The Derivative - From Quarterback to CIO: John McArthur on Alts, AI, and the Future of Wealth at Krilogy

Episode Date: September 3, 2026

In this episode, Jeff Malec sits down with John McArthur of Krilogy to trace his path from backup quarterback at Mizzou and Northwestern to CIO of a nearly $6 billion independent wealth management firm. John talks about how college football shaped his views on timing, opportunity, and accountability, then connects those lessons to building a planning-first advisory culture outside the wirehouse world of AG Edwards and Morgan Stanley. The conversation dives into how Krilogy builds portfolios using a mix of active and passive tools, daily-liquid alts, private markets, and fixed income, with a particular focus on left-tail risk, crisis alpha, and why diversification still matters in a market dominated by mega-cap tech and AI narratives. John explains how the firm thinks about private equity, private credit, secondaries, and interval funds, emphasizing liquidity trade-offs, client education, and realistic expectations around distributions in a higher-rate world. Jeff and John also tackle the economic and market implications of AI, both as a powerful productivity engine and a potential source of labor disruption and how that overlays with client fears about geopolitics, inflation, interest rates, and elections. They wrap by getting practical on college savings strategy when markets are at all-time highs, the behavioral side of advising (part therapist, part portfolio architect), and close on a lighter note with John’s football roots and his personal Mount Rushmore of gridiron stories, including a nod to Bo Jackson’s legendary 30 for 30.   SEND IT!Chapters:00:00-01:20= Intro01:21-05:25= NIL Millions, Teenagers, and the Trouble With “New Money”05:26-14:26= From Backup Quarterback to CIO: Building Krilogy and Planning for the Next Left-Tail Shock14:27–24:47 = Beyond “Alts”: Private Markets, Secondaries, and Whether AI Fuels Boom or Bust24:48–33:08 = Buffered Notes, Interval Funds, and De-Risking College at Market Highs33:09–43:17 = Fear, Euphoria, and the CIO as Therapist: Coaching Clients Through the Next Shock43:18–51:45 = Bo, Ball, and Balancing Risk: From Two-Sport Legends to Two-Sided Portfolios51:46–54:32 = Bo, Bars, and Bill Simmons: McArthur’s Mount Rushmore of Football FlicksFrom the Episode:PODCAST: Scott Karl episode: Painting Corners to Protecting PortfoliosRCM Golf Clinic Sept 25th Sign-upFollow along with John and Krilogy ⁠on LinkedIn, and be sure to check out krilogy.com to learn more about what they are up to.Don't forget to subscribe to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Derivative⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, follow us on Twitter at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@rcmAlts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sign-up for our blog digest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠⁠⁠⁠⁠

Welcome to the derivative by RCM Alternatives. Send it. Hello there. Welcome back to the derivative brought to you by RCM Alternatives, where yours truly just won the annual golf outing last week. Well, my team had Jeff Eisenberg, call him Oz, from Ohio, and Jamie from Arkansas, round and out the winning team. Speaking of golf, we're doing a few golf events in and around the President's Cup,

which is coming to Chicago. to Medina this month. So go check it out. Let us know if you can make some of the events at RCMaltz.com slash golf. Okay, on to this episode where I sit down with John MacArthur, CIO of Krilogy Financial, who we first started talking with five plus years ago and has really been looking into alts in a big way since then and are now nearly at $6 billion under management.

Impressive. We'll forgive them for being Cardinals fans during the Cubs postseason run here, but how do they view the market? How do they use alts? And what should I do with my college savings? Send it. All right, everyone. We're here with John McArthur.

How are you, John? I'm great, Jeff. Pleasure to be on. Thanks for having an easy name for me to pronounce. Sometimes there's five minutes of me figuring out how to pronounce the guest name, but you're right on it. We're here. What are recording on end of August? I think tomorrow.

It's a Friday. Tomorrow's Week Zero of college football. And we were just chatting on. offline for a sec, you got some college football experience? A little bit. Yeah, a little bit of college football experience. A long time ago. I was at Missou for a couple years, University of Missouri, and then Northwestern for a couple of years.

So I had a unique experience to get a couple of years at both places. And you don't look like an interior delinement. What were you playing? I'm not an interior de lineman. I was a quarterback. Nice. Yeah. A little backup, some backup action and special teams.

So there you go. So what, high school star in Missouri and then ended up at Missouri? Yep, ended up at Missouri. Missed most of my senior year, actually. I broke my foot in high school. Yeah, week before game one. Missed most of my senior year, unfortunately, but it's how those things go. Did they win the state title without you?

We did not win the state title. We wouldn't have won it with me or without. So fun fun experience. So let's do a little, was Missouri was in the Big 12 when you were there? It was. Yeah, that dates. Now SEC. So what do you have, a Big 12 preview or an SEC preview or just a Missouri preview?

Yeah, gosh. Or none of the above. Yeah, probably none of the above. As I'm, I still, you know, am involved at some extent, pay attention a little bit, but not nearly as I did at one point in time. Mizzou should be good I look forward to to go to a couple games this year

I was surprised when they joined the SEC I didn't feel like they would be able to hang and they've done a pretty good job They did yeah they hung right away Yeah they've done a good job And then I'm going to sneak some bears fandom in here that Luther Burdon

who came from Missouri is just unbelievable We're excited about what he can do Yeah This should be a big year for him Let's hope so stay healthy Not come with Incredibly too That's for sure. Do you ever sit here now and curse, like, you could have gotten all this NIL money and all that, all that stuff?

it's a different era yeah it's a different era I mean I don't know I don't I don't I don't go to that mental space but yeah it's it's fascinating how how things have evolved I actually I think it's a negative as it like the trickle down effect

not to digress too much but you think about youth sports and some of the fanaticism and the youth level I don't I don't know that it helps that side of things you know the parent versus the kid who wants it more and you know it's for sure It's incented the parents greatly, right?

Like, hey, you can get off the payroll quick and more quickly. Yeah, yeah. We did a... It says it is anyway, but... We did a podcast with Scott Carl, who was an MLB pitcher for a while, and we're diving into all this of, like, just the incentives have gotten screwed up. Something's got changed, it feels like, but... It does.

Yeah, I don't know what it takes, but I agree with that. Yeah. And then, like, who's managing that money? Speaking of, right, as a wealth advisor, like, you're a 18-year-old getting millions of dollars? Yeah, I mean, it's, it's like, it's well documented. It's been hard enough for, you know, grown adults, you know, to manage kind of newfound wealth from so many different aspects. And now we're, now it's happening to your point at a much younger age. And then the, yeah, sports, especially football, right? That cool, you're going to make two million dollars maybe

for three years. But your peers are going to make whatever, 300,000 for 40 years. Right. and like the math will work out better and they have to budget themselves and all that stuff weird when did you think okay I'm not I'm not going to the NFL I got to think of a real job yeah I you know I think opportunity and timing is is really important at the at the college football level at any level division one two or three I mean there's you're you're with a lot of folks they can all play right and so you know being able to take advantage of opportunities and timing. Some of those things are out of your control. I feel super blessed at the experience. I think it helped me just from a life experience perspective more than anything about kind of growing up and

you know, self-advocacy and some of those types of things. Because when I transferred, I had to walk on, lost a year of eligibility and then and then had to re-earn a scholarship. And so at Northwestern? At Northwestern. So, you know, that's, you know, was that like Pat Fitzgerald was playing era when? Yeah, he was. I transferred there. in the winter of 96, and they had just finished their citrus pole season. So, he had just finished. Darnell Autry, I'm trying to remember all those names, but somewhere in there. Steve Schnur, Steve and I went to the same high school.

Steve had a storied career at Northwestern. Yeah. And then, so you got to Northwestern and you didn't convert to a Cubs fan? You stayed a Cardinals fan? I stayed a Cardinals fan, yeah. Damn it. We nearly had you. But you've had the best.

better of that for most of the past 20 years. Wow, the tide has shifted here lately, but let's hope. So out of Northwestern, you said, hey, like every young boy's dream, I want to be a wealth advisor? What did that look like to get into that space? You know, I had always been interested in markets. I think my first fascination was, you know, markets in general. And the wealth advisor path is the one that I took. I, you know, I needed to learn how to become a professional as opposed to a college kids. So my first job was at Transamerica and Los Angeles. They had a two-year management training program on-campus interview at Northwestern. It was perfect, actually. I got to move to a whole bunch of different departments, mutual fund research, and you know, you name it, just to again learn

how to be a professional and have a corporate job of sorts. Were you in the famous like Transamerica building there in San Francisco? I was in Los Angeles. That one is San Francisco. But yeah, it was out-town LA, lived in Pasadena, went to UCLA at night, get educated on the financial planning side of things. So yeah, that's where it started, the wealth advisor path. And I've always loved working with people. So that's where it started. And then spent a couple five, six-year stints at A.G. Edwards back when it was around,

great Midwest-based firm. And then Morgan Stanley for a similar period of time, which were both really good in different ways. and then joined actually former teammate of mine at Mizzou, quarterback as well, Kent Scornia. He founded Trilogy in 2009, and I came at the beginning of 2012, and here we are. And you guys avoided any like quarterback logo

or in the name, something, right? There might have been a touchdown wealth advisors. Contest have thrown a ball over a pond in our old office at one point, but our skills have diminished. like after trading here in Chicago at the trading floors at the Merck it's right backs up against the river and cocktails were flowing and invariably a guy would bet some guy like I bet you can't throw this across the river and you have people like oh sure like $5,000 and it's probably 80 yards right so maybe Lamar Jackson could do it maybe some guys could do it but yeah yeah

maybe yeah properly warmed up and everything which I'm sure wasn't the case It was not the case. And then so always interested in markets you were wanted to trade ever? You were like, was there ever a point of like, hey, should I go hedge fund route or something? No, not necessarily. Just, you know, more macro portfolio construction. I got my Seema certification in those early Krillogy years to kind of align with the transition into CIO role, which was in those early days of Krilogy. And, you know, I've honestly been just blessed to have a ton of smart people around me and on our team.

and, you know, we have fun doing it. And what do you see, like, if you pulled out of the big shops, right, A.G. Edwards, Morgan, is that still continue? You see more and more, it seems to me, like, how can there be any big branch guys left? Because all you read about every article is, like, this group pulled out and formed their own R.A., this group pulled out. Yeah, interestingly, there's still so much wealth. I mean, the predominance of wealth is still in the, the, you know, traditional investment bank

firms. I mean, they have a lot of firepower. I think, you know, having reflected on being there prior to being in the independent space, you don't know what you don't know, really, you know, you just used to, this is how things are and you just don't know any different. I, you know, it's, again, positives on both sides of the equation, but being in the independent space, you know, for as long as I've been now and, you know, having the type of culture, it seems really cliche, but we are super intentional here around our people and teammates and collaboration. And, you know, everybody's got a different experience at bigger firms. And mine certainly wasn't a bad one.

I experienced a lot of growth and got a lot of great value from it. But, you know, the culture feel on the independent side at our firm is different. Yeah, yeah. You still felt compelled to leave, right? Yeah. And then you mentioned what happened to A.G. Edwards. They got cobbled up. by Wachopia and ultimately Wells Fargo.

Oh, yeah, yeah. Yeah. Yeah, so that was in the, you know, 0708 period, yeah. Wachovia. I forgot about that name. Right. Was that one of those 09 bank buyouts? Yeah, that's right.

And then talk about, so you got founded in 09 or you came on in 2009? Kent Scornia, our founder, yeah, started the firm with like $20 million and three people. And, you know, kind of going back to the football conversation. around timing and opportunity. Kent and I remain friends, you know, post our college days and stayed in touch. And the timing just wasn't right, right out of the shoot for me.

I had literally just moved to Morgan Stanley and had kind of informally partnered with a branch manager, with the idea of setting up a formal team within Morgan. And again, timing was tough with GFC and management change and all those types of things. And so it was too recent for me

to have just, you know, leap to from A.G. Edwards to Morgan Stanley and then right after independent. So it took a couple of years for that to happen. And we were probably managing 100 million or so in assets when I came over. And we're a little under $6 billion a day. Five six billion. And then what did that look like in 2009, right? Was he purposely at that timing or just was dumb? No, I think that's just how it happened. Not a bad time to start a firm, I guess, right? When you're at the levels of the market. It was out in March is 2009. I have this conversation with my wife of my son was born in 2009 and my daughter in 11.

And we put basically the same amount of money into their college accounts. And his is like way better, right? She's like, why is this so? What are you doing? Do you favor him? I'm like, no. Yeah. Like the market was at, literally he was born in February.

Wow. And we started plowing it in right there in March at the low. So it's like, all right. He'll have to spread the wealth. sister at some point. Exactly. That's a fun, I want to talk about that later of get your wealth advisor take on a college savings and whatnot. But right, like I've heard a lot of advisors before, like, oh, I was at the big bracket and I didn't like how they were handling the risk in 08. So I peeled out to start my own firm or whatnot. So you did see a bit of that around that time. Yeah. Yeah,

it's interesting. You know, we're thinking about we're having those conversations on our investment team now. Like how do you how do you solve for left tail risk type of considerations? I mean, markets at all time highs by all account, things are clicking on all cylinders. Earnings growth is going gangbusters. Like everything seems to just be hitting right. Of course, there's plenty of noise in the background and things to be worried about. But as we know, I mean, it doesn't last forever. And so just thinking about, you know, crisis alpha, you know, left tail risk, uncorrelated strategies, those types of things.

So let's dig into all that. So where that's a newer look into that or you guys have had some alternatives. I know you've had some stuff with us for quite a while. But yeah. So you've had some alternatives, but you're saying, hey, this is looking more and more needed. Yeah, it's, you know, if you think about the wealth creation, it's just so above trend for so long now for most people. I mean, our work is always financial planning based and focused first to help kind of guide and dictate the appropriate strategy and portfolio construction. And, you know, everybody's had,

you know, generally speaking, assumingly you're taking some meaningful level of market risk outside, outsized returns relative to expectations. It's now a lot of conversations about not only preserving, but turning into, you know, cash flow during the distribution phase of that, of that process as they transition close to or into retirement. So, you know, when you kind of factor all those things in together and just recognize where markets are, historical valuations, all the things you see floating around in the, you know, financial media and so forth, it's, yeah, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's

have the tools in the toolbox. It's ultimately, at the end of the day, we're not going to, our investment team and committee isn't going to dictate how an advisor should run their practice, but we sure is heck better equip them with all the tools and resources they need to. Yeah, so what does that look like?

How many advisors and then they each get to pick their portfolio? You have an approved list or what does that look like? Yeah, we have modeled portfolios that we run. We hired a technical analyst about four years ago, who's added tremendous value to our process. that really complement our, the more traditional fundamental work. We've got a quant analyst. So we've got a lot of tools in the toolkit.

Some, of course, more tactical in nature with the technical analysis piece, some more strategic, strategically based. You know, we'll use individual equities. We'll use ETS. We'll use mutual funds. All the above on the public market side of things, individual bonds, mutis, et cetera. And then private markets, you know, You know, it's been an effort for us really out of the shoot.

I mean, the last 12, 13 years plus, I mean, private markets themselves have evolved so much just in terms of how to solve for and the different structures and asset classes that one can now get access to that they couldn't in the past, which is really exciting. And so we've approved one-off solutions pretty slow and methodically over time, really just, again, trying to cover all the bases or as many as we can from a resource perspective. And ultimately it's up to the advisor to, you know, to continue to kind of lean in and learn to incorporate with clients or not. You know, there's definitely some, you know, it's not always needed, right? You definitely don't always need to solve with private markets or alts, but I think it's an increasing.

Not on this podcast. You always need to solve with alts on this podcast. That's right. That's right. Well, especially now, right? I mean, you haven't needed to be diversified in markets for a long time. If you're a large cap, you're fine. And what's your personal and firm view on that of like,

but I could argue this, it looked just as scary five years ago, 10 years ago, 20 years. Right? Like, it's almost always the case that we're kind of burying along and it seems irrational. And it just, it's like the whole world is set up to keep this thing propped up. Yeah. And the smart ones know it can't always. last, but in the meantime, the dumb people are the, or I won't say smart and dumb, but the risk blinders, blinders onto the wrist are just like, what, just buy it? Just 3x in video.

What could go wrong? Yeah. Yeah, I mean, it's always appropriate, right, to have some level of just market beta and just be in the game, but, you know, concentration-wise, I'd heard the staff the other day. I mean, when, not if, open AI and anthropic end up going public. It's like the top 13 names are 50% of the, 50% of the S&P. I mean, so from a market account perspective, you know, so like give or take there, right, like really close. So gosh, how how diversified can you be? I mean, you know, you debt's definitely right to be to have some, again, level of beta and inevitably you're getting the AI exposure. But, you know, if you look at the private markets, some of the, you know, head strategies or, you know, trend strategies, which are less than non-correlated or even, you know, venture and private equity tend to be, again, in the right situation. really nice compliments and in really benefiting from the U.S. economy in a much more meaningful way. Again, it's become so funneled and narrowed on the public market side. There's so much of the economy that folks just are participating in when they're just in public markets alone.

What would you say? I'm a client. I'm arguing, hey, I think it is a winner-take-all economy of the future. And there's going to only be a handful of these big tech firms that own everything, right that drive all this AI that have the content that do all this so why why do I need that long tail of those other equities like why do I need an index at all an index on the public side yeah of like right if 50% is those names like yeah maybe I'm cool with it because right that's a winner take all scenario and I believe that's what's going to happen yeah you know the challenge would be that's the belief and that belief existed in 99 that belief is it yeah two things 2007, right? So, you know, if to have some level of exposure there is prudent, right? But, you know,

the math certainly shows if you weather the downturns in a much more meaningful way, that the compounding wealth effect and kind of smoothing out the ride, if you will, is going to help you win in the end. Particularly, too, when you consider one's time frame, right? Like, you may say, look, I'm looking to, I'm looking to shut things down or become fully, fully dependent on my portfolio for cash flows in retirement. I mean, the market doesn't care about your time frame, right? I mean, it's going to, it's going to pay. We can't announce bad earnings because Jeff's about to retire.

Right. Right. Yeah. So it's, I think in periods like this, and again, I'm not suggesting that the top is even near. I just think the prudence around diversifying into other markets, both public and private. I mean, we have a call this afternoon with our team in regard to fixed income and the bond. market. I mean, this is, of course, the moment, you know, when the 10 year is at 475 and, you know, clients are wondering why any bonds are owned in the portfolio. They're once again flat to negative

year to date. Like, why are we doing this? It's, it's, you know, that's a panic on the bond side akin to bottoming inequities. That doesn't mean that the 10 year can't press higher to 5, 5.5% or beyond even, but we would suggest a lot of the damage is done there. given where cash flows are on fixed income even. So I think it remains an important piece. Would you say your model portfols are mainly 6040 like? It's weird in our space. Everyone's always comparing to 6040.

And I'm like, who's really doing 6040 anyway? Yeah, yeah. And for sure it's not just spy and ag, right? It's like maybe it approximates that, but it's significantly more dynamic than that. Well, I think the other thing, well, so the short answer is there are, you know, essentially five different risk buckets in each of the kind of the model philosophies, if you will. And our approach, again, is to we want to give advisors and ultimately clients a large degree

of choice to kind of align with their belief system. So that may be, you know, everything from purely passive, I want as low cost as I can get, you know, kind of per our conversation earlier, or I believe. the benefits of both active and passive combined. And so some of our solutions are truly roughly a 50-50 mix of both of those. So what we deem kind of our less efficient asset classes will have some active management. And then it's the daily liquid alternative solutions. And, you know, I've long felt that the academic theory has been terrific in that space, but really hard to implement in a consistent and compelling way. And we've, you know, again, some of it's maybe

better to be lucky than good. I would attribute it to our talented team, but, you know, we've, we've had a lot of success in the daily liquid alternative solution. So to your question, it might look more like a 60, 20, 20 for many as opposed to, you know, a 6040. And then do you feel like some people get to that 6040 by, well, the 20 active, whatever, kind of looks like a equity or it looks like a bond from a risk standpoint. So maybe we'd jam it into that bucket. Well, that's really critical, right, is understanding the risk that you're actually taking. So that 20%, let's call it an alt sleeve. I don't love the alt stigma, by the way. It has a negative connotation. But, but for, you know, it's, yeah, it's important. They're not certainly all created equal. I mean, commodities, you know, long commodities would be a high ball solution where, you know, merger arbitrage, market neutral. I mean, there's a whole bunch of different ways to play that sleeve. But it's got to, you know, it doesn't have to be non-correlated, but it sure should be quite a bit less. It should help hold up the portfolio with equities falter. Yeah. That I'd get wonky for a minute, right? Like,

you could even have something positively correlated, but it's negatively correlated at the right time. Yeah, you bet. Yeah, which is basically managed futures can act like that, right? I mean, I'd say they're non. Yeah. But for a lot of time, they're long stocks, they're long bonds. They're in the same positions. You bet. It just can switch. Absolutely. Which a lot of people miss of like it's it's the path of the correlation, not just the raw number over X period of time. Yeah. Well said. So you mentioned you don't like alts. What would you call it? Is that more from the clients? Yeah, private markets, I think. But that's what that's what the solutions that are anything other than less than daily liquid. Right. That I can't buy on the exchange basically. But do you feel like clients

having a version of that term, to the alts term, or it just starts a whole conversation of like, what, what? It's probably my own thing. Alts feel like it's, it's, I shouldn't, shouldn't be doing this kind of thing, right? Yeah, right. Like, this is like, way out, you know, bleeding edge of sensibility, maybe. No. All right.

I'll work on that. Private traditional. No, yeah, I don't want to, I don't want to make that any bigger than that. And then, so what is that suite of privates that you guys look at? A couple there, so it's basically all hedge fund categories? You know, it could be hedge funds. It could be tax favorable hedge funds. It could be infrastructure, you know, private credit or private lending in general.

It could be private real estate. Secondaries. It's been a really hot space for the last few years, both on the venture side and especially like late-stage growth equity. That's like getting a piece of anthropic. Exactly. Last year or something like that. Right.

Yeah, exactly. Right. Could be, you know, private equities, you know, small mid-market buyout. I mean, this, the sample set is just so large. I mean, to the comment earlier around truly participating in the U.S. economy and Blackstone has great educational pieces on, you know, companies that have a certain threshold of revenue, higher than $100 million in revenue in the U.S. I mean, most of them are private by a significant margin. It's like 87% or something like that. So I think that resonates with focus. Like, gosh, if I'm in the Mag 7 or I'm in the top 10 to 15 publicly traded S&P names, and I truly do really have a narrow focus here. There's so much more to the U.S. economy that I could be participating. It doesn't come without risk, of course, right? But liquidity being, you know, one of the highlights.

But from a long-term perspective, you can certainly be additive, yeah. Isn't it, is that a little surprising to you, right? There's been so much private equity money for so long. and so many deals. Like you'd feel like every good private company's been snapped up. Like five, 10, 20 years of that going on massively.

Yeah. It's interesting, though, like if you think about, you think about like the cloud computing, you think about the internet, you think about the mobile transition. If we think about all these,

let's call them, innovation cycles, technology cycles over time. And now, of course, we're amidst AI at whatever stage it is. I mean, there's so much incredible innovation that's happening in these new companies that are being born and just growing faster than ever, doing more with less. I think that's super exciting for the U.S. economy on a go forward.

So irrespective of whether we're close to the top or not close to the top, I mean, there's still, you know, the future winners, the future Meg-7s are being born in this moment. I think that's really exciting for investors. And I've just seen friends in private equity and firms that have gotten bought. Yeah. They don't just sail off into the sunset. They're going to start another company or they're the next level of executives or the team is like just got paid out. Maybe they go sale for a couple months or something. And then they're like, all right, what's next?

So I think that's where that next layer of private equity investments comes from. That's so true. Yeah. Those people are performers, right? They're born to build and create and are inspired by that. it's yes, they've done well financially, I assume, over time, but in so many cases, it's way more than that, right? They've got this.

A little bit of is the entrepreneurial folly, too, of like, oh, that worked. That's easy. I bet I could do that in. Yes. Right. I can try that now over here. And a lot of times, it doesn't work. Sure.

Yep. That's what keeps the world moving. That's exactly right. Yep. And interested on your thoughts, you thought you kind of sounded like AI is going to be this productivity. the push and fuel the economy even more. My theory is we have a big risk that it causes a big recession, right?

That there's, oh, I think that's right. A lot of labor costs are removed, which means people's salaries. Speaking of anthropic, and I've said this on the pot a few times, I saw a deck that said they're trying to take 15 trillion of labor costs out of the market, which is basically 15 trillion of spending. So I'm like, that can't be good for anybody. Right. Right, for the economy.

So yeah, what are your overall thoughts there of maybe the market goes higher? I think it, I think you're right. I think it's, I think, I think our fixation has been on like the, the, the infrastructure and the large language models as it relates to AI. It's really about, I think, the next phase of it, which plays out, in my opinion, over the next few years of the businesses that are born on a lot. of that heavy lifting and spend that's taking place. I mean, I think you're right that it ultimately ends in a downturn, and it's probably not too different from those big majors that we've discussed

already. Obviously, I don't know the timing of that. I don't think it's an imminent thing, though. I think that's, you know, probably a slower moving phenomenon. I mean, there's plenty of factors to go along with that, you know, the 40 trillion in debt and significant deficits and the pressure on rates. I mean, right, there's a culmination of factors, I think, that come into play. I just think it, my sense is that because it's such a topical concern right now tells me that we're probably way early. Yeah, right. If we're all talking about it, it's not going to happen. Yeah. Yeah, but to me, a lot of people, I'm like, are you crazy? Like, they're building to take away jobs. And then maybe it's a weird, I don't think stagflation maybe is the right term, but like the market's at all-time highs.

Yeah. But this underlying consumer economy is hollowed out. And maybe for your clients and a lot of people that listen to this podcast, that's just fine. They've got investments that are doing well. But it seems like that would be unsustainable for, you know, you don't have any more revenues coming in for a lot of those. Yeah. I guess it does make me wonder, though, around, you know, there's been disruptive technology forces in the past that, you know, changed kind of the job market and a lot of the professions that once existed that now don't.

It just does make me wonder like what what exists in the next five, 10, 15 years from a profession perspective that doesn't exist now that we're not even thinking about. Somebody running somebody responsible for managing instead of people, they're managing the agents in the in the firm, the AI agents. I don't know. I mean, my way is all that passed of like reprute replace labor where this is like replacing the actual brain.

Yeah. So it's like you don't have to hit these buttons anymore. Now you can go over here and hit these buttons. Yep. This is like, no, we don't need your brains at all. Yeah. We got to figure out. Think about the value, though, and day-to-day interactions on pick your business of the people skills, though, right?

It's what I tell my older two that are out of college. You know, the value of being good with people, a good communicator. I don't think that's going away. I think the value of that in the future is even more critical. And that's, I'm surprised there hasn't been, remember the whole robo-advisor move? Yeah, oh, yeah. Whatever that was five years ago, I'm surprised there hasn't been like AI advisor moves here. I'm like, hey, you don't have to call your, you know, and a lot of young people don't like talking people anyway.

So if they've just done their phone and can interact with their agent. Well, I think that's coming. I feel like Robin Hood and maybe some of the others are working through that. I don't know to the extent that it's live or actually happening, but I've definitely heard conversation of it. Yeah. Hopefully we'll be out of the way by then. You mentioned private equity and private credit.

Like over the last two years, where you, you know, the liquidity is the big risk there. Private credit, especially with like Blue Owl and all those groups, putting up gates and all that. Was that surprising or dismaying or what was your take? on that. In fairness, you know, we've been much more lukewarm for the past couple years. I mean, ever since you see the historic rates, yeah, I mean, there's an inevitability aspect there that you can't go from zero to five in short order without having some consequence. So we have certainly some solutions on the platform. We've been much more lukewarm on it for the past couple years. But, you know, outside of a few specific examples, by and large, the space is holding up just

fine. I mean, even some that are in the news, it's like, you know, you get this negative headline risk and I don't want to name names, but like, yet the strategies are positive year to date. And by the way, the bond market's negative. So yeah, yeah. You know, there's a lot of, there is a lot of noise. You know, I don't want to be totally dismisses of it. I mean, dismissive of it. And, you know, A lot of crules are happening and increasing. But again, I think that's just a function of the historic rise in rates and kind of the persistency around it as well. And then, you know, interestingly, in real estate, like, I would argue that, you know,

private credit's probably going through a similar type cycle where, you know, there's this troughing phase and then, you know, you come out on the other side. There's opportunities amidst it. It takes a couple of years to work through. I mean, that really happened on the real estate side for the, you know, better part of three or four years and I feel like that pendulum is swinging in the in the better direction. You know, even even despite the rate pressure we've seen. And private equity?

Have you seen less distributions there, a little bit of a different experience? Yeah, that's a pressure for, yeah, for private equity and venture alike, which does make the secondary space interesting. That's been of interest to us for a while. I mean, if you can kind of shorten that J-curve effect and get involved with businesses in their four, fifth, six year of existence on kind of a normal 10-year cycle, then that shortened that theoretical time frame

of seeing some DPI and the distributions. But, you know, I think, you know, for segments of private equity, you know, small mid-market buyout, I mean, it's such a massive universe. And then if you look at the public small cap side of things and look at the lack of profitability, I mean, there's an interesting conversation there

of having some attractive valuations and opportunities. Obviously, it's not all created equal, but again, to the point earlier, for certain clients, that can be a nice compliment to the public markets piece. I mean, inevitably, distributions will increase and happen again. And so hopefully we're starting to see that a little bit. Do you ever have to convince clients to the efficacy of private equity? Like, I'm thinking of, I can't remember the stats, but it's like more and more companies aren't going public.

all, right? Right. Like they're just remaining private until they're a trillion dollar value or whatever. So like how do you access that? You've got to get through one of these channels. Yeah, I think the system is changing. My sense is that if we look forward in the next five to 10 years, the mechanisms for liquidity will continue to increase in a significant way, which I think is a really good thing. You know, I think it's for us that it's really just about education for clients. I mean, we don't want to, obviously we want to have a strong position and conviction around beliefs and the why and taking the long view and the benefits of incorporating certain asset classes. But it's really an education thing. At the end of the day, there's some that

will just say, and it's not right or wrong, we just say, look, I can't get comfortable with anything less than daily liquidity. I feel convicted. There's a give up in that, for sure. And I think there's a lot of data that proves that. But if the person feels that way and and sleeps best at night by not having anything that's less than daily liquid, then that's where they should be. See, I can't have your job because I'd be like, why? What is it doing for you? What are you going to do with that daily liquid?

Are you going to pull it all out and travel to Africa with cash in bags? You're right. Yeah. Yeah. You're right. I mean, there's a careful boundary there of pushing them outside their comfort zone, right? It's more of education. Here's the why and look for, like,

consensus and buy-in as opposed to, you know, them pinching their nose and see, okay, I'll do it. Yeah. And then talk to that for a second of like the move. Everyone came out of the big brackets and into independent advisors, mainly doing ETFs. Is that the case here? Like, what would your ETF mutual fund mix look like?

No, we're pretty split. I mean, it's everything, again, from individual, to ETFs to mutual funds. Yeah, I think it's definitely more passive and mutual fund. I think nowadays, too, though, you can get active management within the ETF wrapper. Yeah. And we have a fair amount of that, both, you know, really on the equity side and the fixed income side. And I, you know, the, the alternative side has gotten a lot better in the ETF wrappers as well.

Of course, it's not as pure and ideal, in my opinion, as you're going to get with a less liquid solution. There's, of course, limitations by being able to offer daily liquidity, but that's involved, I think, in an effective way. And what about interval funds, right? Because kind of a little bit of both. Like, hey, you can access some of this cool private stuff. It's exchange traded, but it's not as liquid as you maybe want it to be. Yeah, I think those are interesting. I think to your point, you know, I think for people to just have the peace of mind around there being a liquidity mechanism is enough.

I mean, we remind people, too, like, if everybody's running for the exit at the same time, you know, that's not a good time that you want to get out anyway. So the fact that a manager is going to create some liquidity restrictions there is for your benefit. As long as that's kind of message on the front end, I think that's critical. But, you know, that's a good point. That's probably missed by most people. And like the blue owl we mentioned stuff like, hey, they're not doing anything criminal. They're trying to protect a run on this asset. Yeah, it's protecting everybody.

the entire investor base. And I think, yeah, it's easy to miss that one for folks. But the interval fund structure, I think, is interesting, certainly applicable in scenarios. I mean, we have a couple fixed income solutions that we really like. I mean, we've talked a little bit about, well, topically, the discussions are like senior direct lending for the most part with private credit, but there's such a much more dynamic private lending, private credit space beyond that. And I think it's a really interval funds can be an interesting way to kind of marry the benefits of public and private, for example, in one vehicle and entrust in the manager and their skill set and team and resources to have decision making around where the best opportunities are given the market environment. So I think, you know, that's an example I think. That's interesting.

I agree. And like some insurance related stuff in their lending and like that middle market that you need to term to do that deal. can't do the term without right, putting it in that interval. And then, yeah, use that income to fund some beta to fund some other alternatives. And like, that's a good looking portfolio. You bet, you bet. 3.51 exchanges. You guys seen a lot of that.

Like, is a lot of your clients wealth in these Mag 7 names and they want to kind of get out of it? Or you're not seeing that as much? We're not seeing a lot of it. It's definitely a topic of conversation, but we're not seeing a lot of it. We're seeing more of the long, short tax solutions. That's been a much more topical conversation. I mean, that's been, you know,

in our experience, a really effective solution. But, yeah, the 351s, again, conversations are happening, but we're not seeing a lot of it. Yeah, that's crazy. I was reading that article a month or so ago, of that AQR hedge fund that gets the money from the tax is now the largest hedge fund in the world.

Which to me is a little bit weird. Like, cool, you're taking out of this concentrated position, you're doing some tax less harvesting, but then it's going into their hedge fund. Now it's locked up over there, essentially. Right? Like, you have to pay your tax when you get it out of there. So you've changed the character and timing of it, but you still have the tax over there. Well, I think there's a couple different, you know, so that one of the AQR solutions is the hedge fund that has a tax piece to it. I mean, to their credit, they've had a phenomenal track record with long, short and trend, kind of married together. The second piece, which is more like the 351, I would suppose, given that it's capital gain focused, is a separately managed account. So, like, they're able to, you know, manage the money to provide pre-tax alpha, but also defer, you know, tax, tax liability. There's no, there's never a magic bullet, right? Yeah, completely self.

It's a deferral mechanism. Yeah. And then I should have mentioned this back. We're talking a little more privates and all. But buffered notes, all that jazz, are you guys doing a lot of that? Yeah, we've done some of it. Yeah, it's really interesting. That space has gotten.

Yeah, massive. Really, really interesting. Yeah, but there's some interesting solutions there. So, yeah, we've done some of that. My hesitation is always like from the bank selling it to me. Why are you trying to sell me then? Right. Yeah.

I instantly put up a thing of like if you are trying to get it off your books, something feels weird. I'll circle back so my son's a senior. Like, what do you tell these people? I've saved up all this money for college. I'm about to spend it down. And the market's at all-time highs. I can't do a lot of the alternative stuff.

I know how to do in the different college savings accounts I have. So what do you tell clients of how to manage that final year of that? Go to cash slowly. Yeah, he's a senior in high school about to have a four-year college run. Exactly. Yeah, yeah. I think with. education planning and I felt this very early in my career, early 2000s, like,

retirement is one thing for folks. Like there's, there's various levers you can pull. You know, you can work longer, you can live on less. Like, you know, you can, you can be a little bit more flexible there at that Sarangetty, hot air balloon trip. Yeah. Yeah, exactly. To not have the college funds there is like from a behavioral perspective, just a different animal. So the short answer to the question would then be get more defensive, and particularly because it's imminent. And I would expect that if it's an age-based or equity-oriented allocation,

that the growth has been outsized probably relative to expectations for a good long run here. And so given that tuition is going to be due here every six months, let's call it for the next four years to dial back that risk. I don't think you need to go to the stable value fund per se, in my opinion. You know, definitely dialing back that risk allocation makes a great deal of sense. I mean, maybe it's 20, 30, 40 percent equity type of thing would be my thought process there, given that you still do have kind of four years to fund. Exactly.

Like, you know, if you miss this. And especially what we're talking about, if it's like a blow off top. Right. Yeah, exactly. You don't want to be sitting in accelerate another. Yeah. Yeah. Right. And then I've got a free tip for you when you talk to really young clients,

because nobody taught, right here, I'm not sure in St. Louis, but here in Chicago, like, a grade school, private grade schools, 30, 40, 50 grand. So I'm like, when you meet a girl in a bar, start saving, right? Like, yeah, that's right. It's known wealth management to, like, start saving for college when you have a baby, but no one tells you, like, to pay for elementary school. Yeah. So you meet her in the bar, start saving for elementary. Starts in right away.

A couple less drinks. Yeah. Yeah. But yeah, these costs have been getting out of hand. No doubt about it. Awesome. So what, two questions. Like, what's, we talked a little bit about the, is that your fear or the clients here?

I kind of want to hear like what your clients and obviously they had thousands of them that have thousands of different opinions. But if you pulled them, what do you think their biggest couple fears of the next year or two would be? I think this goes back to another reason why I don't think, generally speaking, like, this is the top of the market, the top of the cycle, because I think for the most part, there is a lot of concern and fear. I don't see anything close to euphoria from clients, broadly speaking. They're concerned about Iran and geopolitical conflict. They're concerned about interest rates, you know, those, you know, inflation. Those are the kind of the main topical things, you know, administration, whether you like the administration, whether you don't. Like there's a whole litany of, I think, topical financial media type concerns, which,

which is interesting because the market is at all time highs and like just based on price and based on the last handful of years of performance, you'd say, gosh, I sure feels like euphoria, but like sentiment wise, I don't, I don't get your vibe at all. You're not getting calls of like, hey, I want to up my AI exposure because Jim down the block just bought a new car. Right. Yeah. That's more characteristic of tops, in my opinion, but we're not seeing that at all. And I'm involved in a lot of those conversations.

Yeah. And then how do you, is that a firm mantra or each advisor of like, how do you handle the behavioral aspects? Like you mentioned the administration, you mentioned Iran. Yeah. Like if you're invested in some of these energy stocks and the straight's open, straight's closed, straight's open and they're up and down 15, 20% a day. Yeah.

Yeah. Right. What are those conversations like of like, hey, just stay the course. We've got a plan. Stick with the plan. Yeah, I mean, that's generally, that's it. I mean, we get way more nuanced than that, of course. But yeah, to be trading based on headlines, of course, is you have to continually be right, which is darn near impossible. So our focus as an investment team is just really frequent communication and styles of communication with advisors. That may be weekly technical analysis videos. It may be monthly investment meetings at a firm level.

It might be an impromptu call like we have this afternoon on the bond market and how to think about it and how to frame it, how to talk to clients about it. It may be our weekly written memos that we do every weekend. I mean, so for us, it's just continually conversing about what we're seeing and what's important to think about, both with markets and headlines, but mainly with portfolios and changes we're making in that regard. So communication, you know,

it's the old cliche, you know, good communication solves a lot of things, and that's kind of our thought process. So preempt them, right? Like get them the education, get them the answers before they ask the question. That's right, yeah. And you started in 2009, so you didn't have to have the big conversation there. of do we get out?

I started in 01. The firm started at 2009. Yeah, yeah. Yeah. So you had two times where you were looking at the bottom. That's right. That's right. My neighbor down the street here's wealth advisor.

He was, I guess that was 20-20. He's like, I'm just a psychiatrist. Yeah. He's like, I'm not a wealth advisor. I'm a psychiatrist. I have 30-minute slots where I talk through everybody's problems. And then on to the next day. Yeah.

which is that you like that part of the job or that like gets gets tiring? No, I like it. I like the human side of it. I like, I got into this business because I like working with people. And I like, I guess similar to the quarterback. And I like the responsibility in being accountable. That part's fun. I never thought of that.

Like the CIA is kind of the quarterbacker, maybe the offensive coordinator, right? And defensive coordinator, the headcoat. Yeah. Like, okay, we need this on the field. Yeah. The fun part is you can have offensive. and defense on the field at the same time. Yeah, that's true. You're right.

And should. And should, right. A lot of people forget that. They're like, no, it's, right? Is that the old advisor model? Like, oh, we're now, we've seen the macro and we're now tilting defensive. And it's like, it's more of a like put this unit on and off, shift the allocations instead of like, this isn't always on allocation to protect things.

That's right. Yeah. Because as we've seen, risk happens fast. And every day that goes by, it seems like that, you know, with algorithm of trading and you know, I think there's just, it's going to market this move faster and faster as time goes. You know, we'll be 24-7 at some point. So for sure, it's coming. Perpetual CME is doing a bunch of stuff on that of like, you know, all the prediction market screwed up.

Yeah. Speaking of it, like, you have clients asking you if they should get involved in that stuff? Fortunately, no. At least that's not coming to me. I'm sure it's being asked, but. And they just say, easy no. I mean, that's like, you know. If you want to throw up people like it seems there could be some use case.

Sure. Right. If you knew your portfolio is going to get screwed if the whatever, whoever wins the midterms or something, which in and of itself, that statement is silly, right? Right. You never really know. But assuming something like that and you could hedge a little. Yeah.

Who knows? Yeah. For certain things, there could be definite benefits of it. But I mostly agree. It's like I think the stats came out like nine. 96% of people lose money. Wow. Yeah.

Messing with it. I didn't prep you for this, but we'll leave with your Mount Rushmore of football movies. So your top four. I never say your favorite because that gets hard. So I borrow from Bill Simmons asking you for your Mount Rushmore. Wow, that's good. I'll give you, you want a list? Good.

Your goodness, yeah. I mean, you know, the first thing that came to mind, candidly, was Rudy. Yeah, I was going to say Rudy. Yeah, what else do you have for my? I would go any given Sunday. Yeah, that's up there. Longest yard, original. Yeah.

Bert Reynolds. I would say any given Sundays up there, Rudy's up there. You know, I think this is a little bit off topic of the question, somewhat related. The Bo Jackson 30 for 30 is one of my favorites. He was my childhood star. I had a poster of him when I was a kid. It had him in his Royals baseball uniform on one side. side and then his Raiders uniform running the football on the other side.

Yeah, he's a love it. My daughter is on the travel softball team out by O'Hare and it's at the Bowdoome. Oh, really? New this year. So we've been going there for like weeks and she's like, what's this? Why is it called the Bow guy? Yeah, and I started explaining all this. And like inside is all these quotes and like, wow.

I'm like, this guy was unbelievable. Like he was the best you could be at two sports. Yep. At the 30 for 30 is a good one if you haven't seen it. All right, I'm going to put her on that. All right, I think we'll leave it there. We'll put Cryology down in the show notes for everyone. Take a look, give them a call, see what they're up to,

and then we'll come see you next time. We're in St. Louis. Please do. Thanks, Jeff. I enjoyed it. Okay, that's it for the pod. Thanks to RCS for sponsoring. Thanks to Jeff Berger for producing.

Thanks to John and Crilogy for coming on. We'll see you next week. Peace. You've been listening to The Derivative. Links from this episode will be in the episode description of this channel. Follow us on Twitter at RCMaltz and visit our website to read our blog or subscribe to our newsletter at RCMaltz.com. If you liked our show, introduce a friend and show them how to subscribe. And be sure to leave comments.

We'd love to hear from you. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference past their potential profits, and listeners are reminded that manage futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses.

As such, they are not suitable for all investors.