ETF Edge - The “managed futures” rush is on 10/12/26

Episode Date: October 12, 2026

Promising to deliver something that works when most other things won’t, this time-honored hedge fund safety strategy in an ETF wrapper could be the next big thing. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things exchange traded funds, you're in the right place. Every week we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors. I'm your host, Dominic Chu. Some investors are utilizing bonds in new ways right now, and then adding a new tool or set of tools to fill the old roles of bonds.

Here's my conversation with Andrew Beer, founder and managing member, at Dynamic Beta Investments, alongside Nate Geraci, President of Novodias Wealth Management. Gentlemen, thank you very much for being here both with us right now for an ETF Edge. That's going to tackle a little bit of the story around bonds and just what they've done and what role they play in a portfolio these days. And maybe Nate, I'll start with you on this one first. Have we seen any kind of opportunistic movement with regard to traders and investors to take advantage of some of these lower bond prices and higher yields, not just across the yield curve

for treasuries, but also in corporate investment grade and high yield as well? There's no question. I think right now, because of the environment where we have had yields surging, fixed income has become more attractive. That said, if you think back over the past several years, we've seen a lot of investors and traders attempt to top tick rates, and that hasn't worked out very well. And so right now you have this interesting dynamic where where fixed income investors are trying to figure out where they should be positioned along the yield curve. And it's a challenge. I call fixed income the most challenging area in investing right now. And I think that's one of the reasons why we're seeing investors look to alternatives

outside of fixed income. So outside of fixed income, that's what we're going to turn to Andrew right now because Andrew, one of the things that you look at, I mean, you look at a lot because you run funds that involve all kinds of different asset classes. I wonder from the bond percentage, perspective right now, if you've seen anything that indicates to you that we could be in for an opportunistic time to nibble on some of these lower prices or whether or not there is a chance that we could see even further downside for that bond market ahead? Sure, I think from our perspective, I mean, again, the strategy that we run are designed to be tactical, right?

This has been a very, very good year to be tactical. What's driving inflation? What's driving the rise in bonds? Well, one thing is the rise in oil prices. This is a very good year to be buying crude oil in the 60s in January before the war starts. It's also been a great year to be betting on the rise in interest rates, which has been happening in recent months. So every investor out there will benefit who has bonds in their portfolio if rates start to come back down. But the challenge is, what do you do when it's not working?

And so in a sense, we've been positioned for what I would call the mother-of-all bond market tantrums. We have runaway fiscal spending. We have no appetite among politicians to fix it. And most investors are simply not able to capitalize on that in any meaningfully direct way. Now, could I follow up there by asking you then if it's the case where this bond tantrum is evolving and has gone a long way in a relatively short amount of time, those problems that you laid out are there not on a tactical level but on a more secular level? These are things that are not fixed overnight, right? How exactly then do you see investors positioning for that rising rate environment and threat from things like geopolitics, oil prices because of it, and fiscal issues, not just in the U.S., but around the world as well?

Well, I think broadly, there's an existential crisis right now in the strategic asset allocation and the model portfolio world. At the end of 2021, right, we've been talking about inflation coming back. come off two decades of the greatest bond bubble we'd ever seen. What did you do as an allocator at the end of 2021? You added bonds because your equities had gone up 28 percent, your bonds hadn't moved. I mean, it was allocation suicide from a capital allocation perspective, but people did it because they are constrained by this idea of we're going to match ourselves to 60, 40 over time. What I've seen over the past several years is people saying we've got to rethink this, okay? It is good to be tactical. It is good to have flexibility in your portfolio. But what we've done is we've

conditioned an entire generation of investors that human beings, and they're absolutely right, human beings are very, very bad at being tactical. They don't have all the tools that sophisticated hedge funds have to be able to capitalize in these kinds of opportunities. So in a sense, what we've seen is people opening the mandate and saying, okay, bonds are there to serve a particular function. But so are many other different kinds of diversifiers. And how do we put that into a portfolio in a healthy, constructive way. Now, let's go back to Nate for this one here. As somebody who kind of allocates for a living and looks at all of these different types of opportunities, the 60-40 has been kind of like this paradigm, this construct, tried and true for years at this point

now. Is there any reason to believe that the bond side of things no longer acts the way it should or has in the past, and that is the reason why some investors are fretting what's going on right now with regard to interest rates and everything else, because we have seen a little bit more of a positive correlation or trading relationship between both stocks and bonds. Well, I think that's the challenge. I think Andrew hit the nail on the head, and that the bottom line is that 40% of the portfolio has not worked very well over the past several years, and especially if you've extended duration, you've been in, say, 20 plus year treasuries, that's been a significant drawdown in that space, a huge detriment to a portfolio. You know, the way that I think about this is

that financial markets are always complex, but I think you can make the case that the current market environment is even more so, just given the uncertainty around whether AI will ultimately deliver on growth expectations that are currently baked in. As you mentioned, we still have sticky inflation. We have higher oil prices and geopolitical uncertainty. We've seen longer term interest rates surging. There's a lot going on. And so when you have that type of environment, I think it has investors looking to alternatives and certainly something like Managed Futures ETFs is a space where investors have turned their heads. Okay. So Managed Futures brings us back to you, Andrew, because you do run funds that are tied to Manage Futures and other alternative type

strategies typically used by more sophisticated investors and things like hedge fund products, commodity trading advisor advised products, that sort of thing. So I guess maybe what I'm asking from an ETF manager who does these types of things, are you seeing a pickup and interest from people who would have maybe traditionally gone more towards bonds as a hedge against some of these issues, more towards these alternative type strategies, which are not as well known to the investing public, but are gaining some ground these days for awareness. Absolutely. And what Nate says about the difficulty of this environment, I mean, it is an extraordinarily difficult investing environment, as we know.

A few things are working, right? AI's been working spectacularly well. Most things are not. And what we're seeing, again, is an expanded view of, I mean, back to some statistics on bonds, they've had a 55% correlation to equities this decade. They've returned. less than cash with a 15% drawdown. It's been dead money for the entire decade. And every year, there's a narrative about how this year it's going to be great. 2023 bonds were supposed to come back. So I think what you're seeing broadly across the space is people saying, you know, we need things that do different things. I fell in love with a strategy called managed futures because tactical is really good. Be nimble when other people aren't. And most allocators out there are simply

frozen into very, very rigid constructs of how they should invest. I have bonds in my portfolio. I love my bonds, right? They give me quarterly coupons that drop into my bank account and I'm very happy to see them. I'm not making it a 40% allocation for something that is not adding value to do to the rest of my portfolio. So we've seen a huge change over the past several years in terms of people saying there are other things that will do a much better job for us. And I say, don't ask me, ask Claude. Go take your portfolio, put it into Claude and say, show me how to make my portfolio better.

I want liquidity. I like ETFs, various other criteria, and it will point you in the direction of things that will help. All right. So, Nate, if that's going to be the case, what exactly are people, investors, I guess, who want income? What do they do now?

Because it's not necessarily that managed futures are the income generating instrument that some people kind of are seeking, they're not there to give you that kind of quarterly paycheck. And these days, by the way, there are ETS structure to give you even more frequent paychecks and that sort of thing. How is it that income investors

are starting to reconcile their portfolios against this backdrop or maybe these traditional income-producing assets are not producing the kind of income that they want or need? Well, like Andrew, I'm still a believer in bonds in a portfolio longer term. bonds clearly have a role. And as the rates have come up, that's helped on the income side of the

equation. But going back to managed futures, think about this, year to date, an ETF like DBMF is up 20%, the S&P 500 is up around 15%. And then you look at aggregate bonds, they're negative. They're down over 2%. And so even for investors who are seeking income, when you see that negative total return, that's going to get your attention. And I think the right answer here is, alternatives maybe fit a sliver of the portfolio. They have a place. They fit in the sleeve of a well-diversified portfolio that includes stocks and bonds. But I don't think you just give up on the bond side of the equation. There's clearly income to be had there. And to me, it's just a balance. It's all about diversification. One of the things, Andrew, that you watch more closely

is just how trends play out. And that's the reason why tactical investing is kind of in your bailiwick these days. But being tactical and understanding trends, is something that a lot of investors have to kind of get their arms around. How to kind of, and I'm not trying to say time the market, but they have to be a little bit more short-term in their thinking and a little bit more nimble with regard to how they get in and out of certain types of investments. How exactly are these types of products that are geared towards alternative investments that are more fast-moving and tactical in nature? How is it that bringing them to the ETF wrapper has made them either more accessible or more understandable?

for people who want maybe a little bit of that diversification exposure, but don't fully understand what a commodity trading advisor does. So my job is to make the benefits of this space understandable to the broad population. Every allocator out there who wants to grow their assets over time, wants to sleep at night, is trying to improve their risk-adjuster returns. I believe that administrators can help them to do that.

It's a hedge fund strategy, you know, going back to the idea of trends, all it is is tactical. You're trying to be early, contrarian, and right in the big things as they happen. If inflation is coming back, position for it. If order is going to break out in the Middle East, position for it. If there's a bond market tantrum position for it, the rest of your portfolio will behave differently, but you want something that really does march to the beat of a different drum. What I think the space, and what we did essentially, was to look at the space, these hedge funds who've been doing it for a very long time and say it's wonderful what they do but god it's expensive

and it's one of these areas where by the time you get through all the cost of implementation and paying the hedge fund managers and everything else you're not left with nearly enough of the returns so we looked at and basically said maybe we can recreate what they do and what do technological innovations do right they make something cheaper more attractive have a better better payoff profile for people at the end of the day and so we basically looked at the space and said maybe we can bring some sort of a technological innovation to figure out the most important things that they're doing, synthesize it and do it in such a way that what people have said about us is one of the few ETFs where you can say we've beaten hedge funds at their own game. But it's because it's through efficiency, which is in, it's in the blood of the

ETF industry. And so efficiency is a way to outperform over time. Can I follow up with that efficiency? How exactly do you garner that efficiency? How exactly do you then minimize the costs, frictions, certain tension points so that these products can be more retail focused for people who are more cognizant of things like that fee structure, especially in a market and ETFs where people focus on lower costs and implementation. So a typical hedge fund in this space will often trade hundreds of sometimes very, very obscure contracts, things you would never normally think about as having an impact on a portfolio. And they do it because they're just.

job is to analyze the world in all of its complexity, to see signs that things are changing here and signs that are changing there. When they implement their portfolios, they implement them with a similar level of complexity, getting in and out of these markets, trades, all the time. So when we looked at the space, I said, if I give you $100, you're going to turn over my portfolio 25 or 30 times during the course of the year. For me, as a longtime hedge fund guy, that is staggeringly inefficient, when what I really care about is, is inflation coming back? Is the dollar getting stronger? Our equity's going to keep going up or keep going down. And so what we found was a way to basically synthesize these very, very complicated portfolios

into 10 major markets. And you can see that every day. So we can put it into an ETF. You can see our positions every single day. And what we found was that actually we could generate as good or better returns than we of the hedge funds in the space, but because we could save maybe three or 400 basis points on the implementation side. And it wasn't just that. It was also hedge fund fees. Hedge funds in the area in this space will charge two to 300 basis points a year. I wanted to set up an ETF that was not competing with Vanguard at five basis points, but was still unbelievably attractive relative to the mutual funds and hedge funds in the space. So we have an expression that fee reduction is the purest form of alpha, which is a little bit technical.

But if you can drive down the cost of an investment strategy and you can deliver more of those benefits back to clients, you're going to have a very, very happy and loyal client base over time. And so that's what we've been doing. Interesting. Okay, so Nate, if we are able to use these strategies more efficiently and make them more accessible to a wider part of the investing public than just the people who are kind of accredited or qualified and are in these to hedge fund type investments, it also changes the way that asset allocators, investment advisors who kind of service their clients, view

these types of assets. In this particular world that we live in now, we talked about that maybe, I don't want to call it the death of 6040, but it's certainly evolving to a point where it's not necessarily 6040 anymore. How exactly do you tackle asset allocation for those clients that you have? I understand that every asset allocation is different for people in different stages of their life with different goals and risk profiles, but that was also the case with saying 6040, 60 socks and 40 bonds. necessarily for everybody, but it became a very cookie cutter construct. How has that changed, given the types of investments that are now available, especially for things like ETFs that track alternative strategies, managed futures, and the like? To me, it always comes back to

education in understanding how the underlying investment functions in the context of a broader portfolio. And I'll go back. Andrew was talking about the benefits of the ETF wrapper, and when you think about the cost efficiencies involved with that, I'll add something else, which is that we talked earlier about how complex the current market environment is. And I think when you have an environment as complex as it is right now, you have the risk of investors and fund managers reacting much more emotionally. And I think of a strategy like DBMF, it can remove that emotion because these are quantitative,

systematic strategies that take human emotion and bias out of the equation. If you even step back a level from that, if you're an investor or advisor that's going to allocate to these strategies in a portfolio, while you have that underlying emotion removed from the equation and the strategy, you also have to behave yourself and let these strategies work over full market cycles. Manage futures strategies, these aren't designed for just a singular environment. If you're going to have them in your portfolio and you want to take advantage of the lower correlation of stocks and bonds, you have to let that work out over the long term. And again, to me, that just gets back to education in the space, understanding how these products interact with the stock side of the equation, the bond side of the equation, and then being prepared for the inevitable periods of underperformance, knowing that there could be periods of significant outperformance.

Nate, where have you seen these types of flows manifesting themselves? Where have the fund flows been in these types of assets? Have you seen them? I mean, they're not going to rival stocks and bonds. those are the two biggest kind of categories out there for ETFs. But have you seen a jump, market jump in the interest flow-wise in some of these alternative-based products? Well, let's just stick to Manage Futures, ETFs, because I think this is a remarkable story in that the entire category is now over $10 billion in assets. That includes nearly $4.5 billion in inflows just this year.

So this category has essentially doubled. And the way I think about it from an industry perspective is anytime you have growth like that, what's going to happen? Well, it's going to attract the attention of ETF issuers. And you look at the category right now, Dom, we have some of the biggest names and asset management involved here. BlackRock, Fidelity, Invesco, J.P. Morgan, they all see the opportunity in managed future strategies. And so I expect additional asset managers to jump in. I think issuers are going to continue to lean in to alternative strategies.

strategies. And this is just an example. I think you can look at some other alternative categories as well, whether we're talking about return stack ETFs or otherwise, and you're seeing increased interest and it gets back to the complex market environment we're in. All right. So that brings us back to Andrew because he's got expertise here. He is an ETF issuer who does this kind of thing. So Andrew, you run a managed futures fund. You have an absolute return fund when that kind of focuses a little bit more on being a little bit more market neutral and just kind of garnering some returns. fund type strategies. Have you seen on your side of the business the things play out that Nate just mentioned, that we are seeing this kind of explosive growth and interest and it's translating

into fund flows for shops like yours? Sure. Absolutely. So the ETF that we managed is closing on $6 billion in assets. We were the first hedge fund ETF. When I got into the managed futures ETF business in 2019, there were two funds with $300 billion in asset center management. When you think about what you want from asset allocation, you want something that has low correlation to both stocks and bonds and something that will do well in crises, it's very, very hard to find a better hedge fund strategy than managed futures to accomplish that. But historically, it's only been available in hedge funds, which precludes 99% of the investment pool.

And the products that had gone in T. are frankly not great. So what I really wanted to do was to create an asset class. And that requires educating people on it. Now, what Nate mentioned is, you know, we're essentially the first mover in the space. I was thrilled when BlackRock came in. Thrilled when Fidelity came in. Thrilled when Investco came in. Because they will spend all day long saying, you need this in your portfolio. You want to have, you don't want to have 50%, 30%, 40% in your portfolio. But if 6040 is going to 60, 20, what do you put in the 20? And it's not a very, very hard call. And so I think this, I think this category, if we get the messaging right around it, because I can explain what we do,

the early adopters of us, we're all sophisticated RAs and hedge fund selectors. But, you know, it's got to be an advisor sitting across the kitchen table from a client who is not talking about the weeds of what we do, futures contracts, long, short this, et cetera, but who's basically saying this is something that can do something that we don't do well. We're not good at picking up on these, you know, oil in the 60s, gold at 2100, betting on rising rates, catching the AI inflection in emerging markets early. Those are things that leave it to the pros. And as Nate mentioned, the pros who have machines that do this have a very, very good track record of doing it over time. And let us bring that to a broader audience. What exactly, Andrew, is the messaging that needs to be

improved around these types of products. So as you look and say, how do I market these types of instruments, how do I educate investors, whether they be individual retail folks or whether they be, you know, RIA firms that are out there, how exactly then do you shift the story that you tell to better capture a bigger total addressable market from those types of investors? Well, so we're trying to make diversification easy, right? And I was asked at an ETF conference recently, He said, what would you tell somebody to get into it? I said that stocks and bonds, I think it's very easy. Take 10% of your portfolio, put half in gold, 5% in gold, 5% in managed futures.

Strategic asset allocation, whether it's 60, 40 or some variant of it, it's the right thing most of the time. It gets you 90% of there. It doesn't get you all the way there. It doesn't help you in 2022 when everything went down. In 2022, when everything went down, a managed futures went up 20%. They called us a beacon of green and a sea of red. an advisor sitting across the table from the client.

The client is losing hope. Everything's going down at the same time. The whole plan, they're tearing up the playbook. They're thinking about pulling kids out of private school. At that moment, you have something that's working. And so it's a strategy that punches above its weight because of that. But what Nate correctly pointed out is you have to have a strategy to hold it not for a year because you'll never get the year right over a market cycle.

My view on what, if I can take hundreds of basis points of returns and hand it back to our investors through efficiency, see, that gives them the cushion to go through the inevitable lower return periods. And so when we started doing this in 2016, the industry went through one of its tough its periods where it wasn't making money over years, but we're still doing hundreds of basis points more than cash, not because we were smarter or better, because we were more efficient. All right.

I'm going to give the last word to you, Nate. In this kind of environment, do you see from your own asset allocation perspective how exactly then do you position your new kind of model portfolios, just how much goes into things like traditional stocks and bonds versus some of these alternative type strategies? And by the way, ALS also includes things like real estate and precious metals and everything as well. So how exactly do you tackle a model portfolio? And again, full disclaimer, I know that everybody is different, but what does the model look like? I think Andrew said it perfectly earlier in that you want to own assets in your portfolio that march to the beat of a different drummer. And the bottom line is

most investors are going to have the core of their portfolio in equities and fixed income. And that's probably what they should have. But you can take that, say, 10% allocation and maybe you do have 5% in coal. You have 5% in managed futures because those are the assets that are going to provide a different correlation, a lower correlation to equities and fixed income. And I don't want to oversimplify things, Dom, but to me it's really that simple. You have to look across, depending upon what your risk tolerance is, you're going to have a mix of equities and fixed income. And then you're going to have that alternative sleeve to provide some diversification, whether we're talking about a year like 2022 when you have stocks and bonds both town together or even a year like 2026 where you have stocks up, but bonds down. Alternatives can play a role in providing positive returns in both of those environments.

I feel like we're going to be talking about a lot of this in the coming months and quarters ahead because these trends are going to be in place. Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETFs with our Markets 102 portion of the podcast. Andrew Beard, founder and managing member at Dynamic Beta Investments, continues with us now. Andrew, thank you very much for sticking around for the podcast. I'd like to go a little bit deeper into some of the parts of the conversation that I didn't get to hit on substantially. And one of them is my fascination about just how much the ETS,

industry has evolved over the course of the last 10 or 20 years to now be able to incorporate things like alternative investing into an ETF wrapper format. You were one of the first movers in this kind of a process. So take us through the story in your mind of how things have evolved to where now we can offer hedge fund like strategies in ETF products. Thank you. Well, first of all, thank you for continuing the conversation. Look, I think to take a step back, right, if you You're a diversifiers have historically been very sophisticated products. And if you had talked to an allocator 10 years ago, they would have said, you know, if I want that strategy, it's going to be a hedge fund.

If clients can't invest in the hedge fund, you know, then I'll try to find a mutual fund that does it. And God, I would never touch it in an ETF. And the assumption was, what, you can see their positions. What's the secrecy of that? And so what's happened is that basically people realize that the mutual fund, the average mutual fund that was set up with a hedge fund strategy mutual fund has been just an embarrassment for the industry, two to three percent per random after 200 basis points of fees after 15 years. I mean, it's a catastrophe.

And the assumption was no one could make it work in an ETF. So what you had, as you mentioned, the ETF business has evolved enormously over the past 20 or 30 years. And they've been spectacular at giving efficient exposure to stocks, spectacular at giving efficient exposure to bonds, and have nothing to point to on. the true diversifier ETF side, you know, like hedge fund or strategy side. And so when we jumped into this pond in 2019, I wanted to show that we could take one of the most valuable hedge fund strategies and make it even work even better. Flip the model. I wanted to, I wanted to show

that we could outperform hedge funds purely through efficiency and design. And so that, in a sense, has kicked off a realization that, wow, you actually can make these really valuable diversifiers work in an ETF wrapper, it's bringing more and more people. So as we just talked about, this little cottage industry that went into had 300 million in AUMs, and it's at 10 billion, seven and a half years later. And the big boys are all coming into it. And like you've now seen the same thing as happening in what we call the multistrat space. So these are massive, massive, massive changes because you've got trillions upon trillions

of dollars of ETF model portfolios that barely have a two-legged stool to sit on. Because again, the bond side is if you were doing what it was supposed to do before. So I think you're going to see enormous education and demand around how to get things that actually help improve the risk-adjusted returns of portfolios in an ETF wrapper into these portfolios over time. One of the things that's developed a lot is this notion that alongside these types of products have become more sophisticated allocation models as well from investment advisors. because they're trying to capture some of that alpha or outperformance versus traditional, say, the 60-40 bond. We don't say that because it's universal. We say that because it's become this kind of this cliche construct, this cliche kind of,

you know, paradigm by which people allocate. These days, there are more investment options for people to use and therefore other places for people to allocate towards. How exactly have you seen asset allocators, investment advisors, or those sophisticated individual retail investors who understand allocation, how much more have they become, I guess, part of this kind of alternatives ecosystem with regard to ETFs? Because it's not a very, it's not a very old industry with regard to alts in ETFs, but a lot more people are adopting them. In other words, how did you see 300 million in a few funds turn into $10 billion, seven years later?

Well, these things take a long time. There's a lot of education. So my early conversations with a traditional ETF allocator about what we do, they didn't know the rudiments of these kinds of strategies. Because the ETF research departments were in a corner over here, whereas the people who could analyze the strategies were evaluating hedge funds on another side of XYZ wealth management platform. They're analyzing the mutual funds. It's completely changed. And what's happened is the allocator community overall has gotten a lot small. about asset allocation. That, you know, 60, one of the problems with 6040s is it works so well for so long,

anybody who was trying to do right by their clients, by bringing new ways of bringing diversification, adding stability to portfolios. There's a risk to it, right? Five years later, your clients are angry at you for trying to reduce their risk and improve their returns. So, so the, so for a long time, people almost just gave up on it. And now what you're seeing is people saying, all right, bonds didn't come back the way we thought.

Okay, we need it. So there's a, and how do we get there? And this is where the basic tools about diversification, statistics around correlation, trying to understand the underlying drivers of strategies, even challenging basic notions as to how do we think about how all these assets are going to fit together over the next 10 years. It's not just happening at pension plans and their institutional consultants.

It's happening at every RAA. and wealth management firm, and people on Reddit, and people going to Claude, as I mentioned, and asking Claude, you know, how do I make my portfolio better? And it's extraordinarily good for the asset allocation business, because people have made so many mistakes in the past, and this is going to help them avoid those. One of the things I think that, and it's great that we have you here, because I'm not going to ask you to give away the secret sauce, because I understand that there's an alpha generating mechanism or, you know, this kind of maybe kind of overall scheme that you guys have to kind of make those returns more possible. But from a pull the curtain back,

kind of see the wizard type situation here. When you look at, say, a managed futures strategy, I don't think a lot of people understand what exactly managed futures investing is, because it is investing in all different kinds of futures related products. that cover everything from precious metals to commodities like gold and silver and oil and everything else to currencies, to interest rate products, to macro products. What exactly goes into a trend following model where managed futures can add value? In other words, how exactly do you choose which investments to go into? And then when to flip the switch on or off to go into those strategies or out of them?

So, by the way, if I succeed in taking this as a mainstream strategy, no one will ask. Okay, because, but the basic idea of it, now, I have a long history in the hedge fund industry, but I'm not a quant. And so when I came at this space, my basic question is, how are you making money and why? Like, who is giving you the opportunity to make? And a part of it's structural. I mean, if you can go long and short, you can see opportunities. Other people can't. If you can move between asset classes, you can see other opportunities.

But the basic idea is the entire world has become, asset management world has become slow moving. Every institutional portfolio, they look at it once a year, they've got 10-year capital markets assumptions. People talk a tactical game, but they don't walk the tactical walk. You know, you talk about, we think Japanese equities are cheap, and it's a 50 basis point move in your portfolio. So what the strategy does is it aims computer models. And I'm talking at the hedge fund level, the guys who've been doing this for a very long time,

who are brilliant and have tremendous resources and great experience. They aim computer models at lots and lots of different what we call markets. What's a market? Crude oil is a market. Gold is a market. The S&P 500 is a market. They are thing, and each of these markets has, contracts that allow you get exposure to it.

You want to bet the S&P 500 is going down. You're better off selling a future than you are trying to go out in short 500 stocks, obviously. So what they do is when they cast this net across sometimes hundreds and hundreds of different instruments, my conclusion was sometimes it's an early warning sign that something big is going to about to happen. Because the person who's in the U.S. Treasury market may not see it. but the person three markets over who has some special knowledge maybe the one who's capitalizing on it.

So the signal of the space is trying to find the early, contrary, and right in things that are going to matter to the rest of my portfolio. When people use this term commodity trading advisor, like you mentioned, I say, let's get rid of that term,

but let's keep CTA because I like CTA. I don't like manager futures. Some people call trend following. I feel like I'm always late to a party if I'm trend following. But what I said, CTA really should stand for contrarian tactical alpha. Because when these guys make money, right, they're early. They're right.

And so what we realized sort of like the key insight was we care about the big things. We don't care whether, you know, within the context of a portfolio, we don't care whether the Thai bot is having a good or bad year and whether there's some big momentum behind it. I care what's happening to the euro, to the S&P 500, emerging market. equity, gold, oil, big things like that. And what we found remarkably was that we could synthesize this really sophisticated business where everyone likes to talk about all the weeds and how their models are better and everything else and basically bring it down to something relatively simple and straightforward. You're worried about inflation? Okay, you want to be long crude

oil and you want to be shorting treasuries because if interest rates go up, they'll go down. it's not doesn't have to be all that much more complicated than that and so when we can do that right we also can break through to a broader range of investors the people who for whom it matters the most it doesn't matter to the average pension plan if they have a great diversifier for a few percent of their portfolio but it really matters to you know hundreds of millions of do-it-yourself investors around the world people who have their who it matters to them at their portfolio goes down 20% or 30% to the next crisis. So that was really why we set out to take this particular strategy and make it work in an ETF because then I can help such a broad range of investors

to make their portfolio just a little bit better. One of the things also that we've witnessed over the last couple of weeks, two, three weeks, is some activity at the Securities and Exchange Commission with regard to some proposals about what they call the responsible retailization retailization of markets that's kind of their way of saying they want to make more of these markets accessible especially when it comes to private investing things like private credit private equity other types of products that have been traditionally used for people like at private equity firms or hedge fund type products it feels as though that's the right way to go

not for anything else from an opinion standpoint, but because there are already products in the ETF marketplace right now that do many of those types of things. And you're just in essence making it more broadly accessible to people. They're also thinking about changing some of the definitions and constructs and rules around what an accredited or qualified investor is versus what is not. I wonder from your mind,

as somebody who works in alternatives in an ETF business, whether or not that's going to be something that is beneficial longer term for the investing marketplace because it does provide more options as opposed to fewer options for investors of all sorts out in the marketplace right now. It's probably a bad idea. You really want to expand the people who can own private credit today. Okay? when you have X percent of the portfolios are in software-related companies that may or may not exist in three to five years.

Look, the asset management business is wonderful in that it is run by red-blooded, rapacious capitalists, but make no mistake. They are trying to maximize their own profits. And institutional investors, I mean, so to me the hilarious thing about, private equity and private credit and I started in these businesses I've known these businesses forever is it in a sense there's the the way people change their investing is always subject to what happened in the last crisis so during the dot-com crisis equities went down NASDAQ went down 80% in the dot-com crisis

equities go down 50% and so from an asset allocation perspective and that by the way and then five or six years later the GFC hits right and then the S&P makes no money for 10 years so it's a little awkward when you're going to your clients and you're showing them returns that show two 50% drawdowns in the space of a decade and no returns on your favorite asset class 10 years later. So what do you do? You do private equity because it never went down. You can pretend away the cruel statistical reality that the market gods occasionally come out and take you out to the woodshed. It's happening with bonds right now. So if you stand there and say, how much do I want, how much in bonds do I want

in a portfolio? How much of my stocks do I want to take away from bonds? Sit down. the answer is zero. You're not getting a differentiated source of returns. You're not getting a different differentiated sorts of risk. So the industry's response to it is private credit, because you can pretend away the fact that this went down 15% and hasn't made money, basically it hasn't made money in 10 years. So I think this is part of a broader trend

of looking for the next bag holder in it. That's just sort of my general bias. I'm very skeptical of the motivations of people who would couch that in some sort of a, you know, democratization. And again, as I mentioned on the show, you know, the average liquid alternative funds, so the average hedge fund strategy, mutual fund, has made money for everybody else but clients. So I do think they're tremendously smart people in the private equity and private credit world. But broadly, I think this education of the allocator community is going to be so important

because they're getting smarter. And honestly, AI is changing everything. You can ask AI to help you. And we are getting calls from people who are saying, hey, I went to my, I went to Claude, and I said, how do I make my portfolio better? What can I do? And you are one of two or three things that found.

And so, and why, right? Because the math is clear. The statistics are clear. You put something in your portfolio that's generated strong returns over seven and a half years, went up in 2020, has negative correlation to both stocks and bonds. And if you start calculating things like alpha is more than some of the flagship multi-strategy hedge funds,

for that to be available in an ETF, it's unprecedented. One last question for you, before we conclude things. As somebody who has brought these funds to market and has been around alternative type investments for years at this point now, what do you think the next trend will be or the next big thing will be with regard to alternative investing products in ETF wrappers? So there's an earthquake going on.

I'm going to focus on the ETF space because I'm much closer with that today. There's an earthquake going on right now in that Black Rock. So BlackRock came into the Manor's Future space, which I love, right, because that helps to put this space on the map. Their heart's not in it. They're not concentrating on it. Where they're hardens coming up with a multi-quantitative multistrat product that is not like Manitutur's in that, you know, it goes up at very specific times, it bounces around more,

but it is engineered to give you an incredibly smooth ride. BlackRock launched an ETF on that in December last year. The ticker is IALT. It's like a magic product. It has gone straight up with very, very, very, very few wiggles over time. And I think it's close to $8 billion in assets right now. This is, this is a full frontal assault in my mind on the idea that you should be paying very, very high fees for most hedge fund strategies. And the people that I know who've invested in this fund

are some of the smartest allocators I know who say, this is the A team with Godzilla behind them. and what it's going to do is this is just like in the manager-cheeser's face, this is going to kick off a wave of everybody trying to figure out how do we offer that one-stop, low correlation, healthy return diversifier

with attractive fees in an ETF. And the incredible thing is you're breaking the story. I love it. Because nobody has written about this thing. I like the fact that we can be ahead of the game and some of these types of things. Well, Andrew, thank you so much for joining us here.

We appreciate the insights. Please come back and see us again soon for ETF Edge. Absolutely, my pleasure. All right. That was Andrew Beer over at Dynamic Beta Investments. Thank you very much for listening to ETF Edge the podcast. You can join us again next week or just head over to etfedge.cmbc.com. We'll see you then.