May 29, 2025 • 45 mins
Ever notice how the biggest market disruptions are rarely the ones everyone sees coming? Brad Barrie challenges conventional wisdom about diversification with his compelling "bus you don't see" analogy, explaining why most investors remain vulnerable despite thinking they're adequately protected.
"Diversification is not more stuff," Brad emphasizes, dismantling the common misconception that simply owning numerous investments creates safety. His multidimensional asset allocation approach transcends traditional thinking by focusing on diversifying return drivers rather than just asset classes. This subtle but crucial distinction makes all the difference when markets experience unexpected shocks.
Through practical examples like the recent tariff volatility, Brad demonstrates how investors often underestimate visible risks while remaining completely blind to others. His counterintuitive wisdom that "diversification means always having to say you're sorry" reveals an uncomfortable truth: if everything in your portfolio performs well simultaneously, you're probably not truly diversified.
Brad explains how his Dynamic Alpha Macro Fund (DYMIX) embodies this philosophy by combining equities with discretionary global macro futures strategies. Unlike trend-following approaches that struggle in choppy markets, DYMIX positions based on fundamental theses that remain valid regardless of broader market conditions. This creates genuine non-correlation not just to stocks and bonds, but to other alternative strategies as well.
The conversation delivers actionable insights for both investors and advisors seeking to build more resilient portfolios. By understanding the specific drivers behind different investments and combining multiple uncorrelated return sources, you can better prepare for the investment "buses" you never see coming. Visit dynamicwg.com to learn more about Brad's multidimensional approach to navigating today's complex market environment.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
One of the analogies I use is it's the bus that you
don't see that hits you right.
So if you see a bus coming, youusually get out of the way
right.
So most recently we've hadthese tariff gyrations.
And did we see the tariffs outthere?
We did, we saw them out there,but we just thought it was.
(00:22):
We didn't think it was a bigbus.
We thought it was going to be amuch smaller, maybe one of
those smart cars, right, or abumper car.
It wasn't going to be anythingmajor.
And then it was major, and thenthat was a huge bus that came
and hit us.
So how?
Speaker 2 (00:36):
should investors think about and financial
advisors think about?
Diversification beyond justsort of the idea of feeling
better because there's moresecurities in a portfolio.
Yeah, divers on just sort ofthe idea of feeling better
because there's more securitiesin a portfolio.
Speaker 1 (00:43):
Yeah, diversification is not more stuff, right?
It's not just different.
More stocks, more funds, and ohlook, I've got 10 different
names in my portfolio.
I must be diversified, it's notso?
The other old saying out thereon diversification is
diversification means alwayshaving to say you're sorry,
(01:03):
right?
So if there's not something inyour portfolio that you're not
happy with, then your portfoliois really not diversified.
Speaker 2 (01:10):
My name is Michael Guy, a publisher of the Lead Lag
Report.
This Lead Lag Live conversationis sponsored by Dynamic Wealth.
We'll be talking aboutBradbury's firm, as well as the
offerings he's got.
But, brad, let's refresheverybody's memory as far as
your background, what you'vedone throughout your career,
your experience and what you doat Grotton.
Speaker 1 (01:28):
Yeah, thanks, michael .
Yeah, it does seem like it'sbeen years since we've done one
of these.
Time tends to fly very rapidly,especially in these uncertain
world that we live in, eventhough it's always uncertain.
So my background I was afinancial advisor for about 20
years, started at the end of1990s and had a financial
(01:50):
planning practice in Chicagoarea.
I transitioned that to mypartners, began consulting
financial advisors on varioustopics.
Basically your investors, yourlisteners, can kind of think
about it as they may go to afinancial advisor when they need
help.
Where does a financial advisorgo when they need help?
They come to somebody likemyself.
(02:10):
So with my experience andknowledge and focus, I help
advisors in a number ofdifferent topics.
A lot of that last few years hadpivoted towards portfolio
management guidance and, brad,what do you know about
portfolios?
60-40 isn't working as well asit used to be and kind of
pivoted our firm to focus moreon CIO work and sometimes the
(02:36):
industry calls it an OCIO, anoutsourced chief investment
officer.
We like to think of it more asa partnering chief investment
officer with financial advisors.
So we partner with firms.
We don't replace their teammembers.
We hopefully make everybodythat much better and build
customized model portfolios forfinancial advisors that follow
(02:58):
our multidimensional assetallocation theme, which I'm
happy to touch on.
Asset allocation theme, whichI'm happy to touch on, and a
number of years ago a few yearsago now we launched a mutual
fund, the Dynamic Alpha MacroFund ticker symbol is DYMIX
which we'll talk about today.
That combines equities with theglobal macro future strategy.
(03:21):
So that's just a little bitabout me.
I can probably go on and on forhours.
I also, very charitablyinclined I run a nonprofit here
in the Las Vegas area called theAlliance Foundation, sat on a
number of nonprofit boards anddefinitely a big believer in
giving back to our communitiesthat we all work and live in.
I believe if we all just do alittle bit, you know, adds up to
(03:42):
a lot.
Speaker 2 (03:42):
So that's me.
I've talked to a lot offinancial advisors.
Some of them are moreintellectually curious than
others when it comes to markets.
As you know, Over the years Iused to be even if they have the
(04:03):
CFA designation, are reallykind of, I'd argue, more hyped
up retail right, Meaning theywill fall prey to the same
behavioral biases that retailinvestors and traders typically
do.
Am I off on the idea that alarge portion of the financial
advisor community, they, don'treally understand markets the
(04:24):
way that maybe they portraythemselves to be understanding
of markets?
Speaker 1 (04:29):
I think, yeah, I think, when you think about a
financial advisor, their job isto advise clients on all aspects
of a client's financial life,right.
Investments is just onecomponent of that.
There's cash flow management,there's income tax planning,
there's estate planning, there'sinsurance planning, there's
(04:51):
retirement planning, collegeplanning.
A good financial advisor, Ibelieve, looks at the holistic
approach and partners with folkslike myself on investments,
partners with good estateplanning attorneys, good tax
preparers and advisors to act asthat you know, sometimes as an
(05:15):
overused analogy the financialquarterback for their client
right and connect industryexperts, financial experts, to
understand the real client'sgoals.
That's what a good financialadvisor does is understand their
client's goals, their risktolerances, what they want to
(05:35):
achieve, and then helps pointthem in that correct direction.
Direction right, Look, we alllove to follow the market and
you know we talk about uncertaintimes that we live in and I
alluded that all times areuncertain.
Even when it seems like we'rein certainty, we're not.
(05:57):
There's always unexpectedthings around the corner and we
can't expect them.
That's why they're unexpectedright, One of the analogies I
use.
I'm a big believer in usinganalogies with investors and if
you are an investor, I thinkit's good to put things in terms
that you understand, that youcan relate to, Because if you
(06:18):
understand it, if your investorsunderstand it, your clients
understand it, then comfortlevel is higher and folks are
more likely to stick with theplan.
Whether that's a financial plan, an investment plan, an
investment, it doesn't matter.
If comfort level andunderstanding is there.
Being able to stick with itlong-term is the key, right?
(06:42):
So one of the analogies I use isit's the bus that you don't see
that hits you, right?
So if you see a bus coming, youusually get out of the way,
right?
So most recently we've hadthese tariff gyrations.
And did we see the tariffs outthere?
We did, we saw them out there,but we just thought it was.
(07:05):
You know, we didn't think itwas a big bus, we thought it was
going to be a much smaller,maybe one of those smart cars,
right, or a bumper car.
It wasn't going to be anythingmajor.
And then it was major and thenthat was a huge bus that came
and hit us.
No-transcript, not letting youremotions dictate your actions,
(08:13):
I think is a core lesson, right,and kind of keeping those
analogies in the back of yourhead maybe helps you put that
into perspective, you know mythoughts.
Speaker 2 (08:26):
Nomadic advisors can be emotional too, oh absolutely.
They're supposed to behand-holding their emotional
clients, but emotion has a funnyway of transferring over from
person to person.
Speaker 1 (08:36):
Well, we're all human .
We're all human At the end ofthe day, until those robots take
all of our jobs right and we'relike the humans in WALL-E and
it's a great movie.
If you haven't seen it, youknow you got to watch that and
you know the humans there arejust kind of all floating around
and everything's done for them.
We're all human.
We're all driven by emotions,and in the investment world,
(08:57):
fear and greed are two bigemotions.
Speaker 2 (09:05):
And you know we all have them.
So tell me how some of thoseadvisors maybe in the midst of
this tariff volatility which youknow in the grand scheme of
things it was a short period oftime, maybe coming back to it
Were you getting calls fromadvisors on the OCIO side?
What were the conversationslike?
Talk me through that period alittle bit.
Speaker 1 (09:21):
Yeah, so we're very proactive.
So when that really started tohappen, nobody knew how long it
was going to happen for right.
You know it was a very quickblip in retrospect, but who knew
right?
So we were very proactive.
We put out a video on YouTubeand LinkedIn to kind of help
(09:43):
investors and advisors putthings in perspective.
We reached out to our advisoryteams we work with with that
type of information and somethoughts and perspective.
But the most important thingduring those buses that hit us
is to focus on the facts, focuson logic, try not to let your
(10:04):
emotions drive you and again, wework with amazing advisors and
they all get it right.
Our advisors were not panicking.
It was more of you know whatare the best topics to reach out
to our clients.
Is now the right time to reachout to clients?
And it is.
And it's not to reach out toclients to scare them or make
changes.
It's to reassure them that,especially the clients we work
(10:28):
with, reassure them that theirportfolios are positioned Now.
By definition, the bus that hitsyou is something you can't
predict Right.
So we're big believers inpreparation over prediction,
with overall portfolios that arebuilt for investors, because
(10:49):
you can't predict but you canprepare, and our message is be
prepared for a range of outcomes.
Yes, I mean, michael, this wasa fast blip down, a 9% rise one
day and we're, I think, back tothose levels pre the.
The liberation day, I believe,is it's called uh, with the,
(11:09):
with the tariffs now, that rain,that outcome?
Certainly, people werepredicting that and there was a
lot of people predicting evenworse.
Um, you know, the people thatpredicted it would be a fast
bounce back.
They were, were right this time.
Will they always be right?
No, so, if you know, I've heardthe word hope often, right, we
(11:32):
hope these tariffs are justnegotiating.
We hope this is all justpositioning.
We hope that, that this isn'tgoing to push us into a
recession and I've heard peopleon the television, experts use
that term and look, I certainlyhope that's the case as well.
But what if it's not?
And if it's not?
And your portfolio is missioncritical.
(11:54):
Mission critical to supportyour retirement plan, for your
kids, college, be there for youwhen you need it.
Hope and optimism shouldn't beyour only plan, right?
So, having parts of theportfolio that are positioned to
do well in periods like thatand we did we had a number of
(12:18):
positions in our portfolios, ourfund included, that did well
during that time and many ofwhich have continued to do well
and did well in the past as well.
So having multiple drivers ofreturn that don't rely on strong
economic growth is, bydefinition, diversification.
(12:42):
And yeah, so our advisors were,I will say, prepared for the
uncertainty as we always need tobe prepared for the uncertainty
and communicated I don't saypositive messages, but
reassuring messages, becausethat's what investors need
during really all times, duringreally all times, even when the
(13:06):
market is doing fantastic.
That's when reassurance andproper portfolio management is
even more important to lock inthose profits when they happen
and not take on too much riskand not keep just the
magnificent seven.
Speaker 2 (13:22):
Let's talk about diversifying hope.
How does one properly do that?
Let's face it, I think it'sarguable that most things are
just variations of beta in termsof an opportunity set.
Even if you look at long-shortportfolios, for example, they
often just track the consumerstaple sector ETF just because
(13:44):
it's a lower beta with rightWith the net long exposure, but
still beta.
So how should investors thinkabout, and financial advisors
think about, diversificationbeyond just sort of the idea of
feeling better because there'smore securities in a portfolio?
Speaker 1 (13:57):
Yeah, diversification is not more stuff, right, it's
not just different.
You know more stocks, morefunds, and you know, look, I've
got 10 different names in myportfolio.
I must be diversified.
It's not so.
Our approach, we call itmultidimensional asset
allocation.
It focuses on not justdiversifying with asset classes
(14:17):
but diversifying with strategies.
Different strategies anddifferent approaches.
Right, you know, you may havemany different types of stocks
or even private equity, but whatdo they all require?
They all require strongeconomic growth by and large.
If we don't have strongeconomic growth, then all those
(14:40):
equities, if there's a macro hit, are most likely all going to
suffer to some degree.
Macro hit are most likely allgoing to suffer to some degree.
So, having you know, and evenlong short strategies you
mentioned, michael, are there'smany different types of long
short strategies and differenttypes of tactical strategies.
Some use quant, some usefundamental, some use technical
(15:03):
analysis.
There's different arbitragestrategies out there that may
perform more like a bond in thelong term but don't have any
interest rate risk or anydefault risk.
They have, whatever theirarbitrage be it convertible arb
or merger arb or otherwise, umare a rely on.
(15:23):
So you know, harrymarkowitzowitz, the father of
modern portfolio theory, assetallocation, diversification,
whatever you want to call ittalked about having different
risks in a portfolio and manyfolks tend to again
misunderstand and think that hetalked about having multiple
(15:46):
assets in an asset allocation.
But that's not really what itis.
It's having multiple types ofrisk in a portfolio, which
sounds odd at first that we'regoing to add risk to a portfolio
, but when you add one risk,you're taking away another risk.
So in the traditional 60-40portfolio stocks and bonds you
have really two main levels, twomain drivers of return stocks
(16:09):
and bonds and a year like 2022or years like others in the past
, when both underperform or godown.
You had two diversifiers.
We think and this is why we callour approach multidimensional
we think you should havemultiple types of drivers of
return.
So if you have just a buy andhold stock portfolio, that's one
(16:31):
driver of return.
Buy and hold bond portfolio isanother driver of return.
Having a tactical manager thatis going to be able to move
between stocks and bondsoverweight stocks, underweight
stocks, move to bonds differenttypes of bonds that risk is not
(16:54):
necessarily stock risk or bondrisk.
That risk is that managersuccessful in their ability to
move between those differentcategories, and there are a
number of managers that aresuccessful in that and that
takes away the buy and hold riskand transfers in the technical
risk.
And that's our view on assetallocation.
It's a view I've had and I'veused with clients for well over
(17:18):
20 years when I was in privatepractice and it works.
And even if you take a step backand you think what is the main
purpose of diversification froma practical standpoint and again
, this is, you know, I don'tknow if CFAs are taught this and
and from the academicstandpoint, but from a practical
(17:40):
standpoint, as someone who hasbuilt portfolios for individuals
that have been retired andrelied on those portfolios to
live on, and I got calls likehey, the car broke down, we need
$15,000, $20,000, $30,000 outof the blue.
What do we take from?
Part of the goal ofdiversification is to always
(18:03):
have something in the portfolioto draw upon for when that bus
hits you, for when thatunexpected occurrence happens
right and the refrigerator blowsup, the car breaks down, the
kids need money, what have you?
And if everything in yourportfolio is down or not doing
well and you have to takesomething that is down and you
(18:26):
sell it, you're selling at thatloss and you'll never recoup it
after you sell it from a loss bydefinition.
So the other old saying outthere on diversification is
diversification means alwayshaving to say you're sorry,
right, so if there's notsomething in your portfolio that
you're not happy with, thenyour portfolio is really not
(18:49):
diversified.
It sounds silly, but the otherway I say it and I would say
this to my clients and manytimes they would finish my
saying I would say if everythingin your portfolio is going up
at the same time, it usuallymeans everything in your
portfolio will go down at thesame time.
Right, and you know, havingthat it's really a different
(19:10):
philosophy and a differentperspective on what
diversification really should be.
Right it's not just having 15different investments in funds
and a bunch of different stocks,it's identifying different
drivers of return that you knowbeat by a different drop and you
(19:31):
know maybe they all go up atthe same time but in certain
times and other times they won't.
And identifying those driversis kind of a key part of the
diversification.
Speaker 2 (19:41):
Sorry, about your fund for a bit here, your mutual
fund DYMIX, sharing the screenhere, but yeah, let's go through
it.
Speaker 1 (19:51):
Yeah, so DYMIX, as we call it, is our mutual fund.
Let me share the fact sheetfirst of all.
So, from a high level, ourmutual fund, it's been around
almost two years now.
It combines a global macrofutures strategy along with US
(20:13):
equities.
Now US equities are balancedbetween growth stocks,
dividend-focused stocks and kindof a broad market think S&P
500-type stocks.
This is kind of the buy andhold equity position and then
within the global macro futuresposition, we can go long or
short various commodity futuresmarkets.
(20:33):
So which you know from a highlevel, they're all listed below
and this was as of March.
Our performance has been verystrong on really all aspects
relative to the S&P, and the S&Ptarget risk balanced index is a
60-40 mix.
(20:55):
We're very proud of thosenumbers.
In addition, we're proud of therisk and our non-correlation.
So if you look at the columnhere, you see my mouse.
(21:23):
Our standard deviation is justslightly higher than the S&P.
But one of the things I like toreally emphasize is our
standard deviation is not risk.
So standard deviation isdeviation.
So if you think about that andI don't know how to use a laser
on this, so I apologize,otherwise I would point.
I don't know if I highlight.
I can highlight a little bit.
I guess Most investors want todeviate on the gain side, right?
(21:44):
You know, if you're deviatingand you're looking different and
you're making more on the gainside, that's what you want.
You don't want to deviate onthe loss side as much, right,
and have greater deviation onthe downside.
So we're very proud that ourgain deviation is more of the
contributor to the overallstandard deviation than the loss
deviation and that's why ourSharpe ratio and our Sortino
(22:09):
ratio are as high as they are.
From a very simplisticstandpoint, sharpe and Sortino
you can kind of think of it asreturn divided by risk.
Sharpe uses standard deviationas risk, which we know we're not
a huge fan of as a measure ofrisk, and then Sortino uses
downside deviation as itsmeasure of risk.
Basically, the higher thenumber the better.
With Sharpe and Sortino,correlation to the overall
(22:30):
market is 0.28.
So we're very non-correlated tothe overall market.
And then upside and downsidecapture ratios.
It's also another one of thosestatistics that most financial
advisors should be familiar with.
Investors think of it this wayis the market is going to
capture 100%, so the S&P isgoing to capture 100% of its
(22:51):
return on the upside and it'sgoing to capture 100% of its
return.
On the downside right, the60-40 portfolio was about 67 up,
73 down since our inceptionperiod we captured almost 70% of
the upside of the S&P 500 withonly about 28% of the downside
of the S&P 500.
(23:12):
And that's because of our kindof overall, non-correlated
approach.
This slide here I'll show you.
We'd like to compare how we'vedone relative to major asset
classes.
So again, this is since ourinception timeframe as of end of
March of this year.
(23:32):
Again, a return, very strongcorrelation to the market.
Alpha is a measure ofrisk-adjusted return.
Again, higher the alpha, thebetter.
Beta is a measure of risk, thelower the number, the better.
And again, sartino is one ofour more favorite.
But you compare us to differenttypes of stocks, obviously
bonds, and sometimes we getconfused for managed futures
(24:00):
strategies, which I want totouch on a little bit Just for a
compliance standpoint.
I'm going to show the rest ofthese slides to keep compliance
happy.
So all those slides are shown.
So, again, our fund invests inglobal macro futures and
(24:22):
equities.
Sometimes, again, investorswill hear futures and they'll
say, oh, you're a managedfutures fund or you're half a
managed futures fund andtechnically we invest in futures
and those futures are managed.
But most managed futures fundstend to be more of a trend
following approach.
As a matter of fact, one of thereasons that we launched this
(24:45):
mutual fund is because I didn'tknow of another mutual fund or
ETF that existed out there.
That is a discretionary,fundamental global macro
strategy.
Right Again, I was a financialadvisor for nearly 20 years,
happily consulting with, helpingfinancial advisors be even
(25:08):
better financial advisors.
I never sought out to launch amutual fund and be a mutual fund
portfolio manager.
Our global macro manager hasdone an amazing job running this
(25:38):
strategy that it made sense tomake it available to financial
advisors and average investors,which is why we launched it.
But getting back trendfollowing managed futures
follows a trend and I don't havethe data to look up, but
financial advisors, investors,can look up their favorite
managed futures ETF or mutualfund and look at their
performance year to date or overthe last year, and they
(26:00):
probably won't be exceptionallyhappy with the returns, Right.
So the the trend followingindex, which is the SD trend
index since our inception, isdown 2.81%, Right, why?
Well, what's the trend beenlike?
The trend has kind of been likean EKG machine, Right, it's
again the tariffs.
It's, you know.
Tariffs across the board 170%tariffs.
(26:21):
Market plummets oh, 90-daypause.
Markets are back up, you know,9 percent in one day.
So if you don't have a trendriding, that trend wave can be a
challenge.
Right Now we like trendfollow-up.
You know in our models that webuild our multidimensional
models for financial advisors.
We incorporate trend, be itthrough ETFs or mutual funds,
(26:47):
but our fund complements those.
Sometimes I'll use the phrasenon-correlation is not binary,
right?
It doesn't mean, you know, oh,binary is one and zeros, right,
you either have it or don't haveit.
Well, I've got diversification.
I have one alternative.
You know trend.
(27:07):
I use long short.
Well, maybe that isnon-correlated, but that's one,
that's binary, you have one.
What about multiple?
And again, this is why we'remultidimensional.
If I showed you, we'renon-correlated to the S&P at
0.28, we're also non-correlatedto trend.
Again, it doesn't show on thisscreen.
(27:27):
If advisors would like to seethose numbers, please contact me
.
I'm happy to send you theanalysis on our long-term
correlation relative to othertrend managed futures strategies
, other alternatives.
We're non-correlated to them aswell as equities versus most
(27:49):
other managed futures funds arenon-correlated to equities and
bonds, but correlated to eachother.
Right, so you know we helpduring these unexpected periods
and, yeah, we're very, veryproud of that.
The one thing I forgot tomention, which you know is silly
of me not to mention it, as wewere the number one fund in
(28:12):
Morningstar's macro tradingcategory for 2024.
Um so, even, uh, even a greatyear for stocks like 2024, where
the market was up over 20%.
Speaker 2 (28:26):
We were up, I want to say also close to 20%, in 2024
because of our innovativestrategy combining equities with
the global macro futures andtaking kind of a different
approach towards it, anythingthat you can share in terms of
how macro positioning may havealtered changed, I mean, I know
(28:52):
you can only disclose to someextent some of the holding
shifts, but anything that looksdifferent in terms of that side
of the portfolio compared to theprior year.
Speaker 1 (29:01):
Yeah.
So look in our global macrofuture side of the portfolio and
we try to be as transparent aswe can Right.
So right on our website, whichis dynamicalphafundscom or
dynamicwgcom, as it says rightnext to my name, we publish
monthly updates on our mutualfund, on what's contributed,
(29:23):
what's detracted, what's changedin the portfolio month to month
and what our current positionsare, and we touch on why we're
positioned in.
That and this is one of thebeauties of being a more of a
discretionary fundamentalstrategy is we have logical
reasons.
It's not because the quantmodel triggered and and X, y, z
(29:47):
happened in the black box toldus to do it.
Um, again, nothing wrong withthose strategies, we're just
different.
Um, and I think sometimes we'reeasier to understand and and,
um, and understanding is there.
It's easier to stick with ourstrategy.
So, um, look we, we had, wewent into this year with more of
a bearish lean on the equitiesbecause of valuations, because
(30:13):
of fundamental reasons for beingbearish, and that has
contributed to some of ourperformance this year.
Positions can be changed at anygiven time, however, so even if
we're wrong on that slightbearish tilt, we're always 50%
(30:33):
long stocks and part of themutual fund right and we can
take off the short position whenand if it's appropriate.
But we have other positions.
We're currently short coffee,and we're short coffee because
of an increase in supply fromharvests in parts of Brazil and
(30:54):
because of favorable weatherpatterns.
Again, there's fundamentalreasons for prices of certain
commodities to to move Um, so wedon't rely on just one theme.
We'll have three to sixdifferent themes, uh in the
portfolio at any given time, um,in the futures portfolio at any
(31:20):
given time, and be activelymanaging that, and risk
management is a key part of that.
You know we will not always becorrect, nobody will right, but
by managing the risks for whenwe're wrong and cutting those
losses short and letting ourwinners run, that's how money is
(31:41):
made in the long run and that'show we've done it.
So I would encourage investorsand advisors to check out our
website, read our monthlyupdates, reach out to us.
Again, we'd like to make themvery readable, which sounds
silly to say, but we've all readplenty of white paper that when
(32:03):
you have insomnia, it helps putyou to sleep.
We try to make ours moreenjoyable, informative and
understandable for everybody.
So, but being that active andtactical and you know, is a core
component.
Speaker 2 (32:20):
Somebody on YouTube who came in late.
Is this a growth fund or anincome fund?
We should think about that.
Speaker 1 (32:24):
I know everyone likes to think of things in terms of
categories boxes half USequities, half global macro
(32:52):
futures, targeting totalpositive absolute return, and
because the futures give usefficiency, we don't need 50% of
the portfolio to get 50%exposure to the global macro
future strategy that we investin, which means we have excess
cash that is really sitting inT-bills.
(33:14):
So sometimes we'll talk aboutit as we're 50% equities, 50%
global macro future strategy andmaybe 30 to 35%, and maybe 30
to 35%, maybe more, in T-bills,earning T-bill interest.
Right, which has been veryfavorable to us, but we don't
(33:38):
target a dividend.
There could very well bedistributions at the end of the
year because it's a mutual fundthat certainly reinvest, but I
wouldn't call it an income fundper se, even though it could
generate some income forinvestors.
Speaker 2 (33:56):
I always think about things in terms of diversifiers
to each other.
So alternatives to alternatives.
How does it stack up againstother non-correlated types of
strategies or asset classes?
You've seen.
Speaker 1 (34:04):
Great question.
Yeah, and I love that termalternatives to alternatives,
because we don't think you know,you should just have one
alternative, right?
So, again, this is it goes intowhy why we decided to launch
this mutual fund.
Because we are non-correlatedwe are a diversifier to stocks,
to bonds, to real estate, tomanaged futures trend following
(34:30):
investments, to arbitragestrategies, to buffered
investments, which are verypopular.
We're non-correlatedhistorically to all of those,
Through all of those, and thereason is and I like to again
identify that there's acausation for that
(34:50):
non-correlation, right?
If you can't identify the causefor something, in the back of my
head I would always wonder isit happenstance, right?
Is it just?
It just happened to benon-correlated this time?
But when that bus hits us, arewe going to be correlated, right
(35:14):
?
They always say what's thephrase?
Correlations move to one duringtimes of stress or crashes,
right, and that's what you sawin 2022, right, when stocks and
bonds all went down, and you'veseen it in other times in the
past.
But if there's a causationagain, think of our coffee trade
.
If there's an increase insupply of coffee because the
harvest is going to be bigger,because the weather pattern is
(35:37):
favorable, and if demand doesn'tchange.
Think back to basic economicssupply and demand curves.
If supply goes up and demandstays the same, prices fall down
, and vice versa.
So that's a identifiablelogical reason.
(36:03):
And that thesis would turn outto be false.
Right, there's no guarantees,and that's why we have multiple
types of positions in theportfolio at any given time.
And but that thesis will hold.
Whether there's global pandemic, whether there's other
(36:25):
variables that may impact.
If stock equity valuations aretoo high and the market is
priced to perfection, who cares?
People are still going to drinktheir coffee.
And if there's an oversupply,prices go down.
The thesis holds true.
Same thing with other thesesthat we have in the portfolio or
(36:47):
we would have in the past.
But long term, our thesis oncopper is global growth in China
and other parts of the worldare increasing the demand for
(37:11):
electricity.
You think of electric vehiclesin this country and in China and
in others.
You know.
You think of artificialintelligence.
You know it's kind of amazinghow much electricity is required
to run all these AI chips,right, Even the new ones that
are, you know, potentially moreenergy efficient.
(37:33):
All that means is they're goingto pop even more of them into
the computers to be even morepowerful, the, the.
I.
I saw a statistic actually Ithink chat gpt gave me this
statistic um that said there'sgoing to be uh over the next 10
years.
They need to build um 10 uhnuclear power plants every year
(37:57):
just to meet the requirement ofartificial.
And this is worldwide um uh 10nuclear power plants every year
to to provide the electricityneeded for um artificial
intelligence.
So that's 100 in the next 10years.
Obviously, in the united stateswe've not been building them
and china's been building a lotof nuclear power plants.
(38:21):
And in the name of our fund isthe Dynamic Alpha Macro Fund,
which means you know dynamic,we're flexible, alpha, we're
shooting for alpha positive, youknow better than market returns
and macro big picture.
Right, we're not picking awinner in saying this nuclear
company is going to do betterthan this one or this EV company
(38:43):
is going to do better than thisEV company.
It's just a macro thing.
Who cares which one wins?
They're all going to needcopper.
So in the future we could verywell have a long position in
copper.
We don't currently, because of anumber of reasons.
(39:04):
We do use technical analysis tolook at price trends and price
valuation of it.
So we're not just going tohaphazardly buy it because you
got to buy it at the right price.
You know you got to buy it atthe right price, um, but to me
that's how I think ofalternatives is identifying what
is the driver of the return forthat alternative.
(39:27):
Don't just say, oh, realestate's an alternative, um, you
know, because it's labeled asan alternative, and nothing
wrong with real estate investing.
But last time I checked, peopledo need jobs in order to pay
the rent and buy houses and forhouse prices to go up, people
need to have jobs.
So normally, for a strong realestate market, you have to have
(39:48):
strong economic growth.
So if we don't, then could thereal estate market be impacted
Most likely, right?
And could the real estatemarket be impacted Most likely,
right?
So identifying what is thatdriver of return to us is a key
(40:17):
component of understandingalternatives and alternatives to
alternatives and just buildinga truly diversified portfolio.
Right, If you only have stocksand bonds, I would argue you're
not diversified.
Right, If you follow a 60-40approach and we like 60-40.
60-40 is part of ourmultidimensional model, right,
but it's not the model, right,Our multidimensional model.
You can think of it as havingmultiple models in one, having a
(40:39):
60-40,.
Having a quant tactical, havinga fundamental global, having
arbitrage long short strategiesin one cohesive model.
Speaker 2 (40:52):
Yeah, no, I think that's very well explained.
For those, Brad, who want tolearn more about the fund or
maybe want to reach out to youto learn more, how should people
go about that?
Speaker 1 (41:00):
Yeah, so, um, dynamic wgcom is our main website.
It's easy one, easy one toremember.
You can also go to dynamicalpha fundscom.
I am very active on linkedin.
I try to post a video everyweek on linkedin, a short five
minute video on market thoughts,financial planning thoughts,
various things like that.
You can certainly email us.
(41:22):
You can email me directly atbrad at dynamicwgcom.
If you're a financial advisor,happy to provide information on
our multidimensional models, onour mutual fund, if you're an
investor, also happy to addressany questions on what we do, uh,
and if you want to be put incontact with uh, you know a good
(41:42):
financial advisor, qualifiedfinancial advisor, uh, let us
know.
It's not our business, but wework with some amazing advisors,
just like you, michael.
You work with some amazingadvisors and uh yeah, I
appreciate those that watch thisslide.
Speaker 2 (41:56):
Hopefully I'll see you all on the next episode.
Uh, be fan of Alternative so wecould be in a more difficult
cycle going forward.
So, thank you, brian, Iappreciate it.
Thanks, michael Cheers.
One of the analogies I use is it's the bus that you
don't see that hits you right.
So if you see a bus coming, youusually get out of the way
right.
So most recently we've hadthese tariff gyrations.
And did we see the tariffs outthere?
We did, we saw them out there,but we just thought it was.
(00:22):
We didn't think it was a bigbus.
We thought it was going to be amuch smaller, maybe one of
those smart cars, right, or abumper car.
It wasn't going to be anythingmajor.
And then it was major, and thenthat was a huge bus that came
and hit us.
So how?
Speaker 2 (00:36):
should investors think about and financial
advisors think about?
Diversification beyond justsort of the idea of feeling
better because there's moresecurities in a portfolio.
Yeah, divers on just sort ofthe idea of feeling better
because there's more securitiesin a portfolio.
Speaker 1 (00:43):
Yeah, diversification is not more stuff, right?
It's not just different.
More stocks, more funds, and ohlook, I've got 10 different
names in my portfolio.
I must be diversified, it's notso?
The other old saying out thereon diversification is
diversification means alwayshaving to say you're sorry,
(01:03):
right?
So if there's not something inyour portfolio that you're not
happy with, then your portfoliois really not diversified.
Speaker 2 (01:10):
My name is Michael Guy, a publisher of the Lead Lag
Report.
This Lead Lag Live conversationis sponsored by Dynamic Wealth.
We'll be talking aboutBradbury's firm, as well as the
offerings he's got.
But, brad, let's refresheverybody's memory as far as
your background, what you'vedone throughout your career,
your experience and what you doat Grotton.
Speaker 1 (01:28):
Yeah, thanks, michael .
Yeah, it does seem like it'sbeen years since we've done one
of these.
Time tends to fly very rapidly,especially in these uncertain
world that we live in, eventhough it's always uncertain.
So my background I was afinancial advisor for about 20
years, started at the end of1990s and had a financial
(01:50):
planning practice in Chicagoarea.
I transitioned that to mypartners, began consulting
financial advisors on varioustopics.
Basically your investors, yourlisteners, can kind of think
about it as they may go to afinancial advisor when they need
help.
Where does a financial advisorgo when they need help?
They come to somebody likemyself.
(02:10):
So with my experience andknowledge and focus, I help
advisors in a number ofdifferent topics.
A lot of that last few years hadpivoted towards portfolio
management guidance and, brad,what do you know about
portfolios?
60-40 isn't working as well asit used to be and kind of
pivoted our firm to focus moreon CIO work and sometimes the
(02:36):
industry calls it an OCIO, anoutsourced chief investment
officer.
We like to think of it more asa partnering chief investment
officer with financial advisors.
So we partner with firms.
We don't replace their teammembers.
We hopefully make everybodythat much better and build
customized model portfolios forfinancial advisors that follow
(02:58):
our multidimensional assetallocation theme, which I'm
happy to touch on.
Asset allocation theme, whichI'm happy to touch on, and a
number of years ago a few yearsago now we launched a mutual
fund, the Dynamic Alpha MacroFund ticker symbol is DYMIX
which we'll talk about today.
That combines equities with theglobal macro future strategy.
(03:21):
So that's just a little bitabout me.
I can probably go on and on forhours.
I also, very charitablyinclined I run a nonprofit here
in the Las Vegas area called theAlliance Foundation, sat on a
number of nonprofit boards anddefinitely a big believer in
giving back to our communitiesthat we all work and live in.
I believe if we all just do alittle bit, you know, adds up to
(03:42):
a lot.
Speaker 2 (03:42):
So that's me.
I've talked to a lot offinancial advisors.
Some of them are moreintellectually curious than
others when it comes to markets.
As you know, Over the years Iused to be even if they have the
(04:03):
CFA designation, are reallykind of, I'd argue, more hyped
up retail right, Meaning theywill fall prey to the same
behavioral biases that retailinvestors and traders typically
do.
Am I off on the idea that alarge portion of the financial
advisor community, they, don'treally understand markets the
(04:24):
way that maybe they portraythemselves to be understanding
of markets?
Speaker 1 (04:29):
I think, yeah, I think, when you think about a
financial advisor, their job isto advise clients on all aspects
of a client's financial life,right.
Investments is just onecomponent of that.
There's cash flow management,there's income tax planning,
there's estate planning, there'sinsurance planning, there's
(04:51):
retirement planning, collegeplanning.
A good financial advisor, Ibelieve, looks at the holistic
approach and partners with folkslike myself on investments,
partners with good estateplanning attorneys, good tax
preparers and advisors to act asthat you know, sometimes as an
(05:15):
overused analogy the financialquarterback for their client
right and connect industryexperts, financial experts, to
understand the real client'sgoals.
That's what a good financialadvisor does is understand their
client's goals, their risktolerances, what they want to
(05:35):
achieve, and then helps pointthem in that correct direction.
Direction right, Look, we alllove to follow the market and
you know we talk about uncertaintimes that we live in and I
alluded that all times areuncertain.
Even when it seems like we'rein certainty, we're not.
(05:57):
There's always unexpectedthings around the corner and we
can't expect them.
That's why they're unexpectedright, One of the analogies I
use.
I'm a big believer in usinganalogies with investors and if
you are an investor, I thinkit's good to put things in terms
that you understand, that youcan relate to, Because if you
(06:18):
understand it, if your investorsunderstand it, your clients
understand it, then comfortlevel is higher and folks are
more likely to stick with theplan.
Whether that's a financial plan, an investment plan, an
investment, it doesn't matter.
If comfort level andunderstanding is there.
Being able to stick with itlong-term is the key, right?
(06:42):
So one of the analogies I use isit's the bus that you don't see
that hits you, right?
So if you see a bus coming, youusually get out of the way,
right?
So most recently we've hadthese tariff gyrations.
And did we see the tariffs outthere?
We did, we saw them out there,but we just thought it was.
(07:05):
You know, we didn't think itwas a big bus, we thought it was
going to be a much smaller,maybe one of those smart cars,
right, or a bumper car.
It wasn't going to be anythingmajor.
And then it was major and thenthat was a huge bus that came
and hit us.
No-transcript, not letting youremotions dictate your actions,
(08:13):
I think is a core lesson, right,and kind of keeping those
analogies in the back of yourhead maybe helps you put that
into perspective, you know mythoughts.
Speaker 2 (08:26):
Nomadic advisors can be emotional too, oh absolutely.
They're supposed to behand-holding their emotional
clients, but emotion has a funnyway of transferring over from
person to person.
Speaker 1 (08:36):
Well, we're all human .
We're all human At the end ofthe day, until those robots take
all of our jobs right and we'relike the humans in WALL-E and
it's a great movie.
If you haven't seen it, youknow you got to watch that and
you know the humans there arejust kind of all floating around
and everything's done for them.
We're all human.
We're all driven by emotions,and in the investment world,
(08:57):
fear and greed are two bigemotions.
Speaker 2 (09:05):
And you know we all have them.
So tell me how some of thoseadvisors maybe in the midst of
this tariff volatility which youknow in the grand scheme of
things it was a short period oftime, maybe coming back to it
Were you getting calls fromadvisors on the OCIO side?
What were the conversationslike?
Talk me through that period alittle bit.
Speaker 1 (09:21):
Yeah, so we're very proactive.
So when that really started tohappen, nobody knew how long it
was going to happen for right.
You know it was a very quickblip in retrospect, but who knew
right?
So we were very proactive.
We put out a video on YouTubeand LinkedIn to kind of help
(09:43):
investors and advisors putthings in perspective.
We reached out to our advisoryteams we work with with that
type of information and somethoughts and perspective.
But the most important thingduring those buses that hit us
is to focus on the facts, focuson logic, try not to let your
(10:04):
emotions drive you and again, wework with amazing advisors and
they all get it right.
Our advisors were not panicking.
It was more of you know whatare the best topics to reach out
to our clients.
Is now the right time to reachout to clients?
And it is.
And it's not to reach out toclients to scare them or make
changes.
It's to reassure them that,especially the clients we work
(10:28):
with, reassure them that theirportfolios are positioned Now.
By definition, the bus that hitsyou is something you can't
predict Right.
So we're big believers inpreparation over prediction,
with overall portfolios that arebuilt for investors, because
(10:49):
you can't predict but you canprepare, and our message is be
prepared for a range of outcomes.
Yes, I mean, michael, this wasa fast blip down, a 9% rise one
day and we're, I think, back tothose levels pre the.
The liberation day, I believe,is it's called uh, with the,
(11:09):
with the tariffs now, that rain,that outcome?
Certainly, people werepredicting that and there was a
lot of people predicting evenworse.
Um, you know, the people thatpredicted it would be a fast
bounce back.
They were, were right this time.
Will they always be right?
No, so, if you know, I've heardthe word hope often, right, we
(11:32):
hope these tariffs are justnegotiating.
We hope this is all justpositioning.
We hope that, that this isn'tgoing to push us into a
recession and I've heard peopleon the television, experts use
that term and look, I certainlyhope that's the case as well.
But what if it's not?
And if it's not?
And your portfolio is missioncritical.
(11:54):
Mission critical to supportyour retirement plan, for your
kids, college, be there for youwhen you need it.
Hope and optimism shouldn't beyour only plan, right?
So, having parts of theportfolio that are positioned to
do well in periods like thatand we did we had a number of
(12:18):
positions in our portfolios, ourfund included, that did well
during that time and many ofwhich have continued to do well
and did well in the past as well.
So having multiple drivers ofreturn that don't rely on strong
economic growth is, bydefinition, diversification.
(12:42):
And yeah, so our advisors were,I will say, prepared for the
uncertainty as we always need tobe prepared for the uncertainty
and communicated I don't saypositive messages, but
reassuring messages, becausethat's what investors need
during really all times, duringreally all times, even when the
(13:06):
market is doing fantastic.
That's when reassurance andproper portfolio management is
even more important to lock inthose profits when they happen
and not take on too much riskand not keep just the
magnificent seven.
Speaker 2 (13:22):
Let's talk about diversifying hope.
How does one properly do that?
Let's face it, I think it'sarguable that most things are
just variations of beta in termsof an opportunity set.
Even if you look at long-shortportfolios, for example, they
often just track the consumerstaple sector ETF just because
(13:44):
it's a lower beta with rightWith the net long exposure, but
still beta.
So how should investors thinkabout, and financial advisors
think about, diversificationbeyond just sort of the idea of
feeling better because there'smore securities in a portfolio?
Speaker 1 (13:57):
Yeah, diversification is not more stuff, right, it's
not just different.
You know more stocks, morefunds, and you know, look, I've
got 10 different names in myportfolio.
I must be diversified.
It's not so.
Our approach, we call itmultidimensional asset
allocation.
It focuses on not justdiversifying with asset classes
(14:17):
but diversifying with strategies.
Different strategies anddifferent approaches.
Right, you know, you may havemany different types of stocks
or even private equity, but whatdo they all require?
They all require strongeconomic growth by and large.
If we don't have strongeconomic growth, then all those
(14:40):
equities, if there's a macro hit, are most likely all going to
suffer to some degree.
Macro hit are most likely allgoing to suffer to some degree.
So, having you know, and evenlong short strategies you
mentioned, michael, are there'smany different types of long
short strategies and differenttypes of tactical strategies.
Some use quant, some usefundamental, some use technical
(15:03):
analysis.
There's different arbitragestrategies out there that may
perform more like a bond in thelong term but don't have any
interest rate risk or anydefault risk.
They have, whatever theirarbitrage be it convertible arb
or merger arb or otherwise, umare a rely on.
(15:23):
So you know, harrymarkowitzowitz, the father of
modern portfolio theory, assetallocation, diversification,
whatever you want to call ittalked about having different
risks in a portfolio and manyfolks tend to again
misunderstand and think that hetalked about having multiple
(15:46):
assets in an asset allocation.
But that's not really what itis.
It's having multiple types ofrisk in a portfolio, which
sounds odd at first that we'regoing to add risk to a portfolio
, but when you add one risk,you're taking away another risk.
So in the traditional 60-40portfolio stocks and bonds you
have really two main levels, twomain drivers of return stocks
(16:09):
and bonds and a year like 2022or years like others in the past
, when both underperform or godown.
You had two diversifiers.
We think and this is why we callour approach multidimensional
we think you should havemultiple types of drivers of
return.
So if you have just a buy andhold stock portfolio, that's one
(16:31):
driver of return.
Buy and hold bond portfolio isanother driver of return.
Having a tactical manager thatis going to be able to move
between stocks and bondsoverweight stocks, underweight
stocks, move to bonds differenttypes of bonds that risk is not
(16:54):
necessarily stock risk or bondrisk.
That risk is that managersuccessful in their ability to
move between those differentcategories, and there are a
number of managers that aresuccessful in that and that
takes away the buy and hold riskand transfers in the technical
risk.
And that's our view on assetallocation.
It's a view I've had and I'veused with clients for well over
(17:18):
20 years when I was in privatepractice and it works.
And even if you take a step backand you think what is the main
purpose of diversification froma practical standpoint and again
, this is, you know, I don'tknow if CFAs are taught this and
and from the academicstandpoint, but from a practical
(17:40):
standpoint, as someone who hasbuilt portfolios for individuals
that have been retired andrelied on those portfolios to
live on, and I got calls likehey, the car broke down, we need
$15,000, $20,000, $30,000 outof the blue.
What do we take from?
Part of the goal ofdiversification is to always
(18:03):
have something in the portfolioto draw upon for when that bus
hits you, for when thatunexpected occurrence happens
right and the refrigerator blowsup, the car breaks down, the
kids need money, what have you?
And if everything in yourportfolio is down or not doing
well and you have to takesomething that is down and you
(18:26):
sell it, you're selling at thatloss and you'll never recoup it
after you sell it from a loss bydefinition.
So the other old saying outthere on diversification is
diversification means alwayshaving to say you're sorry,
right, so if there's notsomething in your portfolio that
you're not happy with, thenyour portfolio is really not
(18:49):
diversified.
It sounds silly, but the otherway I say it and I would say
this to my clients and manytimes they would finish my
saying I would say if everythingin your portfolio is going up
at the same time, it usuallymeans everything in your
portfolio will go down at thesame time.
Right, and you know, havingthat it's really a different
(19:10):
philosophy and a differentperspective on what
diversification really should be.
Right it's not just having 15different investments in funds
and a bunch of different stocks,it's identifying different
drivers of return that you knowbeat by a different drop and you
(19:31):
know maybe they all go up atthe same time but in certain
times and other times they won't.
And identifying those driversis kind of a key part of the
diversification.
Speaker 2 (19:41):
Sorry, about your fund for a bit here, your mutual
fund DYMIX, sharing the screenhere, but yeah, let's go through
it.
Speaker 1 (19:51):
Yeah, so DYMIX, as we call it, is our mutual fund.
Let me share the fact sheetfirst of all.
So, from a high level, ourmutual fund, it's been around
almost two years now.
It combines a global macrofutures strategy along with US
(20:13):
equities.
Now US equities are balancedbetween growth stocks,
dividend-focused stocks and kindof a broad market think S&P
500-type stocks.
This is kind of the buy andhold equity position and then
within the global macro futuresposition, we can go long or
short various commodity futuresmarkets.
(20:33):
So which you know from a highlevel, they're all listed below
and this was as of March.
Our performance has been verystrong on really all aspects
relative to the S&P, and the S&Ptarget risk balanced index is a
60-40 mix.
(20:55):
We're very proud of thosenumbers.
In addition, we're proud of therisk and our non-correlation.
So if you look at the columnhere, you see my mouse.
(21:23):
Our standard deviation is justslightly higher than the S&P.
But one of the things I like toreally emphasize is our
standard deviation is not risk.
So standard deviation isdeviation.
So if you think about that andI don't know how to use a laser
on this, so I apologize,otherwise I would point.
I don't know if I highlight.
I can highlight a little bit.
I guess Most investors want todeviate on the gain side, right?
(21:44):
You know, if you're deviatingand you're looking different and
you're making more on the gainside, that's what you want.
You don't want to deviate onthe loss side as much, right,
and have greater deviation onthe downside.
So we're very proud that ourgain deviation is more of the
contributor to the overallstandard deviation than the loss
deviation and that's why ourSharpe ratio and our Sortino
(22:09):
ratio are as high as they are.
From a very simplisticstandpoint, sharpe and Sortino
you can kind of think of it asreturn divided by risk.
Sharpe uses standard deviationas risk, which we know we're not
a huge fan of as a measure ofrisk, and then Sortino uses
downside deviation as itsmeasure of risk.
Basically, the higher thenumber the better.
With Sharpe and Sortino,correlation to the overall
(22:30):
market is 0.28.
So we're very non-correlated tothe overall market.
And then upside and downsidecapture ratios.
It's also another one of thosestatistics that most financial
advisors should be familiar with.
Investors think of it this wayis the market is going to
capture 100%, so the S&P isgoing to capture 100% of its
(22:51):
return on the upside and it'sgoing to capture 100% of its
return.
On the downside right, the60-40 portfolio was about 67 up,
73 down since our inceptionperiod we captured almost 70% of
the upside of the S&P 500 withonly about 28% of the downside
of the S&P 500.
(23:12):
And that's because of our kindof overall, non-correlated
approach.
This slide here I'll show you.
We'd like to compare how we'vedone relative to major asset
classes.
So again, this is since ourinception timeframe as of end of
March of this year.
(23:32):
Again, a return, very strongcorrelation to the market.
Alpha is a measure ofrisk-adjusted return.
Again, higher the alpha, thebetter.
Beta is a measure of risk, thelower the number, the better.
And again, sartino is one ofour more favorite.
But you compare us to differenttypes of stocks, obviously
bonds, and sometimes we getconfused for managed futures
(24:00):
strategies, which I want totouch on a little bit Just for a
compliance standpoint.
I'm going to show the rest ofthese slides to keep compliance
happy.
So all those slides are shown.
So, again, our fund invests inglobal macro futures and
(24:22):
equities.
Sometimes, again, investorswill hear futures and they'll
say, oh, you're a managedfutures fund or you're half a
managed futures fund andtechnically we invest in futures
and those futures are managed.
But most managed futures fundstend to be more of a trend
following approach.
As a matter of fact, one of thereasons that we launched this
(24:45):
mutual fund is because I didn'tknow of another mutual fund or
ETF that existed out there.
That is a discretionary,fundamental global macro
strategy.
Right Again, I was a financialadvisor for nearly 20 years,
happily consulting with, helpingfinancial advisors be even
(25:08):
better financial advisors.
I never sought out to launch amutual fund and be a mutual fund
portfolio manager.
Our global macro manager hasdone an amazing job running this
(25:38):
strategy that it made sense tomake it available to financial
advisors and average investors,which is why we launched it.
But getting back trendfollowing managed futures
follows a trend and I don't havethe data to look up, but
financial advisors, investors,can look up their favorite
managed futures ETF or mutualfund and look at their
performance year to date or overthe last year, and they
(26:00):
probably won't be exceptionallyhappy with the returns, Right.
So the the trend followingindex, which is the SD trend
index since our inception, isdown 2.81%, Right, why?
Well, what's the trend beenlike?
The trend has kind of been likean EKG machine, Right, it's
again the tariffs.
It's, you know.
Tariffs across the board 170%tariffs.
(26:21):
Market plummets oh, 90-daypause.
Markets are back up, you know,9 percent in one day.
So if you don't have a trendriding, that trend wave can be a
challenge.
Right Now we like trendfollow-up.
You know in our models that webuild our multidimensional
models for financial advisors.
We incorporate trend, be itthrough ETFs or mutual funds,
(26:47):
but our fund complements those.
Sometimes I'll use the phrasenon-correlation is not binary,
right?
It doesn't mean, you know, oh,binary is one and zeros, right,
you either have it or don't haveit.
Well, I've got diversification.
I have one alternative.
You know trend.
(27:07):
I use long short.
Well, maybe that isnon-correlated, but that's one,
that's binary, you have one.
What about multiple?
And again, this is why we'remultidimensional.
If I showed you, we'renon-correlated to the S&P at
0.28, we're also non-correlatedto trend.
Again, it doesn't show on thisscreen.
(27:27):
If advisors would like to seethose numbers, please contact me
.
I'm happy to send you theanalysis on our long-term
correlation relative to othertrend managed futures strategies
, other alternatives.
We're non-correlated to them aswell as equities versus most
(27:49):
other managed futures funds arenon-correlated to equities and
bonds, but correlated to eachother.
Right, so you know we helpduring these unexpected periods
and, yeah, we're very, veryproud of that.
The one thing I forgot tomention, which you know is silly
of me not to mention it, as wewere the number one fund in
(28:12):
Morningstar's macro tradingcategory for 2024.
Um so, even, uh, even a greatyear for stocks like 2024, where
the market was up over 20%.
Speaker 2 (28:26):
We were up, I want to say also close to 20%, in 2024
because of our innovativestrategy combining equities with
the global macro futures andtaking kind of a different
approach towards it, anythingthat you can share in terms of
how macro positioning may havealtered changed, I mean, I know
(28:52):
you can only disclose to someextent some of the holding
shifts, but anything that looksdifferent in terms of that side
of the portfolio compared to theprior year.
Speaker 1 (29:01):
Yeah.
So look in our global macrofuture side of the portfolio and
we try to be as transparent aswe can Right.
So right on our website, whichis dynamicalphafundscom or
dynamicwgcom, as it says rightnext to my name, we publish
monthly updates on our mutualfund, on what's contributed,
(29:23):
what's detracted, what's changedin the portfolio month to month
and what our current positionsare, and we touch on why we're
positioned in.
That and this is one of thebeauties of being a more of a
discretionary fundamentalstrategy is we have logical
reasons.
It's not because the quantmodel triggered and and X, y, z
(29:47):
happened in the black box toldus to do it.
Um, again, nothing wrong withthose strategies, we're just
different.
Um, and I think sometimes we'reeasier to understand and and,
um, and understanding is there.
It's easier to stick with ourstrategy.
So, um, look we, we had, wewent into this year with more of
a bearish lean on the equitiesbecause of valuations, because
(30:13):
of fundamental reasons for beingbearish, and that has
contributed to some of ourperformance this year.
Positions can be changed at anygiven time, however, so even if
we're wrong on that slightbearish tilt, we're always 50%
(30:33):
long stocks and part of themutual fund right and we can
take off the short position whenand if it's appropriate.
But we have other positions.
We're currently short coffee,and we're short coffee because
of an increase in supply fromharvests in parts of Brazil and
(30:54):
because of favorable weatherpatterns.
Again, there's fundamentalreasons for prices of certain
commodities to to move Um, so wedon't rely on just one theme.
We'll have three to sixdifferent themes, uh in the
portfolio at any given time, um,in the futures portfolio at any
(31:20):
given time, and be activelymanaging that, and risk
management is a key part of that.
You know we will not always becorrect, nobody will right, but
by managing the risks for whenwe're wrong and cutting those
losses short and letting ourwinners run, that's how money is
(31:41):
made in the long run and that'show we've done it.
So I would encourage investorsand advisors to check out our
website, read our monthlyupdates, reach out to us.
Again, we'd like to make themvery readable, which sounds
silly to say, but we've all readplenty of white paper that when
(32:03):
you have insomnia, it helps putyou to sleep.
We try to make ours moreenjoyable, informative and
understandable for everybody.
So, but being that active andtactical and you know, is a core
component.
Speaker 2 (32:20):
Somebody on YouTube who came in late.
Is this a growth fund or anincome fund?
We should think about that.
Speaker 1 (32:24):
I know everyone likes to think of things in terms of
categories boxes half USequities, half global macro
(32:52):
futures, targeting totalpositive absolute return, and
because the futures give usefficiency, we don't need 50% of
the portfolio to get 50%exposure to the global macro
future strategy that we investin, which means we have excess
cash that is really sitting inT-bills.
(33:14):
So sometimes we'll talk aboutit as we're 50% equities, 50%
global macro future strategy andmaybe 30 to 35%, and maybe 30
to 35%, maybe more, in T-bills,earning T-bill interest.
Right, which has been veryfavorable to us, but we don't
(33:38):
target a dividend.
There could very well bedistributions at the end of the
year because it's a mutual fundthat certainly reinvest, but I
wouldn't call it an income fundper se, even though it could
generate some income forinvestors.
Speaker 2 (33:56):
I always think about things in terms of diversifiers
to each other.
So alternatives to alternatives.
How does it stack up againstother non-correlated types of
strategies or asset classes?
You've seen.
Speaker 1 (34:04):
Great question.
Yeah, and I love that termalternatives to alternatives,
because we don't think you know,you should just have one
alternative, right?
So, again, this is it goes intowhy why we decided to launch
this mutual fund.
Because we are non-correlatedwe are a diversifier to stocks,
to bonds, to real estate, tomanaged futures trend following
(34:30):
investments, to arbitragestrategies, to buffered
investments, which are verypopular.
We're non-correlatedhistorically to all of those,
Through all of those, and thereason is and I like to again
identify that there's acausation for that
(34:50):
non-correlation, right?
If you can't identify the causefor something, in the back of my
head I would always wonder isit happenstance, right?
Is it just?
It just happened to benon-correlated this time?
But when that bus hits us, arewe going to be correlated, right
(35:14):
?
They always say what's thephrase?
Correlations move to one duringtimes of stress or crashes,
right, and that's what you sawin 2022, right, when stocks and
bonds all went down, and you'veseen it in other times in the
past.
But if there's a causationagain, think of our coffee trade
.
If there's an increase insupply of coffee because the
harvest is going to be bigger,because the weather pattern is
(35:37):
favorable, and if demand doesn'tchange.
Think back to basic economicssupply and demand curves.
If supply goes up and demandstays the same, prices fall down
, and vice versa.
So that's a identifiablelogical reason.
(36:03):
And that thesis would turn outto be false.
Right, there's no guarantees,and that's why we have multiple
types of positions in theportfolio at any given time.
And but that thesis will hold.
Whether there's global pandemic, whether there's other
(36:25):
variables that may impact.
If stock equity valuations aretoo high and the market is
priced to perfection, who cares?
People are still going to drinktheir coffee.
And if there's an oversupply,prices go down.
The thesis holds true.
Same thing with other thesesthat we have in the portfolio or
(36:47):
we would have in the past.
But long term, our thesis oncopper is global growth in China
and other parts of the worldare increasing the demand for
(37:11):
electricity.
You think of electric vehiclesin this country and in China and
in others.
You know.
You think of artificialintelligence.
You know it's kind of amazinghow much electricity is required
to run all these AI chips,right, Even the new ones that
are, you know, potentially moreenergy efficient.
(37:33):
All that means is they're goingto pop even more of them into
the computers to be even morepowerful, the, the.
I.
I saw a statistic actually Ithink chat gpt gave me this
statistic um that said there'sgoing to be uh over the next 10
years.
They need to build um 10 uhnuclear power plants every year
(37:57):
just to meet the requirement ofartificial.
And this is worldwide um uh 10nuclear power plants every year
to to provide the electricityneeded for um artificial
intelligence.
So that's 100 in the next 10years.
Obviously, in the united stateswe've not been building them
and china's been building a lotof nuclear power plants.
(38:21):
And in the name of our fund isthe Dynamic Alpha Macro Fund,
which means you know dynamic,we're flexible, alpha, we're
shooting for alpha positive, youknow better than market returns
and macro big picture.
Right, we're not picking awinner in saying this nuclear
company is going to do betterthan this one or this EV company
(38:43):
is going to do better than thisEV company.
It's just a macro thing.
Who cares which one wins?
They're all going to needcopper.
So in the future we could verywell have a long position in
copper.
We don't currently, because of anumber of reasons.
(39:04):
We do use technical analysis tolook at price trends and price
valuation of it.
So we're not just going tohaphazardly buy it because you
got to buy it at the right price.
You know you got to buy it atthe right price, um, but to me
that's how I think ofalternatives is identifying what
is the driver of the return forthat alternative.
(39:27):
Don't just say, oh, realestate's an alternative, um, you
know, because it's labeled asan alternative, and nothing
wrong with real estate investing.
But last time I checked, peopledo need jobs in order to pay
the rent and buy houses and forhouse prices to go up, people
need to have jobs.
So normally, for a strong realestate market, you have to have
(39:48):
strong economic growth.
So if we don't, then could thereal estate market be impacted
Most likely, right?
And could the real estatemarket be impacted Most likely,
right?
So identifying what is thatdriver of return to us is a key
(40:17):
component of understandingalternatives and alternatives to
alternatives and just buildinga truly diversified portfolio.
Right, If you only have stocksand bonds, I would argue you're
not diversified.
Right, If you follow a 60-40approach and we like 60-40.
60-40 is part of ourmultidimensional model, right,
but it's not the model, right,Our multidimensional model.
You can think of it as havingmultiple models in one, having a
(40:39):
60-40,.
Having a quant tactical, havinga fundamental global, having
arbitrage long short strategiesin one cohesive model.
Speaker 2 (40:52):
Yeah, no, I think that's very well explained.
For those, Brad, who want tolearn more about the fund or
maybe want to reach out to youto learn more, how should people
go about that?
Speaker 1 (41:00):
Yeah, so, um, dynamic wgcom is our main website.
It's easy one, easy one toremember.
You can also go to dynamicalpha fundscom.
I am very active on linkedin.
I try to post a video everyweek on linkedin, a short five
minute video on market thoughts,financial planning thoughts,
various things like that.
You can certainly email us.
(41:22):
You can email me directly atbrad at dynamicwgcom.
If you're a financial advisor,happy to provide information on
our multidimensional models, onour mutual fund, if you're an
investor, also happy to addressany questions on what we do, uh,
and if you want to be put incontact with uh, you know a good
(41:42):
financial advisor, qualifiedfinancial advisor, uh, let us
know.
It's not our business, but wework with some amazing advisors,
just like you, michael.
You work with some amazingadvisors and uh yeah, I
appreciate those that watch thisslide.
Speaker 2 (41:56):
Hopefully I'll see you all on the next episode.
Uh, be fan of Alternative so wecould be in a more difficult
cycle going forward.
So, thank you, brian, Iappreciate it.
Thanks, michael Cheers.
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