In this episode, Rodrigo Gordillo sits down with Rafael Ortega, a distinguished Spanish investor and Senior Investment Fund Manager at Andbank Wealth Management. Known for pioneering innovative portfolio solutions in Spain—from the classic permanent portfolio to advanced return stacking and off-road strategies—Rafael discusses a wide range of topics including diversification, structural risk balancing, leveraging, regulatory hurdles, and the future of portable alpha in today’s dynamic markets.

Topics Discussed

• Rafael Ortega’s journey from engineering to a transformative investment philosophy
• The evolution of the permanent portfolio strategy into a modern diversified approach
• Structural diversification and risk balancing using all-weather return stacking
• Customizing portfolio volatility through post-diversification leverage
• Overcoming operational and regulatory hurdles in Europe’s investment landscape
• The integration of trend following, carry, and other non-traditional diversifiers
• Communicating advanced diversification concepts to retail investors
• The future outlook for portable alpha and return stacking in an evolving regulatory framework

This is what I've been looking for, right?

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I can create a portfolio.

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I can finally create a portfolio that

is truly diversified, that is using

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everything that we know we can use.

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So that means not only

assets, but also strategies.

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We can try to balance those things out.

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It's gonna be a great long-term,

sharpe ratio portfolio.

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It's gonna be stable, it's gonna

be all weather, and then we can

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get it to the volatility that

people actually want, right?

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And if they want an 8%

volatility portfolio, we can

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do that without losing balance.

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If you want a 12% volatility

portfolio, we can now do that.

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And it's not losing balance, right?

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Rodrigo Gordillo: Hello and welcome

everybody Today I have a very special

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guest, a friend of mine and, and

colleague Rafael Ortega which is a

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Spanish investor, not from Latin America,

but from Spain, and he is currently

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a senior investment fund manager at

Andbank Wealth Management, where he

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manages a bunch of portfolios including

permanent portfolio ideas, all terrain,

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return stacking, and what he calls the,

off-road investor approach, which are

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custom built portfolios for institutions

and high net worth individuals.

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Yeah, this is a, interview that I've

been wanting to have for a while now.

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I'm also, been doing his podcast

in Spanish, called The Off-Road

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Investor for over a year now.

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Rafa?

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Yeah.

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Yeah.

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And I struggle a little bit with the

nomenclature in Spanish when it comes to

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our industry, and I'm sure Rafa's gonna go

through the same, it's my turn to make him

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suffer a little bit and do it in English.

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But,

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I figured that, it would be a great

time, to bring him on board because I

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think, broadly speaking, when we talk

about return stacking, and the way

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that we've really garnered attention is

how do people stack returns above a 60

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40 portfolio or 80 20 portfolio, or a

hundred percent equity plus portfolio.

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But, And then you get into, okay, what

else can we do with the return stacking?

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Maybe there's a more balanced approach

to building a portfolio and you

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get to an ultra terrain approach.

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But Raf actually came

the other way around.

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He started, when I met him, anyway,

he's gonna tell us his background,

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but when I met him, he actually had

already started thinking about, the

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concept of a balanced portfolio and

then built himself into all terrain.

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And now he's thinking about in

the latest iterations of doing

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60 40 plus or a hundred plus.

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so yes, he is a fantastic partner.

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he actually has taken the Return

Stacked Portfolio Solutions moniker

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and, and on our behalf started

creating, the brand in Spain.

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So we'll talk a little bit about that,

but before I get into all of the fun

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stuff, I, do want the audience to get a,

bit of a background on you and how you

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started as a, as an engineer and ended up

in Return Stacking, Portfolio Solutions.

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So maybe give us a, broad

overview of your history.

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Rafael Ortega: first of all, sorry for my

English, I, all the investing information

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I consume is in English, but then I

never speak about investing in English,

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so I'm sure some of the words are not

gonna come and maybe Rodrigo can help

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as I've been helping him in Spanish.

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the thing is, I started

not as an investor, right?

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I did engineering.

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I thought I was gonna be some

sort of consultant and I actually

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started in a, one of those big

consultancy firms as an analyst.

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But that lasted only a couple of months

because then, I was studying and living

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in Madrid my family is from Valencia,

that's another city in the east of Spain.

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And my family used to run, my mother

used to run a small business and

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then she was sick and went on a The

business was in a crisis and, I felt

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like the prodigal son that had to come

back and, do something about that.

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My have a younger brother,

he was still studying.

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And, my father had recently passed away,

so we were go going through a, like a huge

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family crisis we solved it eventually.

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And then at that point I was looking

at, like any family and any business,

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what do you do when you make more

than you when than you consume?

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So what do you, what do

we do with those savings?

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But obviously I was, youngish

like 20 something, but I was

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looking at, family money.

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I, hadn't really made that.

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Also something that had taken

a couple generations to build.

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I started looking online on

what do you do when you invest?

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And everything I found was, trading

or, oddly enough, in Spain there's

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a huge value investing culture.

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So I got into, the Warren Buffets

and Benjamin Hams and all of that.

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I also.

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had a look at what had

been done in the past.

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And my mother used to work with a local

bank, and I very, very fast I found

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that most commercial banks, first of

all, in Spain until now, most people

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just relied on their state pension.

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financial literacy is very, low.

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Only the newer generations are

starting to see that they, will need

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to have some savings, the future.

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So basically, everyone worked with their

commercial bank, which just gives you,

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closet indexed funds that are expensive.

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strategy is expensive.

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That's not gonna take you anywhere.

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And,

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I, just couldn't find a solution

that made sense or made sense for me.

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When I looked at a value investor, they

would say have these great marketing

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things, you know, value is what you

get, but price is just what you pay.

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And that's, that sounds great, but if

you've just gone through a crisis like

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I have just done, and if your savings

are 50% down, it doesn't matter that

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you tell me that the value isn't down.

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The price is what matters if,

when you need your savings, right?

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Most people, or at least my understanding

of this was most people need to

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balance out participating protecting.

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You need both of those.

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And that to me is what makes

sense to almost everyone.

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And I started looking at market

history and other strategies

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and I just didn't see it.

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I saw those 50% draw downs.

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And then even if you have a theoretically

balanced portfolio with stocks and

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bonds, those also go through huge

draw downs when there's inflation.

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And just looked around and I couldn't see

anything that I could believe in, right?

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Or that I, liked.

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I don't know how, I just don't

know how found Harry Brown and

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the permanent portfolio idea, and

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Rodrigo Gordillo: You don't remember?

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Rafael Ortega: I don't know what

I saw it the first time, right?

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Just, I must have read a blog post

or something, and that just clicked.

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I, I read it and I thought, okay,

this makes so much sense to me.

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And for those who don't know, basically

the permanent portfolio idea is that,

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we're gonna have economic cycles, we're,

they're really bad at anticipating

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the next step of the cycle, or even

if we know what's gonna happen, we

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have to also have the timing right.

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It's just too difficult.

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But at the same time, we do know

that different assets, and then

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eventually I found that different

strategies, also have this behavior.

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They behave in different ways

in different environments.

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And that is something you

can believe in, right?

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We know that's gonna happen eventually.

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It's not in the short term, but in the

medium term that, eventually happens.

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So you can map those.

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And the simplest version of this would

be a portfolio that has something

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that works for growth, something

that works for deflation, something

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that works for inflation, and then

something that will work in a recession.

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Brown, had stocks, bonds, gold

and cash, or invested cash.

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And so you have three assets that

are, high volatility, that's 75% of

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the portfolio, 75% of the portfolio

have low correlation, and then you

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have a buffer, which essentially is

de-levering that portfolio for you.

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So, you have a conservative

approach investing has low

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volatility, good returns.

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It works in different market, scenarios.

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I think what you're showing here is

yeah, the different asset classes and

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what do we expect right from them.

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But not only what do we expect, like

what do we know is gonna happen, right?

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The theory.

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Rodrigo Gordillo: Yeah.

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Yeah.

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That's a thing that's a kind

of the key thing here, right?

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So, what I'm showing here for those that

aren't, watching and listening is just

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the performance of some periods where

we've seen inflationary stagnation,

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inflationary boom, deflationary

bust, and disinflationary boom.

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which are just fancy names for when

the intersection between high or

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low inflation shocks and positive

or negative inflation shocks happen.

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And, and you can see clearly, right?

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And this is, I think the big unlock

when you get into this world is, okay,

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everybody wants to just do better.

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Warren Buffett value investing and throw

in a little bonds just to reduce risk.

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But the reality is that a lot of retirees

in the last few years that put a hundred

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percent of their money in bonds have

realized that even bonds have risk.

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and you can, and you don't have to

have a lived experience that tells you

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that for them to modify your behavior.

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before we saw the 2022 inflation

shocks, you and I had already

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come to the conclusion that high

inflation would be bad for both

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equities and bonds at the same time.

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But, and this chart here just shows,

inflationary stagnation, you're, you,

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what you generally saw historically was

commodities, gold, and in this case,

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trend following, we'll get to that.

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But, Harry Brown is more

traditional assets, right?

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More gold than anything.

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And, and then inflationary boom, which

is high in inflation, accelerating

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growth, everything floats up, but the

biggest winners are commodities and gold.

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disinflationary boom, which is what our

lived experience, and most investors

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lived experience has spent most of

their time on is high accelerating

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growth shocks and falling inflation.

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And that means, of course, that

equities and bonds are gonna do well.

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And I think that's why the 60 40 has

become so prominent and deflationary

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bust is when you have a bear market

and, a negative growth shock and

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slowing growth without inflation, right?

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So that's generally equities down,

commodities down, and then you

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see bonds really picking up the

baton trend following and, and

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commodities, sorry, and, gold bonds

and trend following, getting hurt.

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So that's when you understand that

framework, you're like, oh, okay.

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We need to think about my families,

in your case, right, It was my

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family's wealth going forward, and

Harry Brown basically, from what

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I understand, it was fairly simple

and the original idea is just, a

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quarter, cash gold equity loan, right?

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Rafael Ortega: seems, it's,

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simple that it looks silly,

but if you look at it

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from what I know now, I.

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Actually the three assets are kind

of risk parity, equal X, right?

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Because it's called stocks

and long-term, bonds.

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And those kind of have the

same volatility, right?

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So you're actually doing like

a risk parity from those three.

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And then the other one is just a buffer.

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It's just de-leveraging the portfolio.

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So you have the conservative approach

because he was trying to find a

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solution that anyone could do and

that it made sense for almost anyone.

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So the conservative approach

to that made a lot of sense.

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Also, we can go on that

a little later, right?

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But with only, if you only have

stocks, quantum gold, there are

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still sometimes where those three

can go down, down especially

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through, some crisis and shocks.

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And so he wanted something that

would protect you even then, right?

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something that was

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Rodrigo Gordillo: Yeah.

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Rafael Ortega: all-terrain I found that,

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Rodrigo Gordillo: I can I just

pause there for one second?

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One thing that I think few

people understand is when we

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say bonds, most people think

about that aggregate bond index.

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Aggregate bond portfolio that

has a, generally speaking, has a

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duration of six to seven years.

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Volatility profile of four or 5%.

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and the key behind balance is

making sure that the maniacs aren't

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taken over the asylum, right?

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That, you don't want equities

to be four tenths of volatility

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of your bond portfolio.

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And there's two ways of doing that

leverage, which we'll talk about in

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a sec, but more importantly here, if

you go out the curve, and the longer

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the duration, the more the volatility,

therefore the bigger the impact when

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you need it the most and the bigger

the impact when you're getting hurt.

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But it's, if it's balance and risk across

equity and bonds, that's the way to do it.

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So when we talk about bonds, here,

we're, really talking about lingerie

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bonds, which nobody does, right?

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Because it's too volatile, because

bonds are supposed to be safe,

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they're not supposed to be volatile.

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And it's so funny because

they could be whatever you.

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Rafael Ortega: exactly.

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So I started my like, own

personal portfolio, like for, the

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company, for the business or the

family, however you wanna see it.

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And it was a permanent portfolio, and

I started talking about the permanent

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portfolio with, different banks

because I was trying to get, those

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long-term bonds in that gold position.

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And it was almost impossible, right?

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And everyone looked at me like, like 25%?

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what?

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they, they couldn't, understand.

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And then also I, started looking

online and finding more people.

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Eventually I found you guys

and I found other, all weather

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solutions or all-terrain solutions.

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But, at that point in time, that's,

that I was like my first aha moment

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where, as we've said before, once

you see it, you just can't unsee it.

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And I noticed that no one in Spain,

or in the Spanish internet world

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was actually talking about this.

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Like absolutely no one.

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And even in the anglosphere, as I, I like

to call it, though, you can find people

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talking about programing portfolio ideas

and all weather, it's, there, there's

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more people doing it and there's obviously

like you guys and more people doing it.

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but it's not that, it's

not standard, right?

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Like it's more of a niche thing.

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In, in the, in Spain or in Spanish

absolutely no one was talking about this.

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So that sent me through, double

path, one of, okay, there's

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a business opportunity here.

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So I, this makes a lot of sense.

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It makes sense for me.

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There's obviously more people

than it makes sense for.

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I need to learn more about this

and, get my license and become an

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advisor and start preaching this.

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And then on the other side, I

need to, keep learning more and

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more about how to implement these

strategies better and better.

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And that's how I found you guys.

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I found, my favor with

this Trinity approach.

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I found, eventually found Corey.

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I found Ray De, Ray Dalio and all

of his, all of his, pupils and

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all of those, risk party ideas.

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So I just, spent the last decade and

a half, reading and trying to see what

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people were doing in the space and then

trying to get my way through compliance

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teams and, Spanish institutions to

try to get these things back so that

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investors in Spain can actually,

have a portfolio that does this.

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Rodrigo Gordillo: Yeah, being a

trail blazer is not always fun.

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Rafael Ortega: Yeah

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along the way I, I built, a community

of people that believe in this, right?

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So when, As you were saying, When,

you came up with the, that all-terrain

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paper Return Stacking Anything.

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I see, I started learning

about trend following.

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Anything I see, I just see it from this,

structural diversification standpoint.

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I just can't see it any

other, any other way I.

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Rodrigo Gordillo: Yeah.

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And, I'll give you credit.

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you are, I, always tell people that

you're the Corey Hoffstein of the,

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Spanish investment space because

when you say you built a community,

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you really are an incredible writer

and synthesizer of information.

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even the stuff that we've written

that we think we synthesize, when,

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you take your take, when you have

your take and your go, it is so

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much easier to under to understand.

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So kudos and credits to you for

being able to do that for a community

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that has literally never heard of

most of this stuff, at least in the

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US you didn't, it's wide enough.

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And Canada, that you

can reach some people.

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you're starting from scratch.

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Every single person you're talking to

like has never heard about this, right?

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And so you, I think you must have learned

by slamming your head against the wall how

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to communicate with a community and create

a, pretty large one, as I see it now.

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Rafael Ortega: think whenever I read

your stuff, I, feel like, okay, this is

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written for someone that knows what we're

talking about, and I always try to, water

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it down into the essence of it because

I'm usually talking to retail, right?

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I, most in Spain, most

funds are sold, right?

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People that do invest with

me buy my funds, right?

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they buy the idea and then

they go into the, strategy.

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I have no, no commercial, team.

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I, just do education and people find our

stuff, and if they have the similar, if

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they buy into the idea or the philosophy.

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Then they eventually, invest or they

do something similar and then preach it

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around and then that hits other people.

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But, that, that's basically what

I've been trying to, trying to do.

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But always with that focus on that,

there's many things I don't know, but I

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do know that, diversification works and

that the true diversification is what I

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think, I think Adam is the first person I

read that said structural diversification.

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And that just, again, I think one

of the things that all-terrain

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or -weather investors don't

have is the same nomenclature.

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And I think that's something that value

investors have and other investors

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have, and that brings a lot of those

people together and then that creates a

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community and that helps the ideas grow.

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So I like how, you guys have been,

interviewing people that are supposedly

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your, competitors, but, in the way I see

it they're, not your competitor, right?

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Your competitor is, someone that's doing

a index, fund, robo advisor thing or,

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just a highly active in the sense of

stock picking, stock picking strategy.

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we're doing something different

and we need to speak about it,

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without trying to hide what we're doing.

314

Like with the example of return

stacking, I think it's very clear.

315

I think the reason people buy return

stacking is that you're actually

316

saying what you're doing and you're

not scared of saying what you're doing.

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And, you're not scared of defending

the idea that you're trying to defend.

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It's tough.

319

'cause you're saying things

320

Rodrigo Gordillo: Yeah.

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Rafael Ortega: leverage, manage futures.

322

especially when I, every time I bring

something to the table, as you were

323

saying, no one's certain like when

I have to explain, or global macro or

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carry strategies, like most of the, time

people are like, what a new thing again.

325

Rodrigo Gordillo: Yeah, we

feel your pain for sure.

326

And yeah, this is why communication and

having the ability to synthesize things

327

as well as you do is important here.

328

but let's, go back to, you have this

interesting permanent portfolio approach

329

and your revolution towards like where,

you got stuck and then how return stacking

330

might have unlocked some value there.

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Rafael Ortega: thing is, when I started

with a permanent portfolio for myself,

332

but when I got the opportunity, I

actually became a financial advisor.

333

That's where I got my first clients

and that I started to grow a base

334

of, investors that were interested

in, adding something different

335

to their portfolios, right?

336

That's how I, actually started

and eventually I got the

337

opportunity to start a small fund.

338

So, I could build a strategy and people

could go into the strategy instead of

339

me, managing everyone's little portfolio.

340

and I thought at the time, this was an

error, by the way, but at the time I

341

thought that most people wanted something

that was not as conservative, right?

342

The permanent portfolio's problem.

343

and, I don't think it's a problem.

344

I think it's, made, it's on purpose,

but it's a pretty conservative strategy.

345

It's conservative in many ways.

346

It's conservative because

it has low volatility.

347

It's conservative because it's

only using biggest assets around

348

because, Brown was thinking about

something that, was fail safe.

349

It wouldn't blow up.

350

But there, he, preached this,

late seventies, early eighties.

351

And, eventually there's more things that

we can do with our portfolio, right?

352

There's more, going on now that

didn't exist then, and that maybe

353

you can bring into your strategy.

354

And I was trying to find something that

was, more, I wanna say balanced, but,

355

really, that was equivalent to a 60 40,

at least in most people's minds, right?

356

Something that was, medium risk.

357

Let's call it medium risk, but yeah,

something that was equivalent to a 60 40.

358

and every time I tried to build

a portfolio, design, a portfolio

359

that was matching 60 40 volatility,

I was losing the balance, right?

360

Because you have to have more stocks.

361

If you have to have more stocks, then

suddenly those stocks are running

362

the asylum, as you were saying.

363

Then if I add diversifiers on the other

side, I get more tracking error, and

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then people are gonna ask questions

when those diversifiers are not working.

365

So it was, it was a tough challenge.

366

I, think I built a portfolio that was,

it's still on now, it's transitioning to a

367

return stack version of the portfolio, but

it's something that was, let's say, around

368

50% equities or 60% equities, and then the

rest was, an all-terrain defense, right?

369

But.

370

If you want more volatility and you

don't use leverage, the only way to

371

do this is to get more stocks in.

372

And then when stocks fall,

your all terrain defense is not

373

gonna recoup all those losses.

374

It's just gonna be more, you have

more trust on the fact that it's

375

gonna work, better than just bonds,

because bonds can also fall sometimes.

376

And all-terrain defense

is gonna work more times.

377

It's gonna, it's gonna work against

those stocks, but it's not really

378

gonna, recover the loss that you got.

379

It's just gonna, what's the word

I'm looking for a word that it's

380

not Rodrigo but it's like you're,

look, you're like diluting your

381

risk in a more efficient way, but

it's not really, you're not really

382

balance things, balancing things out.

383

That's.

384

And every

385

Rodrigo Gordillo: Yeah, that, that.

386

Rafael Ortega: into, okay, so maybe

we get defensive equities and maybe

387

we do some, momentum thing on top.

388

And I was just trying lots of

things to find balance and with,

389

with, traditional strategies.

390

It's just now I think

it's just impossible.

391

Like you, you're never gonna,

you always have to take more risk

392

in the form of cycle risk and.

393

Rodrigo Gordillo: So let me, lemme

pause there for a second and just

394

show an old, an oldie, but a goodie.

395

We've been talking about

this already, right?

396

But this one just shows a chart of

gold, global equities, commodities,

397

and 10 year treasuries, right?

398

Roughly speaking, I don't

399

Roughly speaking, they all make the

same amount of return, but obviously

400

the paths are wildly different, right?

401

So which one do you want to

choose is is always the question.

402

And from the perspective of risk balancing

these, again, we talked about long-term

403

treasuries, I'm using the 10-year.

404

If you run a simple equal risk

contribution analysis to try to make

405

sure that we balance things off,

you're looking at 42% in treasuries,

406

29% in trend following here, 15% in

global equities, 12% in commodities

407

to get a hundred percent portfolio.

408

And of course the 10,000 foot view

of that is that you get this smoothed

409

out line that kind of crosses in the

middle of everything, but actually

410

slightly outperforms over the long term,

mainly due to the rebalancing benefit,

411

That, that diversification premium.

412

Now, while this line looks amazing, right?

413

let's, this is a, I was trying to think

about a different way of explaining

414

to people why is it that an equal risk

portfolio is generally going to not

415

provide the returns that a high risk

portfolio like equities is gonna provide?

416

And the reality is that it's not

true over many decades, right?

417

If you think about the

equity risk premium, right?

418

What's the equity risk premium?

419

depends on, global equity,

risk premium, what is it?

420

3.5%,

421

4% above cash, right?

422

So it's say notional, we're

looking at 6% annualized, right?

423

Term premium, is two, 3%.

424

when you actually look at all

these returns, they all at the end,

425

as we can see from this graphic,

roughly make the same return.

426

The problem is that by diversifying

you're clustering that return

427

around that long term more often.

428

And sadly, a 60 40 investor, an 80 20

investor tends to see more double digit

429

years than you do when you're balanced.

430

And that's painful.

431

And that reduces risk and

reduces, long-term returns.

432

So you have to wait a long time to

be able to say, okay, we did it.

433

We did the same or better

than with lower risk.

434

And the reality is that

it's boring for most people.

435

When you create this portfolio and

you have a 4% volatility portfolio,

436

you're constantly apologizing

for not putting enough risk on.

437

And the reality is that you're up

until recently, you were limited

438

as to what you could do in terms of

giving people what they wanted, which

439

is, look, I'm used to, a standard

deviation in my portfolio of 12%, 15%.

440

Like I'm okay with that.

441

I'm okay with the

drawdowns that I've seen.

442

Can you give me that?

443

And the answer was no.

444

The answer was no.

445

This, you get this is the maximum

balance portfolio you can get.

446

and so anyway, I thought I'd paused there

and show people what we were, what we're.

447

Rafael Ortega: the, that graph, because

I, love it because, it makes so much

448

sense and then no one likes it in real

life because in life, I like to sometimes

449

show this and people will always choose

that dark blue line, then show it

450

starting in 2010 and then that just

451

Rodrigo Gordillo: Right.

452

Rafael Ortega: flat.

453

great risk return, like gr great,

sharpe ratio, but it's just boring.

454

It just gives you a couple percentage

points, while some of the other

455

strategies in this, exactly that

point in time, it's gonna be stocks,

456

Rodrigo Gordillo: Yeah,

457

Rafael Ortega: you those double

digit deterrence and like

458

incredibly high sharp ratios.

459

And it doesn't matter how many

times you show this, people are

460

gonna be okay when they see it.

461

And then after a couple of

months of, low volatility, low

462

returns, they're gonna ditch it.

463

Rodrigo Gordillo: exactly.

464

Rafael Ortega: just the way it is And,

465

Rodrigo Gordillo: and it, and to their

credit, if they feel they're leaving

466

money on the table because they can

take more risk, it's, a problem.

467

Rafael Ortega: that's exactly the

problem I, I was running into.

468

I wanted to add more diversification

because I knew it worked.

469

I, thought the portfolios were

gonna be, more resilient more

470

all-weather and I was, all in on that.

471

But the more diversification you add,

diversification works so well that

472

volatility goes down and the volatility

goes down, eventually returns go down too.

473

then I wanted a bit more volatility

and a bit more return and I

474

needed to have more stocks there.

475

And then I was losing that balance

and then I was going back and forth

476

between those two things, right?

477

More volatility always meant,

that you had to sacrifice returns.

478

And then when you had more stocks in, I

was saying that I was all weather, but

479

I wasn't all weather 'cause I had 50

to 60% equities in my portfolio, right?

480

way that a 50 to 60%, equity portfolio

is gonna be all weather because then

481

you would need a leveraged defense,

Something that was not just a mix of gold

482

bond, bonds and, and trends following

and other alternative strategies.

483

Though that was gonna be an all-weather

defense, but not an all-weather portfolio.

484

was the problem.

485

Rodrigo Gordillo: Yeah.

486

Rafael Ortega: And then when you came up

with the return stacking, paper that I.

487

was my second aha moment where I saw it.

488

I couldn't unsee it.

489

I remember guys did a, late livestream

or maybe an episode, I'm not sure.

490

And I went on the chat and asked,

you were saying, you know how return

491

stacking, we'll talk about this now.

492

like how it can create some

tracking error, whatever.

493

And I think I said something

like, okay, but what if you don't

494

care about the tracking error?

495

Let's talk about a theory.

496

and think one of you like

brushed it off a bit, okay, maybe

497

Rodrigo Gordillo: Yeah.

498

Because 99% of our

audience cares about that.

499

Gonna fuel lunatics like us.

500

Yeah.

501

Rafael Ortega: I emailed you like,

okay brother, we need to talk

502

because if I can do this, this is

what I've been looking for, right?

503

I can create a portfolio.

504

I can finally create a portfolio that

is truly diversified, that is using

505

everything that we know we can use.

506

So that means not only

assets, but also strategies.

507

We can try to balance those things out.

508

It's gonna be a great long-term,

sharpe ratio portfolio.

509

It's gonna be stable, it's gonna

be all weather, and then we can

510

get it to the volatility that

people actually want, right?

511

And if they want an 8%

volatility portfolio, we can

512

do that without losing balance.

513

If you want a 12% volatility

portfolio, we can now do that.

514

And it's not losing balance, right?

515

You're not getting, you're getting

more risk, you're getting more,

516

you're getting exposure, which is

what you want, but you're not getting

517

it through a concentrated cycle risk

bit, which is what you do when you

518

have a 50 to 60% equity portfolio.

519

And I, that I went crazy around the

idea and, luckily, and a half or

520

something later, we finally did it.

521

And we have, portfolios on that

can actually implement these,

522

these concepts in, Spain.

523

So very grateful

524

Rodrigo Gordillo: Yeah, and more, most

of the battle that I saw you fight

525

is a battle that we fought originally

too in Canada is you're not just

526

fighting a battle of ideas, but you're,

running into operational roadblocks.

527

compliance teams don't want you to do X,

Y, Z, the even platforms don't even have

528

the capability of providing you what you

want or you being able to invest in US

529

ETFs that you, that use gold and stuff

like, it's just been a constant struggle

530

and you've mostly fought through all that.

531

tell us a little bit about that journey.

532

Rafael Ortega: Yeah.

533

So the thing is that, I mean

it's counterintuitive, right?

534

I'm trying to say that I'm building

something that is leveraged.

535

It's a hundred percent leverage, but it's

actually a balanced, allocation, right?

536

And that goes against everything that

everyone has heard in, or everyone that

537

you get, that's learning about investing

will, will get as that association that

538

leverage more leverage means more risk.

539

to be fair, all that's equal.

540

Yeah.

541

more

542

Rodrigo Gordillo: Yeah.

543

Rafael Ortega: more risk.

544

it all depends what

we're comparing, right?

545

'cause I think, everyone would understand

that if you have a very risky thing and

546

a very unrisky thing, and sometimes you

can leverage the unrisky thing and it will

547

still be less risky than the risky thing.

548

But anyways, the, the thing here is

that, I found that the solution to this

549

problem is how you frame it, right?

550

People think more leverage means,

more risk, more leverage means

551

that you're chasing higher returns.

552

That's not what we're doing, right?

553

We're using leverage

after we're diversifying.

554

So the right order is you

have a certain amount of risk.

555

Now we are diversifying and we're adding

true structural diversification to

556

different assets and different strategies.

557

So we're bringing volatility down

and because volatility is down, your

558

returns are down, and we're using

leverage to recover the exposure

559

you lost through diversification.

560

So we're using leverage

after we're diversifying.

561

And again, this is another of the things

that I think everyone in the world

562

should be using because if you do the

math and match, amount of added exposure

563

so that it matches the, risk through

added exposure matches the reduction in

564

risk you get through diversification,

you're doing that thing that, the phrase?

565

Eating your cake or what is it?

566

Rodrigo Gordillo: I, you are, yeah,

you're having your cake and eating

567

it too, having your diversification

cake and eating, eating it too.

568

Yeah.

569

Rafael Ortega: so it's, that

is the right order, right?

570

We're reducing risk and then we're

using leverage to recover the lost risk.

571

Another way to see it is that you're

actually, this is, okay, this is

572

from a, all-terrain, point of view.

573

If you look at it from a traditional

portfolio where you have, stocks

574

and bonds you're adding, more

diversification through stacking,

575

that is defensive leverage.

576

You're adding more

defense to your portfolio.

577

So if you do it right,

and if you do the math.

578

Most of the times, you're not

really adding that much risk.

579

It comes with, with, its, what's the word?

580

With its, contra or

581

Rodrigo Gordillo: Yeah, it's, you can say

counterpoints, it comes with this off,

582

with, its, there's other offsetting things

that happen by when you use leverage,

583

but not necessarily in the same way.

584

Rafael Ortega: you will

have, error, right?

585

It comes in the form of tracking error.

586

It comes in the form of your volatility

is gonna be more stable, which, sounds

587

good until you see it live, right?

588

That you're actually getting hurt

more, very little, but all the time.

589

Rodrigo Gordillo: Yeah, more often.

590

But,

591

Rafael Ortega: it more.

592

Rodrigo Gordillo: yeah, so that's, the

thing I wanted to, 'cause we've chatted

593

about this a lot, and this is, this

comes from Corey's saying that risk,

594

cannot be, trans cannot, be eliminated.

595

It can only be transformed.

596

And so how do you, talk about that?

597

Rafael Ortega: Again.

598

I think the way to make people

understand this is to do it

599

in the right order, right?

600

So the right order should be how much

risk are you willing to take in the

601

form of volatility, in the form of

expected drawdowns, et cetera, right?

602

Once that is clear, then how do

we take that risk and how do we

603

do it in the most efficient way?

604

If you build a portfolio, again

that is just stocks and bonds, you

605

are taking a lot of market risk.

606

I've heard you say many times that

when you look at S&P 500 and you

607

use an ETF, that ETF is unleveraged.

608

But if you look at the companies

beneath the ETF and you look at

609

the leverage within the companies

in the ETF, you're actually using

610

three times leverage, right?

611

If I remember right.

612

Something

613

Rodrigo Gordillo: Yeah.

614

Three to one.

615

Four to one.

616

Yeah.

617

Rafael Ortega: you're taking market

cycle risk and we don't have that

618

market cycle risk because that tends to.

619

Crash.

620

eventually, like once every, whatever

years, it will, it, we will get into that

621

part of the cycle where stocks just don't

work and you get those big drawdowns.

622

You want to take that risk

and that risk is the risk that

623

you're diversifying, right?

624

So you wanna add other things that are

gonna move in different ways, ebb and

625

flow in different moments, and it's

the same amount of risk, but if you

626

take the risk in smaller doses, the

same amount of risk, it is much better

627

than just feeling like there's no risk,

which is how a 60 40 portfolio feels

628

when everything is going your way.

629

And then one day, you don't know when,

it's gonna come and it's gonna hurt you.

630

And there's a man, how do

you say this in English?

631

There's a.

632

asymmetry in the way

returns come right with that

633

Rodrigo Gordillo: Yeah,

634

Rafael Ortega: understands where

10%, draw down you, you're back

635

at zero with 11%, but a 50% draw

down needs a hundred percent.

636

So the same amount of

637

Rodrigo Gordillo: to break back.

638

Rafael Ortega: way to take that risk

is to try and do it in smaller doses.

639

Smaller doses makes a lot of sense

until you feel it when the other

640

person is not feeling it, right?

641

And that's what happens.

642

Rodrigo Gordillo: So, you know

what, Corey and I yesterday, were

643

having we're looking at how to

tell this story about this, right?

644

This idea that there's an, there's.

645

There's risk inequities and there's risk

in all-terrain or equal, we're looking

646

at an equal risk portfolio of assets.

647

And so what I, wanted to see is how

often you're in drawdown in, in the

648

S&P 500 on a daily basis, right?

649

So how often are you hitting new

high and started losing money

650

versus how often you're in drawdown?

651

I think we did trend following.

652

We did gold.

653

What's fascinating, there's a drawdown

in recovery chart that we often use.

654

I'll see if I can find it here,

later, but, which is you start

655

losing money and then you recover.

656

and if it's zero, it means you're

making new highs all the time.

657

So the top of the chart is flat as

long as you're making new highs.

658

And when you we're looking at trend

following and trend following is, could

659

you guess how often on a daily basis the

SocGen Trend Index, is making new highs?

660

Rafael Ortega: I would

say very little, right?

661

Because I feel it's like you're

losing all the time and then

662

suddenly you get that big win.

663

I think what.

664

Rodrigo Gordillo: Yeah, it's like

it's around 12% on a daily scale.

665

It's around a third on a monthly scale.

666

And when you look at the chart,

when you actually look at the

667

S&P500, it is like making new highs.

668

It feels, I haven't done the

actual numbers, but it just, it's

669

flat that chart of drawdown and

recovery is flat most of the time.

670

And then you have 2008 and

you just lo lose and lose and

671

lose and it's a massive drop.

672

But you never see that in the

history of the SocGen index.

673

You never see that lose and lose.

674

draw downs in recoveries, draw downs in

recoveries, draw downs in recoveries.

675

and so I think that tracking error

676

Rafael Ortega: I was asking even you get

it to the same level of volatility, so

677

it's like it's structurally different.

678

Rodrigo Gordillo: Is

structurally different.

679

There is, there's some, like you're

just getting more, it's, look,

680

it's the skewness of the S&P500,

Then you have the big fat tail.

681

The moment you start adding

diversification, you add bonds and

682

equal risk, you add gold and equal

risk, you add some diversifiers,

683

you now have a more consistent like

series of drawdowns every year, right?

684

So you'll see your, your, like the area

under the curve for those that remember

685

statistics, is roughly the same between

a diversified portfolio and the S&P500.

686

It's actually less, but roughly the same.

687

The difference is that area under

the curve is showing up every

688

year more often, and most of the

area under the curve happens in

689

big abrupt losses for the S&P500.

690

So the experience here is,

something that is important, right?

691

The experience is how often do

you feel like you're winning

692

versus your alternative portfolio,

693

Rafael Ortega: I think I'm lucky here in

being to communicate this because I've

694

been talking about the permanent portfolio

for so long, and that is something that

695

Rodrigo Gordillo: right?

696

Rafael Ortega: people, I would

say in the investing community

697

in Spain at least know about.

698

Even if they don't believe in

it or they don't use it, they

699

know about it because we've been

talking like for a very long time.

700

Sort of everyone knows that this

is like an all-terrain solution

701

and they've seen how it be behaves

just behaves differently, right?

702

Sometimes it's in a drawdown when

the S&P or in, Europe, most people

703

use the MSCI world as the reference,

but, stocks are going up and this

704

might be flat or going down because I

don't know, bonds are down or gold is

705

down or something else is going on.

706

So they, they're used to this idea.

707

And then from the permanent

portfolio to, a return stacked opera

708

portfolio, which would be like our

most, I, now, I, never say risky.

709

I'd say it's just the most efficient

portfolio, but, our most efficient

710

offering would be like a 12%

volatility, portfolio that is a mix

711

of stocks, bonds, gold, and then

trend carry and other diversifiers

712

that would be smaller position like

Bitcoin or arbitrage or whatnot.

713

And so they, they're used to seeing

that this thing is its own thing, right?

714

the difficulty now is, explaining what

a trend following is, which again, I've

715

been talking about this for longer, but

maybe carry is something that people

716

hadn't been introduced to lately,

and starting with a drawdown is never

717

Rodrigo Gordillo: Yeah.

718

It's tough.

719

Rafael Ortega: but they've seen,

drawdowns in gold and they've seen

720

drawdowns in long-term bonds, which is

something that, everyone was saying,

721

like, why do you have long-term

bonds in the permanent portfolio?

722

Why do you have gold?

723

So we're used to explaining, having

odd things in the portfolio that

724

everyone knows that you shouldn't have.

725

But,

726

Rodrigo Gordillo: Yeah.

727

Everybody knows that you

shouldn't have right now.

728

Rafael Ortega: Everybody knows.

729

I've, learned that,

one, two things, right?

730

Diversification works.

731

The second would be that, things

happen and then the experts show

732

up, It's always that way around.

733

So yeah, never trust the experts.

734

Rodrigo Gordillo: Yeah.

735

I don't understand why you own gold.

736

It's lost nothing.

737

It's lost money.

738

you should have known.

739

We should.

740

Let's get out of it.

741

X post.

742

Rafael Ortega: the

other way around, right?

743

Like gold is an all time high.

744

So

745

Rodrigo Gordillo: Why

don't we buy more gold?

746

Rafael Ortega: would you

own 25% on your portfolio?

747

Or 20% out of 200 even in a off-road

portfolio, obviously you have to.

748

Rodrigo Gordillo: Yeah, and I have,

let's see if I can share this one here.

749

yeah, this is from the an A

brochure, the All Terrain portfolio.

750

So we run a couple of model

portfolios, ourselves in the return

751

stack, website returnstack.com

752

website.

753

But this is just an expert of the

simplest all-terrain portfolio.

754

I think it's levered 150%.

755

It's basically all world, seven to 10

year treasuries, gold, and the, like

756

some commodities and a CTA index.

757

And this is another thing that I,

think we get trapped into is, I

758

think the nomenclature is clearly

appealing, this idea of all terrain.

759

But I think what the, what,

it projects is never lose.

760

And this is an important distinction.

761

I think you, I think the idea

of saying all-terrain is just

762

a more efficient portfolio.

763

You're still in a four by

four going through some rough

764

terrain and you will fall.

765

The issue is, are you gonna

get stuck in the ditch?

766

And we've used a lot of imagery

here on you and me, when talking

767

about the off-road investor and

all-terrain, and I think the important

768

thing is it is a four by four.

769

I think we can get outta most ditches.

770

you don't want to be driving

a Ferrari in this environment.

771

And and this just shows.

772

Rafael Ortega: pot holes, right?

773

And when you drive through

those, you're gonna feel it.

774

if you've ever

775

a four by four, going through a,

offroad path, it's not driving,

776

a, Tesla to the supermarket.

777

It's very.

778

Rodrigo Gordillo: Yeah.

779

That's right.

780

That's right.

781

And it, really is like when you look

at the year over year here, that the

782

all-terrain does experience shallower,

annualized losses and less of them.

783

and you're getting a, the sharpe

ratio of this simple portfolio here is

784

around 25, 24, sharpe points higher, so

more efficient for every unit of risk

785

you're getting more units of return.

786

But in this case, the example

here is to lever it up to the

787

point where it has the same risk

as a traditional 60 40 portfolio.

788

So the thing about this small edge

is that over, over time, you see the

789

value, drawdowns are lower and so

on, but in any given year, you're

790

like, why are we doing this again?

791

it seems like we're getting

the same returns, but it's a

792

lot more complex to understand.

793

And what I've found is that, where this

really becomes abundantly clear is when a,

794

an asset class that people are overexposed

to really goes through a, not a two

795

month or three month, but a significant

series of, years, whether they're flat or

796

down, where you see the value of all the

other pistons in the motor, doing well.

797

And it doesn't always

happen that way, right?

798

Like it, what tends to happen is you have

these shallow losses in gold and recovery,

799

shallow losses in bonds and recovery,

shallow losses in equities and recovery.

800

And it just chugs along and

adds a little bit of value.

801

It's super different.

802

and then there will be a prolonged

bear market in equities where you see

803

the all-terrain, especially something

like this, just chug along positively.

804

And that's when you see the value.

805

it does take time to see the, long-term

value here and it requires a lot of faith.

806

And so a lot of education

807

Rafael Ortega: you have to be careful

with the way you frame that too, because

808

if we say that, I think I've said

sometimes like the overall portfolio

809

needs a crisis in order for you to

see, like a big difference, right?

810

Rodrigo Gordillo: why you have it.

811

Yeah.

812

Rafael Ortega: when you say a crisis,

people are gonna think, know, a, a 10%

813

draw down is a crisis or a 15% draw

814

Rodrigo Gordillo: Yeah.

815

Liberation day draw down.

816

Yeah.

817

Rafael Ortega: you need a really

tough scenario to see that huge

818

difference to appear, right?

819

Because if not, you just see that it

juggles along at that level of volatility.

820

And it can be doing that for, I've, run

the back test suit, so, I can see you,

821

you can get maybe four or five years where

it does the same thing that a equally,

822

equally volatile stock and bond portfolio.

823

And so the question there is, why am

I using this expensive, solution that

824

is so complex when a very simple one

can give you the same, returns, right?

825

it's because in your backpack,

you have a lot of things there

826

that you just didn't need.

827

That doesn't mean that you're not

gonna need them in the future.

828

Like the sensible thing

is always to be prepared.

829

You need to be prepared always.

830

And if we don't get a terrible,

831

I hope we don't get that

terrible car market right.

832

we're gonna do okay too.

833

you, it's not that bad.

834

but yeah, sometimes I find myself

thinking do I want a, like a

835

terrible bear market for equities?

836

So, that, people see the value of this.

837

but yeah.

838

Rodrigo Gordillo: No.

839

that's that.

840

Yeah.

841

Don't we all, I, my anecdote to that

is that I was doing this stuff in

842

'08, and I remember the phases of

emotions, Phase one, OC September, like

843

Lehman goes down September, October.

844

I'm feeling so good, right?

845

I've been talking about

it for a few years.

846

Portfolios are doing great.

847

everybody's losing their minds.

848

Clients don't even know what's,

my clients didn't know it.

849

Like, why is everybody so worried?

850

'cause they were looking at portfolios

in different light and, and so the

851

first was relief and satisfaction.

852

We want that.

853

And then you, have January, February, and

advisors aren't showing up to their desks.

854

Associates are having to talk to

clients that are crying on the phone.

855

Family and friends are losing their jobs.

856

And then you're like, crap, I really

need this to turn around right now.

857

It, is, there is, it is a double-edged

sword to I wanna show the value of this,

858

and this is important, but also I don't

want to ever have to use those tools.

859

I hope I never have to show you

what, how important those tools were.

860

I just need you to trust me

so that when it does happen.

861

And so by the end of it, I was

just begging for things, to change.

862

And then when things changed,

then the markets roared 80% and

863

you're still making 9%, 10% a year,

especially when I was non levered.

864

So it is, as an all-terrain, provider and,

investor, you go through these emotions.

865

At the end of the day, it ti it

comes down to does it, is it a sound,

866

philosophical, fundamental investment

strategy that works over time?

867

And I, I think it's tough to,

once you take the red pill,

868

tough, to say no, it doesn't.

869

and even this year, I'm looking at just

eyeballing the kind of the off-road

870

portfolio, versus an 80 20, right?

871

80 20 year to date is up again.

872

And I had a draw down,

around 13% drawdown.

873

and, in a recovery, and I'm looking at,

and, an iteration offroad roughly around

874

the same risk, actually lower risk, down,

less peak to trough and flat for the year.

875

And they seem identical, but the

reality is that one is a levered

876

portfolio and the other one isn't.

877

Right?

878

And the risk of, hey, it's a

levered portfolio, that's risky.

879

Again, if you're using defensive leverage.

880

Not so much, it had a shallow draw down.

881

It's now back to break even.

882

And and there were tools in there that

the 60 40 didn't have like gold, right?

883

That really helped offset a lot of the

losses on the, on the levered side.

884

And so the question is, what

would've happened if this continued

885

to go down 20, 30, 40, 50%?

886

Would they continue to be in tandem

like we saw in this shallow loss?

887

And history has shown us that no.

888

It's, very, it becomes a very different

portfolio, in a continuation, but

889

hopefully we'll never see that.

890

Hopefully we'll just compete,

like hopefully the ultra

891

terrain is able to compete.

892

Hopefully the ultra terrain gives

what people need in terms of what

893

they care about, which is, am I

gonna have enough returns to make,

894

my, to pay my bills when I retire?

895

Or, grow to get a good

retirement nest egg.

896

But again, if they, if it does happen,

it's important to understand the moving

897

parts and the value that they add.

898

If God forbid anything really bad happens.

899

Rafael Ortega: it's funny 'cause I

was thinking that's exactly what's

900

taken me now full circle to, okay.

901

I can't convince everyone to be an

all-weather investor because it, people

902

are just not built in their mind for that.

903

They like taking risk.

904

they believe in stocks and, they're

value investors or they're whatever, I

905

don't know, they, want stocks and they

want businesses and they believe in

906

the markets and they're capitalists.

907

So whatever they, have in their mind.

908

you still can use, diversification

without sacrificing returns, right?

909

You couldn't do it before.

910

You can do it now.

911

And that's what I was saying, right?

912

You can add to a hundred percent

portfolio that, a hundred percent

913

stocks, whatever kind of thing you're

doing, a hundred percent stocks, you can

914

add some diversifiers on top of that.

915

And if you do the right amount,

you're not gonna feel the difference

916

and you're just gonna get that

extra return from the stacking.

917

So even if you're just looking at

returns, return stacking makes sense.

918

If you're looking at, maybe

you want a little less risk.

919

Not concentrate your defense on bonds,

then you can use return stacking to have

920

a more diversified defense, which is

what I was trying to do before, but now I

921

think I'm doing it more efficiently again.

922

add more defense to that

defense that we did.

923

We didn't do that before with stacking.

924

Rodrigo Gordillo: Yeah.

925

Rafael Ortega: There's so many other ways

to use stacking that when I put myself in

926

other kind of investors' boots, my mind is

exploding because I just can't understand.

927

If you know about it,

why wouldn't you do it?

928

I just don't see a world where in a

couple of decades this the norm, right?

929

Everyone will use

930

Rodrigo Gordillo: Where it's

not, where it's not standard of

931

care for the financial industry.

932

Rafael Ortega: using 20.

933

I see that.

934

if you have a any

version of a 60 40 right?

935

Like your indexed stock in one portfolio,

you can easily add 10, 15%, stack.

936

Without affecting your overall risk

and just get some extra returns.

937

Not like it, will happen eventually.

938

You're adding things that are,

they make money over time.

939

we know that not all the time, but

now you can get a diversified set

940

of things that make money over time.

941

You put them on top of

your traditional portfolio.

942

Tracking error is gonna be minimal.

943

Volatility wise, it's gonna be

almost the same, and you're just

944

gonna get some extra returns.

945

Rodrigo Gordillo: Yeah.

946

And, but ca and the thing is that, the

caveat to all of that is that, we're

947

saying it will, but the reality is

that, you look at some diversifiers,

948

A QR went through a three year period

where their, alpha sleeve just lost

949

money, and now it's killing it again.

950

Like it's, it depends on timeframe.

951

There will be losses,

there's no guarantees.

952

But, again, these are sound, a

lot of these are very sound ideas.

953

even if you're a hundred percent equity

investor and you decide to stack some

954

bonds, the question is, term premium

going to exist in the future if you're

955

able to stack an extra 1% just by

doing a hundred percent equities?

956

20% bonds.

957

Alright.

958

You're adding diversification.

959

Do you believe in term premium?

960

Do you believe that bonds are

gonna make returns above cash?

961

Especially if you're taking duration risk?

962

it seems like a reasonable thing.

963

if

964

Rafael Ortega: I know, we, we have to,

965

Rodrigo Gordillo: Yeah,

966

Rafael Ortega: we have to,

967

Rodrigo Gordillo: we have to Yeah.

968

Temper expectations.

969

Yeah.

970

Rafael Ortega: I feel like that

stock investors never do this, but

971

okay, let's temper expectations.

972

Rodrigo Gordillo: Yeah.

973

Let's us do what we.

974

Rafael Ortega: but, I can see a world

where one of those diversifiers can

975

fail on you even in the long term, but

the more of them you add on, you know,

976

the more probable is than, you know

that, than a series of things that have

977

made money over time in the long term.

978

If you add them together and you

have a diversified set of them, will

979

eventually probably make some money

and that will be something that will

980

be on top of what you are doing right

now and it won't affect your portfolio.

981

Rodrigo Gordillo: Yeah.

982

Rafael Ortega: so.

983

Rodrigo Gordillo: And

I, think you're right.

984

I think the big unlock for guys like you

and me who both started on the All-Terrain

985

camp and were like, this is the only way.

986

when you take that away for a second

and okay, investing is a religion.

987

Everybody has their own religion

and, their, they're all, they're

988

value investors, but there's a bunch

of, there's a bunch of like sects

989

within value investors too, right?

990

and there's a, there's all

terrain investors in there.

991

There's a bunch of sects.

992

So everybody has their own point of view.

993

The, big unlock here is saying, okay,

let's not try to shove all terrain

994

down the throat to be down people's

throats, but rather the realization

995

that, oh, this is just a tool.

996

And, if we can provide tools for

advisors and investors to apply their own

997

religion in a much more efficient manner.

998

Then we should help 'em do that.

999

And I think we're, we both

later in our careers, have

00:59:27,559 --> 00:59:28,819

been like, okay, you know what?

00:59:28,819 --> 00:59:32,089

Let's empower the world's population.

00:59:32,239 --> 00:59:33,409

You're gonna tackle Europe.

00:59:33,769 --> 00:59:38,629

We'll tackle the, anglosphere,

to just do a little bit better.

00:59:39,079 --> 00:59:43,909

And I think that's, you're, you

are coming at it now that's what

00:59:43,909 --> 00:59:45,469

you're gonna start offering soon.

00:59:46,149 --> 00:59:49,869

and, it makes total sense to me,

and I'm actually quite, pumped about

00:59:49,869 --> 00:59:53,079

it, from this, how it's gonna work

in, Europe from your perspective.

00:59:53,706 --> 00:59:53,926

Rafael Ortega: Yep.

00:59:55,119 --> 00:59:55,629

Rodrigo Gordillo: All right.

00:59:55,899 --> 00:59:56,919

we covered a lot.

00:59:56,919 --> 01:00:00,189

Is there anything that I, that

you think would be useful?

01:00:00,189 --> 01:00:01,599

Any parting words?

01:00:02,446 --> 01:00:02,566

Rafael Ortega: I.

01:00:06,696 --> 01:00:06,936

Yeah.

01:00:07,626 --> 01:00:10,896

maybe I, it's more of a question

that I'm asking you, but,

01:00:11,679 --> 01:00:11,979

Rodrigo Gordillo: sure.

01:00:12,426 --> 01:00:17,406

Rafael Ortega: I'm seeing, more interest

in return stacking portable alpha.

01:00:18,096 --> 01:00:22,446

the last couple of months have

been pretty crazy with, lots

01:00:22,446 --> 01:00:25,296

of shops opening up new ideas.

01:00:26,676 --> 01:00:30,816

I understand there's a, one of the reasons

why this hadn't happened before was, had

01:00:30,816 --> 01:00:33,936

to do with, the regulation in the States.

01:00:34,710 --> 01:00:39,870

I, we're looking at how this is evolving

in, Europe, but like, how, do you

01:00:39,870 --> 01:00:44,550

see, first of all, the landscape in

the States in the rest of the world.

01:00:45,318 --> 01:00:45,618

Rodrigo Gordillo: Sure.

01:00:45,930 --> 01:00:46,890

Rafael Ortega: things in Canada too.

01:00:48,766 --> 01:00:51,256

How do you, see this evolving States.

01:00:51,424 --> 01:00:51,904

Rodrigo Gordillo: Sure.

01:00:51,964 --> 01:00:52,264

Yeah.

01:00:53,746 --> 01:00:56,896

Rafael Ortega: The transition to

other markets like Europe, where,

01:00:57,946 --> 01:01:01,426

I've started, as you were saying

before, we, found a way to operate,

01:01:01,816 --> 01:01:04,306

but like we've had to go through many.

01:01:05,914 --> 01:01:07,504

Rodrigo Gordillo: We're, going

through loopholes right now to

01:01:07,504 --> 01:01:10,384

get you the exposure that you

need with your bank, right?

01:01:10,894 --> 01:01:17,704

So it's, I think, like anything new,

it's been around for 40 years, right?

01:01:17,974 --> 01:01:19,594

I think I've, used this analogy before.

01:01:19,594 --> 01:01:24,304

There's a bunch of, for people who don't

wanna die of a heart attack, there's a

01:01:24,304 --> 01:01:29,044

bunch of tests that have been approved

and been recommended for doctors

01:01:29,044 --> 01:01:31,174

to give their, patients for years.

01:01:31,774 --> 01:01:36,064

in order to, assess whether you're

a high risk for heart attack or not,

01:01:36,184 --> 01:01:39,034

that are not being done by the vast

majority of doctors, even though

01:01:39,034 --> 01:01:40,174

they've been around for 20 years.

01:01:40,654 --> 01:01:46,894

And so it requires, in this case and some

experts to bang down the door and say, no,

01:01:46,894 --> 01:01:51,154

everybody needs to get their a OB numbers.

01:01:51,154 --> 01:01:55,921

And they, everybody needs to get their

lp, sorry, LP little a numbers checked.

01:01:55,921 --> 01:01:56,881

And these are things that.

01:01:57,481 --> 01:01:59,551

Nobody really knows about today.

01:01:59,551 --> 01:02:01,771

They just care about cholesterol,

total cholesterol, even

01:02:01,771 --> 01:02:02,701

though it's a good indicator.

01:02:02,701 --> 01:02:05,401

But our maximum indicator

it's, it takes decades, right?

01:02:05,551 --> 01:02:10,741

And, portable alpha has been around

for 40 years and it's taken a few

01:02:11,041 --> 01:02:16,201

people, trying to say the same thing

in different ways and communicate.

01:02:16,201 --> 01:02:19,891

And then when it becomes important,

there's a groundswell right now, if

01:02:19,891 --> 01:02:23,491

you look at how many times the word

portable alpha has been searched, it's

01:02:23,491 --> 01:02:27,211

gone from nothing to, an insane amount

in the last two years, especially.

01:02:27,758 --> 01:02:29,648

probably we helped in

a little bit in that.

01:02:30,413 --> 01:02:32,723

Now institutions have to pay attention.

01:02:33,263 --> 01:02:37,013

Like we know for a fact that

Morningstar is having to think about

01:02:37,013 --> 01:02:41,673

a new category that's going to put

all portable alpha people in there.

01:02:41,703 --> 01:02:45,033

And then the next question

is who's behind the curve?

01:02:45,033 --> 01:02:49,743

And I think the usage structures behind

the curve, they have these weird rules

01:02:49,803 --> 01:02:55,893

about, how one can invest in derivatives

and it makes it really difficult and

01:02:55,893 --> 01:03:01,293

really expensive to provide the best

possible, stack because of that.

01:03:01,293 --> 01:03:07,083

And I'm sure that'll slowly start to

change, because there's going to be too

01:03:07,083 --> 01:03:12,723

many people that matter to them, forcing

them to lighten up a little bit, right?

01:03:12,723 --> 01:03:13,833

So that groundswells is coming.

01:03:13,833 --> 01:03:15,843

People are asking more and more about it.

01:03:16,263 --> 01:03:20,793

once a category in Morningstar, exists

and other platforms will have to

01:03:21,123 --> 01:03:28,023

think about it as well and categorize,

there's a reticent from existing funds

01:03:28,023 --> 01:03:30,963

that have been using portable alpha

from ever to saying the word leverage.

01:03:32,463 --> 01:03:33,153

I think these,

01:03:33,405 --> 01:03:33,675

Rafael Ortega: I,

01:03:34,203 --> 01:03:36,718

Rodrigo Gordillo: yeah,

de-stigmatizing is gonna be huge.

01:03:37,005 --> 01:03:38,895

Rafael Ortega: it everywhere.

01:03:38,895 --> 01:03:40,330

And I know what it is.

01:03:40,340 --> 01:03:40,690

Right?

01:03:41,055 --> 01:03:41,745

But before I,

01:03:42,218 --> 01:03:42,508

Rodrigo Gordillo: Yeah.

01:03:42,615 --> 01:03:46,965

Rafael Ortega: were not saying

it you can find it, right?

01:03:46,965 --> 01:03:49,125

That you'll eventually find, this fund,

01:03:49,908 --> 01:03:51,968

Rodrigo Gordillo: and the goal

here is to de-stigmatizing.

01:03:52,245 --> 01:03:54,075

Rafael Ortega: to a benchmark, and

then you actually end up finding

01:03:54,075 --> 01:03:57,195

out that it's doing stocks plus

something and then that's why

01:03:57,645 --> 01:03:58,935

they're getting those returns, right?

01:03:59,295 --> 01:03:59,925

So

01:04:00,528 --> 01:04:00,818

Rodrigo Gordillo: Yeah.

01:04:01,335 --> 01:04:04,335

Rafael Ortega: I see it everywhere,

but I see people using it and

01:04:04,335 --> 01:04:05,925

not saying they're using it.

01:04:06,405 --> 01:04:10,845

And again, that going back to what

I said before about being very

01:04:10,845 --> 01:04:14,275

transparent on, okay, this is what

we're doing, and we explain it

01:04:14,348 --> 01:04:14,638

Rodrigo Gordillo: Yeah.

01:04:14,775 --> 01:04:19,425

Rafael Ortega: that you don't get scared

and, you see it's okay and it works.

01:04:19,440 --> 01:04:21,900

And, is exactly how works.

01:04:22,040 --> 01:04:22,260

Think

01:04:23,308 --> 01:04:23,598

Rodrigo Gordillo: Yeah.

01:04:23,738 --> 01:04:27,708

And I think a bigger unlock is also

Like anything, portfolio construction

01:04:27,708 --> 01:04:31,098

can be anything, portable alpha

can be any sort of iteration.

01:04:31,548 --> 01:04:35,178

Keeping it as simple as possible with

the one plus one that, that we've

01:04:35,178 --> 01:04:39,498

really focused on talking about Lego

blocks, I think, again, bringing

01:04:39,498 --> 01:04:43,128

it down to a level where people can

understand it, understand what they

01:04:43,128 --> 01:04:44,418

can put in and what they can take out.

01:04:44,808 --> 01:04:51,228

And being upfront about what the

stacks are is the big unlock versus

01:04:51,348 --> 01:04:52,938

we just, how do we outperform?

01:04:53,118 --> 01:04:54,378

We, just do overlay stuff.

01:04:54,408 --> 01:04:55,398

Just trust us.

01:04:55,458 --> 01:04:57,858

We're gonna, we're gonna

just do our own thing.

01:04:57,858 --> 01:05:02,208

And you just need to, batten down the

hatches and, investing it long term.

01:05:02,778 --> 01:05:04,848

We're trying to be like open kimono.

01:05:04,998 --> 01:05:06,198

Here's exactly how it works.

01:05:06,198 --> 01:05:10,848

You should know and let's really

understand what the risks that

01:05:10,848 --> 01:05:13,608

you're taking by using portable

alpha return stacking leverage

01:05:13,608 --> 01:05:17,178

are, and dispel some of the myths

and understand some of the risks.

01:05:18,678 --> 01:05:22,338

it's gonna be a long, journey to get

brought at auction, but I, like I

01:05:22,338 --> 01:05:26,388

said, 40 years from now, I'd be shocked

if everybody's portfolio doesn't

01:05:26,388 --> 01:05:27,798

have at least a little bit of this.

01:05:27,798 --> 01:05:27,998

That's

01:05:28,310 --> 01:05:28,605

Rafael Ortega: see it.

01:05:28,605 --> 01:05:28,665

Rodrigo Gordillo: Yeah.

01:05:28,665 --> 01:05:34,575

Rafael Ortega: Hopefully Europe moves

a little faster and I can introduce

01:05:34,575 --> 01:05:38,235

things because right now I'm seeing

that I'm always the first person to

01:05:38,235 --> 01:05:45,015

ask, or the first person in anything

that is portable alpha esque in Europe.

01:05:45,105 --> 01:05:46,005

Now in Canada too.

01:05:46,065 --> 01:05:47,595

I think I'm, one of the biggest.

01:05:48,003 --> 01:05:48,293

Rodrigo Gordillo: Yeah.

01:05:48,795 --> 01:05:52,365

Rafael Ortega: So I'm, trying to

be there at the forefront of, it,

01:05:52,365 --> 01:05:56,670

but really enjoying it because

I think we're very, early and,

01:05:57,573 --> 01:06:00,603

Rodrigo Gordillo: Very early and it's

exciting and you see that like when

01:06:01,353 --> 01:06:03,603

you put things together and you, I'm

like, oh my God, this is so good.

01:06:03,603 --> 01:06:06,723

We just need to give it, we just need

to show it out and give it some time.

01:06:07,083 --> 01:06:12,393

And it's always it always, because of the

operational burden of doing something new,

01:06:12,393 --> 01:06:15,393

it's always, you're putting things out

two years later than what you want it to.

01:06:15,453 --> 01:06:17,883

Like we wrote the paper in

01:06:17,883 --> 01:06:19,353

01:06:20,073 --> 01:06:25,653

Had we done that, the visual obvious

story would immerse, would emerge.

01:06:25,743 --> 01:06:29,223

And what's happened is it took

everybody two years to, to let

01:06:29,223 --> 01:06:30,243

us do what we needed to do.

01:06:30,243 --> 01:06:34,293

And we launched at the teeth of a,

drawdown in some of these stacks, right?

01:06:34,983 --> 01:06:38,103

we're just gonna have to muddle

through and keep on telling the story.

01:06:38,793 --> 01:06:40,713

And you're a good partner

to have in Europe.

01:06:41,475 --> 01:06:41,835

Rafael Ortega: Let's see.

01:06:41,835 --> 01:06:42,635

Let's see how it goes.

01:06:42,685 --> 01:06:44,305

We'll keep pushing it.

01:06:44,955 --> 01:06:47,373

Rodrigo Gordillo: Okay,

Rafa, this has been awesome.

01:06:47,613 --> 01:06:48,783

we should do this more often.

01:06:48,843 --> 01:06:53,613

Your English is much better than

my Spanish, which is, which is

01:06:53,613 --> 01:06:56,673

incredible, for somebody that

hasn't done this in English.

01:06:57,513 --> 01:06:58,353

thanks again.

01:06:58,353 --> 01:07:02,913

We will, if anybody wants to find

you work and they find you on social

01:07:02,913 --> 01:07:04,593

media and on your websites and so on,

01:07:05,160 --> 01:07:09,570

Rafael Ortega: I'm on Twitter

mostly at Paton, which is,

01:07:10,200 --> 01:07:14,610

R-I-V-E-R-P-A-T-R-I-M-O-N-I-O.

01:07:16,320 --> 01:07:18,810

we'll have it down there the links,

01:07:19,498 --> 01:07:20,198

Rodrigo Gordillo: in show notes.

01:07:20,550 --> 01:07:23,970

Rafael Ortega: and then if you wanna

read about Return Stacking in Spanish,

01:07:24,060 --> 01:07:29,470

you can actually find me if you look

for Return Stacked Portfolios.es

01:07:29,490 --> 01:07:31,590

that's the Spanish, webpage.

01:07:31,680 --> 01:07:37,410

And there we're basically talking about

return stacking and doing, covering all

01:07:37,410 --> 01:07:40,650

the, on the stuff that you guys are doing.

01:07:41,010 --> 01:07:44,550

Trying to bring it again, the main

difference is that we're looking at

01:07:44,550 --> 01:07:46,590

retail investors instead of, advisors.

01:07:46,590 --> 01:07:51,540

So that's why I some of ideas.

01:07:52,113 --> 01:07:55,353

Rodrigo Gordillo: Yeah, I, would

definitely encourage people to go to

01:07:55,353 --> 01:07:59,193

the site and there's a little button

on your Chrome that says translate and

01:07:59,193 --> 01:08:04,533

does a pretty good job of just try to

read a few and read it from a different

01:08:05,043 --> 01:08:07,506

angle, that, that Rafa is really good at.

01:08:07,506 --> 01:08:11,676

So definitely visit the site,

read some of the blog articles

01:08:11,676 --> 01:08:12,906

we'll have you on more often.

01:08:14,226 --> 01:08:16,236

and, keep doing what you're doing, man.

01:08:16,296 --> 01:08:17,166

You're doing God's work.

01:08:18,246 --> 01:08:19,236

Thanks for joining today.