There's a Munger Quote For That

Some quick hits today.

By now you've probably heard about the hedge fund called Situational Awareness run by Leopold Aschenbrenner. He made an absolute fortune leveraging up to bet on all the AI-adjacent stocks that were leading markets higher before they started to rollover in June. The leverage that made him a genius on the way up destroyed the fund on the way down. 

The Old Rope Research blog was apparently a believer in Leo and then wrote this mea culpa. In there, he called Aschenbrenner Lumpy Leo, referring to lumpy returns and attributed a quote to Charlie Munger about "preferring a smooth 10% return to a lumpy 15%." That is a great and concise way to sum up what we are trying to do here. 

This chart from Bespoke Investment Group is insane to me. 

I may not have mentioned it before but I am not a fan of bond duration. 

Recently, I learned quite a bit about outsourced chief investment officers (OCIO) in my work with the Del E. Webb Foundation. Basically, OCIO is a fancy term for the type of specialized investment manager that is equipped to provide service to foundations and endowments. It may seem like I'm making fun of the term but not the work they do. 

I will have more about this later this summer but in talking to one firm, there was one quip that really made an impression. In wanting to stress the importance of the relationship and services provided, they said anyone can manage the money. 

A quick detour, "relationship and services" is very important, there are complexities that differ from a person just trying to save for and then navigate through their retirement. 

But we can still dissect the portfolios. Typically, there's a lot allocated to equities, 65% was a common number. That 65% would include maybe 10-15% in private equity. Firms will often manage public equity with active managers with maybe a small sleeve allocated to index funds. A common allocation to alternatives as diversifiers other than private equity would also be in the 10-15% range. Based on my small sample size, these firms don't seem too interested in doing much with actively managing fixed income which if correct more universally, surprises me. 

I pulled some information about returns and volatility of OCIO managed accounts from Grok for three years ending 03/31/2026.

There's nothing special about the endowment and foundations numbers. There's nothing wrong with them either but they don't refute the claim that anyone can manage the money.

Portfolio 1 attempts a very generic replication. ACWI at 65% involves two decisions; the weighting which is consistent with what many OCIOs do and including foreign with ACWI as opposed to domestic only. APHPX and QMHIX are intended to be the the alts sleeve mixing something that is hedge fund-ish and managed futures. The income sleeve has a little more thought to it. SRDAX is an income fund but it goes off the beaten path and FLOT requires deciding to avoid duration. 

I couldn't really tease out better OCIO data even trying multiple AIs but if a person working at an OCIO shop says anyone can manage the money and we can get similar returns to what OCIOs can achieve then this supports the idea that investors can get "institutional" outcomes with brokerage accessible funds. That's huge and did not exist 20 years ago. 

The result is a little better than what Grok found but isn't all that interesting actually. It tracks very closely to the more generic Portfolio 2 but with noticeably better compounding and slightly less volatility. Both are valid but not special. Inflation ran at 3.04% so both were better than CPI plus 5% which is good of course but that is a short window we're looking at and stocks did fantastically well over that stretch.

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