We Study Billionaires - The Investor’s Podcast Network - TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast)

Starting point is 00:00:00 You're listening to TIP. On today's episode, we sit down with Alex Cahidi and Damien Bisserie to discuss balanced portfolio allocation tactics used by billionaires like Redalio. Damien used to work for Redalio at Bridgewater Associates, the largest hedge fund in the world with more than $160 billion under management, while Alex has over 20 years of experience managing billions of dollars for his clients. We discussed why, after years of research, Alex and Damien have concluded that a portfolio you based on risk parity is the optimal structure for any investor. So sit back and enjoy this

Starting point is 00:00:34 discussion with Alex Shahidi and Damien Bisserie. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Hey, TIPs. Before we jump into this episode with Damien and Alex, I wanted to clarify a few different. things. Quite a few of you had talked about Preston and me talking too much about Bitcoin here on a show. And I wanted to clarify that in the sense that in a way we do and in a way we actually don't. Every Wednesday, Preston has his own episode where he's the only host and he'll be talking solely about Bitcoin. If you don't want to listen to it, that's completely fine,

Starting point is 00:01:25 of course. Then, you know, don't listen to it. And then on Saturdays, I host We Study Billionaires, sometimes with Preston, sometimes with Trey. And it's a completely regular episode. So we won't be talking about Bitcoin. We'll talk about Warren Buffett, books, stock investing, and how to optimize your portfolio like we're doing in this episode here with Damien and Alex. So hopefully you see this is a good thing. If you're really into Bitcoin, listen to the Wednesday episodes. If you're not into Bitcoin, listen to the ones you have on Saturdays.

Starting point is 00:01:53 We try to make the difference clear in a few different ways. One way is that the way I'm explaining it here, but another way is also how we title the episodes. So if it's a regular The Investors podcast episode, for instance, this one, This is called TIP 328. So that's a regular episode, but we won't be talking about Bitcoin. Then we have the Bitcoin episodes, and they are called BTC 4. For instance, that's the one you had last Wednesday, and next Wednesday it's going

Starting point is 00:02:17 to be called BTC 5. And then the third way is that our logo is red, and there is a sketch with me and Preston on the regular episodes, and then the Bitcoin episodes, it should be orange and only Preston or the guest, for that matter. Now, some of the podcast players that we work with actually have that feature. For instance, Spotify has that feature. But Apple Podcasts are just fixing it right now, and it hasn't been fixed yet. So if you are on Apple, it may look like it's a regular episode whenever it's not.

Starting point is 00:02:44 Okay, let's jump into the episode with Damien and Alex. Welcome to the Amherstas podcast. My name is Stake Brodelson, and as always, I'm accompanied by one of my co-host. And today, I'm here with Trey Lockerbie out there in LA. We are super stoked to be sitting here with Alex and Damon to talk about the new ETF. Thank you for having us. So let's kick this show off. How did you guys get to know each other? And how did you come up with a new idea for your new ETF, R-P-A-R? Well, going back in time, I started at Merrill Lynch as a financial

Starting point is 00:03:17 advisor. And what's interesting is when you come in, they give you a phone and a computer and they say, go get clients. And as a more of an investor rather than a salesperson, I set out to try to find what I thought was the best portfolio for clients. And it's been this lifelong journey. journey. So this is over 20 years ago. And as I was going through this process, I discovered a firm that I thought was particularly insightful Bridgewater Associates, largest hedge fund in the world. And they're just very thoughtful about how they build portfolios. And so I started spending a lot of time learning about their perspective, which I thought was different and unique and made a lot of sense to me. And I met Damien at Bridgewater. And he was there for nine years. It all kind of

Starting point is 00:04:01 came together at a particular meeting Damien and I had with Ray Dalio. It was a memorable meeting because Ray had a unique reaction after the meeting. It was the first time he had met Alex, and Alex had a good back and forth with him. And he grabbed me in the hallway afterwards and said, hey, that guy I was talking to has good common sense, we should hire him. And so that was about as high praise as I've heard from Ray after initial meeting. And so I gave Alex a call. I gave him the feedback and Alex said, you know, I'm flattered. I would love to spend time working

Starting point is 00:04:35 with you guys out there, but my family is here in Los Angeles. And so could I open an office in Los Angeles? And I said, no, I've been trying that for years. And I don't think it's going to work. And so he said, well, while we're on the topic, would you ever consider working with me? And so that was the genesis of what ultimately became the firm that we launched, which was Advanced Research Investment Solutions, and we later combined forces with evoke advisors. But that was that, I think, the initial seed to the idea. Very cool. And David, I have to talk a little bit with you about your experience at Bridgewater

Starting point is 00:05:07 Associates. So for those who don't know, Bridgewater is one of the largest hedge funds with over $160 billion in assets under management. And Ray Dalio, who you spoke about, is himself a billionaire worth somewhere around $16 billion, I think. Ray has also kind of pioneered this concept that the holy grail of investing is made up of about 15 uncorrelated investments and uncorrelated being the key word. So this is obviously possible for someone maybe as big as Bridgewater, but how is that realistic for a retail investor to find

Starting point is 00:05:44 15 uncorrelated bets? It's probably not possible for a retail investor to find 15 uncorrelated bets. But there is the possibility to incorporate four or five uncorrelated return streams. You just accessing liquid public markets in an inexpensive, efficient way. And that's essentially what risk parity is. So if you think about the traditional approach 6040 or some derivation of that, that is primarily invested in equity and equity like risk. And so you have to check one number to figure out how you did day to day in your portfolio. Just look at what the stock market did. That's why when you turn on the CNBC, they talk about stocks primarily. That's all that anybody cares about, their portfolios are concentrated to that one thing. And the idea of the Holy Grail is finding

Starting point is 00:06:35 a few things that are unrelated to each other and taking a much greater advantage of diversification. And it's a simple concept, but in practice, very few people do it. So risk parity is our approach to implementing that with liquid public markets. And so essentially, if you think about the asset classes we use there, in addition to equities, we identify other assets that are reliably different than equities, but still have attractive returns on their own. And then to the degree that they come packaged up in a lower returning form, we actually make adjustments, which we can describe. But essentially, the other asset classes would be treasuries, would be inflation, protected securities, different types of commodities, both commodity-related equities as well as gold. And all of those

Starting point is 00:07:22 things are relatively lowly correlated to the stock market. So when you combine those things with stocks, you get something that's a lot more consistent than being concentrated in one thing. I have a follow up to that question. So stocks themselves can be uncorrelated, right? You have different industries, different sectors. So how much of the portfolio is typically thought of us? Are stocks just stocks and that's how we should think of it? Or can you dig a little bit deeper into a stock portfolio and say, look, this is in itself a little bit more diversified because, you know, banking isn't that correlated with utilities or whatever it might be? That's a great observation.

Starting point is 00:07:59 So that's true that if you think about what an equity is, it is a package of earnings from a particular business. And businesses have earnings that are driven by different factors. So you're right that there is diversification across different industry sectors. But the challenge is that when you invest in equities, you also have certain risk factors in common, namely economic risk. So all of those earnings tend to be better in a strong economy and they tend to be lower in a weak economy. So that is a common factor across all equities, no matter what sector you invest in. Similarly, interest rates can have an impact.

Starting point is 00:08:40 So if you think about what an equity is, it's a present value of all of those earnings, and that's impacted by how you discount those earnings. And many companies utilize leverage as well. So they're very directly sensitive to the cost of leverage, which is the level of interest rates. So those common factors tend to dominate the behavior of equity markets day to day. And so when you look across different sectors, they tend to be very correlated to one another. You don't usually find different equity sectors that have zero correlation just because of those common risk factors. Now, that said, you will benefit by having as much diversification

Starting point is 00:09:18 as you can within your equity allocation. And it is important to think about equities that behave differently across different environments. So earnings that are different across different economic environments. And that's why we do utilize commodity producer equities in that way. But we are also honest with the fact that those are not zero correlated to stocks. They are probably 0.6 correlated to stocks. And so what we also hold is gold. And gold is pretty close to zero correlated with stocks. And so when you put the two together, you get a package of commodity exposures that are actually quite lowly correlated to the broader equity markets. The one thing I would add is when you think about diversification, you really want to consider

Starting point is 00:10:01 it during the worst of times because that's when it's there to protect you during the worst periods. And if you think about the 08s and the first quarter of this year in 2020, when you had a massive sell-off, just about every stock went down. And it's the real diversifiers like treasuries, and we'll get into this in gold and inflation protected bonds like tips that go the other way. And so you've heard this saying of during a crisis, diversification doesn't work because all correlations go to one. It's true for a lot of these assets, but for many others, the correlation actually goes to negative one. It actually does its best during the worst of times. And those are the diversifiers that are truly valuable.

Starting point is 00:10:41 And so we'll talk about that a little bit later. You mentioned something interesting there. You said that you're looking at commodities producers. Does that mean that instead of holding gold or oil directly, you might be holding Barrett's gold or ExxonMobil? We hold gold on a direct basis, so we invest in the physical metal, whereas with the other commodities, we access them through the commodity producer equities. And we do that for a couple reasons. Commodity producer equities, in our view, based on our research, have higher returns long term than commodity futures. So some risk parity strategies utilize the futures. we think we're going to generate a higher return with the commodity producing equities.

Starting point is 00:11:23 There's also, from a taxable investor perspective, some pretty significant tax advantages to utilizing the equities. So you can essentially get deferred long-term cap gains instead of realized income from the futures. That's a pretty big deal over time. And then we can build the portfolio in such a way that we can be cognizant of the equity risk we're picking up in the commodity equity exposure and either, hedge that through the gold or hold a little bit less of that in the broader equity allocation

Starting point is 00:11:53 we have. So that's how we adjust for that. But we found that in the context of this portfolio, the ETF that we're managing, that is a more efficient, higher returning way to get the commodity exposure. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, in every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year,

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Starting point is 00:16:20 which is something that Dahlio had coined, I believe. And the philosophy is essentially that all the bets that make up the portfolio are uncorrelated and that the risks kind of offset each other, or at least balance to a certain degree, between the level of risk in each bet. Is that a good way to explain risk parity or how do you guys think about it? Yeah, why don't we start at a high level and work over it? down, just so that we all end in the same place. So you can think of it as like a traveler, right? Every portfolio sets on a journey to go from point A to point B, and hopefully point B is

Starting point is 00:16:56 higher than point A. And these journeys go through peaks and valleys, and you can think of that as volatility, right? There's ups and downs. And the journey ends when the strategy is abandoned, and hopefully it's not at the trough. And so investors have a choice of what path they want to take from A to B. And we can divide it up into two. There's the traditional path, which I'll describe, and then there's the risk parity. We can think of it as like an independent path. That's the path that managers like Ray Dalio follow because they think it's a better path and better meaning less volatile way to get from point A to point B. The big risk of taking that route is abandoning it at the wrong time. And so you can ask, how would that be if it's a better path, if it's less

Starting point is 00:17:42 volatile. And it's because it is the less traveled path. You ask somebody how they're doing, it's all about the market. And the market means the stock market. That's what's in the news. That's what's on TV. That's what's advertised. And so the focus is on that market, which is what Damon described is the traditional portfolio, which is dominated by the stock market. And so when you're on this less volatile path and you're looking over the ravine to the other side, where the other investors are in that more volatile path, it's hard to hold on when you're focused on maybe the shorter term results or how others are doing. So I think that's a very important distinction here, is just make sure everybody's aware that we're talking about

Starting point is 00:18:25 two different types of portfolios. So let's go back to the traditional approach. It's understandable why that's the traditional approach and why it's made up the way it is. I think the way most people think about building a portfolio is they have two menu items. There is stocks and bonds. Stocks have higher return, higher risk. Bonds have lower return, lower risk. And so you own stocks for the return, you own bonds to control your risk. And you scale up or down between those two assets based on how much risk and return you're trying to target. So that's the way most people think about it. It's a very simple model. It's very convenient. But our view is there's actually a better menu available that leads to a better model. And essentially, there's a completely different

Starting point is 00:19:11 framework. And the key, and now we're getting into what risk parity is, the key is understanding that asset class returns are by and large influenced by the economic environment. And there are assets that do well in different environments. So there are bad environments for stocks, but that same environment is actually good for other assets. And then we're talking about growth and inflation, which we'll get into a little bit more detail. And so rather than concentrating in one asset class, like the traditional 60-40 type portfolio that's dominated by what stocks do,

Starting point is 00:19:43 we think you can balance across a diverse mix of asset classes to achieve a smoother ride. And so this recognition that the economic environment largely drives asset class returns is the first step in building a risk parity portfolio. The second step is matching the return and risk of each asset class. And basically what that means is you pick asset classes that do well in different environments, and then you structure each to have a similar return over the long run and similar

Starting point is 00:20:13 risk. And when you put it all together, now you've got a portfolio that's much more diverse with a comparable return, actually a higher return than stocks we think over time. And that's effectively what risk parity is. So how are you defining risks? Academics define risk as volatility, but here on the show we've been very much influenced by Warren Buffett, who disregard volatility but focus on permanent loss of capital and the opportunity cost of holding other assets. Yeah, I'd say there's two. One is volatility. That's the statistical measure of the wiggles of the line, and less volatility is better because it's a smoother path from A to B. But I think that misses one thing, and that is the risk of catastrophic loss or risk of a loss

Starting point is 00:20:58 decade. So stocks, for example, go through these massive declines. We saw in the first quarter of this year, 33% drop in five weeks. That is a pretty steep roller coaster drop for anybody to live through. We've also seen lost decades. People remember the bull market of the last decade, but in the 2000s, the stock market was negative for 10 years. So that isn't completely captured by that volatility measure, I think it's good to look at that, but also look at the risk of these steep declines and also the risk of a lost decade. And we think of risk parity minimizes the risk to all those things. It's kind of reminding me by question about the stocks and diversifying the stocks, because what you just said reminded me of the fact that the value of investing approach has somewhat

Starting point is 00:21:48 had a lost decade, right? Where value has just kind of been sitting by the wayside or declining while these growth companies are just overtaking. And now 40% of the S&P 500 is just a few, really about six tech companies. So in your diversification, even on the equity side, are you factoring different types of companies based on how you would, I guess, classify them, either value or growth? We basically are trying to keep it as balance as possible. And so we invest across all those styles. So the ETF has almost 13,000 stock. in it. And that's across growth, value, U.S., non-U.S., large cap, small-cap, emerging markets, across the board. And the reason for that is I think the market and the average investor has

Starting point is 00:22:39 been trained to draw the lines across growth and value or large cap and small cap and feel that you're getting diversification by going across those assets. We draw the lines differently because our framework is we want things that do well in different economic environments. We recognize that a lot of equities go up and down together during those shifting periods. And so we draw the lines across assets that do well in those periods. And that takes us away from trying to dissect and split up the equity markets and focus more on just own all the equities, because that gives you that full exposure. And you're not going to have the issue of being overweight value and it underperform for 10 years. You're just invested across the board and then really focus on owning

Starting point is 00:23:25 those diversifying assets. And I think that's a much better framework than the one that most people are used to. The thing we're most confident in is the relationship between the assets and the underlying economic drivers. So if you're in a recession, we are pretty confident that treasuries should outperform stocks. And similarly, as the economy recovers and you're in an economic expansion, we have pretty high confidence that stocks should outperform treasuries. And so just building a portfolio around those very logical relationships, in our view, is far more reliable than trying to lean into a particular factor or style within the equity markets.

Starting point is 00:24:08 There's certainly value there, and there are many managers that can generate value that way. But in our view, it's just not as reliable as the relationships we discussed. And to add to that, I think 2020 is a perfect example of how reliable those relationships can be. Because if you go back a year, nobody was predicting a global pandemic. That's not in anybody's models. The last time it happened was 100 years ago. People weren't building portfolios for that. But what happened in Q1 when the economy collapsed, right, without regard to what the cause was,

Starting point is 00:24:44 a virus in this case, but the economy collapsed and these relationships that Deeming just described played out exactly as you would have expected, recognizing that the economy collapsed, therefore, interest rates fell because the Fed had to cut rates to zero to stimulate the economy in response to this collapse. And so treasuries did really well. They were actually in a bull market at the exact same time that equities were in a bear market. And the printing press is turned on in response to this collapse. And so gold rally. And so those relationships, are very reliable without even having to guess what the cause is. Well, it's interesting you say that because, you know, when the meltdown happened,

Starting point is 00:25:22 a lot of people, and this happens with almost every meltdown, which is people first flock to cash, right? And before they figure it out and then make a rational decision, they just sell, they get to cash, they liquidate everything. Does the portfolio hold any cash just for those kind of reasons or any optionality feature in the ETF or is it fully allocated? No, it's fully allocated, and you bring up a very good point because there are rare and short-lived periods in history where cash is king. And so effectively what you're doing with this portfolio is you're making the bet that a diverse mix of asset classes is going to outperform cash over time.

Starting point is 00:26:03 And that's a pretty good bet because if that didn't happen, capitalism would fail. But there are periods where when it doesn't happen, where cash is the best performing asset. And as a result, you would expect this and any portfolio to do poorly. But then what happens is it doesn't last long because there's always a policy response, right? And you saw this this year where the economy is basically going straight down. Capitalism has kind of stopped and markets are not performing as you would expect. And then a policy response ensues and things go back to normal.

Starting point is 00:26:36 It doesn't mean the stock market's going to go up, right? But you get more of a relationship that you would expect. We saw the same thing in September and October of 2008. Same thing happened in the 1930s. And those periods just don't happen very often. And so holding cash might do well during those periods, but because they don't happen very often over the long run, you fall behind.

Starting point is 00:26:56 And so rather than trying to time those things, we recognize they are rare and short-lived, and we just lip through it. And by being balanced, you probably have the best odds of surviving than if you're too concentrated. So give the amount of research you've done And also the background you have, I'm sure you're used to back testing all these different strategies.

Starting point is 00:27:16 So as you gone through the process, did you decide that all roads just lead to risk parity, or is this just one of different options for the retail investor? From the perspective of a retail investor, we believe that this approach or some derivation of this approach is the most efficient way to hold assets, that this will lead to the most reliable outcome over the long term. And it's for the reasons we discussed related to the diversification to different economic outcomes that you can establish a portfolio that can meet a return objective that just has less variation year to year, decade to decade, overtime. And so from our perspective, all roads do lead to this as the most efficient way to hold public markets. There are, of course,

Starting point is 00:28:03 other return streams that investors can access that would be classified as alternative return streams, maybe hedge funds, which are more related to manager skill rather than holding markets or potentially in private assets where you can get pretty unique return streams related to real estate or royalties or different types of credit and equity securities that might be different in profile or different in terms of active management aspects of it that could be complementary to this. But from a retail investor perspective where it's harder to access those alternatives, we believe all roads do lead to this as a more efficient way to hold assets. You know, it's interesting you say that. And I'm really happy that you brought up the private

Starting point is 00:28:46 sector as a form of investment for the retail investor because not a lot of people might think of that as part of their overall portfolio. But it raises a question, which is, you know, if real estate is a viable option to diversify, why would there not be, maybe a reet, you know, in part of this portfolio? So we've looked at public market reits. And the reality is they tend to be very correlated with the broader stock market. So similar to what we discussed earlier, they tend to be more equity-like than real estate-like. And so we've looked at it as a potential inflation hedging exposure.

Starting point is 00:29:23 What we found is that it's not as tight of a fit to inflation as the other things that we hold in the portfolio, namely commodities. different types of industrial commodities and gold. So we made the choice to utilize those exposures as opposed to REITs, but it's certainly something we continue to look at. And for I think retail investors, it could make sense as a small allocation as part of their inflation hedging portfolio. The challenge with REITs and real estate generally is that it's not clear that it's a pure hedge to inflation in the way the commodities are because of the sensitivity to interest

Starting point is 00:29:57 rates. So as interest rates rise, which tends to happen in an inflationary environment, real estate struggles because it's such an asset that people buy with leverage. And so the cost of leverage goes up in that environment. And so there's a headwin there associated with rising interest rates that you don't have with some of the other inflation hedges we mentioned. But as a component of that inflation hedging portfolio, I think it could make sense. It's just in our view. It didn't benefit the portfolio to the degree necessary to include it. And, Trey, also, The other reason we think all roads lead to this is the other road, the 6040, is going to be really challenged looking forward, right?

Starting point is 00:30:36 The 40, you know, of the 6040 is yielding near zero, right? So if investors are hoping to get reasonable returns out of something that has 40% in low yielding assets, and it's largely because those bonds are shorter duration than what we have in ours, it's going to be a challenging road. And so all investors face this conundrum of how do I get reasonable returns with controlled risk? Because the 40 is there to give you a better downside protection. But now it costs you because the yield is so low. Historically, the yield was reasonable.

Starting point is 00:31:11 And so the cost of that diversification wasn't material nowadays. And so we think this is a much more appropriate allocation looking forward for that reason, as well as the odds of severe outcomes and the potential range of potential outcomes in this environment is extremely wide, which is more reason to be more balanced than what a 6040 allocation offers. When people today allocate to fixed income in general, advisors, individuals, they're unhappy with the yields they get from government bonds and the really safe stuff, the investment-grade stuff.

Starting point is 00:31:50 And so normally those fixed-income portfolios are. much riskier than what's implied by the broader bond market, which is the more conventional 40% that most investors would target years ago. So today, that 40% is invested in things like high yield and sometimes reits because they generate income and things like MLPs, which are master limited partnerships that invest in pipelines and things like that. So there's all sorts of income generating things that get thrown into the fixed income bucket that are very equity like because investors are reaching for yield. You know, The other thing I think that is really interesting about that is there's two ways to look at it.

Starting point is 00:32:27 You can look at it from a mathematical perspective. And then there's also, there's an emotional aspect to this. So mathematically, it's a terrible portfolio because you're basically betting on one asset, which is effectively you're betting on one environment. And when that environment transpires, you're thrilled and when it doesn't, you're in terrible shape. But what's really interesting about why that persists, because a question somebody might ask is, well, it's that obvious that why is 6040 conventional portfolio? Why has it been around for so long? That goes to the emotional side, which is, that's just the way other people do it. So you're sitting

Starting point is 00:33:02 here in 2008 and first quarter of 2020 and you just lost 15 or 20 percent and you look over to your neighbors and they lost 15 or 20 percent. So you shrug your shoulders and you say, oh, that's just the way it is. You just got to hold on. And the challenge is because it's convention, it's actually been self-reinforcing. And it'll stay like that until, the masses start to realize that there's a better way, and that might take some time. And so I think what we're doing is trying to be a little bit more innovative and ahead of the curve. And if all roads lead to this, ultimately, you're better off being there before others. One of the reasons why I decided to work with Alex is years ago, he noticed this. So after those initial conversations

Starting point is 00:33:45 with Bridgewater, his reaction was, this is a really interesting concept. Let me, try to figure this out on my own. And so he ended up writing a book on the topic of asset allocation, balanced asset allocation. It was published by Wiley in 2014. That's how he approached the advisory business, which was roll up your sleeves, do your own independent research, and only then recommend it to your clients. And in this particular case, he thought this deserved to get better recognition than just for the few sophisticated institutional investors that were adopting this approach. And so he wrote that book to really provide that transparent. to the masses to be able to implement these concepts on their own. And then the ETF has been our,

Starting point is 00:34:28 you know, really a kind of a continuation of that effort, but really taking some of those concepts, refining them, and then putting them in an easy to invest liquid package. Okay, so let's dig a little further into risk parity. Redela talks about four seasons or quarters, if you like, that could affect the prices of the assets than we have in our portfolios. One would be higher than expected inflation. another would be lower than expected inflation. The third quarter of season, if you like, would be higher than expected economic growth and the last one would be lower than expected economic growth.

Starting point is 00:35:02 Could you talk about the holdings in your ETF and how those four seasons are reflected? We think of it the same way. And this is the conceptual framework that I described in my book. And I think the way to think about it is that there are certain assets that are biased to do well in each of these environments. And so, for example, in rising inflation, inflation-linked assets like tips, treasury inflation-protected securities are biased to do well, commodities and gold. In falling inflation, it's equities and treasuries.

Starting point is 00:35:31 In rising growth, it's equities and commodities. And in falling growth, it's gold, treasuries, and tips. And so you own assets to do well in each of those environments. And what you want is, for the most part, be indifferent to what an environment transpires. And the reason that's the case is because this is, I think, widely misunderstood and actually really important is the odds of each of those environments occurring is about 50-50, right? And the reason it's about 50-50 is because there's a key term that you use in your description, which is what happens versus what was expected, right? And so there might be people saying, oh, I think

Starting point is 00:36:11 inflation is going to be low for the next couple of years. That's not enough. For it to move markets, It needs to be lower than what was already discounted, which is what the consensus view is, or it needs to be higher than what was discounted. And so the odds of those environments transpiring is roughly 50-50. So we want the portfolio's exposure to be about equal across those assets and those environments. And you can structure the portfolio to do just that, where for the most part, you're indifferent. And so to us, that's roughly 25% equities, 25% commodities, and that 25% commodity is split between the commodity producers and gold. And then there's 35% tips and 35% treasuries. And the reason

Starting point is 00:36:52 the tips and the treasuries have more than the equities and commodities is because they're less volatile, meaning they're less risky. So you need to own more of them to have an equal risk so that when those are in favor, they go up enough to offset losses elsewhere. And so if you add all that up, you get 120%. And that 20% comes from modest amount of leverage that's used to basically match the risk across these assets. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. Vanta automates your compliance process and brings compliance, risk, and customer trust together on one AI power.

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Starting point is 00:41:03 I think it's just a different perspective, and it's a conventional perspective, which is what I described earlier, and that is, if you want to take more risk, own more socks, if you want to take less risk, own more bonds. And the assumption is, the younger you are, the more risk you can take, and the older you are, the less risk you should take. And you slide up and down that scale. And the reason I wouldn't say it's bad is that if that's your universe of choices, if that's the menu from which you're picking, then that approach is perfectly recent. But I think there's an opportunity here for people. And that is, there's a much more efficient better menu of choices. And so, for example, if I told you, the choices aren't high risk

Starting point is 00:41:44 bonds, high risk stocks, and then low risk bonds. The choice is not just that if it's high returning stocks, high returning bonds, high returning tips, high return commodities. Now, how do you pick across those? It's not as clear. The answer is really you want to own all of them and you want to be balanced across all of them because that is as diversifying as you can get. So I think the framework is the bad advice. It's all coming from the wrong framework. Let's talk about that word balanced. So it's probably easy for the listener here to think about a balanced portfolio being somewhat of a zero-sum game where one part of the portfolio is going up while the other is going down. How does it all just not net out to zero? It's understandable.

Starting point is 00:42:32 why that would be the result that people would think you'd get to. The reason that's not the case is that each of these assets has a positive expected return, meaning its mean, its average is, let's say, 6 or 8% a year, something like that. And if you're diversifying across all of them, then a good environment for one means that it does better than its average, and a bad environment for another means that it does worse than its average. And because its average isn't zero, it doesn't net out to zero and nets out to the average across all the assets. And so when we say it outperforms or underperforms, we don't mean versus zero. We mean versus its average.

Starting point is 00:43:11 And so what you're trying to achieve is to get as close to the average as possible and minimize the variation around that. And by balancing this way, we think you can achieve that. So, Robbins wrote this book, Money Master the Game, and the best part of that book, at least if you ask me, was this into you with Ray Dalio. And Robbins asked Dahlia there in the book, if you could leave a portfolio for your kids that could not be changed, what would the asset allocation be? And Dahlia allegedly said something like 40% long-term bonds, 15% medium-term bonds, 30% in equities, and 7.5% in commodities and 7.5% in

Starting point is 00:43:51 gold. Is that similar to what you guys are doing in your ATF? And are those percentages even correct? It's similar. Frankly, I saw that. I was still at Bridgewater when that came out, and I'm not exactly sure where Tony got his allocation from. I think there was some interpretation that went into that. It wasn't literally from Ray's lips, but I'm not 100% sure about that. But there's, you know, there's obviously similarities to what we're doing. And again, the idea is this was the genesis of all weather for Ray, which was to create a strategy that would last for generations in his family, it would not require active management. So it was the ultimate investment strategy. And that framework, even though we implemented differently, that framework is really the

Starting point is 00:44:36 governing framework on how we think about asset allocation as well. And that informs how we do our risk parity portfolio. So I'm glad you brought up the all-weather portfolio. So for those who don't know, all-weather is a fund at Bridgewater Associates that is supposed to survive through the four economic seasons we talked about. And for what I've gathered, it's averaged the rate of return around 8% with maybe a similar level of volatility. Is that sort of the expectation with this portfolio as well for the retail investor? We've built this portfolio to target about a 10% annual volatility. That's in line roughly with a 6040 portfolio. And we think we can generate a return competitive with equity. So in excess of a 6040.

Starting point is 00:45:23 portfolio. So that's how we've designed this. And Bridgewater has a number of ways that they implement this portfolio. So it depends on how they package it. But that's how we've structured it. So this risk parity ETF, RPR, it has an expense ratio of 50 basis points, so half of 1%, which is essentially the fee that you're charging the investors for managing the ETF. But that said, RPA is holding lots of other ETFs that I know also charge similar fees. So is the 50%? So is the 50 basis points inclusive of all of those fees or in addition? It includes all of those fees. So that is the total net expense ratio. Yeah. And to keep the fees low, we use ETFs where there are low cost options, like Vanguard ETSs, for example. In cases where there are no low cost options,

Starting point is 00:46:13 we actually get the index exposure by just buying the securities directly to avoid that additional layer. So if ARPA is holding all of those, say, low cost, ETFs from Vanguard, which advantages would it give me as a retail investor to hold the APAR ETF compared to buy up the underlying ETFs that AIPAR is holding in the first place and thereby saving the cost for your ETF? It's a great question. And it's something that we've been dealing with for about 15 years because we used to do that. We used to buy the underlying assets.

Starting point is 00:46:48 And in one word, the reason it's better in the ETF is efficiency. So the ETF is very tax-efficient. So for taxable investors who take all those assets and put it inside of the ETF, you gain tremendous tax advantages, where effectively most of your return is deferred until you sell the ETF as opposed to generating taxes throughout the process. The ETF has about 20% of leverage within it, as we described earlier. That's achieved at a very, very low cost near zero. So that's fairly attractive. I'd say the big, the big, The biggest advantage of the ETF is implementing this strategy is, while it's easy to talk about, it's hard to do in practice because it's so different from the traditional approach.

Starting point is 00:47:35 And anybody who's been managing even their own portfolio or other portfolios realizes that humans are hardwired to look at their portfolio, their eyes go directly to the thing that's doing the worst. And their emotional response is, how do I fix this? This is the problem. And what you're supposed to do is buy the things that are doing the worst rather than sell the things that are doing the worst. And because all the assets in here are relatively volatile, they move around a lot.

Starting point is 00:48:04 And so your emotions are going to be pulled in all different directions if you're trying to manage this outside of the ETF structure. And so what you're supposed to do is buy low, sell high, but the emotional reaction typically is buy high, sell low. And so this prevents you from doing that because the package is much more palatable and easier to hold on to than the underlying line items. And so that's actually one of the biggest advantages of putting everything inside the ETF.

Starting point is 00:48:32 And we just talked about the fees. So the fees are very reasonable. And in some cases, a lot of the assets inside have no additional layer of fees. And then the last advantage is there is a little bit of discretion in extreme cases. So, for example, in March, when the deflation alarm started to sound, balance in a deflationary world is a little bit different from all of their environments. And so the portfolio targets changed a little bit. The allocation of the tips went down, the allocation of treasures and gold went up.

Starting point is 00:49:03 And that trigger occurs because of our understanding of what it means to be balanced in these extreme environments. And so that also occurs within the ETF. And if you're doing it outside, you may not have that insect. One thing that Alex mentioned, I think is an important point that a lot of investors maybe don't fully appreciate, which is the benefit of rebalancing regularly and what that means from a return perspective at the portfolio level. So we've looked at this mix of assets because we created this index going back to 1998.

Starting point is 00:49:38 So we've looked at this since 1998 explicitly in the index context. We've also looked at it with similar exposures back 100 years. And what we found is by rebalancing regularly, the portfolio return is about a percent higher on average than the average of the underlying component return. So if you took the average of the stock component, the Treasury component, tips component, etc, that average is a percent lower than the portfolio average return, which is really powerful from an investment perspective. and something that we don't think a lot of investors appreciate to the degree they should,

Starting point is 00:50:15 partially because when you rebalance across similar things, you don't have nearly the same benefit. That that benefit exists. It's proportional to how lowly correlated the components are. This gets back to your original point of the Holy Grail. The Holy Grail isn't just a risk-reducing phenomenon. It's also, if you can find things that are lowly correlated to one another and individually are quite risky and combine them in a portfolio, you actually get a portfolio that's higher returning than the underlying components. So that is a really powerful aspect that we've been able to take advantage of in the context of the ETF.

Starting point is 00:50:48 Yeah, it's kind of the oldest rule in investing by low, sell high, and it's just hard to do. And the reason it's easier to do with these assets is because you're not betting on any skill or anything like that. You're just betting that you have mean reversion and broad asset classes that have been around a long time. it's easier to have confidence in that. Yeah, as Warren Buffett says, the stock market is the only place where people run out of the store when things go on sale. And I have to relate, it's so hard to fight that urge. And no matter how much you study this stuff, when you see the stock market down and you open the app on your phone, you get an emotional reaction. It's just so much about what investing

Starting point is 00:51:28 is all about. So if you're able to take that away, it's powerful. And if you're adding a percentage or two based on rebalancing, sounds like that pays for the expense ratio by itself. So, yeah, you're getting that active management side and taking away that emotional side, which is really fascinating. And, you know, the reason that emotion exists is because when the market is down, regardless of what market you're talking about, there's good reason that it's down. The news is bad and the outlook is bad, right? So it seems very logical to say, I'm seeing red on the screen and the out.

Starting point is 00:52:03 Look looks bad. I'm going to sell until the outlook looks better. The experts think the market's going down. Why should I hold? And then maybe you fight the urge for a little bit and it goes down further and you kick yourself and you say, I knew I should have sold. If I would have sold, that would have been better off, right? Until you get the last there standing, meaning, you know, everybody has sold and that's the bottom of the market. Right. And that's just the timing of that is impossible to consistently call. And like you said, it's really hard to fight that urge. In some ways, you have to remove that power from investors to protect themselves. It's funny, we obviously are advisors ourselves, and we talked to a lot of advisors.

Starting point is 00:52:44 And it was interesting how stressful the crash was in February, March, and then how equally stressful the rally was because a lot of advisors were out of the market. When the rally happened and they were incredulous that this is a real thing in the midst of this historic recession to have the market rallying to that degree. And so that market timing decision is inherently difficult and very stressful. And in my experience, very few people are actually any good at it. And you see it on the positive side as well, you know, in terms of where everybody's investing today, it's the tech stocks and things that are up four or five times this year.

Starting point is 00:53:21 Those are the things that people want to buy. And I can tell you, having been in this industry for a while now, that's not how things normally behave. Things don't quadruple and quintuple in a year. It's, you know, it's nice when it happens. The challenges, a lot of those things can equally fall by half or 70% in subsequent periods. And so our view is that you're just much better off having a balance mix and not being so dependent on trying to time the bottom or the top in a particular asset class.

Starting point is 00:53:49 And when you have a portfolio structure like this, it's just less sensitive to those timing concerns because usually within that portfolio, something might be doing great, but many things are doing poorly. And so it's not like you're buying everything at a top or trying to. trying to time the bottom, you know, you're basically capturing bottoms and tops at the same time, and you're just less sensitive to that timing decision. And to give you some numbers, so R-Par at the market low, which was March 23rd, you know, the S&P was down 30, R-Par was down 10 year-to-date. And then through the first quarter, R-PAR was down 4%. And that was one of the worst quarters

Starting point is 00:54:25 we've ever had. And now it's up about 15% year-to-date. And it's largely because it protected on the downside and it participated in the upside. And the net of it, obviously, we all know that the negatives hurt you so much more than the positives help you. You lose 20. You have to make 25 to break even. You lose 50. You have to make 100 to break even. So you lose only four. You don't have to do as well on the upside and you can net out, you know, way ahead. And it's interesting that you would bring that up. You're saying this is not how this typically works. And we are in uncharted territory in so many ways, especially when we look at the global debt. and money printing situation.

Starting point is 00:55:02 How is the A part ETF accounting for that? You know, the way I would think about that is you're in uncharted territory on many levels, right? And if you just think about what the next five to 10 years looks like, you could have deflation like what Japan's been going through the last 30 years. That could easily be the outcome. You could get high inflation, like maybe what we had in the 1970s or anything in between. that's a pretty broad range.

Starting point is 00:55:30 And the assets that do well in the first scenario are almost the opposite of the assets to do well in the second scenario. And then talking about growth, you could have a depression. I mean, we were effectively heading into a depression. If the Fed just stepped back and fiscal stimulus didn't come in, you could be in a depression today. You could get really strong growth if the stimulus is just extremely powerful and ongoing or anything in between.

Starting point is 00:55:55 And so the potential range of outcomes is so wide. that it almost sounds irresponsible to not be super well diversified. I mean, this is of any time in our lifetimes that you want to be really well balanced and own all these assets. It's today. You know, I'm reminded of this other Buffett quote where he says, diversification is for those who don't know what they're doing, right? With this idea of a concentrated portfolio,

Starting point is 00:56:20 if you're highly specialized in something, you know, and you have an expertise, that's where you should go really deep. And I'm curious if you agree with that sentiment and just that the average person often does not have that type of or level of expertise or does it go totally in face of what you're talking about here. No, I would refer to that as something different than what we're trying to capture here. So what Buffett is referring to is how do you translate skill in identifying those undervalued or under managed companies that are about to turn the corner and concentrating your views to try to outperforming. the market in those few stocks, that is an active decision. And there are some people like Buffett and others that are exceptionally good at that, and they can generate a return stream that looks very different than the markets. It's going to be much more of a function of the behavior of those

Starting point is 00:57:11 companies that they're concentrating in. And there are a few people in the world that can generate very attractive returns doing that. So I think that is absolutely viable. We've allocated to some of those managers over time and had success doing so. The challenge is getting access to those managers. Not a lot of them exist within the mutual fund universe, which is what most retail investors can access. There might be a handful. And if you have the ability to access those managers or if you have the ability to do it yourself, great. But in general, that's a very, very difficult thing to do. Even Buffett has underperformed the S&P for more than 10 years. So alpha is a hard game. Alpha meaning, because I know a lot of listeners may not know what alpha

Starting point is 00:57:49 is alpha is what we refer to as active management return. So it's the return that's generated by you deviating from the market. When you say you're trying to get alpha, it means you're trying to generate outperformance versus the market. And getting alpha is a hard game. There are very few people in the world that have done it successfully for long periods of time. Even the legends that you've quoted now a few times have gone through long stretches where they haven't generated any alpha. And so this was Ray's acknowledgement early on that at Bridgewater, they, you know, in their alpha portfolio, their active management portfolio, their individual trades were right about 60% of the time. So they were wrong 40%, which is a lot.

Starting point is 00:58:29 So, you know, they have an edge and they're able to translate that edge into something that's attractive, but they're also wrong a lot. So the idea that individuals or the average person or even the average manager can be more right than wrong after fees and taxes is a tall order. our experience, most don't accomplish that. And so we view this as kind of your core, set it and forget it, buy and hold approach. And then if you can find alpha or managers that can concentrate and generate market out performance, go ahead and access those managers. That would be great. And you can compliment, or if you do it yourself, you know, you want to form

Starting point is 00:59:06 your own views on what stocks might be the next market leaders as we come out of this pandemic. that's certainly something that I think many people have found profitable this year. And so we think there's merit in that, but also be humble about your ability to do that consistently. That one good year doesn't mean that you're going to be able to do this on a long-term, sustainable basis. And this is what I was referring to as this notion of things don't just keep quadrupling and quintupling because they make a great product. That's not how the markets behave.

Starting point is 00:59:35 And so there's some pretty extreme outcomes, which I think have resulted partially because of the stimulus you mentioned, partially because a lot of people are at home and there's a lot of speculative enthusiasm around certain stocks, partially because of good fundamental reasons that interest rates are low and you have a lot of technology disruption that's impacting all industries. And so you have these big differences between winners and losers. But those things can't persist forever because eventually the price reflects that optimism. And then at some point, the price is so high that you're more likely to disappoint relative to that optimism, even if the company is wildly successful. The price is basically over, you know, over-reflected that, you know, very attractive outcome.

Starting point is 01:00:18 And so, you know, there's a long-winded way of saying that I think to the extent you can find it great, but I think it's actually quite rare and that most investors would be better served by just having the right allocation to start. Speaking of accessing those great managers, right, what would it take to access the all-weather portfolio fund if you even could at this point? I mean, how much money are we talking about that someone would need to even participate in something like that? I'm not sure what their current minimums are, but it's, you know, $100 million or something in that range. You know, you need to be an institution with billions of assets under management. Right, which is so great that you guys are compartmentalizing this down to a retail investor level and making it accessible. It's something I'm very passionate about and kind of leveling the playing field to a certain degree. And speaking of Ray and his skill set, I'm wondering how you look at him, Damien, especially

Starting point is 01:01:13 working with him so directly for so long. You know, Warren is often looked at as a great stock picker and a great operator. But I look at Ray as this more macro investor who is able to distill down a lot of information and make these really beautiful, elegant frameworks and ways to look at the world. and then mitigating his risk by automating a lot of the decisions, whether it's actual algorithms. But you know, you read his book on principles. It seems like his brain is one machine learning computer based on these algorithms and that's how he operates.

Starting point is 01:01:50 Do you look at him like a stock picker? Do you look at some superpower that's totally different than that? I think, so Ray is a phenomenal person in many regards. The thing that he's obviously very well respected for his investment acumen and his views on things. And you're absolutely right. I think you had a good distillation of what makes him unique, that he's able to see these very compelling and very simple frameworks out of the noise of investing. And these oftentimes are frameworks that nobody else has acknowledged prior to Ray coming up with these frameworks to explain how the world works. It's like he's identifying the laws of gravity.

Starting point is 01:02:29 And that's really his mission is finding truth. And that applies to the markets as well as it applies to people and how to manage people. And so I think actually, though, the thing that's underappreciated about Ray is how great of a leader he is. There's an ask, you know, the principles talk about kind of how he approaches the job of management. And I think they're phenomenal. But what I found most enriching at Bridgewater was the community. that he was able to build and cultivate, the talent that he is able, not just to find,

Starting point is 01:03:05 but to retain. So it's interesting when you talk about Bridgewater, there are no senior investment professionals that ever left Bridgewater and started their own hedge fund. There are a few people that did it, but they were at the more junior levels. And so finding people like Bob Prince and Greg Jensen, who are some of the most phenomenal investors on the planet,

Starting point is 01:03:26 and having them contribute for a lot of, as long as they have and continue to be completely invested in Bridgewater is an exceptional talent that Ray has. And I'll tell you, as somebody who worked for him, the reason why that happens is because Ray has an incredibly big heart. That that culture obviously drives excellence. And this is a very competitive game trying to beat the markets. And so you have to find the best talent.

Starting point is 01:03:52 And then you have to get that talent to work harder than everybody else. That's just the reality of it. You know, Kobe Bryant wasn't what he was because he was just. talented, he also worked harder than everybody else. The same thing with Michael Jordan or anybody you think about Tiger Woods, et cetera. And the same thing would go in our business. And so Ray was really talented of finding these exceptional individuals and then squeezing every ounce of productivity out of them. So it's a challenging environment, but it's incredibly enriching. And part of what he does in order to achieve that is that he really cares about the community and the members of that

Starting point is 01:04:25 community. So an example was when I was there, I was three years in, and I joined Bridgewater back at a time when Ray hired everybody. And so I had a personal relationship with him. And, but I wasn't very senior three years into my Bridgewater tenure. And my mother was diagnosed with colon cancer, was living on her own in San Diego. She was going to have to go through chemo. It was pretty advanced. At the same time, my father was going through a triple bypass and recovering from that. And I basically said, look, I need to be with my family. And Ray was very understanding. He actually allowed me to live out with my mother for a year as she went through chemo

Starting point is 01:05:03 and worked from there. But not only that, he gave her his personal doctor to coordinate all of her specialist appointments. He called her personally. To this day, when I talked to my mom, she asked me how Ray is doing. And I left Bridgewater in 2013. That's the kind of individual he is. He just cares.

Starting point is 01:05:19 Literally everything stopped for him. And he's a busy guy. and he called my mom, who he, you know, for somebody to work for two and a half years. And really, that was the most important thing to him at that moment. And so the loyalty that people have to Ray is real and it's tremendous. And so that culture that he's created there, it's not just a cold, harsh environment where you're berated constantly. Of course, they're high standards.

Starting point is 01:05:43 And he's tried to create an environment that drives excellent outcomes. And so you have to have high standards. But it's also a very caring community. And the support I got from him, from my colleagues, was really tremendous. And ultimately, I went back after a year and I moved back to the West Coast for personal reasons. But my experience there was great. And it really forged my approach, not just to investing, but to life in general and how to think about what's important to me. And a lot of that came directly from him challenging me on personal choices that I was making,

Starting point is 01:06:15 not just investment choices that I was making. I love that and thank you so much for sharing that personal story, Damien. It's so insightful to learn how Redalia has shaped such a strong culture. And speaking about the culture, Bridgewater is known for having this search for the truth. And that is found through something Redali refers to as radical transparency, which is very uncommon in the rest of corporate America. Could you provide a few different examples of radical transparency and what it personally meant to you? So radical transparency just means that there is an active effort to constantly evaluate bad outcomes,

Starting point is 01:06:57 whether that's something that resulted from a weakness that I had personally or a bad process. You want to stare at the bad outcomes and understand what contributed to those outcomes. Be very honest with each individual as to their strengths and weaknesses. Be very honest about what parts of the process are not working as desired and constantly improve and iterate, and that's how you drive an organization that continues to compete at the highest levels. It's not about just finding the magic formula and utilizing that to get rich. Organizations that are successful face challenges all the time, and if you hide from those challenges, most people don't want to look at uncomfortable truths about themselves, that that is a hard thing to do,

Starting point is 01:07:45 and so they avoid those things and therefore they don't really evolve. What I found most rewarding about Bridgewater, and I think the reason why I fit in there is because I actually enjoyed the challenge of facing the things I wasn't good at and trying to improve upon those things. And sometimes it's also just acknowledging that I'm never going to be able to do those things well. That's just not who I am as a person. And so I have to design around my flaws.

Starting point is 01:08:08 But you're going to get to the place you want to arrive at much quicker if you're honest with yourself about those weaknesses or those flaws or those mistakes. And that's the environment that he tried to create there. Alex and I have tried to create in our own business because that's how you drive rapid evolution. That's how you drive improvement. And frankly, that's how I think you drive fulfillment in whatever endeavor you're approaching is constantly trying to achieve better outcomes and being honest with yourself

Starting point is 01:08:39 at when those outcomes are less than ideal. But it's hard to do because there's emotional blocks, right? It's hard to focus on the things you've done poorly. Most people run away from that. And I think the way you get there is this is what I think Ray is a master of. And then there's others like that. They're truly independent thinkers. They don't just follow the herd because that's just the way other people do it.

Starting point is 01:09:02 They step back and I describe it as zooming out. You zoom out to a point where you can see the flaws in the way convention has evolved. and you look at and say, no, what is the right way to do it? And you go back to the basics and you build things based on what you think is ideal, forgetting what has been learned through time. Some things that have been learned through time you can use, others you can throw away. And so building a balanced portfolio, you can get there if you do have that independent thinking framework and managing an organization, which is basically you have this machine

Starting point is 01:09:36 and you're trying to improve it and you forget emotions, you forget what everybody else is doing, and you find the weaknesses within that machine and you improve that piece. And then you go to somewhere else and you improve that piece. And you fast forward five or ten years, you're in a much better place. I agree. It's one of the hardest things to do in an organization. And not only is it hard because it's emotional, it actually also takes a tremendous amount of energy and time.

Starting point is 01:10:02 You have to really set aside time to put yourself under the microscope or put your colleagues under the microscope and analyze, right? Because that's what we're talking about here. It's almost like you're analyzing people just like they're a stock pick or something. You have to take that level of care and detail into your examination and do it on a frequent basis. It sounds like almost a daily, you know, in my company, we have six-month reviews. This sounds like it could be daily reviews. I mean, is that the right way to think of it? Damien, is it that level of analysis or, you know, how much are we talking about here? It is. I mean, I think you know, you want to be efficient, though, as well. And so you have to balance the desire to provide feedback, which can be done on a regular basis with those longer, more meaningful conversations, which might be done on more of a periodic quarterly or semi-annual basis. But I think it's important that you spend the time to do that, that you're going to achieve a much better outcome if you create the space to evaluate these things and figure out how to improve.

Starting point is 01:11:07 And the key is the buy-in in the beginning, meaning recognition that if I want to get better, this is the path to get there. And that allows you to get through the challenges of facing your flaws and your weaknesses and recognizing you've made mistakes and trying to get better. Because without that initial buy-in and appreciation for why you're going through that painful process, you're probably not going to do it. Yeah, it's hard. You'd rather hear nice things about yourself.

Starting point is 01:11:34 Even today, I've been doing this for many years, and I'd still, you know, I'd rather hear nice things, but the reality is I also really value that, you know, critical feedback. That's how I get better. And the good stuff I kind of already know. The insightful stuff are things that maybe I didn't notice or, you know, I'm blind to, and that's how I'm going to then reach that next level. That's one of the reasons Damien and I are partners is I was searching for a partner for about 10 years.

Starting point is 01:12:01 And Damien was the only one who would tell me what I was doing wrong. And so I'd come up with some idea and I'd share with, you know, 10 of the people who were closest to me who I thought were very thoughtful. And, you know, all of them would say, brilliant, I love it. And that happened over and over and over again. And then I'd tell Damien and he'd say, that's the worst idea I've ever heard. And I listened to them, I go, wow, maybe seven or eight of those I actually agree with. So then I would go to him more for feedback because that was what actually made improvement.

Starting point is 01:12:30 And so that's kind of how we ended up together. Fantastic, guys. I want to give you the opportunity to talk about evoke advisors, your new ETF, and where the audience can learn more about you. Our websites for the ETF are Rparetf.com. The website for our firm is evokeadvisors.com. So we have a lot of information on there. There's a lot of material that we're constantly updating. We're a $19 billion registered investment advisor in Los Angeles. We manage money for high net worth and institutional clients. And we have this ETF that we created for our clients. And it's shown broad appeal across not just the U.S., but across the world. The ETF is now over 850 million.

Starting point is 01:13:15 We just started in December. Normally when you launch a product before a global pandemic and the steepest stock market decline in history, it's bad timing. In this case, it was actually a perfect timing because we have these theories of how it's supposed to hold up and it did and how it's supposed to recover and it did. And so it was like a real-life stress test. And that's similar to how we manage our total portfolios. So our part is actually a good encapsulation of our overall philosophy and how we try to achieve a steady return for clients. I really appreciate you guys coming on the show today. I look at a portfolio as sort of like this work of art. I mean, I know we're talking finance, but honestly, it's no different than if you play drums and guitar and bass and you package

Starting point is 01:14:01 all these things up into something that makes a great song. I mean, that's what you're talking about here is what is the recipe that's going to be put together in a very great way? And it's, it's almost this puzzle that you're trying to put together. What is the most optimized way to structure portfolio? So I was really glad to bring you guys on. I know you do a great job talking to the listener and making this really bite-sized and approachable for us. I hope we can do this again soon. I would really love to do that. And I look forward to tracking R-PAR and seeing its performance over the years to come. Thank you for having us. All right, so as we are letting Damien and Alex go, I just wanted to follow up on what

Starting point is 01:14:35 I said there at the very beginning of the episode. Every Wednesday, Preston will have a brand new Bitcoin episode, and then every weekend, I'll be co-hosting a regular episode of the MS's podcast, sometimes co-hosts with Preston, other times co-hosted with Try. Thank you for our time, guys. Have a great one. Thank you for listening to TIP. To access our show notes, courses or forums, go to the The investors podcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional.

Starting point is 01:15:05 This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast)

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