From LTCM to ETFs: Victor Haghani's Long Road to Index Investing

time to do the podcast look for you anything. But I was going through people to interview and I came across this article in the Wall Street Journal and it said, you know, former long term capital management, you know, now an index or. And there's been a couple of cases like this of people who go from the active world and in long term capital management's case, that's probably is active and in hedge fundations you could possibly get right. This is a famous hedge fund in the nineties that

had some of the most brilliant people. Um, and we'll go over that a little bit in a minute. But he somebody who is now an indexer and has an advisor and basically manages money, uh, using low cost, mostly Vanguard ETFs, and so I thought, Okay, I wonder what what caused this guy to do that? So I interviewed him from my book, and I thought, you know, everything

he's saying was really good material for the podcast. Given we talk about e t f s and some of his experiences, I think a lot of even you know, just regular retail investors will relate to UM. And so I thought it'd be interesting to talk about his transition and some of the stuff he's thinking about today. His firms called ELM Partners, which will discuss with him this time. I Triuian victory, Victor, what can of trillians? Thanks for

joining us. Thanks great to be here. So Eric mentioned long term capital management, and I want to talk about that. But ELM Partners, it seems like what you're doing now is long term capital management. So how did you go from from one universe to the other. Well, I guess that name was taken, so I had to go with something with something different UM. But yeah, so you know the trajectory that landed me doing ELM Partners and you know,

low cost what we call dynamic index investing. You know, I started off at Solomon Brothers, in the research department. In four I studied finance and econ at college and eventually I wound up in the trading on the trading desk called the Government Arbitrage Desk run by John Merryweather.

And then eventually we went off and set up the hedge fund ltc M. And I guess the you know, the thread that's that's relevant here is that from when I started at Solomon, you know, through the end of l t c M UM, I never really thought much about personal investing, you know. My My focus was on

trying to generate alpha for our capital provider. So to begin with, it was Solomon Brothers the firm, and then later on it was all these investors in l t c M, mostly institutional investors that would allocate, you know, small part of their capital to any given investment like l t c M. And it was only after the you know, after the crash of ltc M shortly after that, that I started to I took a sabbatical in two thousand one after sort of the wind up of l

t c M and the launch of a successor vehicle, and it was only then that I started to think about what to do with my own savings and I wasn't working at that point, and uh, the first thing that I did was I looked at what people who I really respected we're doing, and I saw that everybody that had a good ount of wealth was still chasing alpha or not still, but was chasing alpha in one form or another private equity, distress, venture deals, angel deals,

hedge funds, whatever. And I so I went and started doing that too, from like two thousand and one until I don't know, maybe around two thousand five or six. And then I just realized that that wasn't a sensible way to manage my family's savings. That an individual investor is really different than an institutional investor, and so I decided that I wanted to get lower cost, more tax efficient,

more diversified, long only totally transparent. And I was like, Okay, well, now I'm really back to what I was taught when I was in college. And it led me to UM to deciding to get indexed with with my family's savings.

And then there was this road from there for about five years till two thousand and eleven, when I decided to offer it to friends and eventually to UM to everybody that that wants to use us UM as a low cost manager of of E t F and index fund portfolios and talk to us about what you're offering is at partners, like what as a individual investor, what what should I expect that I couldn't get on my own.

So the main the main form of the offering is that we help you open up an account of Fidelity or Schwab and then you put some of your savings in there and then we manage that in a portfolio of of E t F s. We have two strategies. One of them is what we call global balanced, so that's a balance between risk assets mostly equities and fixed income, and we change the weights over time as the expected return of the different asset classes is changing. I mean

real interest rates go up and down. That's one thing that's changing. And also the long term expected return of equities is changing over time, as as indicated for one thing, by the earnings yield or decichulically adjusted earnings zield of equities. And so we are rebalancing the portfolio over time based on expected returns, mostly from long term expected returns point of view, but also we have a trend component that we marry together with that, and we do tax laws harvesting.

We help people to average into the market if they've been in cash for a long time and they don't want to make the jump all at one time. And we also give advice to people. We help people to think about you know, lifetime spending and and how spending and investing go together. We help people think about, you know, realizing the realization of taxes, um you know, at different times.

All the different big important financial decisions that people have were there if they want to discuss them with us. But we just charge twelve basis points is our only via basis point a month. And so you know, we're not like a concierge service. I mean, we try to be really efficient, but we have a you know, relatively

high minimum. So most of our investors are relatively affluent and uh a lot of them are financed people so financially sophisticated, and so it works for us that we can sort of help them to have a diversified, low cost portfolio of et f s and index funds managed for them. How many clients do you have, and like how much how much which are a U M on

their behalf? So we have I think we have around uh close to four D clients all together, and our a U M is we haven't calculated it lately, but we think it's probably between one and a quarter and

one and a half billion right now, something like that. Um. You know one of the things that we talked about, Victor in my interview with you for my book, and I found this really interesting and is I asked you what you thought about index funds and Vanguard and Vogel when you were at Solomon in the eighties, and I gotta think the nineteen eighties, you know, what a what a decadent time. It seems almost like thinking about that

with such a far off thought. But you talked a little bit about the concept of indexing being around Solomon. Could you go into that a little bit into terms of your exposure to the concept of indexing, um, while you were at this massive, sort of Wall Street firm. Sure. So Solomon was this really interesting synthesis of of of academic thinking and sort of rough and tumble street smart

people as well. And you know that that the idea of indexing came out of the modern portfolio theory of you know, Marco Witz and Sharp and so on, from the nineteen fifties and sixties. And that threat of thought also included people that I was working with or people that I was working with the people that they had trained with. So for instance, you know that Paul Samuelson is somebody that Jack Bogel credits with really encouraging him to do the the index business and all for index funds.

And it was a concept that we knew about. Um, we had people coming through our firm, uh trying to get us interested in sponsoring it. And um, you know, even the earliest idea around E t F s was something that came through. I remember being in a meeting and some guys came through and said they had this

idea for basically the E t F structure. And you know, it wasn't really something that fit with what we were doing on the arbitrage desk, but it was something that we were aware of and that the and and there was also this intersection of the academics that we worked with that trained us, that guided us and the beginnings of of of indexing. So as I said, you know, Paul Samuelston's student was Bob Murton. Bob Murton's students, you know,

like half a dozen of them were my partners. And Bob was a partner UM and and worked, you know, consulted at Solomon was a partner at LTC M, you know, as well is Myron. And so there was this whole you know, legacy of it that was there Solomon Brothers. Um, what was it about that place? It seems like it was almost like Seattle is to music, Like just all these bands coming out of this one small place. Mike Bloomberg,

our boss, came out of Solomon. Michael Lewis long term capital. Um. What was it about that place that produced so many people like that? Well? You know, I think that when I got out of college, I UM, I got there were two job offers that I was thinking about. One was JP Morgan and one was Solomon. And I went to my dad and I said, what do you think I should do? Um? Which one should I take? By the way, the one that Solomon is paying, um, I don't know, thousand dollars, The one that JP Morgan is

paying thirty five thousand dollars. That sounds like maybe JP Morrigan, JP Morgan. Big. First of all, hold on a second, this is right? That was that was decent money back then? Oh, yeah, yeah, it was great and so okay, sorry. And by the way, at the time, yeah, and Maman had this great training program, you know. So I was gonna go there. They were gonna train me for like a year there. I was going to move all around, et cetera. Was going to

be this great development of human capital at Solomon Brothers. Um, you know, there was gonna be no training. I was just gonna hit the I was gonna go into this research department and that was and and just start working. And my dad said to me, well, you know, if you do well, which place will you be able to do well faster? And I said, definitely, you know at Solomon Brothers, you know, and and and so I took the job at Solomon, and Solomon was so flat. Everybody

knew everybody. The senior people were just incredibly supportive of the junior people. I mean, I remember we were short on desks and and you know. And so one day I come in and and my boss, Bob Coprush says, what you know, Marty Leebowitz's secretary is out on maternity leave. You're gonna have to use that desk for a while.

So I was sitting in Marty liebu. It's his secretary's desk outside of his office, and you know, people would come by, and you know, like I thought that I was the replacement secretary, which was fine, you know, could you grab some coffee for this meeting or whatever, But you know, Marty would come out and just talk to me, and and you know, like one night I was hanging out doing some work and he comes out and he's like looking around for somebody, and I was the only

one there, and he got me involved in a really interesting project because I was the only one. They're sitting outside of his office. Do you remember what the project was? Yeah? Yeah. He gave me all this data and he said, okay, you know see this column here. You know, I want you to run some regressions over here and do these tests and whatever. So I do it all. I don't even know what the data is. And he comes in in the morning he says, did you do it? And

I said yeah, so I give it to him. He goes into his office and he comes out smiling and he says, this is great. He says, do you know what you just did? And I was like, no, I really don't, and he said, you just calculated the duration

of the stock market, and so he he was. He wrote a few papers then that was looking at the interest rate sensitivity of the stock market, you know, by by doing these regressions and saying that you know, at this point in time, you know the stock market in addition to having all the stock market risk also looks like a five year government bond as well. UM. And he wrote a bunch of things about you know, thinking it was really thinking about the correlation between stocks and bonds.

And he called it the effective duration of the stock market. But you did you did the heavy lifting. No, no, it was one night's work. It was it was the thought and the question that was important, not the regressions. But by the way, well, Joel, can I just digress here for a minute. And I told Victor this story. His story reminds me of the story that I told him. That is also related to just being around when you're

young and like available. Because when Long Term Capital Management UM fell and got bailed out and there was a lot of negative media attention, I was working at a PR firm, a crisis communication firm, and I just I was the guy who could use the video camera because none of the old heads could really operate a camera.

So yeah, it's true. So one of the clients was long Term Capital Management, and so John Merryweather and another guy Kim Or who it was, but probably come in on a Saturday and they're like, hey, can you run the camera for this media training? So I got to watch him get media trained. And two things I observed. One he was not happy. This was not it wasn't a fun time for him. I'm sure it was. It was, you know, pleasant. I mean, it wasn't like a jerk,

but he was. He was just very serious. And the second was he rolled in with a sweater vest and this was the nineties when like everybody wore a suit all the time, and I just thought that was pretty badass. I don't know, he just seemed like he was over the whole suit thing. And I don't know, I kind

of I kind of was in awe of that. But anyway, that was my experience with getting into something at a young age, just by like sort of being around So Victor, as long as we're talking about Solomon Brothers, Um, you know the thing that the book that made made everyone you know, understand Solomon Brothers better was Liars Poker obviously Michael Lewis's book, and I'm I'm curious, what wasn't in Liars Poker that should have been? Boy? Um, she's that's

such a good question. I think that it did. I think it did a really good job of what it was, um, you know, trying to do. I mean so, so one thing that's really interesting with that book is I remember

when it came out. When it came out, everybody at Solomon Brothers was piste off, you know, really piste off, and and then our group in particular was even you know more piste off because it really, you know, wrote about John having this um apocryphal hand with John good friend, you where it's like, you know, no five million, you know, I'll only I'll only play one hand for five million, which didn't actually happen, but you know, there was a bunch of fun things that did happen, and anyway, um,

you know, so like, um, you know, I don't know, twenty five years later and I and I was friendly with Michael. We uh we worked together. We also were at the London School of Economics, both of us. We shared that in common. And so like twenty five years later I read the book again and and I just couldn't I couldn't reconcile why I was upset about it. Um, you know, back when it came out in in the nineties, I mean I just thought it was it was so funny.

It's sort of caught the spirit. It was so positive on John and you know, and and all the different people. I don't know, it was really really funny, how you know. Back in the nineties, you know, like it was all about sort of privacy, and you know, it was like an invasion of privacy. You know, Michael was there at Solomon and he was keeping notes and then he wrote this book. But you know, with the passage of time, when I look at it, you know, I just say, well,

he caught something really well. I mean, he's obviously a great, great storyteller and writer. And you know, the really ironic thing about it, right is how you know, Michael says, I wrote that book to try to warn people not to join Wall Street, you know, smart young people to do something else and not to go to Wall Street. And of course you know that that was probably the single biggest thing that drew uh talented, smart people to Wall Street. So it's kind of really funny it's interesting

you say that. Um. I have a one of my son's friends. His mom is in the financial industry. She's moved on, but she first was in the financial industry for about, I guess ten fifteen years, and she said that book inspired her to take a job on Wall Street. And this is sort of like the movie Wall Street. I think Oliver Stone's like I tried to write this is like Gordon Gecko is a bad guy, but people are like, I wanted to be Gordon Gecko. And it's

interesting how that happens. UM. I also think The Big Short inspired a whole generation of top callers and skeptics that honestly have probably lost a lot of money. UM. I think there's these moments where this is something's immortalized and it does attract people, perhaps um in a way that isn't what was intended by the art. UM. So we're gonna I want to get to ets in a minute and ask about the picks. One more thing about the old days in long term capital management. And this

is just something that I guess I'm curious about. When you have a lot of chefs in the kitchen, these are very smart guys. How does it work? Out like what to invest in? Like how is the process of an active fund like that um with so many smart people or do you develop a system and the system kind of rules and the people just add to the system.

It was. It was a very consensus oriented approach. I think some people look back on that and and you know, call that one of the problems with with ltc M. But um, you know, we we tried to work together on the portfolio construction and selection, very all very closely together. It was very much a collegial sharing um, consensus oriented sort of approach to investing and and sort of risk man. You know, we didn't really have a totally separate risk

management from the portfolio management function. I mean we had risk. We had a risk management function, but there was you know, overlap in the people and and so on, and so we didn't really you know that we didn't really have somebody that was sort of you know, like what you would think of as a risk manager, where his only job is to be the risk manager and to say no, no, no, whatever. But those are just sort of red herrings, you know,

in terms of what caused the failure. I think that the the way that most of us feel about it today looking back, is that um, having a standalone pool of capital doing leveraged relative value trades, it's just not a great business model. UM that the better business model is that the activity that we did should be done within a large organization with lots of capital, where just a small amount of the capital is being dedicated to

these relative value trading strategies. So, you know, ironically, you know, I think it should be something that's you know, a city, you know where city has you know, a couple billion dollars of capital. Doing these sorts of proprietary trading strategies within city is fine today, that's that's not legal, or it's it's outside of the regulatory remit for banks. But but I think that that activity needs to be encased in a large pool of capital so that it can

deal with the periodic shocks that it gets. Um, you know, which we've seen over time. You know that we survived a bunch of those shocks up till night. We did well, you know whatever, but the shock got us. And if the shock didn't get us, actually the two thousand and eight shock was even better, even bigger, and UM, you know, I think that just speaks to you know, a stand alone pool of capital relying on the street for financing doing this one activity. I think it just doesn't It's

not a good business model. So I don't think it has to do with how we manage the risk. I think it just had to do with this activity just doesn't make a lot of sense there. And you know, and today there's very few dedicated pools of relative value capital. And the ones that that do it, you know that

we're similar to us. The ones that do it are are doing it in a very narrow thing, like they're doing bonds versus bond futures, you know, and it has and it's okay, that thing has a two month that has two months to go, and then you're going to deliver the bonds or take delivery, and you know, stuff like that. People are still doing stand alone, but but not sort of the more expansive relative value stuff that

we were doing with longer horizons. I have one other question that can kind of bring us up to present day about this. But you know, having lived through long term capital management and what happened there recently, Archegos capital fell um and this is the Bill Wong implosion twenty billion dollars that were wiped out in two days. Just curious as somebody who's who has gone through um um something like in our newsroom we talked about long term

capital management as ARCHEGOS was was happening. And what stood out to you about ARCHEGOS and what what what what what most interested you in that? Um? What most interested me in that? Um? You know, I just don't. I don't. I don't really know enough about the strategies that that

they were doing. I mean, I suppose that the thing that stands out most to me about both LTCM and this situation of ARCHEGOS is that, you know, when you're doing leverage strategies, UM, you know, there's always this risk that that you lose a lot of money. You know, that's just the nature of being in leverage strategies. And we know that, and we've always known, you know that that financial assets are a fat tailed they're not sort you know, it's not sort of some well behaved, UM

kind of geometric brownie emotion sort of thing. UM. You know, it's that that there's an endogenity in other words, right that UM, it's not like a physical process where it's just determined by the states that it's in. I mean, it actually is. It has there's feedback loops and all that.

So we know that about financial assets. Now the thing about l t c M that doesn't get written about that much, but I think is actually the signal message and importance of l t c M is for me, the biggest sort of mistake with l t c M is how much of our how much of the partners like me, how much of our own capital we had

invested in our own fund. Now, it seemed like a great thing at the time, you know, but I had, like I had probably se of my investible assets invested in our funds and uh and actually some of that I even had averaged. But you know, I still had thirty percent of my savings that wasn't in the fund. But the seventy percent I had in was even some of it was leveraged. And you know, I think that it's really hard to justify having that much in your own fund, especially when you also own a large part

of the management company. So you know, if I had sent in the fund, but my liquid net worth was probably worth less than my ownership interest in LTCM, the management company. So really I was sitting there with like a nine percent exposure or more of my total net worth to the fund. And you know, given the fact that we know and we you know, we we were aware of this, and we had it built in and all that that we could lose a lot of money. We knew that we could lose thirty or forty percent

and basically be out of business. Like we knew that that could happen. Um, you know, I was too exposed to uh, to my business like that. And that's kind of a really big less and from the whole thing. And now we look and hear about Bill Huang and Archegos, and again we see somebody who has done really well, had a lot of wealth and it seems like he had we don't really know, but it seems like he had most of it, a very large fraction of it,

you know, being managed and exposed to this leverage. And and I think that that's just a really a really important lesson for all investors and all actors out there, is is how important it is to not put you know, I mean, it's just so try to say it this way, you know, but um, you know, you you know, really smart people can get blinded to this and just have too much, you know, in their own cooking, and it's like, oh, I want to have all this skin in the game.

Well that's doesn't you know, it just doesn't make sense. And um, you know, I think that's a really good lesson from lt CM in particular. You know, the whong thing. We don't know enough about it, but ltc M we kind of know, you know, we you know, it's it's it's more transparent what happened there. That's intra thing because the skin of the game gets brought up a lot when you're evaluating active funds, and they'll be like, well if they don't if they don't have skin in the game,

don't invest in it. But that's sort of risen up the ranks as a criteria. But that's an interesting point you make about it. Um, I want to move on to the sort of all that is is a very unique world. Then you come down to your portfolio today, Um, it's it's a lot of Vanguard ETFs. Um. Your biggest holding is v t I, which I have always considered the perfect ETFs probably the only one I can say is flawless because with the securities lending you kind of

have perfect tracking. It's free exposure to the whole market. You just can't really beat that deal. That said, there are people who worry the v T I s and the v O O s of the world. Sptfs are like these giant blobs that are just growing bigger and bigger and bigger as more people say the hell with it,

I'll just index. It's a very logical decision. Um, what what are your thoughts on that bigger worry of indexing as somebody who holds these kind of e t f um, is there some kind of a risk that beta just fails for a decade or something? Any take on that? Sure? So, you know, there's lots of criticisms of uh, you know, of market cap indexing, and um, I think that a

lot of those criticisms are wide of the mark. Like one thing that you hear as well, you know market cap indexing is a big momentum machine because you know, it makes people invest more in the biggest companies. Well that's not true in a number of diff from a number of perspectives. That's not true. I mean the first thing is that once an index fund owns a certain amount of a large company, it doesn't need to buy more of it when its price goes up. It just happens.

It keeps the same number of shares ownership and the value of it goes up. So it's not that's not momentum trading. You know, when a stock goes up, you buy more of it. That's momentum trading, which an index

fund isn't doing. You know. I think another argument that's very enticing on the surface, but I think is logically incorrect, is that by definition, people will say a market cap weighted index fund overweight it's overvalued companies, and underweight it's undervalued companies, and it's a it's a it's it's an argument which is subtly but you know, logically incorrect. So you know, think of it as like, imagine that the

market is composed of just two stocks. You know, one of them is a two billion dollar stock, the other one is a hundred billion dollar stock, and so you could be market cap indexed, but you know that the fair value of both of those stocks. We we don't know what the fair value of both of those stocks is, and so you know, a priori to begin with, like the fact that one of them is a two hundred billion doesn't mean that it's more likely to be overvalued

versus undervalued. So it might be twenty billion overvalued or twenty billion undervalued. That the fact that it's a two hundred billion doesn't tell us a priori that it's more likely to be over or you're valued. And so I think that the logic and that argument of well market cap weighted index makes you long the overvalued stocks more, you know, is not correct unless you have some way

of figuring out what fair value is. So like, if you if you have some way of beating the market, then market cap index you know, it's better to beat the market than to do market cap indexing. But you can't say that you're agnostic to um to beat you know, to U two generating alpha through valuing companies and just say that there's an inherent flaw in market cap indexing. No, I think that that arguments, um, you know, incorrect. The

size of indexing. You know, we're nowhere close to the size of indexing being a problem in terms of uh, you know, liquidity and the amount of active managers out there, um you know, I mean there's a bunch of other arguments. And other argument is oh, when when somebody moves money into an index fund um, you know, they're taking it away from active managers and that's making you know, that's causing the cheap stocks to get cheaper and the rich

ones to get richer. Well, active managers taken collectively own the market cap index. You know that put them all together. So so for one thing, if you're just sort of randomly reducing So if somebody has a bunch of active managers and he's selling those two then buy an index fund, well, he's selling the index to buy the index and just getting lower fees. That's one thing that could happen. Or maybe he's like, oh, I'm gonna sell my active managers

that have done really poorly. Well, you know, so now we're saying that active managers. You know that that the reduction of assets allocated to active managers who have done poorly is making the market less efficient. I mean that seems that's a bit of a stretch, isn't it. It's like, Okay, the guys who have done really poorly are actually the really good ones. How do you talk to your clients

about alpha? I mean, this is you know, when you were at long term capital management you're also you have clients now who you know are are wealthy and involved in the financial industry, and like alpha is the thing that everybody you know, it is, It is the pinnacle of everything. So how do you how do you talk to clients about that? Now, we say to them, when when you've given up on alpha, come to us. You

know that alpha, Alpha is expensive. Alpha is very difficult to you know, maybe difficult or near impossible to identify based on historical data because you'll never have enough stationary data to identify it. And so you know, when you've thought about it and you've decided that, um, you know, I want I want diversification, i want cost efficiency, i want tax efficiency, and I'm kind of willing to give up on chasing alpha. Then you know that's now now you should decide do you kind of want to do

it yourself? Do you want some help? Um, you know, do you want to free yourself up, or you know, do you want to put some of your money, you know, into something that's less alpha orient And now we're still dynamic, but our dynamic is not chasing alpha. The dynamic is just trying to have the appropriate portfolio for the appropriate attractiveness of different investments at each point in time. So

we're not trying to generate alpha. We're just trying to have you know, sensible portfolio mixes depending on the investment environment for for our investors. I'm looking at this portfolio. It's a very it's a robo esque portfolio. And I say that as a compliment. It's got very basic, cheap ets, little I shares, a little vanguard, maybe a little spider here and there. It's just very much like what a betterment would use. Your twelve basis points and you do planning,

is that right? Yes? Yeah, I mean this is part of what I'm researching. Also, is the sort of vanguard effect that's going to hit the advisory world. And you don't hear about that as much. But why did you choose twelve? I mean that is really low. It's almost like you didn't need to. And are you open two outside investor or do you have a cut off with how much money you can invest? You talk a little bit about the process of that pricing and the future

plans for the advisory business. Sure, so when when I started this at the end of two thousand and eleven, UM, you know, the first investors were all a bunch of friends of mine and um, and you know, I was just I thought that low cost is really important. It's like this one thing that we can control. Um, you know, as Benjamin Franklin said, um, you know, uh, a penny

saved is worth two pennies earned. You know, some people think that he said a penny saved as a penny earned, but actually he said a penny saved is two pennies earned. And what he meant by that, I think, uh, you know, it's really was was really insightful on on his part. Of course, Um, you know is that a penny in the bank that you've saved is risk free? Uh two, you need to earn two pennies in a risky way

to be equal to one penny that's risk free. And and and actually you know that's modern finance actually tells us that's correct. So so anyway, you know, it's focused on costs. And I was like, well, it's my friends. What fee if if one of the what if one of my friends that was going to invest with us, if the if the roles were reversed, What what I think is like a fee that just wouldn't bother me at all, and I would say that's great. And that was where the twelve came from. And you know it

could have been thirteen or eleven, but twelve. There's twelve months in the year, so the basis point a month. That's that's where it came from. And you know, it seemed super super low back in two thousand and eleven. You know it's still is low today. But you know, the the world is coming to us for sure. Um. You know, at the moment, we have this cut off of you know, roughly half a million dollars of of assets and the family you know, in the family group

to start with us. But you know, as we get more efficient and build more technology, we want to bring that minimum down, you know, and make it available to anybody that wants to come with us. But you know, right now, we can't really be efficient for somebody that wants to give us five thousand dollars. We can't be efficient for them. You know, we can't do as much as we want to do for them. But you know,

our our investors are all over the place. You know, we've got I don't know, a hundred million dollar investor, and we've got you know, people that have given us three hundred thousand dollars and we waived the five hundred for them. You know, we have young people. You know mostly it's people that are that kind of look like me in terms of age and experience and all that. But you know, we have people in their twenties, we

have people later in life. Um, and you know, we just want to keep on helping more people and and and using technology to do it. You know, I think that's the key thing. Like, we couldn't do this business twenty years ago for so many reasons. We couldn't do it twenty years ago, but today, you know, it's it's you know, all of the different pieces that we need

are there. You know, all this different kind of outsourcing, Fidelity and Schwab being terrific places to have assets, you know, etcetera, etcetera. So um, and just real quick final question is, uh, when you look at the portfolio, it has a six vibe to it. But there's all so some of the things in there that you can tell you're you're mixing it up a little bit. You've got some gold in there. Um and uh, some different international exposures, uh, some different

this targeted bond exposures how active are you? Do you have like a generic sixty forty for the people who don't like want any of your of activists, or how do you do that in terms of detect how tactical to get So are the baseline portfolio that we have, which is the portfolio that we start with before we overweight or underweight different buckets. You know that that is a little bit more granular than just owning a global MSCI equity index and an aggregate bond index, you know,

like for SIVE. So you know, we have a five percent bucket for reats in our in our separately managed account programs. We actually don't have gold, but we do have gold in our in this private fund that we started with before. But anyway, um, so you know we have reats in there. We have a small bucket for muni is in there. We have a bucket for tips and nominal bonds and corporate bonds. We kind of have broken things up like that, and you know, and we

get granular in terms of regional equity market. So we have you know, us, we have Europe, we have developed Asia e M and well then you need Canada to fill it all out. Um, and so you know, that's our baseline, and then uh, you know, we overweight or underweight based on a long term expected return metric mostly that's the cyclically adjusted earnings yield, and then a trend

metric that we put together with that. And um, yeah, I mean if somebody says, look, you know, I just want you to manage a static portfolio for me, Well, first of all, we have this all equity version, which is less dynamic because it's always in equities all the time. It's just we're changing how much US versus e M

versus Europe. Um. But we would also do a static portfolio for somebody, but we would try to you know, we would try to explain to them that we think, you know, that just makes less sense than doing something that's responsive to the investment environment. So we don't have any static portfolios, even though we would be willing to do that for people if they wanted it, you know, I think that we would tend to encourage them to

do it on their own. And and um, you know, because it's if you're gonna be static, if you're always going to be a sixty and you want to do that, then you know we'll do it for you. And tax loss harvest and all that, no problem. But you know you might want to do it yourself too, and um, you know, because that's a pretty simple thing to to do without needing to put much time into it. How much trading are you doing? So we rebalance the R

S M A portfolios once a week. We rebalance them like a quarter of the way to where we ultimately would want to be, so we don't generate too much turnover um. And you know, we're we've built these systems that you know, try to do the minimum number of trades. You know, their tax aware, so you know, if you're gonna realize a short term gain, you don't do the

trade normally or whatever. So you know, we we try to dampen down the trading that you would get if it was just like oh here, here's this dynamic target. It's moving around, just moved to it all the time. You know, we're kind of moving trying to trying to keep up with it, but in a in a low turnover, low you know, tax efficient manner. So so Victor, I gotta ask you a question that we ask everyone at the end of trillions, which is what is your favorite

E t F ticker? My favorite E t F ticker. Yeah, I guess it's uh uh yeah, I guess it's v O O. You know, the the you know, the Vanguard um SMP five hundred sort of with that nuance of you know, of the Roman digits sort of thing. I think that's my favorite good job knowing that, by the way, that is a I thought you didn't know it. I was ready to like just drop that cool factoid, but you did. And that's to me, how how did you

did you just figure that out at face value? Because I didn't know it until someone told me at Vanguard. I was like, oh, now I get it. I might have read it in one of your articles. Eric, I don't know where I learned it, but I did not. I did not figure that out myself. I read it or heard it somewhere. I did not. It didn't hit me. It's the most hidden cool ticker of all time, Like, because only you have to someone asked to tell you about it for you to know about it. Yes, yeah,

that's what that happened with me for sure. Victor, thanks so much for joining us and Trillions. Yeah, sure thing, I've been great. Thanks for listening to trillions. Until next time you can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, and wherever else you like to listen. We'd love to hear from you. We're on Twitter, I'm at Joe Webber Show, He's at Eric caltur Nois, and you can find more about ELM Funds at thumb

funds dot com. This episode of Trillions was produced by Magnus Hendrickson. Francesca Leave is the head of Bloomberg podcast Bike h