Lead-Lag Live
Welcome to the Lead-Lag Live podcast, where we bring you live unscripted conversations with thought leaders in the world of finance, economics, and investing. Hosted through X Spaces by Michael A. Gayed, CFA, Publisher of The Lead-Lag Report (@leadlagreport), each episode dives deep into the minds of industry experts to discuss current market trends, investment strategies, and the global economic landscape.
In this exciting series, you'll have the rare opportunity to join Michael A. Gayed as he connects with prominent thought leaders for captivating discussions in real-time. The Lead-Lag Live podcast aims to provide valuable insights, analysis, and actionable advice for investors and financial professionals alike.
As a dedicated listener, you can expect to hear from renowned financial experts, best-selling authors, and market strategists as they share their wealth of knowledge and experience. With a focus on topical issues and their potential impact on financial markets, these live unscripted conversations will ensure that you stay informed and ahead of the curve.
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Lead-Lag Live
Beyond Traditional Diversification with Brad Barrie
What if everything you thought about diversification was incomplete? In this eye-opening session, Brad Barrie of Dynamic Wealth Group challenges conventional wisdom about portfolio construction with a deliciously simple analogy: building an investment portfolio is like baking the perfect cookie.
Most investors focus on finding either the best ingredients (top-rated investments) or creating the perfect recipe (advanced allocation models), but rarely excel at both. The result? Portfolios that appear diversified on colorful pie charts but actually contain just "two colors" – stocks and bonds – that move in unison when markets face stress.
Berry introduces a multi-dimensional approach to asset allocation that goes beyond traditional diversification. Just as a cookie needs non-sweet ingredients like salt and flour to succeed, portfolios require truly non-correlated assets that work according to different economic drivers. The Dynamic Alpha Macro Fund, 2023's top-performing macro trading fund in its category, uniquely combines fundamental global macro futures strategies with long-only equity exposure to target smoother returns without compromising long-term performance potential.
Through compelling examples like how weather patterns in the Ivory Coast affect cocoa prices independently of stock market movements, Barrie demonstrates "non-correlation with causation" – investments with logical, understandable drivers completely disconnected from traditional market forces. This approach proves especially valuable in today's high-valuation environment, where historical data suggests muted future equity returns.
Whether you're currently using alternatives and seeking better diversification or looking to add non-correlation for the first time, this presentation offers a fresh perspective on building more resilient portfolios. Remember: if everything in your portfolio rises together, it will fall together too. Are you truly diversified?
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Foodies unite…with HowUdish!
It’s social media with a secret sauce: FOOD! The world’s first network for food enthusiasts. HowUdish connects foodies across the world!
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I'm excited to bring this webinar to each of you. I have got to know Brad Berry and Dynamic Wealth over the last I think. Now what six months, brad, we've been, maybe working together, or so, not longer. Yeah, time flies. Yeah, time flies. Big fan of him as the individual and a big fan of this particular fund which he'll be touching on. Very knowledgeable when it comes to markets I've had him on podcasts and I think you'll all enjoy hearing his story the firm and then how the mutual fund works, and some of you may know that most of my clients on the lead lag side tend to be ETF issuers. I'm very selective, actually when it comes to mutual funds and the fact that this is one of the few issuers that has a mutual fund that I help bring some attention to should be hopefully a good endorsement without using the word endorsement legally or compliantly for this product. So for those are here for the CE credit, I will email you after this webinar, either today or Monday. I'm backlogged but I will get to all the CE credit CFP boards submissions that I have to do, but I will email you to get your information to be able to submit that.
Speaker 1:Just stay to the end of the presentation. If you are an advisor in an office with a bunch of other advisors, please do me a favor Let them know that this webinar is happening. I think they will enjoy it. I will pop in towards the end for to ask any questions. So if you do have questions, just type in the chat box or in the Q&A and I'll bring it up towards the end. So, brad, I gave you the ability to share your screen. I will let you take it on the air and thank everybody for being patient. Appreciate it.
Speaker 2:Thanks, michael. So I am Bradley Barron. I'm one of the portfolio managers for the Dynamic Alpha Macro Fund. As the screen shows, we were the number one macro trading fund in our category, or the Morningstar category, last year, which we're very proud of.
Speaker 2:Today's agenda first and foremost, I want to have a little fun. Finances can definitely be intimidating and complex, but I think if we make it fun and positive, everyone is more likely to be involved and obviously we want to provide some insight at the same time. So who is this presentation for? If you are not currently using alternatives, we will show you a different reason why you should. If you are currently using alternatives, we're going to talk to you about an alternative to alternatives, because diversification and non-correlation, I like to say, is not binary. It's not. Oh, I have an alternative, oh, I have a diversifier. So I'm meeting my objective. You can have more and a lot of alternatives are correlated to other alternatives. But we'll talk about a different approach on how we view it. We'll talk about who we are and, again, diversification, obviously talk about our fund and if there's any questions, we'll leave some time for the end as well. So Dynamic Wealth Group is our parent firm. We are the sub-advisor to the Dynamic Alpha Macro Fund, ticker symbol DYMIX, and we also run Dynamic Alpha Solutions, which is a full service. Sometimes we're more of a partnering firm where we partner with financial advisors, helping to provide true value, acting as a real chief investment officer, solving complex client problems, questions, providing value. So diversification simplified, if we simplify diversification.
Speaker 2:I'm a big believer in analogies. I also happen to like cookies. If this was an in-person live conference, I'd be handing out some cookies right now, which would probably put smiles on all your faces. But I believe analogies are a great way to communicate to investors, to clients, to think for yourself. So, if you are an individual investor on this, putting things in perspective in terms that you can understand is a key part of being a good investor and staying invested for the long term, because any investment will have gyrations, any investment will put second thoughts in your in your head, and if you understand it and you believe in it, you're more likely to stay with it long term. So again, analogies, perspective is a good way to do it.
Speaker 2:I think building an asset allocation or any portfolio is like baking a cookie. You need two primary things you need ingredients and you need a recipe. And when you go out and you start to bake that cookie or build that portfolio, you go out and look for the best ingredients and then throw it into an average recipe. To us that's kind of like finding the highest rated investments out there and then throwing it into a boring traditional 60- 40 allocation model, right, and trying to find the best large cap growth manager, the best large cap value manager, um, and and try to perform that way. Another way of of building a cookie is is, or a portfolio is to get average ingredients and then try to build an amazing recipe. Right, and in this regard, it's kind of like using just passive indexed investing, average and then trying to build an advanced timing allocation model. What have you?
Speaker 2:We think our approach. We think you can do both. We think you can get amazing ingredients out there to build an amazing recipe and then you get an amazing cookie. Or, again the corollary, an amazing asset allocation model. Our approach we call it multi-dimensional asset allocation because we believe in multiple layers of diversification.
Speaker 2:As that picture of the cookie shows, you may like and build up an asset allocation model for a chocolate chip cookie, but again, as a cookie lover, I don't think you can just eat chocolate chip cookies for the rest of your life. I think you need to have gingerbread. I think you need to have peanut butter. I think this M&M version looks pretty good. Same thing with asset allocation. There's different types of asset allocations. There's passive, there's active, there's tactical, there's alternative. There's quant models there's tactical, there's alternative, there's quant models, there's fundamental models. Diversifying not just with asset classes, but with approaches, with different types of recipes, different types of cookies, is the key Also. So not only with true variety. You want to make sure who's ever baking your cookies is eating their own cooking. We're big believers in eating our own cooking, which we'll talk about with the fund. Also, you need to leave the cookie in the oven long enough, but not too long, right? You don't want to time the market and flip-flop too fast, right? But you want to watch it and make sure that it's baking the right way. So a little fun there.
Speaker 2:Let's talk about traditional diversification, a quote from Harry Markowitz. To reduce risk, it's necessary to avoid a portfolio whose securities are all highly correlated to each other. 100 securities who returns rise and fall in near unison, afford little protection than the uncertain returns of a single security. What is he saying, just because you might have 100 hundred different stocks, if all a hundred different stocks go up or down at the same time, you're not diversified. And diversification in Harry Markowitz many times is misunderstood and misquoted to think you need to diversify your assets. What he actually is saying is you need to diversify the risks that you're taking so that not everything moves in unison.
Speaker 2:We call it also basic asset diversification Right, and yeah, we're having a little fun with the acronym there, but it is basic, which really focuses just on stocks and bonds as as your asset classes. It views all alternatives as the same and it'll put alternatives in one box. And it is again, it's asset class driven. It is simple to invest, which is the positive thing to it. True diversification asks the simple question of what's driving the return for that particular investment. Right, and looking at a portfolio and trying to identify and ask okay, I might have 100 stocks, but if all 100 stocks rely on strong economic growth, rely on the consumer to have incomes that are strong, that give people confidence to go out and buy things, that's one driver of return.
Speaker 2:Exploring the alternatives to alternatives is part of the true diversification, or our approach called multidimensional asset allocation. It goes beyond asset class labels. It may seem complex at first, but it can be simplified, and that's our job as a firm to simplify that complexity for advisors, for them to then provide more value to their client. If I simplified it even further, basic asset diversification diversifies you with asset classes, true diversification or multidimensional. Not only does that, but it diversifies you amongst strategies and approaches, creating the additional drivers of return.
Speaker 2:Some key phrases to remember, and again, when I was a financial advisor, I would reiterate these phrases with my clients. Diversification means always having to say you're sorry, if you don't have something in your portfolio that you wish wasn't doing better, you're probably not diversified. Again, I would say this phrase and my clients would repeat this. The ending with me If everything in your portfolio goes up at the same time, means everything will go down at the same time. That's not diversification, right? So let's look at again traditional basic asset diversification.
Speaker 2:You've seen this type of graph, you know, hundreds of times, thousands of times. I've put this type of graph in front of my clients when I was a financial advisor a number of times. Many of my clients would look at this graph and they would say, ooh, brad, look at all the pretty little colors, right, and that's what we want folks to see is diversification. The problem is and I'll show you in a little bit you don't get all the diversification you think you are. The colors are nice, but what do you actually get At the end of the day, it's stocks and bonds, and the term two-legged stool is also used a fair amount in this industry Sometimes. I'll also say it's like riding a bicycle with a wheel that only has two spokes on it. You have a bicycle wheel with two spokes. If one of those spokes breaks, you're in trouble. If both spokes break, you're going to crash, crash.
Speaker 2:So, looking at what clients traditionally see with these asset classes, all the pretty little colors looks pretty, but in reality, for 15 years, you primarily got two colors. You primarily got stocks and bonds. So the way you read this is the number underneath the asset class is the correlation of that asset class relative to large cap stocks. So let me get the pointer back. So when you see international stocks at 0.88, 88% correlated to large cap stocks In 2022, when you really needed that diversification the correlations merged right. Many of us have heard the term during times of stress, correlations merged to one. That's what we saw in 2022. We've seen it in other years as well. So, getting all the pretty little colors that you think you might be getting for 15 years long term, you got two colors and when you really needed it, you you have one color. Right. You had one driver of return, strong economic growth. That kind of fell apart.
Speaker 2:So what can you do to add non-correlation or diversification? Bonds do work sometimes, but again, if you rely solely on bonds, you have one diversifier. What else can be used? Here? Again, some high level categories long short equity event driven REITs stands for real estate investment trusts, hedge funds. Long commodities market neutral. Global macro again, us bonds managed futures and again, bonds can be non-correlated as one different driver of return, but its return is low. Now, some of these other ones that also have lower correlation tend to have lower returns. Right, if we look at the bottom half, tend to have lower correlation. Most of them have lower returns, except one category a global macro. This is the global macro index low correlation to equities, historically higher return. We happen to think, or we know a really good global macro manager that we'll talk to you about shortly. We happen to think, or we know a really good global macro manager that we'll talk to you about shortly.
Speaker 2:Before we do that, I got to wrap up the cookie analogy. This is probably lunchtime for some of you folks. It's getting close to lunchtime for me. This is probably making some folks a little hungry. To build the perfect cookie, you have to use all of the ingredients and folks sometimes forget you have to have non-sweet ingredients in a cookie, right? So this is kind of tying the cookie analogy together from a holistic asset allocation true diversification standpoint to more towards why you need non-correlation. Right, you can't just use all sugar, you need to use non-sweet ingredients, but by themselves salt does not taste good. Flour does not taste good by itself, right, but you leave those ingredients out of a cookie, it's not going to be as good as it was. So portfolios are just like that. Portfolios need non-correlation Because, as I said, if everything goes up at the same time, everything would go down at the same time. So that's kind of the holistic high-level viewpoint.
Speaker 2:Let's kind of take a step back now and talk a little bit more about global macro and why global macro now, we believe, really makes a lot of sense. First off, it's an amazing diversifier. I showed you the pie graph a little earlier, though, and you saw two primary colors for 15 years. If we add in global macro into that mix, you see global macro for 15 years. If we add in global macro into that mix, you see, global macro for 15 years is non-correlated, and the reason it's green is because it's non-correlated not only to the stocks, but to the bonds as well, and it's also actually non-correlated to other alternatives as well, which we'll talk about. And then, but what about that 2022? When you really needed it 2022, it was also non-correlated to stocks and bonds and it gave you that diversification that you really needed.
Speaker 2:Again, folks think of it as that two-legged stool or the two-spoked bicycle wheel. During good times, it works perfectly fine. 60-40 works beautifully during good, normal times, just like a two spoked bicycle wheel works good during normal times, but when one of the spokes breaks and you only have one diversifier left, it gets very bumpy Having a third or fourth or fifth diversifier. That's the premise we follow with multidimensional investing, and global macro is a key component of that. Another reason why global macro now makes a lot of sense, besides just being a good diversifier over the long term, is look at current stock valuations.
Speaker 2:So we didn't invent this type of scatterplot. Many firms have shown this type of scatterplot. The way you read this on the horizontal it shows the starting valuation of the S&P 500. And then on the vertical, this particular graph shows the following five year returns so at the beginning of the year, the Shiller PE ratio is right around 37. So the way you would read this is historically, with the starting valuation, in this area we would expect returns to be right around zero, maybe slightly above zero, based on long-term historical patterns which, again, this isn't rocket science. I'm not sharing something you most likely haven't heard that high stock valuations tend to lead towards lower stock returns. And, yes, shiller PE, the valuations fell with the tariff concern, but we're about back to that level where we stand today. Valuations are still historically high.
Speaker 2:Now what about the global macro index? So when we put on the global macro index onto this same chart, what we see is something very interesting. We see that there's somewhat of an inverse relationship where, yes, when valuations are high, global macro actually tends to perform very well, but when valuations are normal, you actually see global macro performs pretty much in line with equities because they've just had the snot beat out of them and market has fallen so much. So it's such that valuation ratios are extremely low. Yes, equities will outperform during many of those timeframes, but this touches on a very important topic and when we get into why we created the fund the way we did, it'll all make sense.
Speaker 2:Because when we created the Dynamic Alpha Macro Fund, we wanted it to be an investment that could be held for the long term. That would target a smoother return experience. So the way we did that is, we combined a global macro strategy that focuses on fundamental research, taking discretionary positions, and pair that with a long, only US stock portfolio. So about half the portfolio is invested in a global macro futures strategy and then the other half is broken down between growth equities about 20 percent about 20 percent in dividend or value equities, about 10% in broad based US equities. And again, if I went back to this slide, this emphasizes part of the logic on why we did that. Because a pure global macro strategy or pure alternative strategy yes, it can be non-correlated, but it can be hard to stomach at all times. So by pairing essentially these two types of asset classes into one fund, we're targeting a smoother return experience throughout the entire ownership experience of the fund, the other thing it affords us to do, as this chart shows, and why we call the fund the dynamic alpha macro fund is we target to create alpha by being able to dynamically rebalance between these two sides of the fund, of the portfolio. At any given time, equities are performing well and maybe global macro is not performing as well. That affords us the ability to rebalance between the two sides and and vice versa.
Speaker 2:Our strategy, our global macro strategy, as I said, is a fundamental global macro strategy and advisors you've probably seen, you know hundreds of these. These funnel upside down. You know pyramid triangles, funnels where we start with this and it narrows down to this. Ours is the same way. We start with global macro economic viewpoints. We look for supply and demand imbalances within the macro markets. We'll take long or short positions with the global macro side of the portfolio. Some technical analysis is used to help to fine tune the timing of that and really we'll take about three to six themes at any given time.
Speaker 2:This is not a quant algorithmic, black box, trend following model where we'll have a hundred different positions at any given time in the portfolio. That's not what we do. Nothing wrong with those types of strategies, that's just not what we do. That's one of the reasons why we're great diversifiers with those strategies and others that are out there. Again, we're fundamental, which means we look for logical, identifiable reasons for why we believe something will occur. Global means broad reaching, broad reaching universe of uncorrelated assets, and I'll show you that slide shortly. Macro meaning it's big picture, big picture viewpoints we're not concerned with. Is Apple better than Google's, better than Microsoft? Those are micro decisions. We're more of a macro manager, the global macro universe that we have to work with. This is not all encompassing, but it gives you a high level viewpoint and gives investors asset classes that they probably don't have exposure to currently, things like coffee and corn and cattle and currencies and hard commodities like metals or energy.
Speaker 2:One of the examples I love going through is cocoa. So a number of years ago so a number of years ago, cocoa was identified as a fundamental long position. And it was identified as a fundamental long position because at the time, cocoa was largely grown in one part of the world, in the Ivory Coast, and there was a bad weather pattern headed towards the Ivory Coast, an El Nino weather pattern that was believed to disrupt the crop position, the crop, and then, in addition, there was poor fertilizer application by the local farmers there and underinvestment by the local farmers. So if you just think of it logically, if cocoa is largely grown in one part of the world and there's bad weather and bad fertilizer application, that's going to cause a supply shortage. And if you think of basic economics supply and demand curves if demand holds and supply falls, then you're going to see prices go up, right, and the demand for cocoa doesn't normally change, right? We love Michael. We know he fasts, he's probably he's not eating his cocoa, but most other folks still do. So. Assuming demand stayed the same, supply goes down, prices went up. That's what happened, right?
Speaker 2:This is a core example of the type of fundamental, logical, understandable methodology that we take in the portfolio. We call it non-correlation with causation, meaning what does poor weather and poor fertilizer application have to do with interest rates or corporate profits from one quarter to the next for your favorite tech company? Nothing. And that and that's the that's the point, folks is is having something in the portfolio that has an identifiable or the identifiability of it makes it easier to stay invested, makes it easier to understand, makes it gives you good stories to share with your clients and your investors so that they understand it to, to help them stick with the investment longer term. Right, just like the cookie analogy firm believer If you understand an investment, you're more likely to stay invested long-term and be a happier investor in the long run. So how is the portfolio done since we launched? We launched August, july 31st 2023.
Speaker 2:As of end of April numbers, you can see our performance here. The market peaked around February 19th of this year. So from the market peak, the S&P 500 as of end of April was down about 9%. We were up during that time almost 2% 1.83%. Year to date, up about 5.5%, with the market down almost 5%. Our longer-term numbers, also very strong. S&p 500, you're familiar with that. The S&P target risk balanced is a 60-40 portfolio, 60-40 index portfolio, basically, and you can see our results there. Quarter-end numbers. So for for reporting purposes, you can see our quarter end numbers here for three month year to date. One year Again, all very, very, we believe, very strong numbers.
Speaker 2:Looking at the breakdown of the statistics, returns are only one part of A portfolio, so breaking the return down to risk is is uh is important, right? If, if that portfolio gyrates a lot, you're not necessarily able to stay with it long-term. Even if you believe in it, um, you may not be able to stay in a long-term. So standard deviation is a term, um, most folks use for risk, right? So our, our standard deviation is slightly higher than the S&P 500 and higher than the target risk balanced index, which is a 60-40 index.
Speaker 2:We argue many times a standard deviation is not the best measure for risk, because if you just think about what is standard deviation, standard deviation is how much do you deviate from your average return or your mean return? That deviation can be either on the gain side or the loss side. So when I was a financial advisor, I knew my clients wanted to deviate on the gain side. They don't mind deviation on the positive side, right, they want to try to minimize the deviation on the loss side. That's why we report both.
Speaker 2:So we look at standard deviation, and yes, it's slightly higher than the S&P. So we look at standard deviation and yes, it's slightly higher than the S&P, but more of that deviation is being occurred through the gain side than the loss side. Right, it's only slightly higher loss deviation compared to the S&P 500, which helps to explain why our Sharpe ratio and our Sortino ratio are higher. So as a refresher, sharpe ratio is basically your return divided by standard deviation. Now it's actually return minus risk-free return divided by standard deviation. I like to keep things simple, right. So Sharpe is what most folks are familiar with. Again, we're not a big believer that standard deviation is the best measure for risk, which is why we use Sortino ratio. Sortino ratio is not as well known out there, but we think it's a much better measure for risk. Adjusted return it's basically return divided by your downside deviation. Again, at the end of the day, you want to have a higher sharp and a higher Sortino.
Speaker 2:So the higher the numbers, the better Correlation. Again, our correlation to the S&P 500 is at 0.28. So we're about 28% correlated to the S&P since our inception. Up-down capture ratio are also very important statistics. It helps to compare the performance to the S&P 500 on the up and down side. So at almost 70%, upside capture ratio means when the market's going up, we're capturing about 70% of that upside. When the market goes down, we're capturing about 28% of that downside. Very strong statistics from a correlation standpoint. Very strong statistics from a correlation standpoint and since there's time, I'll go back and emphasize that this is all because of the approach that we're taking right that it's a different approach. It's giving different drivers of return relative to just equities. Right that we can have long or short positions in many of these different future contracts that help to provide the drivers of the return. And being able to rebalance between the two sides helps to create, again, hopefully, that smoother return experience.
Speaker 2:So why invest in Dynamic Alpha Macro Fund? Again, it's a true diversifier, without compromise. So many alternatives that folks would look at can help to reduce risk, can help to provide non-correlation, but do so at the sacrifice of returns. I've heard folks say that they don't like alternatives because it lowers the risk but also lowers the return. But then they look at our strategy and they understand our fund and they realize that it is different. It's different by design and the outcomes have been different. And again, why it's a fundamental macro, global macro strategy. It's uncommon in the public markets.
Speaker 2:I didn't get into my background very much. In addition to being the portfolio manager and CIO for the firm, I alluded that I was a financial advisor for 20 years and never really sought out to start a mutual fund. But doors open, opportunities present themselves and the reason that we created this fund is that there's no other fund that I know of ETF or mutual fund that manages money the way that we do with a with a fundamental discretionary viewpoint on the futures Um. Ordinarily to get this type of of management you'd have to go the hedge fund route, um, and you know you have a two and 20 fee structure. You have accredited status that's required. You have liquidity. You have valuation limitations. This is a mutual fund daily NAV pricing, highly liquid futures that are obtained.
Speaker 2:Michael opened up with generally preferring ETFs over mutual funds. One of the common questions we would get in you know we're getting close to the Q&A timeframe so I'll bring up this question in advance because it's generally one of the Q&As that we get is why is it a mutual fund and not an ETF? Again, one of the most common questions we get. The reason was to us there was very minimal advantage to structuring this as an ETF versus a mutual fund and there was slightly more disadvantages as an ETF versus the mutual fund. So, first off, understand whether you're an ETF or a mutual fund.
Speaker 2:If you have futures exposure, those futures are marked to market at the end of the year for a tax standpoint. So if those futures have made money or lost money, they're marked to market and that's passed on as a tax ramification for investors. So the ETF does not provide the tax advantages with a fund like ours or any fund that offers futures exposure. And then you have some of the disadvantages of ETF where you have potentially wider bid-ask spreads. You have potential liquidity issues if there's not enough volume in the ETF. The mutual fund simplifies that for investors you buy it, you sell it at NAV and makes it for a very good product over the lifetime of the strategy. So the fund is designed to be non-correlated, again, both to equities and other alternative investment managers. Again, it's by design.
Speaker 2:We do things differently. You know, I like to say yes, we have futures and we manage those futures. But I don't like to label us a managed futures fund because managed futures is kind of synonymous with trend following and that's not what we do at all. We're complementary to those strategies. If you're an advisor and you're using a managed futures ETF or mutual fund or hedge fund, reach out to us. We can do some deep analysis and show you our correlation to them and help show how we can be additive to those other strategies and in some cases make both strategies even better because of that high non-correlation.
Speaker 2:Again, we target diversification without compromise. We seek equity-like returns over time with lower volatility, and again, to us that means lower loss deviation. We may have the same standard deviation or even higher standard deviation than equities over the long term, but we target lower loss deviation because that's what risk really is and again, unlike other alternatives, we're targeting those higher equity-like returns. Also, why someone should invest in us Again, we eat our own cooking as portfolio managers. We have over 2 million of our personal investment assets in the fund Huge believers in eating our own cooking. Questions I don't know, michael. If there's any questions that have popped up, happy to address some questions. If not, I'll kind of go through some of the other more frequently asked questions.
Speaker 1:For those that are here again if you want the CFP CE credit, I will email you either later today or Monday. I'll get that done, promise, by next week. Stick around if you ask questions week. Uh, stick around if you ask questions. But, yeah, maybe, um, maybe you and I can kind of go through a little bit of back and forth here. Uh, brad, as far as, yeah, how to think about the fund in general, I mean, look, let's face it, I think you know you can argue that, um, we're in a, in a cycle that people prefer the, the dynamics of an etf maybe more than a mutual fund. So I want to start off with that. Let's talk, talk about why the mutual fund wrapper for this particular product makes a lot of sense.
Speaker 2:Yeah, and again, I think that the misconception that ETFs are always tax efficient is one of the reasons. You know the fact that we are half futures contracts, a half future strategy, I should say At the end of the year. Futures contracts are marked to market, which means all the trades in the futures are looked at and did it make money? Did it lose money? If it made money, then there's going to be a distribution, whether that's in an ETF or a mutual fund. And in ETFs, many times market makers and ETFs don't always like some of the more esoteric, different, unique strategies. And you can find some of these futures ETFs that have bigger bid-ask spreads. And let's be honest, in the fund business, in the ETF business, sometimes it's a chicken and egg business where advisors don't want to buy a new ETF unless it's bigger. But the ETF won't become bigger unless people buy it Right. And in a mutual fund you don't have those concerns of bid ask spread, of selling at a premium or a discount. You buy us at NAV, you sell this as NAV. You know it makes it simple. We're on the majority of the large platforms for independent financial advisors through Fidelity, schwab, pershing, we're on a number of other broker dealers. If we're not at your firm, you can certainly ask for us reach out to develop this strategy, because nothing in the marketplace existed like this.
Speaker 2:I wanted to make sure we developed an amazing product, you know. So when we did this, we looked at ETF versus mutual fund. We looked at how to gain exposure to the futures contracts and not to get too complicated. But there's something called swaps and and some future strategies will gain exposure to a future strategy or a future strategy manager through a swap and that can add additional costs, that can add a default risk with the swap provider. We did not want to do that. So we have direct exposure to the actual futures contracts in our fund and once a month on our website, dynamicwgcom.
Speaker 2:We believe in transparency, so once a month we put on our website commentary on how did the performance go over the last month, what worked, what didn't work, what changes did we make, why are we positioned in the things that we're positioned in, which, again, I think, helps investors stay invested long-term, so that it's not just you know and nothing. And we like quant models, we like my degrees in mathematics and economics, so I understand math, I understand the benefit of quant. But there's those strategies out there. They complement us, we complement them. You know a 40 act fund available for you. Know everyone that you know we, we, we give that reason for why we're invested in what we're invested in and happy to dive into some of the other trades we've taken, and you know our longer term view on certain certain commodities and aspects to the one thing that I've always found interesting about the fund is that it has aspects of being core plus satellite and kind of one wrapper.
Speaker 1:I want you to kind of unpack that a little bit, because it does relate to sort of thinking about how to weight it.
Speaker 2:Good question. You're right, and that is by design, because when you think about and if I go back to this slide here, that shows kind of the high level structure when we built the fund, we could have launched it as a pure global macro strategy right, and the non-correlation would have been even bigger. But the problem with that is people say they want non-correlation, but when the magnificent seven is running and people only want tech stocks or whatever, then you don't want non-correlation, right, and you know it's. It's kind of like I've got a little dog and I've got to give him medicine every, uh, twice a day for his heart. Um and uh, his name is Beamer, it's a little Havanese. I've had him for 13 years. I got him from a shelter Shelter, dogs are amazing but I have to give him this heart medicine twice, twice a day, and he doesn't, he doesn't want to take it. So what do I do? I crush it up and I mix it with peanut butter. And dogs love peanut butter, I love peanut butter. Who doesn't love peanut butter? Right? So it's.
Speaker 2:It's kind of the same thing where I don't want to say fundamental global macro is medicine, but it's something that you need in a portfolio. You need non-correlation. It makes you stronger, it makes you better, it makes your portfolio healthier, but by itself it doesn't always taste good. So by by mixing it with the peanut butter or the chocolate or whatever you want to say it, it not only does it give us ability to create dynamic alpha, by rebalancing between the two, it helps to smooth out the differences. So, yeah, we really believe this is a core holding. I don't even always like the term alternatives, because everything's an alternative. Equities are alternatives to global macro right. To me, equities are the alternative investment. No-transcript. That experience of sitting across the table from a client and addressing questions like why is this investment not working? Does this go up? Always, the market keeps going up. Why do I want anything besides S&P 500? Well, because it doesn't always go up right. And having that non-correlation in a vehicle that makes for that better experience, I think, is why we did it that way.
Speaker 1:And I would go so far as to say that you're probably closer, if already, and maybe you're already in a cycle where it's not going to just be about cheap beta, that there should be more opportunities. And that's the thing about this last decade or so of S&P dominance. I mean, it's killed off a lot of the active managers, it's killed off anybody that's tried to generate alpha, because it's been largely just as a beta and that's it. But by definition, if you have fewer other players trying to go after alpha and exploit inefficiencies, the inefficiencies must get larger because there are fewer players trying to arbitrage those opportunities away. I want you to talk about that, because the cycle part of alternatives, I think, is missed by a lot of people. I'd argue you want alternatives toward the tail end of a bull market and you want as much beta toward the tail end of a bear market.
Speaker 2:Absolutely right. Right, we're definitely in the cycle and that's where I think this analysis really helps to hit home. Because valuations are high, right, and look, valuation by itself is not a reason for a cycle to end. Right, we Everybody knew there was a tech bubble a year before the bubble burst right, but we never know what causes that bursting of the bubble. Right, or I call it the bus that hits you, that you don't see coming, and valuations can't stay this high in perpetuity and get strong returns. We don't know what's gonna cause it. Is it the tariffs? Is it uncertainty? Is it something else out there? Is it movement of money? You know who knows.
Speaker 2:Right, we're big believers in not trying to predict the future, but preparing for the future, regardless of what happens, is the key. Because you're right, michael, there's a cycle in alternatives, there's a cycle in stocks. Knowing when that cycle turns and stays turned you don't know until it happens, right, and if you wait until after it happens, then it's too late, right, and that's again why we built the strategy the way we did did combining equities with the global macro strategy. Again, it kind of hides the medicine with the peanut butter. It gives you what you need, helps for the smoother return experience, but in the long run, we actually think it'll help to actually outperform the market. You know no guarantees, obviously. That's what we. That's what we strive for is outperforming with a smoother return experience, because we're giving exposure to two categories, two things that don't exist. And you touched on an interesting point around efficiencies, and the more people that are investing in it and the more popular it gets, it tends to underperform. And that's the same with buy and hold equities, along with alternatives and, as yet, another reason why we launched because, look, there are more futures-based ETFs and mutual funds launching now in the last few years than in recent history. We're the only one that I know of. Again, that is fundamental base. So if you look at those strategies performance year to date, please compare them to our performance year to date and you'll see dramatic differences because we're doing something different. And if somebody is doing something different and looking at different data, doing it differently, that's where opportunities can be created. We're a small fund as of now, roughly 160 million. That small size affords us the ability to do things that maybe behemoth funds can't do.
Speaker 2:When I was a financial advisor and I picked investments and funds for my clients. I liked the smaller funds. I liked funds that could be more nimble. It's kind of like the difference between a cruise ship and a speedboat, right? If you're in a cruise ship and that cruise ship wants to turn or change direction, it's gonna take you a long time to change direction in a cruise ship. If you're in a speedboat or a jet ski, you can make that turn in a heartbeat and then maybe turn around again if need be.
Speaker 2:And that's something I didn't touch on is we are active in those futures such that we will have our three to six themes at any given time and you may read our monthly commentary and you may disagree with some of our monthly commentary, and that's okay. Um, you should still invest because we could change our mind as well, right, and we're not so, um, stoic in our belief and and think it's our way or the highway. We will change and we'll pivot and we're small enough to be able to do that and again, do it with futures which can be highly liquid and, in a way, very highly tax efficient because again, they're just mark to market at the end of the year without having to worry about over, over trading the futures market. So, yeah, I think that touches on the question a little bit from from that regard.
Speaker 1:Brad, for those who want maybe access to you to talk further about the slides again, I'll have this as an edited podcast, but just reaffirm that point of how we're going to reach out.
Speaker 2:Yep, so you can go to our website, dynamicwgcom. You can sign up for our newsletter. We have a white paper on our website that is busting the seven risk and return myths, where we kind of talk about why standard deviation is not risk, and it goes into some other statistical things that advisors should really be looking at and understanding and differentiating yourself so that you can provide the best value to your clients and your investors. I encourage you to go to our website, download our white paper. This slide has a QR code that you can access our calendar to schedule a half hour introduction meeting if you like. Half hour introduction meeting if you like.
Speaker 2:I am active on LinkedIn. I try to put a short video once a week on LinkedIn on various topics, not just on our fund, but on various financial planning topics. We did a very interesting one this week on health savings accounts and how to prepare for the rising healthcare costs that are out there. But yeah, please reach out to us. You can email us directly at info at dynamic WG as well. Happy to talk to financial advisors on various topics and if it's individual investors, we're happy to address any questions you may have as well.
Speaker 1:Appreciate everybody for attending. Look out for an email from me on the CE credits soon enough and everybody enjoy the weekend. Thank you, brad. From me on the CE credits soon enough and everybody enjoy the weekend. Thank you, brad, appreciate it. Thanks everyone. Cheers everybody.
