisticated sovereign wealth funds and other institutional managers, what they do is they build a diversified portfolio of hedge funds, of thirty or fifty hedge funds that are world class and nature and they basically say, we don't know exactly which one is going to perform well or poorly at any particular point in time, but I put together thirty or fifty hedge funds together, and that's going to create a nice diversified

portfolio that over time is going to go up into the right it's going to generate pretty good returns. And so that's really we're sort of drawing on that expertise and saying, instead of looking just one strategy or one manager, build an aggregated portfolio, a diversified portfolio, which is likely over time to be more consistent than just focusing on one manager, one strategy. Do you ever hedge over that

in any way? What we're doing with HfN D, we we don't apply any of our own proprietary views or or or or other or other strategies on top of it. What we're trying to do is is match the hedge fund index grossive fees to be clear, which is a important consideration because, uh, when you look at hedge fund returns grossive fees, they're pretty good. You know, you you have returns that are better than stocks, a bit better than stocks, and volatility that's about half what you'd see

holding stock index return. So that's a that's a pretty good return stream that most investors and advisors were wanting their portfolio. It's just typically they're too expensive to access, uh or or you know, the fees are too high, or you can't access the best the best ones because they won't take your money. And so that's what we're trying to do to really create that democratization of that diversified low cost index fund concept just for the for

the hedge fund space. So what's the best way to use your your product, because I guess looking back at ten years, it must have been frustrating. Everything everything everywhere was going up, and yet you had to kind of like wait for a moment, and that moment may have arrived now. And so you're you know, you're selling picks on the way to a gold rush all of a sudden. Um but I'm you know, I'm curious, like now that this is happening, how are you telling investors to think

about using the product now and going forward? So um so, to stick with my flood insurance analogies flood not gold rushes. So um so, Look, you can overpay for flood insurance and if a flood doesn't happen for five or six years, you've probably given up your policy when you need it. That happened to a lot of people in this space. Uh. The Manatutre space on the hedge fund side was notorious, and actually Bloomberg wrote an article nearly a decade ago talking about how of all gains in the space had

gone to everybody but clients. Um So, obviously it's it's got a lot better since then, and some of the funds we track have actually been leaders in in in making it somewhat more rational, but it's still an area that could be very expensive to invest in. And the other is is the fine print in the policies and you know, so you get it by a flood, but it turns out the flood was from a storm surge um.

So there are plenty of funds this year, including some very popular funds that have actually gone down in a year where everybody else has gone up. And so you know, this is an area if you if you pull institutional investors and you say where do I get the most diversification bang for the buck Manachuchers is always at the top of the list, going back to your point zero correlation over time, and it's hit the trifecta of gains during the dot Com crisis, the GFC, and this year.

The problem is it's been very very difficult people to access. And we're trying to make it simple and easy, not for the institutional investors who can do it and they've done it successfully, but rather for the trillions of dollars of ETF based model portfolios that have never had an access point to get into this space. So Joel I have kind of trolled Andrew a little bit on Twitter by calling his fund the arc of the fed hiking era um, because you know, Cathy would is obviously like,

do you get a commission for that? Sounds it sounds pretty good. Well, if you're on Twitter, not everybody's a Cathy fan. I mean i'd say almost the majority, especially the professionals. They just they she she really gets under their skin. Um. And so obviously she's down in the past like year or two, not having a good time,

although the investors are pretty loyal. But the reason I say that is because if you look at ARCS flow chart and dbmfs there they sort of hung in oblivion for a while and then bam, the out performance started. The people came. You had the shiny object moment up this year, which is phenomenal because the markets down or something like that. So that's a fifty percentage point above it. One billion in assets were one point one allion. That doesn't seem like a lot, but relative to alts, that's

market share of the category. I don't think I've ever seen a fund go from nothing to market share in a year. So in a way, even though you're a smaller scale, it is an ARC type phenomenon in that category. And the question I would have for you is, now that you've got all this love and people you know, kind of going to that shiny nous, let's say the Fed pivots or they just say we're done hiking, and that, you know, that kind of turns on that whole ARC

trade again. Um, do you prepare them for like maybe the fact that it won't be up every year? I mean, how how's that going? And is that like a like a fear of yours that like what goes up comes down? I mean, I don't know. I'm just curious where your heads out on that. Well, there are a couple of differences dark. One is I'm not going to tell people that we're gonna make thirty Okay, let's let's let's get

that very straight. Um. The other difference that we're actually an interesting similarity is you know, and you and I have exchanged thoughts on this is that part of the reason ARC started out as a stock picking story, and then over time people realize it really wasn't as much a stock picking story as access to a particular strategy, a thematic strategy that that that people didn't have access to otherwise and you know, as I've also said, I'm I'm a huge respect for the decision that Kathy would

made to launch those et f s when she did, although I have also been critical of maybe some of the things she said publicly. Um, but but that's what DBMF is, right. DBMF is supposed to be if instead of thematic play, it's the strategy play. And and now what you're gonna have in the beginning of three the narrative is going to be, it's not stocks bonds in real estate that didn't work. It's probably not gonna be stocks, bonds in private equity that didn't work. It's gonna be stocks,

bonds and manner futures. Because that's if you need three legs of the stool, those are the three best legs to have over time. Our play is not too displace hedge funds. You know. In fact, I encourage everybody that I know who runs one of these strategies to set them up in e t F s and to broaden because I think I think E t F allocators should have more opportunities and more options to invest in. But we're supposed to be the easy allocation that you want

to start with it. You don't know the space very well. You're supposed to be able to say, all right, boy, I can see how ten percent of this and my portfolio would have made a huge difference this year. And yes, if the world comes back tomorrow, the other is going

to do great. But on the other hand, if as a lot of hetche ones think today that this could go on for a number of years as we try to renormalize, this could be a very very valuable part, and we're supposed to be the easy way to get access. Also similar between you and Cathy as you both go where Vanguard doesn't Cathy's active share to say, the SMP fire is like meaning only two percent overlap, You're gonna

have no overlap with Vanguard. Um. I call him vfcs Vanguard free zones like and because just talk to an active manager support like no taxes like duty for any duty free. Yeah, if you can party there a little bit, Yeah, it's still fun. Um. So I do think if you're serving up something that you can't get that hasn't been vanguarded yet, you're also in a good spot as a as an active manager or product provider. Because the Vanguard really hills the sixty. I mean, they're pushing so many

people to get cheaper or even out of business. But this is something where you can come in here, have some creativity. Um. Other firms like Simplify have done option overlays, so you can talk a little bit about the sort of changing dynamic of Active and the fact that Active might have a I don't know, more of a home over here in the future versus sort of the traditional Let me get mostly like the SNP and try to pick a few stocks to outperform it by two percent

that year. Yeah, I think a lot of investors and allocators have looked at ETFs as basically being the low cost and ex solution, and they've delivered in spades along that dimension. And you know, innovators like Vanguard as well as a variety of different producers have created a vast set of products that are available that are sort of the picks and shovels that you might have have or want to build a portfolio. But I think we're really we're entering the now next really the next generation, or

i'd say sort of the third generation. We sort of had the index, uh the index ETF generation. Then we had uh, maybe the style or the or the thematic UH E t F generation, which you know, I think it we're sort of closing the book on more and more today and now we're going to see sophisticated asset strategies in the package of an e t F. That's really what where we're going in terms of the et

F space. And the reason why that is is that the E t F is the best structure for the investor, hands down, whether it's taxes, liquidity, transparency, it is the best structure. And so what we're gonna see is that sophisticated asset managers are going to to use that structure when they can to to basically create a product which is much more investor friendly than UH than products like traditional LP positions, which I mean, every advisor we talked

to just just UH hates an LP structure. Everyone hates an LP structure in the paperwork, the taxes, all this stuff. It's terrible. When you can get that in the E t F structure. Et F are not cheap anymore. They're ideal packages for sophisticated strategies, and so you know, I think if anything, I mean Andrew was obviously UH on the very much the cutting edge of this years ago.

I think we're starting to see what will be a lot of institutional quality folks coming into the e t F space, utilizing its efficiencies uh and and offering a lot of differentiated products in the way that the vanguards and the wisdom trees, etcetera. Cannot. Are you seeing other um E t F people trying to follow what you're doing at all? Yeah? For sure, I mean, I I get UH. It's interesting. When I started Unlimited, I had never issued an e t F. I didn't know much

about the ets base. As you know. I came from the from the hedge, the traditional hedge fund space at Bridgewater, and I think the e t F community was very important. It was very helpful in sort of uh coming and letting me ask questions and have the picked their brain about what's the best way to set these things up. Uh. And I came along way in terms of understanding ETF through that process of the course of the last year.

And now I'm getting the calls from people who I knew in the two and twenties space basically calling me up and saying, what about having an et F for sophisticated structure. Let's talk about that, what do you do, how do you structure it? What have you met? HF? And well it's you know, it's interesting. Goldman just announced last week they're coming up with a white label business, which is major because there are small, small white labors label issuers on the indie side, but Goldmen doing it.

And the reason they did it is they said they had institutional clients who were talking about converting their s M A or their hedge fund into an e t F. Now you can just convert it. You don't even need to launch a new one. So we could see a wave of existing funds convert. My guess is if a fund's really successful and still charging two and twenty, they're

not converting. But I do think some will look at this as an option because why, you know, it'd be like if you're a band, and why wouldn't you offer your music digitally rather than just on CD and and vinyl. It just makes sense. I'll tell you what we're seeing on our side, which is that so we're, as you mentioned, were one point one billion now and with all of our competitors in the mannor Tucher space where maybe one point seven billion, and simplifying ct A has had great

success as well. Um, but how big should this space be? Right? It's there trillions and trillions of dollars of e t F based model portfolios that have zero exposure to the space. It's there's four hundred billion dollars maybe five billion dollars of hedge fund assets allocated the strategy and essentially zero

in the e t F world. So I'm getting calls from people who are saying, we can see this going to a fifty billion dollar space, a hundred billion dollars space, at two hundred billion dollars space over the next decade, and that all of a sudden changes the calculus for because it's cheaper, as we know in the et F land, you're not going to make as much money, but if you do it right, you can have that that that that that massive scalability. So I do I agree with Bob.

I think, I mean, I think the world has changed in a way. I have very very strong views on what products I think will succeed in not which is a longer conversation. And again, is the money going to come from advisors in retail or institutions or both. It will come from model portfolios Okay, So which will be

which will start when? It'll start with the independent areas where we've seen demand, Then it will migrate to the top tier wealth management platforms, and then once it gets big and becomes established, then you'll start to see institutional allocas money. For those who don't know, a model would be like something an advisor can just buy and has the whole portfolio already made. That way, the advisor can

focus on getting new clients and like tax stuff exactly. Yeah, okay, but since you're new to the space, I'm curious, is there anything relatively new to the E t F space? I guess they should clarify. Is there anything that the e t F can't do that you wish it could do? I think for what we're trying to do, the E

t F is a perfect package and rapper. Um, there's natural limitations in terms of UH running strategies that are particularly high frequency or with a great deal of turnover, where the E t F rapper isn't necessarily the the best strategy that that you can are the best structure

that you could use. But I'll tell you the vast, vast majority of sophisticated asset strategies are ones that uh that fit well into an E t F type structure, and frankly, you know would would really benefit from that very uh, that very positive investor friendly structure relative to the typical things that are out there. Andrew about you. Since you've been you've been in the game for a bit. Anything that you could add to your wish list of

things in E t F could do so. So the reason we do it the way that we do it, which is essentially copying the big trades cheaply with these very efficient liquid instruments, is because we don't run into

those hurdles that you normally run into. Make no mistake, hedge fund strategy should never be put into an et F right, It's I mean, I wrote probably the seminal paper thous in two thousand fourteen on the mutual fund space that when you take a hedge fund strategy, you often kill it when you try to when you try to tie it up with those constraints. Um. So, I think you know, our view is that the vehicle itself is extraordinarily valuable in part because you've had this exponential

geometric growth of the space. Um. But um, but you have to be very very careful about what you put into e t f s because those constraints are very very real, and if you have a strategy that doesn't fit with it very well, you will lose what you wanted in the process. And I think the history of head fund products in the ETF has been in general, it has been pretty abysmal. I have a question for you but about um the fact that hedge fund are

doing more and more private investments. So how do you end up going around replicating those things which you can't well. I think most of hedge fund businesses, or what have traditionally been hedge fund businesses, are looking to the private space to generate returns either most of the time through other vehicles or structures that are less sort of traditional hedge fund type structures and more private vehicles in a

variety of different ways. And so a lot of what we're doing, we're really focused here with h F n D on the traditional hedge fund space, the trading of liquid markets to generate alpha, where some of those private market elements are are less relevant or or less impactful to the to what's generating the returns um So, Bob, you know, I have a long history with Bridgewater and

writing about Bridgewater because a couple interesting things. You talk about the E T F being such a great vehicle that I would sometimes use Bridgewater thirteen F to sort of explain to people, you have the biggest hedge fund in the world. You guys must have had four or five billion in ETFs, might even been even more. I think it was a risk parity strategy, and all Weather Fund used E T S four UM And then I would say, and guess what the E M or whatever

ticker they're in. My mom pays the same fee because it kills the share class system that the mutual fund world has. And I thought that's kind of cool. But then I was looking at your thirteen F. This might have been ten years ago when I saw you were in an e M and I AMG had come out like a few years before, and it was getting liquid, and I M G is like, I don't know, fifteen

BIPs and E M was like sixty nine. So I did the math and I wrote this article for Bloomberg Opinion that said if Bridgewater moved to e M or I MG, they would save seventy two million dollars a year. I was like, they could even hire like one or two people. That was my little joke. Anyway, that's for the that's for the people back. So, Um, then you did, and I want to ask, was it my article? I I was not not involved in in uh in the selection of the the et F while I was there.

So but but let me tell you, we're reading everything you guys, right, and you know there's no uh no shame in grabbing great ideas from people who are outside and using that to make your product better. So I want just five of that. That's all I asked. You're not gonna get it. Um, let's bring it back to investors right now. Um, what are you expecting your products to to do and evolve over the course of the next few months as we continue to see, um, you know,

very chaotic moment in the market. So as I've been telling people so Ministratus broadly and again, what we do is going to be dependent upon what these incredibly smart hedgephones we're spending all day, you know, with our computers trying to figure this stuff out. Um. But we've been in crush protect a moode all year and it's been basically, if you had to put it into a sentence hedge funds.

These hedge funds were perfectly happy in a low inflation world, but they saw the bread crumbs and they switched to a view that inflation was gonna gonna pick up, and and that's played out through their portfolios. The thing about these strategies, and what makes it very very different from Cathy would is they change over time. They are and so you look at this strategy over a very very long period of time, they almost never go down more

than ten from the front peak to a trough. They don't hold onto things with the white knuckle grip, and so it's going to be depend upon what happens in the world. You know, when you talk about as an active strategy, what makes the strategy valuable is that it will change what it does over time and and for from an asset allocator's perspective, you have to be comfortable with that that that that the index itself is not

static exposure. The index itself is what these hedge funds are doing and how they're making money over time and over the past twenty two years where we have good data on it. It's just simply the best diversifier for portfolio.

And I think my my, my thought is similar to to what Andrew saying in terms of uh, we with h F and D. Really, what we're trying to do is gain the wisdom of the hedge fund community in terms of how to navigate through what is, frankly the most challenging investing environment that you know, we've seen in

fifteen plus years. And so how exactly that plays out is I think pretty uncertain, and so the question I think that should be on most investors minds today is do you essentially hold index positions and hope that that works out, or do you hire the smartest, most sophisticated asset managers in the world to navigate through this environment that you know it's very challenging and benefit from that

dynamic through time. As Andrew says, that positioning, what what the positioning is today will inevitably evolved based upon the evolving set of economic conditions, and so, uh, really, what you're trying to do with these structures is, in a very simple way, higher the best to navigate through this environment.

But as a compliment, I would assume, right you would be a portion of a bigger pie which would still contain the sixty forty right, because it would be tough sell to get everybody to drop every sixty forty come over. I mean, are you able to get anybody to do that? I mean I would assume that's hard. They're not doing that.

I think any if you go back to the structuring of any portfolio, you want to think about the returns that come from beta or passive indexing invests index investing, which are pretty reliable over long periods of time, and then you want to think about the returns from alpha

as a compliment. Uh. And you know alpha is less reliable, less correlated, and so you certainly want when you think about balancing those two things, your beta allocation and your alpha allocation, it's not you know, you put all your money on alpha and let it go, because beta has a real important purpose. I think there's lots of work investors could do to create a more balanced beta portfolio relative to where they are now. Commodities, gold, things like that.

But you know, typically a good alts portfolio, if you look at the most sophisticated investors in the world, is maybe thirty percent of their portfolio of their portfolio looking for alpha related to alternative investment strategies or hedge fund strategies. Yeah, on the manistutus at the allocations five, it's it's bounder than that range. Depends on depends, It depends on your view of the world, it depends on what else you have. But at all it's always it should always be view

as a compliment. Okay, last question one that we often ask on trillions. Favorite et F ticker other than your own, Bob, I'm gonna start with you. I love the tickers that give you a little chuckle, so like, uh like an ahoy? I like that or honestly the K pop one. I thought it was, you know, just you know when you're when you're going through this very serious business and so it's just every once in a while nice to get

a little laugh out of it. Yeah, wait a second, ahoy, is that like a leveraged shipping e T I forgot it's it's it's a recent et F focus done the oceans Andrew h without a question, happy h a p I which is uh Dan Rli and Harper Capital teamed up for that one. I'm a huge fan of Dan r Relli, the behavioral finance guru, and uh, I love

that one. I'll give you I'll give you a second one as well, which is one of our competitors, which maybe, but our competitors simplified got C T A. And when I saw that come, I thought, oh man, it's definitely easier them, which is still it was all my chicken scratch, but we got it so so simplify. Paul, You are welcome, Andrew, Bob, Cathy thinks so much for joining us ly, thank you for having us, Thank you, thank you so much great being here. Thanks for listening to Trillions Until next time.

You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify, or wherever else you'd like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Webber Show. He's at Eric Faltunus. This episode of Trillions was produced by Magnus Hendrickson. Bye