Rodrigo Gordillo, Corey Hoffstein, and Adam Butler review the Q3 2025 performance of their ETF suite, drawing from the latest Return Stacked® ETFs Quarterly Performance Report. The discussion explores the strategies and use cases for each capital-efficient fund, from the core stock/bond RSSB to the newer gold and Bitcoin-focused RSSX. They delve into the underlying mechanics of the stacked strategies, including trend following replication, merger arbitrage, and the concept of portable alpha. This quarterly analysis provides a detailed look at how each fund has performed and is positioned within the broader framework of Return Stacking.

Topics Discussed

• An overview of the Return Stacking ETF suite's growth to over one billion dollars in assets under management

• The capital efficiency and diverse use cases of the RSSB fund, which provides 100/100 exposure to global stocks and bonds

• A detailed look at the blended replication approach used to track the trend following managed futures category in RSST and RSBT

• The role of the futures yield (carry) strategy as a low-correlation diversifier to trend following

• Positioning the RSBA merger arbitrage fund as an alternative to traditional corporate credit, especially with credit spreads at historic lows

• Managing exposure to gold and Bitcoin in the RSSX fund through an active inverse volatility weighting strategy

• The practical benefits of pre-stacked solutions for advisors, such as simplified implementation and automated rebalancing

• A review of recent performance drivers, including the resurgence in trend following and the lifecycle of merger arbitrage deals

RSST– https://www.returnstackedetfs.com/rsst-return-stacked-us-stocks-managed-futures/

RSBT– https://www.returnstackedetfs.com/rsbt-return-stacked-bonds-managed-futures/

RSSY– https://www.returnstackedetfs.com/rssy-return-stacked-us-stocks-futures-yield/

RSBY– https://www.returnstackedetfs.com/rsby-return-stacked-bonds-futures-yield/

RSBA– https://www.returnstackedetfs.com/rsba-return-stacked-bonds-merger-arbitrage/

RSSB – https://www.returnstackedetfs.com/rssb-return-stacked-global-stocks-bonds/

RSSX– https://www.returnstackedetfs.com/rssx-return-stacked-us-stocks-gold-bitcoin/

BTGD– https://quantifyfunds.com/stackedbitcoingoldetf/btgd/

Definitions

A Basis Point is equal to 0.01% and is commonly used to express changes in interest rates, fees, or investment returns. For example, 50 basis points equals 0.50%.

Duration refers to the average life of a debt instrument and serves as a measure of that instrument’s interest rate risk.

Standard Deviation is a statistical measure of how much an investment’s returns vary from its average over time, indicating the degree of volatility or risk

*The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost, and current performance may be lower or higher than the performance quoted above.

** Investors should carefully consider the investment objectives, risks, charges and expenses of the Return Stacked® ETFs. This and other important information about the ETFs is contained in their prospectuses, which can be obtained by calling 1-844-737-3001 or clicking here. The prospectuses should be read carefully before investing. Investments involve risk. Principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. Brokerage commissions may apply and would reduce returns.

Tidal Investments, LLC (“Tidal”) serves as investment adviser to the Funds and the Funds’ Subsidiary.

Newfound Research LLC (“Newfound”) serves as investment sub-adviser to the Funds.

ReSolve Asset Management SEZC (Cayman) (“ReSolve”) serves as futures trading advisor to the Return Stacked® Bonds & Managed Futures ETF, the Return Stacked® U.S. Stocks and Managed Futures ETF, the Return Stacked® U.S. Stocks & Futures Yield ETF, the Return Stacked® Bonds & Futures Yield ETF, and their respective Subsidiaries.

Quantify Chaos Advisors, LLC (“Quantify”) has entered into a brand licensing agreement with Newfound Research LLC (“Newfound”) and ReSolve Asset Management SEZC (Cayman) (“ReSolve”), granting the Quantify the right to use the “STKd” brand, a derivative of Return Stacked®. Neither the Trust nor the Adviser is a party to this agreement. In exchange for the branding rights, Quantify will pay Newfound and ReSolve a fee based on a percentage of the Fund’s unitary management fee.

Investments involve risk. Principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. Brokerage commissions may apply and would reduce returns. Bitcoin Investment Risk: The Fund’s indirect investment in bitcoin, through futures contracts and Underlying Funds, exposes it to the unique risks of this emerging innovation. Bitcoin’s price is highly volatile, and its market is influenced by the changing bitcoin network, fluctuating acceptance levels, and unpredictable usage trends. Not being a legal tender and operating outside central authority systems like banks, bitcoin faces potential government restrictions. The value of bitcoin has historically been subject to significant speculation, making trading and investing in bitcoin reliant on market sentiment rather than traditional fundamental analysis. Blockchain Technology Risk: Blockchain technology, which underpins bitcoin and other digital assets, is relatively new, and many of its applications are untested. The adoption of blockchain and the development of competing platforms or technologies could affect its usage. Derivatives Risk: Derivatives are instruments, such as futures contracts, whose value is derived from that of other assets, rates, or indices. The use of derivatives for non-hedging purposes may be considered to carry more risk than other types of investments. Digital Asset Risk: Digital assets like bitcoin, designed as mediums of exchange, are still an emerging asset class and are not presently widely used as such. They operate independently of any central authority or government backing and are subject to regulatory changes and extreme price volatility. Gold Investment Risks: The Fund will not invest directly in gold but will gain exposure through gold futures contracts and Underlying Funds. These investments are subject to significant risk due to the inherent volatility and unpredictability of the commodities markets. The value of these investments is typically derived from the price movements of physical gold or related economic variables. Leverage Risk: As part of the Fund’s principal investment strategy, the Fund will make investments in futures contracts to gain long and short exposure across four major asset classes (commodities, currencies, fixed income, and equities). These derivative instruments provide the economic effect of financial leverage by creating additional investment exposure to the underlying instrument, as well as the potential for greater loss. New Fund Risk: The Fund is a recently organized with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions. Non-Diversification Risk: The Fund is non-diversified, meaning that it is permitted to invest a larger percentage of its assets in fewer issuers than diversified funds. Underlying Fund Risk: The Fund’s investment strategy, involving indirect exposure to bitcoin and gold through one or more Underlying Funds, is subject to the risks associated with bitcoin as well as gold. Shareholders in the Fund bear both their proportionate share of expenses in the Fund and, indirectly, the expenses of the Underlying Funds. Bond Risks. The Fund will be subject to bond and fixed income risks through its investments in U.S. Treasury securities, broad-based bond ETFs, and investments in U.S. Treasury and fixed income futures contracts. Changes in interest rates generally will cause the value of fixed-income and bond instruments held by Fund (or underlying ETFs) to vary inversely to such changes. Credit Risk: Credit risk refers to the possibility that the issuer of a security will not be able to make principal and interest payments when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer.

The Return Stacked® ETF suite is distributed by Foreside Fund Services, LLC, Member FINRA/SIPC. Foreside is not related to Tidal, Newfound, or ReSolve.

All right. All right. We are live for another wonderful episode of Stacked Unpacked with our quarterly commentary. Welcome to the stage, Corey Hoffstein, CEO and CIO of Newfound Research, and Adam Butler, CIO of ReSolve Asset Management Global. Myself, Rodrigo Gordillo, President of ReSolve Asset Management Global, and we're gonna be unpacking all the goodies that came at us this quarter with all of our ETF lineup. But, anyway, how are you gentlemen doing before we get into it?

[00:02:13] Corey Hoffstein: Yeah.

[00:02:15] Corey Hoffstein: Good quarter, you know, excited to talk, dive into what we're seeing in the suite. We're continuing to see strong growth across both the returns, as well as the asset base and the suite, which we're excited to talk about. So it's been a great quarter and we just got done hosting our Return Stacking Symposium in Chicago, which was our first ever phenomenal event.

I don't know how much we want to talk about here, but thank you for everyone who attended, who made it such a huge success. It was a great full day education, all about portable alpha and Return Stacking. The feedback we got was phenomenal. We look forward to hosting another one next year.

[00:03:19] Corey Hoffstein: Planning starts now.

And as we look at the RSSB, which is a simple way of achieving capital efficient, this is where we're trying to get an equal amount, a 100% exposure to global equities, and a 100% exposure to a Treasury/bond ladder.

And the goal here is really just to be able to replicate that a 100/100, minus the cost of borrow. And as we can see here, we've done a pretty good job, or the ETF has done a pretty good job of providing that tracking. What are the use cases, or what have you seen this quarter in terms of performance?

I think most portfolios that offer 60/40 have had a similar path. Though this is obviously fully invested, a much larger volatility because of the hundred/hundred. But, bonds and equities have had a bit of a runup since Liberation Day, and we're only now starting to see it maybe consolidate a little bit, but bonds are starting to act quite nicely in the last, in the last few months.

It's obviously a good diversifier, but what are the clear, if we can scroll down a little bit Corey, I just wanna check, yeah, let's get the disclaimers there. The clear tracking against the a hundred/hundred portfolio here, which is just a proxy of what we're trying to do is, we're pretty close to results here at 8.03%, for the last three months is the NAV, and the 100/100 portfolio we're trying to replicate is 8.15%, so well within tracking expectations. The same thing for six months. And since inception, we're really off just a few basis points. In fact, slight out-performance, that's just mainly noise. This is an ETF that is fairly simple to put together, fairly simple to understand, but incredibly powerful from a use case perspective. And so unless you guys want to add anything to the performance of this quarter, I just wanna highlight one slide from the original deck.

But what happens is, our international exposure keeps pricing, even though global markets are closed at that time. So you can actually see point to point at any given quarter, some pretty meaningful differences. And we've seen that in past quarters. I think we have a long enough track record, at the end of Q4 we'll come up on two years that I think, obviously looking towards those inception numbers, how closely we're tracking that a hundred, minus fees, I think is the real key here for this product.

And what I'm showing here is a comparison of, in the black line, a portfolio that is a fully invested, paid up, 50% global stocks, 50% U.S. bond portfolio. And the green line is a portfolio that is 50% of a 100/100, meaning the similar structure to RSSB, plus 50% in cash. and as you can see here, one, while they both provide the same level of return in this simulation, what is absolutely incredible is what you can do with that cash. And you can imagine a, there are a series of use cases here. You can use that cash to invest in other diversifying assets and alternative strategies, which we talked about in the past. You could use it to borrow against the portfolio.

So you can remain invested in the risk factors of equities and bonds while borrowing money at institutional rates without having to get a credit report, or be at the mercy of a bank. You can borrow money against your portfolio to use it for whatever it is, whether it's buying a house, a car, or investing in a business. You can use it as a, if you have a portion of the a hundred/hundred RSSB ETF to deal with cash drag. If you're an advisor that has to keep 3%, 4% cash in the portfolio, you can top up your equity/bond exposure by using a, something similar to this. So anyway, just wanted to highlight how, you know, how, while simple, very powerful concept of this ETF, that we've been running out for a while, pretty successfully. But, any questions on this, guys? Anything to add?

Everything from explicitly wanting to stack bonds for duration, to freeing up capital to add to alternatives, institutions who are stacking private credit to get some extra yield for their clients to your point, trying to simply just avoid cash drag or sort of, as you mentioned, borrowing at these institutional rates. So it being such a flexible on surface, very simple, but that simplicity allows it to be so flexible, and again, that's I think why it's our biggest ETF currently.

All right. So Corey, why don't you walk us through the trend stacks, both RSST and RSBT. Tell us…

Now in our implementation, one of the big questions that always comes up is, how do you do the trend following managed futures? This is a category for those who are familiar with it, that is notorious for dispersion among its managers. And what we wanted to do was provide an approach that hit down the middle of the fairway, as much as possible. And so what we wanted to do was create an implementation that was as similar to the performance of the category as possible. If you took all the biggest managers, average their performance, that's ultimately the performance we wanted to provide.

And this is known as a replication approach. And in our implementation, we take two approaches to replication. One is a top down. This is a purely mathematical regression-based approach, where we're trying to use historical returns of these managers to back out their positioning, and then invest according to those estimates.

We also use what's called a bottom up approach, which is, we know these trend, these managers are all implementing trend following. We can build trend following models that we then parameterize, such that the result of that implementation looks as similar as possible to the average returns of these managers.

And again, there's always going to be some tracking error in the short term, but we believe over rolling 1, 2, 3 year periods, we can exhibit a strong degree of correlation to benchmarks like the SocGen Trend Index. One of the things I wanna highlight here is that our models that we're showing are also net of underlying cash, as well as estimations of transaction costs and fees, trying to put them as on an equal footing to the SocGen Trend Index.

And so we're very happy with these results. Again, we wish trend following had performed better over the last 12 months, but our goal here is to provide trend following results. And I think we've done a very admirable job of providing, again, right down middle of the fairway of the category.

We can talk a little bit about trend resurgence here in the last, call it three, four, five months. I'm gonna get to that in a minute, but I wanna stay on really quickly talking about these different models, because one of the things people ask us all the time is, they'll look at the performance of some of these models. In this case, something like the top down number one model, which is this dotted line up here at the top and say, why don't you just use that model? It seems to perform the best.

And one of the things we always like to highlight is performing the best doesn't mean it's necessarily doing the best job. Where our job is to try to replicate a benchmark like the SocGen Trend Index as closely as possible, while this one outperformed all the other models, it arguably did the worst job replicating the trend category. So it had the best performance because it did a bad job replicating. Trend did poorly over the period. It did well. That's not because it had some edge.

One of the things that we find when we look at the actual numbers, is that using a blend is almost always superior to trying to choose any one of these individual models. So what I wanna show in this figure, and I think this is profoundly powerful, is we look at the rolling one-year tracking error of these models to the category, to the SocGen Trend Index.

And again, tracking error is gonna be how a measure of how different they are. And one of the things that I think is really powerful about this model is that even if we had a crystal ball and could say with certainty, which of the models was gonna have the lowest tracking error over the next year, and we could pick that model specifically, in almost all cases, you would've done worse than just taking a blend of the models.

Again, we think this is another successful quarter in doing exactly that. This continues to be something that I think we've delivered very well upon in the mandate. And so for people who are looking to add trend following as an overlay to their existing portfolio, both RSBT and RSST I think have proven to be very compelling opportunities to do that.

Rod, I don't know if you want to talk about the recent resurgence in trend. This is something that I think a lot of people were called Trend dead after two years of bad performance, but we're seeing trend have a strong resurgence here since the post-Liberation Day period.

There's been a lot of research and commentary out about a couple of months ago, about how it had some of the worst draw downs in its history, and that, if you were able to bottom tick when trend following strategies do poorly, they tend to historically have recovered quite well.

Now, I'm not sure we bottom ticked it, but it seems to have hit a low that is recovered quite nicely from, and provided that level of diversification. What, maybe before we get into what may have driven those returns, Corey, can I just, final, go back to the slide on tracking error, and just get clarity on that 6% tracking error is calculated, in what way? It doesn't, mean that it's 6% from the benchmark average volatility, like…

[00:19:12] Rodrigo Gordillo: And 6%, 7% is actually quite low, is the outcome here, right? So it's, we're doing a pretty good job. And then the other thing I wanna point out before we get into the attribution, that we get a lot of questions when comparing our stacks to other CTAs, is something that Corey said earlier, which is we have to make sure when we are making these comparisons to take out the cost of financing, right?

We're, oftentimes, when I've seen advisors and investors try to do a comparison, they'll deduct the returns of the S&P 500 or the bonds if it's RSBT, and then compare just that, versus other indices or other equity other managed futures funds. But you have to make sure that you're also subtracting the cost of borrow to get apples to apples comparison.

So just a reminder when you're doing that yourself, to take that out. And if you have any issues trying to do that, we can certainly help. Reach out to the team and we can get you the statistics that you need.

[00:20:30] Rodrigo Gordillo: That's …

[00:20:54] Adam Butler: That the tracking error during the live deployment has been lower than what we observed even in simulation. So just another sort of validation of the modeling approach and the ability to actually run that with strong execution live, and see even better results than we might have expected from back testing.

[00:21:59] Rodrigo Gordillo: Yeah, I'm gonna show, I'm gonna show right…

[00:22:15] Rodrigo Gordillo: So are you guys seeing my screen now? Yeah, just click on, hover over the ETFs. You can choose whatever ETF you want. This is across the board for every ETF. Click on RSBT up here. If you click on fund details, it'll take you all the way down. Keep scrolling…

[00:22:32] Rodrigo Gordillo: Yeah, sorry, portfolio risk allocation, and then you can get to see on a live basis what's happening to the portfolio.

But then what you can do is you can scroll down even more, and you can go position by position. And you can see that currencies, for example, aren't actually, it's not like all the positions are zero, but what you're seeing is some are long, some are short. For example, that short Yen position is contributing about 3.4% of the total risk of the portfolio, but long Euro is contributing 3.2.

The top level, at the sector level, is just taking those longs and shorts and they're getting averaged out. But if you want to see the actual positions that are contributing meaningfully to the risk at any given time, if something is going on in the markets and you're going, why did the portfolio behave a certain way on a certain day, this is a great way to see what sectors and what positions are actually in the driver's seat of the portfolio at any given time.

One of the great things about trend is that you can typically look at charts and have some meaningful amount of intuition from just looking at the price evolution over the last kind of three to 12 months, about how the portfolio should be positioned. And nine times out of 10, when you look at the actual risk contributions, they're aligned with what you'd expect, based on just having a cursory understanding of what's been going on in markets, so that's another…

So it, what do we care about? What should investors care about the most? Is it the dollar-weight of something that has a standard deviation at 2%, or the dollar-weight of something that has 20%? We should care about how much risk we're taking by putting whatever position, dollar position in there.

And this is a great snapshot to understand the impact of these positions, these dollar positions here, when translated from a risk perspective, right? So I know that's fairly new to a lot of people, but starting to build an intuition is important. All right, anything else on the website, Corey?

[00:26:03] Rodrigo Gordillo: We have some videos here if you wanna rehash, some of the old stuff and the presentation deck and quarterly commentary as well. Alright, lets get back to all…

[00:26:23] Adam Butler: Yeah, so futures yield, like Corey said, we have a lot of newcomers every time we do a session like this. So it's worth reviewing at a cursory level, what the carry strategy does. We're calling that, this is also a managed futures strategy and a source of signal that many of the major managed futures funds use to complement their trend signals within their broader portfolios.

And the idea is just to gain some information from the slope, and potentially the shape, of the futures term structure, keeping in mind that when you trade in futures, you've got contracts that go out many months. You might, the current futures contract might be, for example, the December future, but there's also a March future and a June future into next year, and into many following years, especially, for example, in some of the commodity markets.

So when you look at the position of ladder contracts relative to spot or the front month contract, that has a slope, right? So if the ladder contracts are trading above the spot, then that tells you something about the market. When it's, when the ladder contracts are trading below spot or the near term, that tells you something about the market. So typically you expect, all things equal, that if future prices are trading below the current price, then prices are, over time, rolling up to the current price. So if you were to invest in that contract now, you would expect while that contract matures or expires, that the price is going to rise over time.

If the ladder futures markets are trading at a price above the current spot price, or the front month, you'd expect that investing in that market to climb down over time. So you wanna be short the futures markets that have positively sloping term structures, you wanna be long markets that have negatively sloping term structures and that, if we do that systematically, observing changes in the term structure over time, that is this long/short managed futures carry strategy and it, I guess some people wonder whether carry, this works in theory, does it actually explain returns in practice, and in fact, whether you look at bonds or currencies or commodities or equities, in fact, if you measure the sort of the inverse of carry, in other words, wanting to be long markets that have negatively sloping carry, and short markets with positively slope and carry, then you do in fact notice a pretty strong correlation between the currently measured carry and forward returns, which is just what these charts are showing. I don't know, Corey, if you've got a better way of explaining that or wanna emphasize something there.

And so when we go to build the portfolio, ultimately what we're trying to do is we're trying to go long those things that have a high expected carry, and short those things with a low expected carry, but cognizant of their correlation and the risk that is different between, so Rod, maybe you can go down to, there's a page in the back half of the presentation that, yeah, these are great pages where we show on the bottom the risk adjusted carry score of these different markets. And then on the Y axis, we show the risk adjusted target weight.

And what we can see is that those things that have higher positive carry, get a, tend to get a positive weight. Those things with negative carry get a negative weight. And then there are some things that do have a positive carry but actually get a negative weight because they're being used as a hedge, and other things that have a negative carry that might get a slightly positive weight because they're being used as a hedge, within the portfolio construction. But generally speaking, what you can see is, there's a linear relationship in how we build the portfolio of what has a positive carry and what gets a positive weight.

And in fact, we do observe this low correlation in the live period as well. The correlation between the carry strategy that we run in the Return Stacked® products and the trend replication strategy has been pretty near zero for most of the time of live deployment. And of course, one of the things that we emphasize just in general in the Return Stacked® suite is yes, we want to stack products to improve returns, but you don't want to stack products that have high correlation with one another.

That's how you get into trouble. Rather, you want to stack products that have structurally low, long-term correlation because that's how you get that sort of diversification free lunch from adding a little bit of leverage, right? So that's why we feel strongly that carry is such a great complement to trend strategies.

And one of the really interesting, weird validations of the carry strategies is to see how, over the last little while, with the exception of the most recent quarter where trend went on a bit of a run, carry and trend had been going down together for a little while, but preserving that low correlation. And when you look at the positions, it's not that one had the exact opposite position of the other. Like, they weren't completely offsetting one another, they just had completely different positions. If they had just had offsetting positions, the correlation would've been negative one between them. But they weren't, they were about zero.

So carry was doing its own thing. Trend was doing its own thing. They were doing them for very different reasons, which is exactly what you want. It's just that, for a time, they were both going down at the same time. And just like we have the ability on the website to see what the risk contributions and current positioning of trend is, we also have the same charts and tables for carry and also worth looking at that. And if you do look at that, you'll see that the positions for carry are quite different than the positions for trend right now. And also that carry tends to be, at the moment, positioned far more defensively in general, while trend tends to be, at the moment, positioned a little bit more aggressively, right, from a diversification, but also from an aggressive/defensive standpoint, they offer a nice potential complement for one another.

[00:33:52] Adam Butler: While he brings it up, I'll also mention that, you know, carry has sort of continued to flatline a little bit in drawdown, while trend has recovered, and sometimes it's helpful, there is a conceptual and also a shifting relationship between the performance of carry and the performance of other yield-type strategies.

Call it like a, like how are dividend stocks or high-quality stocks doing relative to the broader market, or stocks with high earnings yield doing, relative to stocks with low or negative earnings yield, where we're clearly in a period in the market where the markets want to own things with either low or very negative yields. They're pining for sort of speculative growth assets and ignoring or selling down the higher yielding assets to fund those investments in those speculative growth assets. And from a conceptual standpoint, it probably shouldn't be surprising to see that carry continues to languish a little bit more than trend in this current environment, but it's also positioned to be potentially a nice little buffer against a change in that orientation in the weeks and months to come.

[00:35:20] Adam Butler: Yeah, exactly. Corey, did you have, you'll go ahead and speak to this if you want.

Well, these sort of economic carry ideas tend to be a little bit more persistent, but I think one of the things we can see here is some of the cyclical changes versus the structural changes in positioning. And, I'll very specifically highlight that top blue line, which is fixed income exposure, which has been increasing over time over the last year, and then has stayed as a strong, persistent, thematic structural bet within the portfolio, whereas other components like currency, metals, energies, and equity indices have actually come in and out of favor, and are all currently largely near zero in their target weight as a sector. Very different positioning than trend.

Still seeing a lot of carry opportunity in fixed income. Fixed income markets seem to be suggesting that they're in need of capital flow, not from a stress perspective, but simply, there's a real yield opportunity there, and so that is how the portfolio is positioned.

So, very interesting to see live, and obviously great diversifier. In fact, Adam, I was looking at the correlations. they've been negative, between carry and trend, slightly negative, but still they drift very, at times very similarly. So it's definitely a great diversifier to your diversifiers. Anything else on carry before we move on to merger arbitrage? All right.

Corey, let's get to what's been happening with mergers this quarter.

The amount to which they jump up is gonna be based on two things. One, the market's perception of when the deal is gonna get done, right? If the company's trading at $50 and the buyout price is 100, but that deal's not gonna get done for a year, it's not gonna jump to 100, it's gonna jump to 100 discounted by one year's time value of money, the Treasury rate, but then two, the market's gonna price in what are the actual odds of the deal being completed? Is this a company that wants to be taken over? Is this a company that's gonna run into some regulatory scrutiny that might make it take longer than a year? Is there a risk the deal might get blocked, or break down, or something else that could have an issue?

And so you get what I would call an idiosyncratic credit component, almost, to the deal. And so the idea of investing in merger arb, and this is a very much a time-tested concept and strategy that's been around for a long time in markets, is after that deal has been announced, you buy into the deal, very often, fundamental investors are the ones selling out, and they're looking for liquidity because there's not a lot of juice left to squeeze, but the juice that is left to squeeze often looks like low duration credit, right, over the long run. The excess return of merger arb as a diversified strategy, has been about 200, 300 bips per year, call it over the last 25 years. And so, it's a very attractive, in my opinion, risk premium. You're bearing risk that these deals might fall apart. You're getting paid to hold for that last little component.

That little last little component tends to look like a low volatility credit risk. And so this can be a very attractive diversifier. The unfortunate side of merger arbitrage is that the duration can be quite low. And so unless you are someone who explicitly is just, has a whole bunch of cash sitting around, merger arbitrage on its own, it tends to look like cash returns plus 200 to 300 basis points.

So the idea behind this ETF RSBA, is for that every dollar you invest, we're gonna give you a dollar of core U.S, Treasuries, plus a dollar of the excess returns of this merger arb strategy. And so we'll talk a little bit about how that, how merger arb looks, versus say credit. But what's largely gonna drive the returns is what deals are coming in and out of the portfolio. And so what we saw at the beginning of the year, if you read through the earlier quarterly commentaries, was Q1 was a very dry period. Our models that we're using, indicated that there weren't very many attractive deals to buy into.

Not only was deal flow quite slow, but the deals that were out there were richly priced. Q2 all the market volatility that we saw actually created opportunities, where deals that had been passed over by the models actually suddenly became attractive with market volatility, and so we were able to buy in. There was a number of deals that were also announced. What we saw in Q3 is a lot of those deals ended up closing out. And in Q2, Q3, we saw a fairly nice runup in performance. Exiting Q3, what we have seen is that the portfolio has gone back to being less fully invested.

And so I think figure 10 here really highlights that. You can see the beginning of the year. This is, these are the deals in the portfolio. There weren't a lot of deals by the beginning of end of Q1. There was very little activity. We then saw a whole lot of activity get added to the portfolio, and a lot of those deals have matured, come to expiration, and have now subsequently been removed, and we're back to half-invested, waiting for more attractive deals, and we consider this to be a feature of the strategy. We're not investing in deals just for the sake of investing. We're investing in deals that the models find attractive and that are going to provide a meaningful risk-adjusted return, and that underwriting the risk is gonna give us a return that we think is worth pursuing.

One of the things that I personally think is particularly attractive about this ETF is that it, because what we're effectively doing is we're taking merger arbitrage and we're stacking it on Treasuries. I think it's a really powerful complement and diversifier and potentially even a replacement to traditional investment grade corporate bonds.

Traditional investment grade corporate bonds can be thought of as Treasuries plus the credit risk premium. And so what we're able to do here is simply say, why don't we give you the same Treasury, underlying Treasury exposure, but instead of having to inherit a risk premium that's baked into the asset class, we can choose a different risk premium, and what we think is an equally attractive risk premium over the long run?

And so in figure 11, what we show is the return of the merger arb strategy, the index that we seek to track in this ETF, versus the return of the credit risk premium, since the ETF has gone live. And one of the things I want to highlight here is that, because merger arbitrage is, the deals are so idiosyncratic, the correlation that you tend to see between merger arbitrage and credit as well as merger arbitrage and equities tends to be significantly lower than say the correlation between credit and equities where there is a much more, sort of systemic structural economic component to both of those risk premia. And so we think both of these credit and merger arbitrage or risk premia, you can earn 200 to 300 basis points over time, for bearing. But we think merger risk premia is actually something that's potentially a little bit more stable in its nature.

So this is something, again, we think is very attractive to stack on top of that core Treasury component, particularly in the current environment. And this is something I really wanna highlight with figure 12, which is that we are in an environment where credit has done incredibly well, right? You can see it, it sold off in Liberation Day, and then had a significant rally.

That's because credit spreads have tightened and have tightened to multi-decade lows. And when credit spreads expand, right, that is a headwind to credit. For credit, the credit risk premium to continue to pay out, there either needs to be less defaults than expected, or credit spreads need to continue to tighten.

Now, there are those who argue that credit spreads could, in theory go negative, that when you look at benchmark credit, it's dominated by such high quality companies that there are people who might pay a negative credit premium relative to say, investing in U.S. Treasuries, which maybe are getting riskier by the day.

So maybe you believe that there's another 70 basis points to squeeze here. But the point is, there's not a lot. And so for people who will have a significant allocation to investment grade credit, we look at something like stacking merger arbitrage on top of core U.S. Treasuries as a really interesting, viable alternative where you're getting a very similar risk profile.

You're getting a very similar core duration, with the underlying Treasuries, but you're getting a different uncorrelated risk premium on top. One that we think is equally compelling over the long run, and has a really strong opportunity to deliver really great returns. So RSBA coming up on its one year anniversary in December. I think the performance has been exactly in line with what we're looking to see, and I think this year has told a really great story about how the process works, how we sit on cash when there's no interesting deals, how we can rapidly invest when the deals manifest, and then go back to a position of sitting on cash waiting for the right opportunities in the fact pitches.

And if you compare it against an aggregate bond index, it's very similar. And that's due to the nature of once you put those deals in, they don't move much. It really, you're still, the day-to-day up and down movement tend to be mostly from the Treasury portfolio, and of course a little bit here and there from the positions that we hold in the merger arbitrage until we get, some of them get completed, and you get a little bit of a pop in the NAV.

And so it's just a unique and idiosyncratic stack that, while it may seem a little scary when you think I'm stacking a hundred percent of merger arbitrage on top of bonds, what type of excess risk we're taking. The empirical evidence shows that it's actually pretty stable, very similar to bonds. So if it is something that you're contemplating, swapping out some of your bond allocations into some sort of diversifier, this is a, I think we can make a strong case for why this would be a good candidate. All right.

All right, let's move on to RSSX of Return Stacked® US Stocks, Gold and Bitcoin ETF. So this is our latest launch. We launched this ETF in March, and what this ETF is trying to do is provide exposure to three different asset classes. Your basic exposure will be U.S. equities. And then what we're gonna do is stack a gold/Bitcoin strategy on top.

The gold/Bitcoin strategy is not a static allocation. We talked earlier in the presentation about the value of risk and understanding and getting an intuition of risk of, versus allocation. What we didn't want to do is let the maniacs take over the asylum in this particular stack. So if we were going to get exposure to unique asset classes like gold and Bitcoin, what we wanted to make sure is that we roughly gave them the same level of risk.

So this, the gold/Bitcoin strategy is an active strategy that will change weightings between gold and Bitcoin depending on their relative risks. So for example, if Bitcoin represents 80% of the risk is 80% standard deviation and gold is 20% standard deviation, then we would give them the inverse weight of that. You would give 80% of the exposure to gold and 20% of the exposure to Bitcoin. And we actually have a, kind of a long-term average of the volatility, to give us a signal as to how we should be adjusting those while we can trade daily. There's a band that we use so that we're not doing trading too often, and that ends up historically looking like a rebalancing between the two, in a two week to a month intervals. So that's basically it.

And when you, what's interesting about this, ETF is that everybody's really hearing a lot more about gold than they have, I think, in our investment careers. They're hearing a lot more from investors about Bitcoin than we've ever heard. The word debasement is coming into play. We were just talking about it yesterday, how the Google searches for currency debasement are through the roof, and we can see the results of that, right? When, you look at the runup of gold since mid-August, Bitcoin's had its runup before. when you also compare how U.S. equities are doing, they're all doing fairly well. Obviously, gold has done fantastically well in, at the latter half of this quarter. But even just looking at this chart here, you can see why we put these three asset classes together. They're very uncorrelated to each other, and from a use case perspective, I think it's important to talk about three major reasons why I think this is a very key allocation in portfolios, dealing with it from an advisor perspective.

I think you have a client base that's more and more interested in these asset classes, but it's really tough to sell down asset classes that people are used to, they understand. This is probably why, in spite of gold doing so well for the last 40 years, people still can't quite wrap their minds and allocate to it. And so having to sell down your equities in order to make room for these weird asset classes has not been a successful strategy. By stacking these asset classes on top, and we're not recommending that people do a lot, but even if it's just enough to appease the masses, or to, what is it that Mike Philbrick says, crawl, walk, run.

Maybe start with a small allocation, even selling down 5% of your equities to replace it with RSSX, what you'll get is your, you'll get your equities right back, and then the stack will, given today's allocations, which is roughly 75% gold, 25% Bitcoin. as I was looking at it today, based on the relative risks, what you're getting in that portfolio is a 3.5%, 4% exposure to gold, and one and a bit exposure to Bitcoin. That's the sinning a little towards asset classes that seem to be quite valuable in a debasement, in a currency debasement scenario if this continues.

And so that, from the perspective of getting exposures and making it easy for yourself, and because the fact that it's wrapped in a single solution where you're not having to worry, or clients don't have to see the vagaries of each one of these asset classes, it adds a behavioral element to it that also makes it easier to hold. And then finally, I think from a fiduciary standpoint, this is a point that I think has resonated with a lot of advisors that I've spoken to when they're getting calls about Bitcoin, a strat, a fund or, any one of these ETFs that have a 100% Bitcoin exposure with a 60%, 70% annual standard deviation, is that there it's a lot of volatility. They're constantly having to rebalance on their own. If it, doubles in price, they have to go and rebalance the whole portfolio, get ticket prices for trading all of the client's accounts for the sake of 1% position in the portfolio. RSSX does that for you.

The other thing is a lot of advisors still don't know much about the idiosyncrasies of Bitcoin, and in that market, and there's a lot of risk involved in having to keep an eye on that one asset class if it's a single line item in your portfolio. We find that the fund's ability to increase or decrease exposure to Bitcoin based on its volatility could potentially act as a safe way to set it and forget it. This ability, if, Bitcoin becomes less and less adoptive, if it starts to become a persona non grata in the next administration, who knows what the future lies for Bitcoin? The volatility of Bitcoin's gonna go up, and hence, the exposure to Bitcoin within this fund will go down.

So just to recap, it's a way to get small amounts of exposure to clients. It's a way to rebalance without you having to do the rebalancing. And it's a way to feel comfortable that risk is being managed by this inverse volatility strategy that we have in gold/Bitcoin. So that's really all I wanted to touch base on with RSSX. Anybody have any thoughts or comments on the benefits of this allocation?

RSSX is the exact opposite, right? You've got, equities are a pretty high vol base, and then you've got gold and Bitcoin, even though they're being held in relative risk proportion, are 15 plus vol assets themselves, on a risk-weighted basis. And so you're talking about stacking two very volatile things and the combination ends up being around a 20 vol.

And so, what I like to point out to people is a little bit goes a long way. This is a pretty spicy allocation. And as an allocator on behalf of other investors, you have to be aware of that line item risk. And so you know that 5% is probably right in the sweet spot where it's big enough to make a difference, but it's not so big that the day-to-day vol, right? We just saw last week these sort of things can be up 4%, down 4% in a day. And so, you need to position that correctly within your portfolio.

It's not precisely what we do in the fund, but it gives you an idea of how the weights between Bitcoin and gold can change over time. And we are actually seeing the largest Bitcoin exposure recently, as volatility has gone from 120 to, you know, just over 60% standard deviation. So this is, to get, gather some intuition on how the Bitcoin/gold strategy might move. The other questions that we have, on how we get exposure to gold and Bitcoin, I think we should be clear that we're not buying direct gold. We're not buying actual Bitcoin in the spot market. We're getting our exposures through a combination of futures and ETFs. So for gold it'll be gold futures.

The equity portion is a combination of ETFs and possibly some, many futures contracts. And then for Bitcoin, it is a combination of a ETF that gives us exposure to Bitcoin, and futures as well. And we wat to do as much as we can on, in a spot ETF, that gets exposure to Bitcoin, versus the futures contract, because there is a little bit of negative carry in owning Bitcoin today, though that is likely to get better and better as it becomes more and more adopted. And so that's, if you want to see how the positioning works, go to the website, download the holdings, and you'll be able to see how that is currently implemented. Any other thoughts on the holdings and how we implement this…

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We're not looking to adapt the positioning to short term changes. It's long-term structural relative changes in their vol, and we're inverse vol-weighting them relative to each other. So the current weights of, call it 75% gold, 25% Bitcoin, should not change dramatically with short-term relative changes between gold and Bitcoin's volatility.

But as Rod pointed out, if gold continues up the adoption curve, we expect structurally for that vol, excuse me, if Bitcoin continues up the adoption curve, we expect structurally for the vol to fall, and that weight should go up within the portfolio.

Someone asks, are we able to ask questions here? Yes, you are able to ask questions here. So a couple other, there've been some questions that have been adding up, so maybe we can just address some of these. We can rip through them quickly.

Will there be a based version of RSST launched in Europe? That is currently not on the roadmap. doesn't mean it won't come, but there are peers and competitors who have such solutions out there in the uses world. But it is not on our roadmap in the short term.

Another question is whether we can comment on other replication strategy managed futures ETFs? Now, I don't want to comment on them specifically. There are friends and peers - all to say that every replication strategy has its own pros and cons. We designed ours a very specific way to try to address many of those pros and cons. Our peers have made different trade-offs, and we'll just leave it at that. It's unfortunately up to, we're happy to address why we did the way we did it, and why we have processed diversification and all that sort of stuff. But, we certainly don't wat to spend any time commenting on our peers and competitors who, we don't want to say something out of line with a misunderstanding of how we think their process works. So unfortunately, it's incumbent upon allocators to ultimately judge the differences.

[01:02:47] Corey Hoffstein: Another question, will there be a stacked covered call strategy? I'm not sure what we can talk about there. Stay tuned…

[01:03:01] Corey Hoffstein: Is there a stacked long/short equity in the works? There are some internal discussions. There is nothing, unfortunate, that we can say more than that at the moment. A lot of product design stuff, what's hard is either we're working on it internally and don't want to discuss, or we filed for something and then we are prohibited from discussing.

So unfortunately, it's hard for us to discuss anything about what we are not doing. Suffice it to say, when we look at our current lineup, what we're always trying to think about is what combination of base and alternative investment strategy or asset class that we have high conviction in, are we missing?

And obviously we aren't playing in the long/short equity category at the moment. It's a very hard category to compete in. I think there's a big open question as to whether it can be done well within an ETF, but these are certainly things we're exploring.

How does the future yield product think about cross seasonal risk? Natural gas is an obvious example. Adam, do you have any thoughts on that?

[01:05:31] Corey Hoffstein: Another question here. Could we stack trend following and carry in the same stacked ETF? So I'll take this three ways. We are not going to do a trend following plus carry ETF on their own. That's just a systematic macro ETF and it's not really stacked. We will consider and are considering a more comprehensive stack where we might do say, an equity base plus a mixture of trend following and carry, and maybe some other stacks.

That is something we are internally discussing, whether, call it equity plus diversified alternatives, as a more thorough all-in-one stacking solution. Provide people both the building blocks if they want to self-implement as well as maybe a turnkey solution. That, so that's, certainly something we're discussing.

I will say there is, a mutual fund that we sub-advised that does that right now for those who are looking for a current solution that includes, an equity bond base plus trend following carry and some other systematic macro signals.

[01:07:01] Corey Hoffstein: I'll just say thank you for everyone's support. We went from zero in this suite - it was just an idea, to well over a billion dollars, well over to a billion dollars in a little over two and a half years. We are starting to see that this is not just a nascent category, but we're seeing our peers and competitors launch products in this space, and this is what we expect. We truly believe that this is a product category that will grow from zero to $50 billion by the end of the decade, and I, hope we're at the forefront in the vanguard of that growth. But, this is something that we're incredibly passionate about and incredibly grateful for everyone who tunes in and listens and expresses their interest and questions about these products. You help us get better and you give us great product ideas. So thank you for your time.

So look out for that. And if you're not signed up for our monthly newsletter, you again can go to the website, scroll down to the bottom, subscribe to the newsletter, and you'll be brought up to speed on a monthly basis on what we are writing, talking about, and where we're trialing. So thank you everybody again for staying as long as you have. Thank you for your support and we will see you next quarter. Thanks gentlemen.