Two years ago a friend asked for help with a $25,000 inheritance. This was not serious money for him, and his wife, so they could be somewhat aggressive. I got the sense they wanted really just set it and forget it.
The anchor was the iShares All Country World Index ETF, a small weighting into AGFiQ US Market Neutral Anti-Beta ETF which is a client and personal holding and Standpoint Multi-Asset Fund which is also a client and personal holding. I also put Bitcoin on the table, explaining my thoughts on its asymmetry that could go to zero or go to a bazillion.
The basic idea was a whole lot of plain vanilla but global in case foreign ever starts to outperform again, a little anti-fragility with BTAL and all weather with Standpoint. I explained all that to my friend. Plus the asymmetry...maybe...if he bought BITO.
I sent him this on June 30. 2022 so I set the above to start July 1, 2022 on Portfoliovisualizer with no rebalancing in case I was correct about wanting to set it and forget it. The non-Bitcoin version is interesting, about 100 basis points better than 60/40 with about 100 bps less of volatility. With the Bitcoin version, the rest of that portfolio is up enough that if Bitcoin went to zero from here, the account would still be up noticeably.
The simplicity is a positive. The biggest risk would be if ACWI and REMIX both went down a lot (I don't mean something like The Great Hiccup Of August 2024) at the same time. BTAL's sizing means that its gain in that scenario would only offset a little of the decline. Standpoint tends to go up when stocks drop but that is not guaranteed to happen in every event obviously.
Pivoting, I wanted to check in on the ReturnStacked Bonds & Managed Futures ETF (RSBT). This is the first of their funds, it now has more than a year for us to look at. We usually look at the fund that pairs equities with managed futures but RSBT leverages up to own 100% in Aggregate Bond-like exposure and 100% in managed futures.
The result now isn't much different than when we looked at it before, although it has been a while. I'm not seeing where the leverage is additive. Portfolio 2 is how the ReturnStacked guys position the fund. It maintains a 60/40 allocation adding managed futures on top. They wrote at least one paper about this and had a podcast-like show about it too.
Their argument for adding managed futures seems to have worked in the period studied. In countless other blog posts looking at much longer timeframes, adding managed futures has been pretty effective. One premise underlying the ReturnStacked entire strategy, add managed futures works often enough for me to be convinced. The other premise underlying the ReturnStacked entire strategy, leverage up is less clear to me. I keep looking, I'm trying to find that it can be additive but for now it seems like added complexity and possibly added risk without any benefit...yet?
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2 comments:
This simplification is very appealing to me, you cover already many diversified portfolios and would be nice to see more along these lines of "less is more" (preference ETFs vs mutual funds). I'm currently testing 35% (SPY/QQQ), 20% Managed Futures(DBMF/KMLM), 15% BTAL and 30% Long/Short (CLSE) however would like to add more alternatives to the mix. Thanks for your work!
John, thank you for commenting. Any combo of SPY and QQQ will be a huge overweight to tech and an overlap in many big names. Cool if that is intentional but important to realize if not intentional.
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