Blue Owl Keeps Going Down

Let's continue with some followups to previous posts but also some broad market dynamics too. 

It keeps getting worse for Blue Owl (OWL). The other alt investment firms appear to be in sideways patterns after enduring what thus far have been less severe declines. There is an ETF that tracks these with symbol AAUM which is down 22% YTD.

Obviously the private asset space was showing signs of trouble before the war in Iran started. It's not clear to me that the war is making it worse is making in terms of demand for withdrawals from funds that don't offer daily liquidity. That seems like a market event versus the war being a geopolitical event.

We've looked at these stocks before. They are obvious proxies for the space. We isolated that during the good times and it is apparent during the rough times too. Similar to tech, the group tends to outperform on the way up and go down more on the way down. There's a sort of capital efficient or barbell aspect to it. A small allocation to something with these attributes when sized correctly can provide a return similar to a full allocation to equities but the drawback is periods like now. Forgetting Blue Owl, a 25% drop from a smaller equity allocation might be emotionally difficult to endure when the broad market is down much less. Sized correctly, the dollar impact would be the same but still tough to endure. 

Here are four more portfolios we built for random blog posts that I wanted to circle back to.

The first one is the Cockroach Portfolio that we've looked at many times, this latest version was November of 2025 where the title of the post was I Cracked The Cockroach! Maybe! I can't find a link to the post about the portfolio I labeled Asness Factor Blend but it was in the folder on my computer where I keep all these portfolios we blog about. No dice on the HEQT/Managed Futures post either. Here's the link to the post about the 75/50 portfolio. 

All the portfolios did much better than 60/40 in 2022 which was due to avoiding duration and adding managed futures. I don't feel that I am cherry picking because I actually did that for clients that year. The Asness Factor portfolio is of course quite the standout. I'm not sure why I used the AQR Market Neutral (QMNIX) back then because despite the name it has had some monster up years that may not repeatable. If they are repeatable then I wouldn't think of it as market neutral despite the name.

Redoing that portfolio to use more of a real market neutral/absolute return proxy, the results are still compelling versus VBAIX and more inline with the others. 

The 75/50 portfolio was too conservative, it captured less than 75% of the upside of the S&P 500, more like half and it went down a lot less than half the S&P. It did quite a better than VBAIX but again, that is attributable to avoiding duration and owning managed futures. While I think duration will be a bad place to be going forward, if that sentiment ends up being incorrect then these portfolios will probably look a lot like VBAIX, not outperform. 

ReturnStacked updated its model portfolios and I wanted to review a couple of them, Structural Alpha Growth which is sort of an 80/20 and Structural Alpha Moderate which is like 60/40. What I did for these is build them exactly as the appear on the website. The models are leveraged using their capital efficient funds, the models leverage up 25-30%. The way they do this is if they allocate 10% to RSST in the model, that adds 10% of domestic equities and 10% of managed futures. It's probably not ok to share the holding and weightings as they posted them, you can create a userid and password and access them yourself. 

The unleveraged versions are mathematically true to the originals, just scaled down.

My version of their 80/20;

And 60/40;

It is very rare if ever where I see the leveraged products actually making it better. Part of it might be their willingness to have AGG-like bond exposure but that doesn't account for all of it. 

The concept is clearly valid so maybe the fund category needs to evolve more. I do think the idea of doubling up the volatility which only a couple of funds do at this point (meaning they target volatility not twice the daily return), could be a better path to capital efficiency via exchange traded products. 

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