What does it take to build a portfolio that can survive inflation shocks, growth booms, credit crises, and lost decades—without sacrificing long-term return potential?

In this episode, Rodrigo Gordillo, President and Portfolio Manager at ReSolve Asset Management, joins Pierre Daillie to break down the Four Piston Portfolio: an All-Terrain investing framework designed to perform across a wide range of economic regimes. Drawing on principles of risk parity, managed futures, systematic macro, defensive leverage, and return stacking, Rodrigo explains why diversification—not prediction—is the foundation of resilient portfolio construction.

Rodrigo's conviction was forged early. Growing up in Peru, he witnessed 7,200% hyperinflation wipe out his family's savings. A 55% Toronto housing crash followed, then the tech bust. These experiences shaped his belief that no single asset class should be trusted with your entire financial future.

The result is a portfolio "engine" powered by four balanced return drivers: global equities, long-term bonds, gold, and systematic macro. By allocating risk rather than dollars, and using capital-efficient tools to scale diversification to equity-like risk, Rodrigo argues investors can pursue stronger long-term outcomes with shallower drawdowns and less dependence on any single market forecast.

The conversation explores risk budgeting, managed futures, trend following, return stacking, and the growing institutional shift toward the Total Portfolio Approach—offering a practical blueprint for investors seeking to build portfolios that can adapt to whatever the next decade may bring.

Key Topics

• Rodrigo's formative years: hyperinflation in Peru, the Toronto housing crash, and the experiences that shaped his investment philosophy

• Why portfolios built on the last 40 years of market experience may be vulnerable to the next lost decade

• The Four Piston Portfolio: combining global equities, long-term bonds, gold, and systematic macro

• Why diversification beats prediction in uncertain economic environments

• How inflation and growth regimes determine which assets lead and which lag

• Risk parity and inverse-volatility weighting versus traditional asset allocation

• Why "equities for returns and bonds for protection" misses the bigger picture

• Defensive leverage and the difference between productive and destructive leverage

• Managed futures, trend following, and systematic macro as powerful diversifiers

• Return stacking and capital-efficient portfolio construction

• Solving the diversification dilemma without sacrificing market participation

• Thinking in units of risk rather than dollars: institutional risk budgeting and the Total Portfolio Approach

Read the companion article, From All-Weather to All-Terrain Investing for the Stormy Decade Ahead:

https://investresolve.com/from-all-weather-to-all-terrain-investing-for-the-stormy-decade-ahead/

Welcome back.

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I'm Pierre Daillie and Today on

the show we are diving into what it

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really takes to build a portfolio

that can handle any market weather,

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booms, busts, inflation shocks.

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Everything in between.

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My guest is Rodrigo Gordillo, President

and Portfolio Manager at ReSolve Asset

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Management, and one of the leading voices

on so-called All-Terrain Investing.

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We'll unpack how he and his

team at ReSolve Asset Management

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are building regime aware, risk

balanced portfolios across global

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equities, bonds, commodities,

gold, and liquid alternatives.

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Why they use thoughtful leverage to

turn diversification into meaningful

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returns, and how advisors can

integrate this kind of strategy

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into real world client portfolios.

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If you've ever wondered what a

truly all weather core holding

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could look like, stay tuned end.

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Rodrigo, great to see you.

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And thank you for agreeing to do this.

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I'm excited to get into the nuts and bolts

of the All-Terrain Fund strategy that

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you, Adam, Mike, and the ReSolve Asset

Management team have brought to market.

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Rodrigo Gordillo: Yeah,

great to see you too, Pierre.

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It's been a while.

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I've been pretty busy

building a couple business.

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Yeah.

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Um, but really excited to be talking

about this particular topic that, you

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know, is near and dear to my heart.

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Um, I've been, uh,

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Pierre Daillie: yeah,

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Rodrigo Gordillo: investing this way

for a couple decades now, and finally

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putting something together for people

to be able to take advantage of.

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Pierre Daillie: You're not just

the hair club president, right.

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You, you, you liked, you liked the

company so much, you bought it.

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Right?

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Um.

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Before we kick things off, tell

us a little bit about the arc of

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your career, where you got started.

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What was it that shaped your experiences

and your approach across that span?

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Rodrigo Gordillo: I know I've told this

story in the past before, but every

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one of us is formed by our experiences

in our, in our formative years.

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I was born and raised in Lima, Peru.

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Uh, I was very lucky to be born

into a family where my father

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was already bring in the.

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Bleeding edge of computers and

computer science to our household.

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Uh, I'm a family of,

uh, uh, three brothers.

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I'm the the third child.

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But, um, you know, my father

was always big on ensuring that

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we knew how to use computers.

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We knew how to do

programming, knew mathematics.

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He was a math professor

at the University of Lima.

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He was actually one of the men

responsible of bringing the first

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computer room to the Peruvian

Navy when he was part of the Navy.

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So.

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Wow.

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Things from that perspective were

going well in Lima and, and Peru.

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My dad, uh, started a software development

company that was bleeding edge and what

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that meant was, uh, writing codes so

that cash registers can do the math.

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That, yeah.

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Was a great business at the time.

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Anyway, money went into the

bank, safest bank in Lima.

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Yep.

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And sadly in 1989 there was a

transition of government and Anna

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Garcia decided to start printing

money and say no, say to the IMF that

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they weren't gonna pay their loans.

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And inflation went from a moderate level

in Latin American standards, which is

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around 23% to 7,000, 200% in six months.

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And whatever purchasing power that

cash had in the account went to zero.

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And so it forced us to make some

decisions and we immigrated to Canada.

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When we got to Canada, my father

bought a house for 5% money

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down, which is what we had left.

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Right before, I mean, I know a

few people will remember this,

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but the Toronto housing market

went down 55% from 89 to, uh, 94.

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And of course we moved back to Lima in

94, so we had to sell that at a loss.

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Um, did my high school years there,

you know, got back to Toronto.

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My brothers invested, my dad's starting

to put his money to work again.

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He knows tech, you know, that's the one

area he does know, so can't lose, right?

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Um, right before a 75% tech draw down.

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So by the time I graduated from

Commerce Finance statistics, I

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knew I didn't want that to happen.

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Um, and I just went to work.

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Like I, I did not care about

Warren Buffett's sell investing.

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I saw the 80% drawdowns that he

had in his live, uh, investing.

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I just wanted to not lose money.

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And that brought me to unique

concepts of maximum diversification,

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you know, risk, uh, weighting, risk

parity, uh, permanent portfolio and

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so on, that basically paved the way.

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So that I can invest in the way I didn't.

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And also being, um, on the quant side,

finding quantitative strategies that

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added, you know, a, people talk about a

third leg of the stool, well these things

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add a fourth, fifth, and sixth leg of

the stool that, uh, had been around for

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decades back in the two thousands when I

started, continue to be around, but very

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few people use it correctly and apply it.

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Pierre Daillie: You've also talked about

your experience going through the, um, you

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know, the GFC bust in 2000 8 0 9, and, um.

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So it, it, it's, it's, uh, it's

amazing how, you know, that stuff

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gets burned into your memory.

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I wonder, you know, also there's a

lot of advisors, there's a lot of

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investors out there, uh, especially,

you know, in the younger set who've,

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who've never experienced anything.

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Even, even 2008, 2009, they

haven't been through it.

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They sort of just, you know, some

of the, uh, older millennials

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sort of maybe started their, their

investing experience after that.

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And so, you know, bringing this

all-terrain fund, this all-terrain

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strategy to market, it comes at a

time when, first of all it's possible

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to bring something to market.

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Um, uh, you know, if you just go back

five, 10 years, that kind of thing.

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Bringing something like this

strategically, uh, structurally was.

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Probably next to impossible, maybe only

available at the institutional scale.

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Um, so it's, it's, it's, uh, that's

part of the reason I'm so excited

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to talk to you about this because,

because I think, you know, even

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looking back over time, there were

times where I wondered and wished, you

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know, like, there would be so cool if

there was so, so, you know, wonderful.

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If there was something you could do

that would, that would, you know,

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check off all those boxes that, you

know, are so imp are, are so hard to

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predict and so hard to prepare for.

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So let, let's get into it.

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Um, rod, at a high level, what is

the All-Terrain Fund and what problem

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is it trying to solve for investors?

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Rodrigo Gordillo: The real issue today

is that the vast majority of investors

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have focused on an asset allocation

decision based on their lived experience.

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Their lived experience, for the most part

has been the last, you know, 40 years of

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which the vast majority of time has been

spent with equity markets going up, right?

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Let's, let's forget about the 2000,

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to now, we're seeing nothing but,

but easy investing with low cost and,

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um, maximum value from doing that.

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Alter rain is a recognition that our

lived experiences are going to hurt us

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if we don't understand the, our history.

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We don't understand the reasons that

equities go up, the reasons that bonds

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make money when they do the reasons why

alternative assets like gold and possibly

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Bitcoin add tremendous amount of value

in diversification of the portfolio.

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And, and, and also certain alternative

strategies that all that make money

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when all those form lose money.

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Um, you have to go back a couple hundred

years and understand those dynamics in

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order to create a more balanced portfolio.

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And so that the problem

it's trying to solve.

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Twofold.

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Number one is to create a much more

balanced portfolio so that a lost

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decade, like 2010, doesn't happen

to you at the worst possible time.

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And number two, with the changes in

rules and availability of, of, um,

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certain instruments to trade, you

are now able to create not only a

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diversified, balanced portfolio that

is nice to an equity line that's kind

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of smooth and and nice to see, but now

you're also able to run it at a level

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of risk that is whatever risk you want.

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But in the case of the fund

here, we've made it so that it's

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competitive with equities, and

that's the formal aspect of it.

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Right.

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How do you create balance

and minimize fomo?

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Well, you have to be able to

compete with the horsepower that

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equities have and the horsepower.

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And the way I see it is standard

deviation or volatility.

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Global equities run at 15 to 20%.

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Volatility.

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Most portfolios that are well diversified

because of the diversification

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run at five to eight, that's a

tough thing to win most years.

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But if you're able to scale your overall

exposures and your balance exposures up

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so that you match the level of risk to

equities, but you expect to be to four

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times higher units of return for that

risk, then all of a sudden you now have

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what everybody's been clamoring for, um,

which is a hedge fund style investing

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that can actually, or has a shot.

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Beating the index.

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Um, and I think we've been stuck

in a place where anything that

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was different from the s and

p needed to be low volatility.

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I've decided that I'm

not interested in that.

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I'll take the pain, the, the short-term

pain of volatility so that I can show

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some long-term gain while being balanced.

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Right?

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So that's, that's the problem.

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And so it's trying to solve a, creating an

equity line that can, that has a good shot

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of being upward sloping in any decade.

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And also reduce the FOMO of, um, of

the, the gravitational pull of not

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doing as well as the equity market.

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Pierre Daillie: So, very interesting.

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I I, I think it's attractive from

the standpoint that, that investors

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desire equity like returns from

all their investments, right?

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So when you can, when you can

structure a strategy that, that.

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Aims to provide that equity like return,

but with substantially less risk,

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uh, you know, less downside exposure.

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You can see where, you know, that type

of strategy becomes very desirable,

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especially in the context we're in today.

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Rodrigo Gordillo: What I've done

with this is I want to offer the

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same long-term volatility, same risk,

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Pierre Daillie: right?

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Rodrigo Gordillo: But like, like you

said, do it in such a way where the

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worst outcomes for equities are not the

worst outcomes for this strategy, right?

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So the, the depth of

corrections are more tempered.

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And we also said equity like returns.

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We're actually aiming to do better

than that by virtue of diversification

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scaled up to equity risk.

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Um, so the goals here are.

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To give people the risk that they've

been used to, but try to do better.

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Pierre Daillie: So you're, you're backing

into the context of, of adaptive asset

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allocation, which is, which is actually,

uh, the context of which is the book that

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you, Adam and Mike actually co-authored.

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Um, which is a terrific

book, if you haven't read it.

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Uh, it gets into, you know, the, the,

um, uh, real world concepts of risk

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budgeting and risk balancing a portfolio

as opposed to what we commonly have,

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uh, which is the 60 40, which is, which

when you actually do the risk X-ray

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on, is more like 85 to 90% equity risk.

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Um, so risk balancing, uh, is where a

lot of the concepts that we're gonna

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talk about are, are based, which is

in, in using, um, thoughtful modest

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amounts of leverage to balance risk

across all these various ac um,

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all these various asset categories.

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You describe, uh, all-terrain as a way to

prepare for the future, not predict it.

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And that's very important distinction.

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Uh, because so much of investment programs

are based on high conviction prediction,

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market calls, making directional, you

know, calls directional bets on, on

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things that are happening in the market

trends, um, but in a very superficial

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way, what does that, what does that

actually mean in portfolio design terms?

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Rodrigo Gordillo: Yeah, so the basic

thing that I think people need to

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understand or re re relearn, because

I think we've all learned this

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concept of if you hold equities long

enough, they're gonna make you money.

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If you hold bonds long enough,

they're gonna make you money.

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People have been skeptical about

gold forever, but if you just

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look at the empirical data, if you

hold long, uh, gold, long enough,

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they're gonna make you money.

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Um, that I think we can

all agree on, right?

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We can agree that it's up and to the

right, and so the basics of like the,

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let's start building a layered cake.

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The basics is we need to all agree that

that is true, that we should expect

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these things over a full lifetime.

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To be up to the right for reasons

like risk taking requires,

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um, a higher expected rate

of return On the equity side.

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Taking risk on duration demands a higher

return than cash for taking that duration

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risk Gold, you the, we wrote a white

paper on gold on the return stack.com

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side if anybody wants to read it.

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That really does make a case for the

fact that gold was non-risk from a

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retail perspective before the seventies.

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But once it got decoupled, the risk was

transferred over to the individuals for

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taking global political risk and taking

the risk that there won't be inflation.

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And so when there is

inflation, you get paid.

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Um, and that premium is very

similar to what we see in equities.

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And so if we, if we truly at least

believe that, then you can create a

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more balanced portfolio because it turns

out that all those three asset classes

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respond differently to different things.

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Um, the last category is that people may

disagree on is whether non-correlated

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alternative strategies that are

directional, like managed futures, trend

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following carry strategies or systematic

macro strategies, which is what we lean

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on here on our fourth, um, asset class.

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Whether that makes money over time.

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Now there's been an index around since

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and it actually right does as well as

equities, bonds, and, uh, and gold over

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a long period of time, or in that same

realm of returns of access returns.

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Uh, you can go back even

further with the turtle traders.

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It's just, you know, we can

empirically observe that that's true.

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And so that's the basic, the

basic is equities aren't the only

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thing that can make you money and.

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If any one of these can make you money

over time, can you predict what's,

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which one of them is gonna make the most

money based on your prediction model?

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Geopolitical models?

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We don't think so.

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We've yet to find a way to predict what's

gonna happen over the next 12 months.

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And we used to write an, uh, a newsletter,

uh, every year that was called Bold,

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confident, and Wrong, where we would

assess all the predictions from the big

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banks of what was gonna happen in the

next 12 months and how they were wrong.

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Um, so the premises are, there are

asset classes that make money over time.

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They don't make the

money at the same time.

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It's really tough to predict the future.

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So the first step is at least

creating the Do No Harm portfolio,

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which is something that is an equal

risk waiting between those assets.

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We've added Bitcoin, which is

a bit more contentious, but

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we can talk about that later.

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Right.

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Um, so that's, we're not predicting,

we're just creating a, a, a

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fundamental diversification.

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With risk balance, so, so making

sure that the maniacs aren't taking

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over the asylum and not giving too

much weight to high volatility, even

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less, more weight to things with low

volatility so that we can create that,

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do no harm portfolio to start with and

then you can start getting fancy on.

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Yeah.

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Rather than trying to predict which,

which one's gonna do better, this

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board this year, these next 10 years.

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Right.

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Something you can kind of put to put

in place, fall asleep, wake up 10

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years, and you'll be confident that in

that 10 year period you probably did.

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Okay.

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Pierre Daillie: Rod, walk us through the

building blocks of the strategy, which,

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which major asset sleeves are you using?

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And, and we just, you just

went through the list.

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Um, and what role, more importantly,

what role does each play in different

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growth and inflation regimes?

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Rodrigo Gordillo: Absolutely.

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Let me, let me share my screen here so I

can show you a couple of key, um, elements

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and I'll switch between the brochure

that we created for broad audience and

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then the, um, presentation as well.

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So.

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You see my screen, this is

from our All-Terrain brochure.

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You guys go to investment call.com

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in the All-Terrain section.

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Um, you'll be able to,

to grab it from there.

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But the basics here, if I zero in on

this graphic, is that we talked about

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four different categories of investments,

but we didn't really explain why

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it's important and why those things

move differently from each other.

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Right?

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But when you understand how

markets work, markets work based

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on the inner connectivity between

inflation and growth, right?

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Periods of high inflation, low inflation

intersected by periods of high growth

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and slowing growth will define which

asset class is likely to do well.

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And this is kind of intuitive, right?

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Like if you have a period of rising

inflation and slowing growth like

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a stagflation environment in the

seventies, Pierre, what would you

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expect to do well in that environment?

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Pierre Daillie: First of all, I mean,

I would expect, I mean, I, I think

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low hanging fruit, uh, would be,

you know, anything floating, right?

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Would do well, uh, cash for

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Rodrigo Gordillo: sure.

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Yeah,

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Pierre Daillie: cash, definitely.

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Cash would be a a, a great asset.

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Um, uh, commodities,

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Rodrigo Gordillo: yeah.

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Pierre Daillie: Energy, things like that.

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Rodrigo Gordillo: So the

commodity markets are likely to

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outperform even that big cash.

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Yeah.

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Um, right.

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So you want things that outperform cash.

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It's generally gonna be

commodity, it's gonna be gold.

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Um, it's gonna be yeah,

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Pierre Daillie: real assets,

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Rodrigo Gordillo: real assets and

strategies that can go along those things.

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In short, the other things,

right, like systematic, macro

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and managed use strength falling.

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Um, and so we can go do this

exercise across the board.

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If we think about, uh, rising, uh, or

accelerating growth and low inflation,

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well that's good for businesses, right?

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So if it's good for businesses and

there's no inflation, well commodities

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are probably gonna go down and

you're probably gonna see equities

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do well and bonds do well, right?

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And if you're gonna see a period like

oh eight where credit dries up and

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there's illiquidity and slow growth

and low inflation, well that's when

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people are gonna go towards bonds and

sell out of equities and commodities.

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So all of these are intuitive things.

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And when you look at, in that

second page here where we show

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examples of periods where, um.

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Where we saw inflationary stagnation,

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growth periods like 2000, uh,

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credit crisis and disinflationary

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You get, you see that play out, right?

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You see that in an inflationary

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We always knew, we've been talking

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Pierre, that when the rising inflation

is slowing growth, the bonds and equities

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were gonna lose at the same time.

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And you'll see that bonds here lose a lot.

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It's because we, um, here and use

the long term, uh, treasury market.

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So the 20 to 30 year, um, I, I think

what we use here is T-L-T-T-F, if

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you guys wanna take a look at that.

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Um, in oh eight, it made up, it made 22%.

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Um, in 2022, it lost 41% because

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Pierre Daillie: right.

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Rodrigo Gordillo: Rising rates are

bad for both equities and bonds.

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What it did well, gold did okay.

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Systematic macro, which can trade

commodities and go long and short.

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Commodities and currencies and bonds

and equities globally over, you

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know, dozens and dozens of markets.

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You know, they tend to do well.

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Um, and then we can just go

on for the viewers, you know,

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and inflationary growth.

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Gold did really well, did the best.

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Equities second and bonds, okay.

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You know, weight equity's down,

um, bonds up, gold, up systematic,

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macro up and Disinflationary growth

is the best for the 60 40, right?

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That's what's dominated the last 40 years.

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30 of the last 40 years have been this.

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Um, you're seeing equities be

the best performer and bonds

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be the second best performer.

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Not surprisingly, everybody

has a 60 40 portfolio, but.

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We gotta think about all decades, not

just the decade we've lived mm-hmm.

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Or 40 years that we've been investing in.

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Um, and that's why I am, that's what this

is trying to show that you want structural

368

diversification and you gotta be okay

with the, that diversification means that

369

you're always having to say your story

about some elements of your portfolio.

370

But ultimately it is the, in my opinion,

the safest way to put portfolios together

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rather than focusing on equities alone.

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Pierre Daillie: I think it, it, um,

will make it substantially easier

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when it's wrapped up in one line item

as opposed to having four separate

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line items all the time that would

cause behavioral difficulties.

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Rodrigo Gordillo: One of the things, if,

if you're okay with me talking about risk

376

balance, um, I want to get into here is

that there's this view in the marketplace.

377

That has been, uh, permeated across

advisors and individuals and boards

378

that you have your equities for high

returns and you have your bonds for

379

moderate returns and protection.

380

And that's just, you know, a not,

381

Pierre Daillie: yeah,

382

Rodrigo Gordillo: not, not quite correct.

383

It is, bonds can be just as

good long-term as equities.

384

You just have to be able to get

exposure to bonds that provide the

385

same level of risk as equities.

386

Right.

387

And so, yeah, you don't have

to do anything fancy here

388

to see the value of that.

389

You simply can buy that long-term

government bond, E-T-F-T-L-T or look it

390

up to see how it did from 1990 to I think,

391

And for most of my career, people

were like, equities, I wanna buy, no,

392

we need to have an equity portfolio.

393

And I kept going on this black line

that outperformed equity markets.

394

From two thou from 1999

395

Um, and not only that, but made

money during the tech crisis.

396

Made a lot of money in October of 2008.

397

Made money during COVID, right.

398

These are mm-hmm.

399

This is what happens when you put your

risk goggles on and say, Hey, if this

400

is an interesting thing to invest in

and I believe in it long term, what

401

can I do to scale it to the same

level, to the risk that I'm okay with?

402

And then do an apples

to apples comparison.

403

So this is close, right?

404

That long-term treasuries, equities,

and gold are roughly, uh, exhibiting

405

the same volatility, but not quite.

406

Not quite.

407

So you said putting together

this in an equity line.

408

I believe everybody should have this as,

as their base portfolio before they meet

409

with any advisor, before they talk to

ReSolve asset management or anybody else.

410

Pierre Daillie: Mm-hmm.

411

Rodrigo Gordillo: Will come to me

and say, what, what should I do?

412

I say, you should consider we're having

these three asset classes and putting

413

'em together, but not an equal dollars.

414

I think equal dollars

is misleading, right?

415

Because it's like, the way I describe

it is you, you, I've given you a three

416

piston motor, but if you do equal dollars

and one piston is thicker than the other

417

piston, then you're gonna have a three

piston motor that's non balanced, right?

418

Um,

419

Pierre Daillie: yeah.

420

Rodrigo Gordillo: You need to, you

need to actually modify them so that

421

each one of these three differentiated

pistons have the same width and provide

422

a balance to how the motor runs.

423

And so

424

Pierre Daillie: to, I

think that's a concept.

425

I, I think the concept of risk

balance is, is something advisors and

426

invest, a lot of advisors, not all

advisors, but a lot of investors and

427

advisors are simply not familiar with,

which is, you know, the risk X-ray.

428

Like what, what does your portfolio

risk balance look like versus your

429

name, you know, label diversification

that you have in your portfolio.

430

That's right.

431

I think, I think, you know, when you look

at that, when you look at that chart.

432

And, and on an, on an even simpler

note, I mean, if you talk, if you talk

433

to bond people, people who you know are

actively trading in the bond market,

434

they'll tell you exactly what you just

said, which is that you can make as much

435

money in bonds as you can with equities.

436

And if you talk to equity bias

people, you're gonna hear,

437

you know, equities forever.

438

And if you talk to, if you talk

to gold, yeah, if you talk to gold

439

bugs, you're gonna hear gold forever.

440

Right?

441

And

442

Rodrigo Gordillo: finally, if talk

to of, uh, equity investors in

443

black Monday of 1987, they'll tell

you that they jump off a bridge.

444

If you talk to bond traders

445

money in their entire lives.

446

Right.

447

So,

448

Pierre Daillie: right.

449

Rodrigo Gordillo: It's, it's, and

it, and still we continue to not

450

understand, um, that, so we're trying,

we've been trying for 20 years to

451

change that, but uh, it's slow moving.

452

Slow moving.

453

Pierre Daillie: Well, it is because

you have to overcome, you have to

454

overcome those, those biases that have

been created by the industry itself.

455

Rodrigo Gordillo: Correct, correct.

456

But

457

Pierre Daillie: about the roles

about, you know, about the

458

roles of different investments,

459

Rodrigo Gordillo: different

assets, and, and again Yeah.

460

Different assets, then

risk weighting them.

461

Right?

462

Pierre Daillie: Right.

463

Rodrigo Gordillo: So in this, so if

you really wanted to have a strategic

464

portfolio of those three assets, instead

of doing 33% across each, what you wanna

465

do is you wanna look at the volatility and

then do what's called inverse volatility.

466

With, with, uh, all the AI

models, you can just search it up.

467

How do I create an inverse

volatility portfolio of three assets?

468

And it'll do it for you.

469

But the numbers here over that

period, um, are that you want to

470

have a little bit more to treasuries,

in this case around 39%, 31% to

471

gold, and 30% to global equity.

472

So not a wild deviation, but

you know, a little bit more.

473

And this, this may seem like, oh

my god, so much risk to bonds.

474

But in reality, it's.

475

Equal risk long term.

476

And when you put together a portfolio

that simply, you actually end up

477

with, you know, the, the dream, right?

478

That, that equity line that, um, that

everybody talks about, which is how do you

479

smooth out how sequence of return risk?

480

How do you, how do you mitigate the

chances that the day that you retire,

481

you're gonna have a lost decade?

482

And for those, um.

483

People just listening in and not watching.

484

Just imagine what happens when you have

a three piston motor and every day puts

485

out some output and that that, mm-hmm.

486

And it's a much smoother ride.

487

It's a much smoother equity line.

488

And so that to me is the, the, the OG way.

489

This is not anything new.

490

Harry Brown came up with

this in the eighties.

491

Pierre Daillie: Yeah.

492

Rodrigo Gordillo: Um, you know, he

added some cash in there, but then the

493

volatility is way too low for my taste.

494

But that's a good place to start

and that, that should change.

495

That should red pill a lot of

individuals, a lot of advisors to

496

say, okay, yeah, this seems better.

497

Um, and then we can build on that as to

how to it, how to then make it so that

498

you're competing with equity markets.

499

Pierre Daillie: So, um.

500

Practically, rod, how are you

measuring and balancing risk across?

501

I mean, I, I know you, you know, we just

showed balancing risk across equity,

502

global equities, long-term bonds and gold.

503

But now when you add in commodities

and commodity trading advisors and

504

systematic macro trend following,

how do you incorporate that?

505

How do you incorporate, sorry.

506

How do you incorporate that

element along with those three?

507

Is it, I mean, do you use the

same inverse volatility, uh, risk

508

budgeting, risk balancing model?

509

Rodrigo Gordillo: Yeah, so just,

again, not to get too deep on

510

what systematic macro is, but it's

using systematic, uh, signals.

511

Like what is the trend on coffee?

512

What is the trend on German bonds?

513

What is the trend on, um,

gold and so on across dozens

514

and dozens of global markets?

515

Um.

516

And trend might be one thing.

517

You could also look at seasonality.

518

Is it a good time to

invest in gold right now?

519

Yeah, good trend, but is it a good

time from a seasonal perspective?

520

What about mean reversion?

521

Are we, has gold gone crazy?

522

Should we take some back?

523

What about things like, um, the

yield, I'm getting to hold gold.

524

The futures contract, is

it positive or negative?

525

So all these different well-known

factors that you can kind of, uh, harvest

526

over time, that they're all imperfect.

527

But when you grab those signals, add

'em all up and then say, okay, I've

528

gotten all of the opinions from these

systematic models of what my position

529

should be in each one of these markets.

530

You aggregate it and then you

decide that day to go long short.

531

Once you have your portfolio, then

once again you can decide how much

532

risk you wanna take on that portfolio.

533

So in the sense of we just talked

about gold equities and long-term bonds

534

and equal risk, you can then create a

strategy that targets a specific risk up.

535

Okay.

536

Right.

537

And then, and then you have a fourth

piston that acts very differently

538

than the other three that has an equal

width is all these, these other ones.

539

And that creates a much, now you're,

now you're talking about a powerful

540

motor that is also, um, more balance.

541

Right?

542

So that's how you, that's how you

add that and those alternatives.

543

Yeah.

544

You've, man, if you're able

to manage 'em yourself.

545

Pierre Daillie: So I think what you're

getting at Rod is that the, the, where

546

we're gonna get to that, um, in a moment,

but it's that the three core elements,

547

uh, long-term, long-term bonds, gold

inequities are the core of the portfolio.

548

And the systematic macro is an overlay,

549

Rodrigo Gordillo: is the

return stacked portion now.

550

Pierre Daillie: Right?

551

Right.

552

Rodrigo Gordillo: And, and it'll depend.

553

There's different iterations.

554

So far what we've

discussed is that, right.

555

So.

556

Those allocations I gave you,

we're not selling those down in the

557

example that I used in the brochure.

558

Right.

559

We're simply stacking that other return

stack that, that other systematic

560

strategy on top of those three.

561

So this is very doable using

derivatives and that modest

562

leverage that you talked about.

563

Right.

564

So it's, uh,

565

Pierre Daillie: okay.

566

So, so let me ask, let me ask you the

question in, in, in, because I, I know

567

in the brochure you show an all-terrain

allocation scale to equity, like risk.

568

Rodrigo Gordillo: Mm-hmm.

569

Pierre Daillie: Using low cost leverage.

570

Um, how are you implementing that leverage

and how do you think about the, between

571

diversification and gross exposure?

572

Rodrigo Gordillo: So the trade

off between how much leverage do

573

you use or not really comes down

to, are you able, are you taking.

574

Are you doubling down on the same risks

or are you using leverage in order to

575

use it from a defensive perspective?

576

Right.

577

So we call that defensive leverage.

578

Um, and there are limits to the

amount of leverage you can use.

579

And we have separately managed account

clients that want to, you know, that come

580

to me and said, I can do 40% volatility.

581

And I say, you may, but

mathematically that is, um, a really

582

nearly impossible thing to do.

583

And you will, there, there's limits

to the amount of alerts you can use.

584

Um, but if you're looking to mo,

like I say, most people are used to.

585

Investing in equity, like volatility,

or at least when people choose to do

586

something different, they'll sell their

equities to buy that different thing.

587

Right?

588

So at least we wanna

589

Pierre Daillie: Well, that's

590

Rodrigo Gordillo: have,

591

Pierre Daillie: that's the peren,

that's that's the perennial problem.

592

Rodrigo Gordillo: Yeah.

593

Yeah.

594

We wanna have, if we're selling a

motor with a certain horsepower,

595

we wanna replace it with equal

horsepower at the very least.

596

Right.

597

Hopefully more efficient model, uh,

motor, but at least the same horsepower.

598

Um, and so one that doesn't break down

as much and so on, just to push the

599

analogy even further, um, but the.

600

The way the amount of leverage that

is used will vary over time, um,

601

especially on the systematic macro side.

602

As things get riskier,

you reduce allocation.

603

As things get more risk, less risky,

you increase your allocations to

604

maintain that level of risk targeting

that you're, that you're using.

605

We wrote a piece that, um, that really

has an, a nice little acronym and when it

606

comes to leverage, you wanna avoid lice.

607

And, you know, l stands for leverage

and I stands for illiquidity.

608

So levering illiquid assets is a risk

that you need to take in into account.

609

You wanna reduce concentration, right?

610

So what this, the world

of retail has been scared.

611

Um.

612

Over the last couple decades on are

these two times, three times lever

613

ETFs that are doubling down and

tripling down on the exact same risks.

614

And I think we've all learned what

the disadvantages of just keeping that

615

invested and never rebalancing out of it

and what type of, uh, you know, you're,

616

you're, you're tripling the return, the,

the risk where you're not tripling the

617

return because of rebalancing issues.

618

Um, you are getting larger drawdowns.

619

So that is leverage that you wanna avoid.

620

Um, and excessive leverage, right?

621

Three times levered s and p right?

622

All, you're not a good idea.

623

When we go back to the concept

of all terrain, what you're

624

levering is non additive.

625

It's not, uh, multiplied, it's additive.

626

So lemme say that again.

627

You're not multiplying the same risk,

you're adding different risks and when

628

you're adding things that zig, when

the other one zag, what tends to happen

629

is the leverage is increasing, but the

risk remains, or the volatility of the

630

portfolio can remain the same or lower.

631

And the peak to trough losses

can also get lower if you put

632

the right pieces together.

633

Because you know if one or two markets

are suffering, if you're diversified

634

enough, the other 2, 3, 4, 5 pieces

635

Pierre Daillie: right,

636

Rodrigo Gordillo: may provide the offset.

637

Right?

638

So.

639

The key is in avoiding lice, and

the key is in defensive leverage.

640

And once you put all that together and

then you decide, okay, well how much

641

risk do am I really comfortable in

taking then, then that those are the

642

levers you can now pull rather than

just taking what you're given, right.

643

And you, and you're really creating a

robust model that I haven't invented.

644

By the way, this is a Nobel Prize

winning concept from William

645

Sharp that I've piggybacked of and

many institutions, you know, have

646

been actively using for decades.

647

Pierre Daillie: In a nutshell, borrowing

to buy diversifiers true diversifiers.

648

Assets that behave

differently from your core.

649

Rodrigo Gordillo: Correct.

650

Correct.

651

And what we have, what we do

as a society is we borrow money

652

to leave with the same risk.

653

People don't know it, but when you

look at the s and p 500, uh, and you go

654

all the way down to the balance sheet,

those companies are borrow two, three

655

times what they're actually worth.

656

So you are implicitly

borrowing by buying equities.

657

Uh, when you buy a house,

you are using leverage.

658

You're putting $20 down to buy

five times the value of something.

659

Right.

660

And we, and you create a real

estate portfolio, you are

661

just doubling down on that.

662

When you buy private

equity, we right, we do.

663

There's a number of studies

that show that it's around 1.6

664

times levered, small cap equities.

665

You just get to not see the volatility.

666

So leverage is all around us, sadly.

667

It's very some illiquid, concentrated

and excessive in our view.

668

And you wanna diversify away from

that if you can use leverage.

669

Pierre Daillie: Well, it, it, it enables

us to do things we would otherwise not

670

necessarily be able to do, first of all.

671

And secondly, what we do with that

enablement is what really matters.

672

Rodrigo Gordillo: Correct.

673

Pierre Daillie: Right.

674

Uh, there's, there's thoughtful

and prudent use of leverage,

675

and then there's the imp prudent

676

Rodrigo Gordillo: with great

power, great responsibility.

677

They say

678

Pierre Daillie: you're, you're also

employing additional risk management

679

filters where you would reduce or

divest from assets with negative trends.

680

What's, what does that process

look like in practice and, and what

681

are you actually responding to?

682

Rodrigo Gordillo: Yeah, so these are

things that have been around forever.

683

You look at, uh, things like

global tactical asset allocation,

684

where you wanna let the equity.

685

Bond gold.

686

And in our case we add Bitcoin.

687

And again, Bitcoin doesn't

get a, uh, 33% weight year.

688

It gets a significantly lower

weight, very, very small weight.

689

But in those major asset classes,

you wanna let those portfolios be, we

690

believe that they're gonna make money

over time, but sometimes there are

691

some clear and available, um, signals.

692

I think the Ivy portfolio for Med

Favor was the first time, you know, I

693

encountered something that I'm like,

okay, something that simple can add such

694

tremendous amount of value, particularly

in just getting outta the way while that

695

particular asset class is being shaken.

696

Right.

697

And, and it's not that complicated.

698

You're just, you wanna have long-term

filters here so that you can benefit

699

from the long-term upward sloping returns

of each one of these asset classes.

700

But you also want to have a certain

point where you can just get out.

701

And, and our, our, much like our adaptive

asset allocation book, leaned on momentum

702

and trend for the long term, um, for

these asset class holds that we wanna

703

just do very little trading, but be able

to get out, um, we use momentum filters

704

to simply sidestep the worst of it.

705

Um, and then we also have some immune

reversion systems when things go

706

too crazy on the upside, like gold

did in October and February, where

707

we're able to see, okay, this is

probably gonna come down very quickly.

708

Let's at least take some off the table.

709

And so that's kind of the first layer of

extraction from what we just talked about.

710

Like up until now we've, we've

really talked about something anybody

711

can implement on a non lever way,

712

Pierre Daillie: right?

713

Rodrigo Gordillo: The next

level is then to say, okay, um,

714

I want equity, like leverage.

715

Um, how do I do that?

716

Well, you don't do it

by going to equities.

717

Remember, in our

framework, we want balance.

718

We want those pistons.

719

We, we've created a motor

with three pistons, maybe the

720

motors like little horsepower.

721

Now we want to create a bigger motor

with the same piston, uh, configuration.

722

And you do that by scaling all those

asset classes to a certain level of risk.

723

Okay?

724

Now with that horsepower comes some

craziness and you wanna mitigate that,

725

um, those potholes as much as you can.

726

And that's when you, the first level

is, um, you, you scale the portfolio

727

using derivatives that you need a

derivative manager like us to manage.

728

And the second level is then to

say, okay, add a filter for trend.

729

So we get outta the worst periods.

730

And once we have that in place, that

is your, your levered global tactical

731

portfolio that on its own is already

pretty neat, but it does struggle.

732

And period.

733

What do you do when 2022 and all three

assets, including big four assets are,

734

are out, you're just sitting in cash.

735

Where else can we make money?

736

And that's where we get into

fancier stuff like systematic

737

macro, if you want me to again.

738

Pierre Daillie: Yeah.

739

You have a history of employing

systematic macro in man and managed

740

futures as components in portfolios

that have a history of helping during

741

inflation shocks and equity crashes.

742

And I think that's the part that that

investors and advisors would be, you

743

know, would, would, would stand up or

light up to know more about, because

744

that's the very thing that, that.

745

We seek to avoid other than, you

know, owning bad investments in the

746

first place or negative trending

investments in the first place.

747

And, and so I think, I think it would

be very instructive to talk about,

748

you know, where, how you implement

systematic macro into this portfolio.

749

Um, where do you fund it

from is the big question.

750

I think, you know, the perennial

problem people have, investors have

751

with diversification is having to

subtract from their foundational

752

portfolio in order to do these things.

753

And that's where, you know, that's

of course, that's where the return

754

stacking slash portable alpha,

um, strategy comes in, uh, to this

755

conversation, which is, which is that

you don't have to subtract from your

756

foundational portfolio to do, to do this.

757

You can, you can do it, you know?

758

Please, please talk about

759

Rodrigo Gordillo: that.

760

Yeah.

761

Look, the simple, the simple

thing, like if you think about.

762

Um, I'm gonna, you know, on the

return stacking side, people's

763

foundational portfolio is 60 40, right?

764

Yeah.

765

So everything I do on the return

stacking side is about keep your 60 40,

766

that's your base beta portfolio within.

767

Everybody loves no one's in loves, and

let's be honest, the majority of people

768

aren't gonna move away from maybe 80 20.

769

And then we're able to then

stack these diversifiers on top.

770

How do we stack the diversifiers on top?

771

Well, most people invest in index

indices, index investing, right?

772

And they buy, let's say an IVV or a spy

ETF and and an Ag, a GG in the US, AG

773

ETF for bonds, and that's our portfolio.

774

That's a way of getting exposure to 60 40.

775

Another way is for us to sell, let's

say 20% of SPY, and we have $20 in

776

cash and we buy a futures contract.

777

That doesn't fu for me to buy 20%

of exposure to the futures contract.

778

I need a couple of dollars, a couple

percentage points of that in order to

779

get full exposure and margin, right?

780

Similar to buying a house.

781

When you own your house, you

don't own your house, right?

782

You like a house, you give

the bank, uh, 20% down or

783

sometimes 5% down at times zero.

784

Mm-hmm.

785

Sometimes 5% down.

786

But what you're getting is a full

exposure to the, the returns you're

787

gonna get on that property over time.

788

It's the same thing for futures contracts.

789

It's simple.

790

It's exactly the same analogy.

791

I can sell down my spy ETF,

which which is $20 of a hundred.

792

I can go to the market and say,

I want to buy $20 of exposure to

793

the market again, but I only want

to give you a couple of dollars.

794

Okay?

795

And so then you buy that futures contract

and it gives you that full exposure.

796

So now you're back up to 60 40,

but you have all this cash left.

797

What can you do with that?

798

You can buy a diversifier,

whether it's merger arbitrage or

799

systematic macro or gold or Bitcoin.

800

You just buy in.

801

And what you've, in essence done is

created a portfolio that's 60, 40, 20 and

802

that's using capital more efficiently.

803

You buying a house is using capital

more efficiently, and that's why it's

804

called a capital efficient strategies.

805

We rebranded it to return stacking

'cause I think it's just intuitive.

806

We're making it easy for

you to do 60, 40 plus 20.

807

Now, I, the reason I bring that

analogy up is because the world has

808

decided that 60 40 is their best

market portfolio and all terrain.

809

I've decided what I think the best market

portfolio is, and that market portfolio

810

is equal risk across equities, bond global

equities, bonds, um, gold and Bitcoin.

811

That's what I think.

812

And then I've said, uh,

because they're so well, so low

813

correlated, I need more juice.

814

I need to create a bigger motor.

815

So I'm gonna scale all up.

816

But that leads to drawdowns

that are still better than just

817

buying any one individually.

818

But I wanna minimize those through

global tactical asset allocation.

819

And those are like, you're not

trading all the time a couple times

820

a year, maybe, maybe less than that.

821

Sometimes you can go years

without getting out of an asset.

822

That is my, that's my starting

point versus a 60 40 plus systematic

823

macro that I just described.

824

Right?

825

My starting point is that first

balanced portfolio, and now I'm gonna

826

add the fancy stuff that moves very

quickly, that systematic macro that,

827

um, that has just a, a bunch more

opportunities to make money in, in bad

828

inflation periods or bad bear markets.

829

Um, so what is, actually, let me

just go through, lemme show you

830

the assets that it can trade, so.

831

In the world of, of futures

contracts, you can get exposure

832

to nearly anything you want.

833

And what I'm showing here on the screen

is dozens of bond markets, energy

834

markets, equities, foreign exchange

grains, livestocks, uh, soft, uh, like

835

cocoa, coffee, cotton, metals rates,

volatility, assets, big digital assets.

836

All of these are available to trade

with that same framework of I want

837

a full ex exposure to, you know,

corn, but I only need to give you

838

a little bit of my money, right.

839

In order to get that full exposure.

840

Right?

841

So futures contracts are naturally

capital efficient and allow you to

842

stack all of these things on top, right?

843

Um, and again, we can go long and short.

844

That's also future contracts

allow you very easily, right?

845

To take the opposite direction.

846

And so when you, when you grab all

of those and then you say, okay, I

847

have this, this asset class set that

is already more diversified than.

848

Anything you have in your portfolio.

849

And then I allow it to trade

daily and I can be net long.

850

All of those things, net short, all

of those things are net neutral.

851

And I can be long one day and then

three days later I'll be short.

852

So much faster moving.

853

What does that look like?

854

Um, the systematic, uh, macro

index, but from Pivotal path is

855

what I'm showing here in dark blue.

856

The key highlights here is that it

has zero correlation to global equity.

857

Zero negative 0.02

858

to be exact, and for, uh, a 0.05

859

correlation to bonds.

860

Right?

861

So that's not negative correlation.

862

It's just independent of bonds and

equities, which is what we want.

863

What other characteristics does

this asset class tend to have?

864

Well, if we look at periods like 2000,

865

Uh, reliably provided double digit

positive outcomes during periods where

866

most assets or all assets lose money.

867

Is that surprising from

a structural perspective?

868

Probably not to most.

869

If you could short, then you can

find signals that say, yeah, it's a

870

good time to short bonds and equities

and good time to go, long energies.

871

You're probably gonna come out

on top, uh, in those periods.

872

Now, why doesn't everybody own this?

873

'cause when you look at this equity line,

it's done the same as equities for the

874

full period of the index being live.

875

Well, because like gold and like bonds

and like equities, it can go through

876

decades of dormant, low returning periods.

877

And you see this throughout the index,

uh, time, especially like the FOMO

878

that people are gonna feel if they

sell their favorite toys or sell their,

879

they have to sell their equities to

make room for an equity line like this.

880

And you go through a period like

881

a lot of clients really be upset.

882

And so the benefit of putting this equity

line on top of your favorite market

883

portfolio so that you get the full market

portfolio return, and if it goes through

884

a five year period of doing single digits,

it's single digits on top of, right on top

885

Pierre Daillie: right.

886

Rodrigo Gordillo: Not subtract.

887

Pierre Daillie: It's not,

it's it's not, yeah, exactly.

888

You didn't, you didn't sell something

in your, in your foundational

889

portfolio to, to do this.

890

It's actually on top

891

Rodrigo Gordillo: precisely.

892

And then you get the benefit of when

it's time, when there's clear trends

893

and there're robust and everything's

going down aggressively or going up

894

aggressively, that's when it shines.

895

Um, I'm showing you, I'm highlighting

three periods where equity markets

896

went down aggressively three times.

897

Bond markets and equity markets in 2022

went down aggressively together, uh, where

898

systematic macro made a lot of money,

but it can also make a lot of money in

899

if commodities do poorly for a long time.

900

And that's 2014.

901

That was a, that was a, you

can see it there on the chart.

902

It did really, really well.

903

Why?

904

Well, because the energy complex was

getting a clear signal to go short.

905

And it, um, these, the vast

majority of these managers were

906

able to capitalize on that.

907

So you add this fifth piston to the

portfolio and you make it so that

908

the motor as a whole has equal horse

powered equities, but a much more

909

efficient and more robust system.

910

Um, your, your kind of

in good shape, I think.

911

Um, uh, so that's, that's the,

the second last fancy thing

912

that goes into my framework.

913

Our framework.

914

And then the final thing is tail

protection or long volatility strategies.

915

Pierre Daillie: Right.

916

Rodrigo Gordillo: But any

questions on this Pierre?

917

Pierre Daillie: No, I, I think,

I mean, I, I, it's, it's,

918

it's nifty how, how it works.

919

I think most people will

be surprised to see that.

920

Intro: Yeah.

921

Pierre Daillie: To see that line.

922

Um, I mean when, when you,

when things are talked about in

923

isolation, when I think is really.

924

Um, misleading is all the talk that occurs

around CTAs and trend following about

925

the last 10 years of underperformance.

926

I mean, it's the same thing that

happens with value versus growth.

927

It's the same.

928

I mean, there's always gonna be people,

folks in the market who are growth

929

people, and they say, well, growth has

trounced value for the last 10, 15 years.

930

And there's gonna be folks who say,

well, equities have trounced managed

931

futures for the last 10, 15 years.

932

But that's not the point.

933

The point is not, and, and, and, and

what they're, what They're often leaving

934

out of those, you know, that phrasing

or that turn of a phrase is that,

935

you know, value didn't lose money.

936

It just did half as well.

937

Managed futures didn't lose

money, they just did half as well.

938

Right?

939

And, and, and that's the problem is

that that's being left out of the asset

940

allocation conversation often by folks

who are more dismissive of, of that

941

because it doesn't fit into their realm.

942

Rodrigo Gordillo: And I, by the

way, I feel the pain, right?

943

Like it's tough to not participate

in something that has done so well.

944

Um, and the answer to that is to

not, not sell your favorite toy to

945

make room for these diversifiers.

946

Pierre Daillie: It's that that

dim, it's that dim neighbor alpha.

947

Rodrigo Gordillo: And again, I think

this, this in large, like the whole

948

return stacking concept in large part

solves the, the behavioral issue.

949

Um, if you like, if you loved your

traditional portfolio, you can just

950

stack whatever you want on top and

add some extra, um, uh, alternative

951

betas that are non-correlated, that

help create a better portfolio.

952

And then you don't get that.

953

FOMO as much.

954

There will be periods where whatever

you stack on top is negative, but you're

955

still participating in all the upside.

956

And then Yeah.

957

You know, rather than like the, the

difference here is if you sell 10% of

958

your equities to buy, let's say managed

future trend and equities are up 20%

959

and managed future trend is down to your

opportunity cost, there is massive, right?

960

Like you literally cost yourself

a 20% return for that allocation.

961

The concept of saying, no, no, no, you

get to keep your 10% of equity so you

962

got the full 20% and then stack the

2% on, or the ne negative 2% on top.

963

So, so you only did 18% instead of 20.

964

Right?

965

That's a conversation than just doing 2%.

966

Right?

967

Um, and so the stacking, I think most

advisors have been pitched managed

968

futures in the past and they're all

like, yeah, the theory is great.

969

I can't stick to it.

970

I'm sorry, like it's just tired.

971

Every six months I'm getting calls.

972

I wanna avoid that.

973

The concept of actually stacking

it provides that, that benefit.

974

Pierre Daillie: I can only guess

that when, when you actually get the

975

opportunity, and I'm sure like when

you go around presenting to or meeting

976

with advisors, uh, on, on this or

speaking to a room, you know, I, I can

977

only imagine that, that at first blush,

people's reaction is, is Wait, what?

978

Rodrigo Gordillo: Yeah.

979

Yeah.

980

It always

981

Pierre Daillie: is.

982

It, it is, is O okay?

983

I didn't see that.

984

I didn't know you could do that.

985

Rodrigo Gordillo: And you wouldn't

have caught most institutional players

986

selling the record and bonds to use

987

Pierre Daillie: Yeah.

988

Rodrigo Gordillo: Uh, managed futures.

989

Right.

990

Most institutional players are doing

return stacking back in the day, and

991

they continue to, it's that retail.

992

Because of regulatory reasons,

we're not, we're unable to, that has

993

changed in the last three, four years.

994

Um, you can do it now.

995

You can actually invest, yeah.

996

Like an institution for a

hundred bucks if you wanted to.

997

So it's that

998

Pierre Daillie: unlock,

999

Rodrigo Gordillo: right?

00:54:46,120 --> 00:54:49,825

It's a massive unlock and people are just

starting to understand and learn about it.

00:54:50,365 --> 00:54:55,795

Um, where they can apply the theories

that everybody in finance learned in

00:54:55,795 --> 00:54:59,395

the first chapter of their finance

textbook and, and quickly forgot about.

00:55:00,535 --> 00:55:04,525

Now we can actually say, oh,

the Nobel Prize stuff actually

00:55:04,525 --> 00:55:05,875

works and I can use it.

00:55:05,995 --> 00:55:08,155

That is a, that is huge, huge unlock.

00:55:08,845 --> 00:55:09,265

Yeah.

00:55:09,535 --> 00:55:13,825

Pierre Daillie: I mean, it used to be

in theory only and now it's in practice.

00:55:13,855 --> 00:55:14,065

Rodrigo Gordillo: Yeah.

00:55:14,065 --> 00:55:19,525

And, and the returns, the return stacked

ETF suite, uh, is about providing the

00:55:19,525 --> 00:55:25,345

picks and shovels for advisors, uh,

and individuals to do it themselves

00:55:25,705 --> 00:55:26,845

and the way that they see fit.

00:55:27,325 --> 00:55:27,535

Pierre Daillie: Right.

00:55:27,595 --> 00:55:30,505

Rodrigo Gordillo: Um, but

you know, all terrain is.

00:55:30,910 --> 00:55:35,920

My, you know, we don't provide the

assembly instructions for the ETFs here.

00:55:35,920 --> 00:55:39,910

I've provided the assembly instructions

and then I, I run, I run it based

00:55:39,910 --> 00:55:41,260

on those assembly instructions.

00:55:41,290 --> 00:55:45,640

It's the be the thing that I wanted to

put together for decades, but was an

00:55:45,640 --> 00:55:50,860

indulgent thing because nobody would

want to have a full stack solution.

00:55:51,010 --> 00:55:53,680

Um, turns out it's pretty popular.

00:55:53,680 --> 00:55:54,070

So,

00:55:54,520 --> 00:55:57,610

Pierre Daillie: I know, I know

you, you've been sort of, you know,

00:55:57,610 --> 00:56:01,540

tiptoeing and walking along the edge

of that mountain range for a while.

00:56:01,960 --> 00:56:02,080

Yeah,

00:56:02,800 --> 00:56:04,450

Rodrigo Gordillo: no, I'm very

happy, very pumped about it.

00:56:05,590 --> 00:56:06,190

Pierre Daillie: I imagine.

00:56:06,610 --> 00:56:09,010

Who is Thera Fund really designed for?

00:56:09,010 --> 00:56:13,060

Is it more of a core for risk aware

investors, or is it a satellite

00:56:13,060 --> 00:56:15,790

diversifier for equity heavy allocators?

00:56:16,180 --> 00:56:18,340

Who do you, who, who,

where does it best fit?

00:56:18,820 --> 00:56:19,845

Rodrigo Gordillo: So I think.

00:56:20,605 --> 00:56:23,785

The market will tell us what,

what that ends up being.

00:56:23,785 --> 00:56:28,675

It's, uh, you know, for myself and my

wealth, this is how I run all of my

00:56:28,675 --> 00:56:30,625

wealth in this concept of all terrain.

00:56:31,315 --> 00:56:36,235

Um, but again, the, the reason we've

gotten so much uptake on the return

00:56:36,235 --> 00:56:40,555

tax side is that we're not telling

people to redo their whole portfolios.

00:56:40,555 --> 00:56:43,405

Nobody would buy a single fund

for their whole portfolios.

00:56:43,885 --> 00:56:48,625

Um, and one of the reasons I made this

fund match the volatility of equities

00:56:48,625 --> 00:56:54,445

is because in spite of it, including

equities and bonds, the correlation of

00:56:54,475 --> 00:56:59,095

the altering concept as a whole with the

tactical and the systematic macro ends up

00:56:59,095 --> 00:57:00,895

being very low to both bonds and equities.

00:57:01,345 --> 00:57:06,175

And so at the same level of risk

as equities, investors can now say,

00:57:06,235 --> 00:57:09,985

well, what if I sell my equities

and I buy this all terrain?

00:57:09,985 --> 00:57:13,045

It's not gonna be the

same return every year.

00:57:13,165 --> 00:57:15,685

It's not gonna rates in your equities

like on the return tax side, but

00:57:15,685 --> 00:57:19,945

it's, it's creating the balanced

portfolio at a level of risk that.

00:57:20,425 --> 00:57:23,815

We'll match the risk or attempt

to match the risk of equities

00:57:23,875 --> 00:57:24,895

so that it's competitive.

00:57:25,765 --> 00:57:28,765

Uh, does that mean that the altering

will outperform equities every year?

00:57:28,765 --> 00:57:29,125

No.

00:57:29,275 --> 00:57:33,805

It could be a year where gold bitcoin

bonds and systematic macro do worse in

00:57:33,805 --> 00:57:39,235

the equity side, but most years because

it's, it tends to that when you diversify

00:57:39,235 --> 00:57:45,445

that way, your return per unit of risk

taken is significantly higher than any

00:57:45,445 --> 00:57:46,705

single asset class, including equity.

00:57:46,705 --> 00:57:51,625

So it's, it's a good diversifier

to sell equities in my view,

00:57:52,045 --> 00:57:54,385

and buy sys, uh, all terrain.

00:57:54,415 --> 00:57:59,455

It provides the diversity while

also attempting to minimize the

00:57:59,455 --> 00:58:01,255

FOMO of having sold your equities.

00:58:01,260 --> 00:58:01,310

Right.

00:58:02,425 --> 00:58:07,675

Uh, so that is, I think, a good starting

place for, so on the advisor space, we're

00:58:07,675 --> 00:58:09,265

approved across a bunch of platforms.

00:58:09,265 --> 00:58:12,865

You know, normally anywhere outside

of Canada, this fund minimum

00:58:12,865 --> 00:58:13,885

is a hundred thousand dollars.

00:58:14,335 --> 00:58:20,365

Um, in, in Canada it's I

think 10 grand, um, to invest.

00:58:20,365 --> 00:58:24,805

Um, so very, very accessible

through fund serve, so advisors

00:58:24,805 --> 00:58:26,275

can have access to it easily.

00:58:26,935 --> 00:58:31,885

Um, we have a founder's class right

now because it's new, um, that is

00:58:31,885 --> 00:58:35,155

significantly cheaper than it will

be once we hit certain thresholds

00:58:35,155 --> 00:58:36,685

and close that, that class.

00:58:36,835 --> 00:58:39,025

Um, but yeah, I think it's for everybody.

00:58:39,295 --> 00:58:43,555

Uh, there's enough content out

there that people should be able

00:58:43,555 --> 00:58:46,375

to wrap their minds around what

we've done and why it's important.

00:58:46,495 --> 00:58:50,515

And, uh, we provide as much transparency

as we can on how that portfolio looks

00:58:50,515 --> 00:58:52,045

and the allocations on a daily basis.

00:58:52,045 --> 00:58:56,785

So it is, we're trying to make it as easy

to understand and accessible as possible.

00:58:58,045 --> 00:59:02,635

So what happens with, uh, when people

take the red pill here and they like

00:59:02,635 --> 00:59:06,955

the fund, then they say, well, what if I

wanna manage my whole portfolio like this?

00:59:08,245 --> 00:59:12,505

Well, that then probably shouldn't

be a 16% volatility for most

00:59:12,595 --> 00:59:14,095

it is for me, but not for most.

00:59:14,515 --> 00:59:18,925

Um, then we can create lower volatility

versions of this and, you know, maybe

00:59:18,925 --> 00:59:21,475

we're matching the volatility with

60 40 or matching the volatility

00:59:21,475 --> 00:59:23,125

with 50 50 depending on the client.

00:59:23,125 --> 00:59:26,995

So, um, we do bespoke

mandates of all-terrain,

00:59:27,685 --> 00:59:27,895

Pierre Daillie: right.

00:59:27,955 --> 00:59:32,245

Rodrigo Gordillo: And we run it

anywhere from six vol to 23 vol.

00:59:32,815 --> 00:59:37,585

And, um, and if anybody wants to do

that, then they can reach out to ReSolve

00:59:37,585 --> 00:59:40,555

and we can see if we can help 'em

out on the, um, on the bespoke side.

00:59:41,545 --> 00:59:43,765

But the, the fund isn't easy for a shot.

00:59:44,935 --> 00:59:45,265

Pierre Daillie: Yeah.

00:59:45,325 --> 00:59:49,525

So for anybody looking to scale more

of their portfolio, they can actually

00:59:49,525 --> 00:59:51,925

come to you for, for tailoring,

00:59:52,225 --> 00:59:52,705

Rodrigo Gordillo: correct?

00:59:52,855 --> 00:59:53,965

Yeah, we do bespoke minutes.

00:59:53,965 --> 00:59:54,025

Yeah.

00:59:54,445 --> 00:59:55,015

Pierre Daillie: Wonderful.

00:59:55,015 --> 00:59:55,075

Um.

00:59:57,445 --> 00:59:59,635

What do you think is

the right mindset here?

00:59:59,935 --> 01:00:03,985

That, that, and I know, you know, we've

touched on it throughout our conversation

01:00:03,985 --> 01:00:13,285

today, but, you know, what do people,

to get to the place where this makes a

01:00:13,285 --> 01:00:18,535

lot of both, you know, behavioral sense

and logic, what do you, what do you

01:00:18,535 --> 01:00:22,915

think people need to believe about the

future path of inflation and growth?

01:00:22,915 --> 01:00:29,035

I mean, if, if you have a high

conviction about either, um, it

01:00:29,035 --> 01:00:31,495

might not interest you, right?

01:00:31,495 --> 01:00:41,155

But if you have, uh, on the contrary,

um, an uncertainty about what the

01:00:41,155 --> 01:00:49,045

future holds, you're just plain worried

about both or neither about, you know,

01:00:49,045 --> 01:00:53,905

geopolitical risk, inflation growth,

you know, growth risk, recession.

01:00:54,325 --> 01:00:54,985

Um,

01:00:55,255 --> 01:00:55,645

Rodrigo Gordillo: yeah.

01:00:56,815 --> 01:01:01,765

Look, it's, it's, uh, we always

talk about the, there's a kinda

01:01:01,765 --> 01:01:07,255

a range of how confident you are

in your view of the world, right?

01:01:07,255 --> 01:01:08,185

Is it a hundred percent

01:01:08,185 --> 01:01:08,485

Pierre Daillie: right?

01:01:09,385 --> 01:01:10,915

Rodrigo Gordillo: Is it 90%?

01:01:10,915 --> 01:01:11,905

Is it 50%?

01:01:12,055 --> 01:01:12,235

Right?

01:01:12,235 --> 01:01:15,055

Everybody seems to have a

very strong and visceral view.

01:01:15,445 --> 01:01:20,305

Maybe some investors don't, but most

people do, and oftentimes they meddle and

01:01:20,635 --> 01:01:22,855

they change the shape of their portfolio.

01:01:23,725 --> 01:01:28,135

Now it's really tough to, to actually

track the decisions you made with your

01:01:28,135 --> 01:01:31,915

gut or your intelligence over time to

see if it actually added value or not.

01:01:32,965 --> 01:01:39,235

But I think a good rule of thumb is ask

yourself how confident you are about your

01:01:39,235 --> 01:01:44,545

point of view and it, and give yourself

a number between one and a hundred.

01:01:45,445 --> 01:01:49,195

And if it's 80% and you don't,

you're uncertain about 20.

01:01:49,495 --> 01:01:53,125

Then an altering portfolio,

which is more agnostic and just.

01:01:54,100 --> 01:02:00,400

Really designed to be balanced

across regimes is probably a

01:02:00,400 --> 01:02:05,890

good idea as a edge against your

confident point of view, right?

01:02:05,890 --> 01:02:08,440

So that's the way I kind

of help people along.

01:02:08,710 --> 01:02:09,970

Like, you're never a hundred percent.

01:02:09,970 --> 01:02:12,700

If you're a hundred percent, then

great, you're, you're crushing.

01:02:12,700 --> 01:02:14,770

It's on you, you feel and

control your portfolio.

01:02:14,770 --> 01:02:15,370

Wonderful.

01:02:15,880 --> 01:02:20,230

If you don't, then you want to, you

wanna hedge out some of that risk.

01:02:20,470 --> 01:02:25,090

I think this a concept of all-terrain is

the most neutral approach to different

01:02:25,090 --> 01:02:31,480

economic regimes, and hence, a good

solution to, um, uh, as Bernstein

01:02:31,480 --> 01:02:35,410

puts it, uh, um, in inflation, sorry.

01:02:35,440 --> 01:02:38,320

Diversification is an explicit

recognition of our ignorance.

01:02:38,680 --> 01:02:41,830

Identify what you're ignorant

of, add this in there.

01:02:41,920 --> 01:02:46,870

And I believe that will be a, a

decent way of managing that risk.

01:02:47,425 --> 01:02:50,275

Pierre Daillie: Rod in your

back tests, an all-terrain style

01:02:50,275 --> 01:02:54,535

portfolio delivered higher returns,

similar volatility, and shallower

01:02:54,535 --> 01:02:56,905

drawdowns than global equities alone.

01:02:57,565 --> 01:03:03,775

How should investors translate those

stats into realistic forward expectations?

01:03:04,915 --> 01:03:09,625

Rodrigo Gordillo: So, you know, the,

the way to see this is really to,

01:03:09,625 --> 01:03:15,895

again, it may seem unrealistic, but

let's just do some simple math, okay?

01:03:16,945 --> 01:03:23,065

Um, let's say that you believe that

you have no real crystal ball into

01:03:23,065 --> 01:03:25,105

which one of these asset classes are

gonna do well in the next three or

01:03:25,105 --> 01:03:26,395

five years, and maybe you don't care.

01:03:26,515 --> 01:03:31,795

You have a 20 year time horizon, you do a

20 year time horizon, and you expect all

01:03:31,795 --> 01:03:34,735

these assets to make some return, right?

01:03:34,735 --> 01:03:37,255

Let's say like, let's talk about

the equity risk premium, right?

01:03:37,255 --> 01:03:41,635

Equity risk premium is the return above

cash, and that's between three and a half

01:03:41,635 --> 01:03:42,745

and four and a half, depending on market.

01:03:43,300 --> 01:03:46,120

All right, so you just collected,

you just, you're gonna buy that,

01:03:46,120 --> 01:03:48,160

that's gonna be something that

you think you can count on.

01:03:48,970 --> 01:03:50,800

What's a term premium

for the 30 year note?

01:03:50,830 --> 01:03:51,580

Well, it's about the same.

01:03:52,570 --> 01:03:52,840

Okay.

01:03:52,840 --> 01:03:57,700

So now you're just like, okay, you're

stacking it on top again, you can

01:03:57,700 --> 01:03:59,620

with, with the admin of leverage.

01:03:59,830 --> 01:04:03,460

Remember, we're not beholden

to the a hundred line, okay?

01:04:03,820 --> 01:04:04,120

Pierre Daillie: Right.

01:04:04,180 --> 01:04:08,320

Rodrigo Gordillo: So I, now, let's

say I put 50% in equities, okay?

01:04:08,710 --> 01:04:11,650

Now I'm gonna put 50% in long-term bonds.

01:04:12,730 --> 01:04:13,030

Okay?

01:04:13,030 --> 01:04:14,020

Now I'm at the a hundred line.

01:04:15,010 --> 01:04:20,140

Let's say I add 50% on

gold gold's, about 3.5%,

01:04:20,860 --> 01:04:22,900

um, equity risk premium as well.

01:04:23,170 --> 01:04:23,380

Okay?

01:04:23,380 --> 01:04:26,890

Now I'm stacking another

excess amount of return.

01:04:27,790 --> 01:04:30,400

What is systematic

macro done in the years?

01:04:30,400 --> 01:04:33,820

And do I can do, can I count on

that from, uh, returns above cash?

01:04:33,820 --> 01:04:34,150

Yeah.

01:04:34,180 --> 01:04:34,420

Okay.

01:04:34,420 --> 01:04:36,970

Now, now I'm stacking another couple

percentage points on top of that.

01:04:37,720 --> 01:04:38,529

What about bitcoin?

01:04:39,025 --> 01:04:41,755

Do we think bitcoin's got some

sort of risk premium, right?

01:04:41,755 --> 01:04:46,795

You wouldn't put 50%, you put

5% that goes on top, so you're

01:04:46,795 --> 01:04:50,275

literally Lego blocking returns,

01:04:50,815 --> 01:04:51,115

Pierre Daillie: right?

01:04:51,175 --> 01:04:54,865

Rodrigo Gordillo: If you're limited

to the a hundred dollar line and

01:04:54,865 --> 01:04:58,345

you're using short term bonds and

low volatility stuff, you're, you're

01:04:58,705 --> 01:05:00,175

hindering your absolute return.

01:05:00,925 --> 01:05:05,904

But if you keep on collecting different

line items above the a hundred percent

01:05:05,904 --> 01:05:11,425

line, and because they're non-correlated,

even though you're, you're, you're using

01:05:11,485 --> 01:05:16,945

more exposure than a hundred percent, the

volatility is still moderate, then the

01:05:16,945 --> 01:05:22,135

intuition is that you can achieve a higher

rate of return than just a portfolio

01:05:22,135 --> 01:05:23,725

that's a hundred percent in equity.