December 23, 2025 • 13 mins
In this episode of Lead-Lag Live, I sit down with Greg Babij, Co-Founder and Chief Investment Officer at Sundial, to explore why traditional buy-and-hold strategies may struggle in a market defined by faster cycles, rising volatility, and structural change.
From the rise of zero-day options to the importance of tactical exposure, tail hedging, and trend following, Babij explains how portfolios can be designed to survive growth, recession, inflation, and deflation without relying on predictions.
In this episode:
– Why buy and hold may no longer deliver the same results
– How zero-day options are changing market behavior
– The difference between prediction and probability-based investing
– Why tactical and non-correlated strategies matter more now
– How to construct portfolios that adapt across market regimes
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
Start your adventure with TableTalk Friday: A D&D Podcast at the link below or wherever you get your podcasts!
Youtube: https://youtube.com/playlist?list=PLgB6B-mAeWlPM9KzGJ2O4cU0-m5lO0lkr&si=W_-jLsiREjyAIgEs
Spotify: https://open.spotify.com/show/75YJ921WGQqUtwxRT71UQB?si=4R6kaAYOTtO2V
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:36):
We do build complete portfolios for our member
families.
And when building completeportfolios beyond our equity
strategies, we like to look atthe world through our two
lenses.
And the first is there's onlyfour macroeconomic regimes:
growth, recession, inflation,and deflation.
And we want to have someinvestments for each.
And the second lens is allinvestments either fall under a
stability-seeking type ofinvestment or an
(00:57):
instability-seeking type ofinvestment.
And some people call those shortvolatility and long volatility.
And we recognize we need to haveboth types of those investments
in portfolios.
SPEAKER_00 (01:20):
Alright, well, it's the holidays, and I'm officially
going to be spoiling one of you.
I'm giving away this duffel bagpacked with a bunch of our
signature Few Crew branded merchthat has all the inside jokey
slang that you only get if youactually get it.
So what's inside?
Well, a men's What Up Butcheshoodie, an exquisite hoodie for
(01:42):
her, and a few other things totake you from, I think I get it,
to Few Crew certified.
Now, if you want in, here's thedeal.
You have to follow at Lead LegReport on X.
Follow me, Mela underscoreSchaefer on X.
Subscribe to Lead Leg Media onYouTube, and like and share this
video.
You do that and boom, you'reentered.
(02:03):
No gimmicks, no funnels, and nononsense.
One winner gets the wholepackage.
The rest of you stay f untilnext year.
Happy holidays from the FewCrew.
I'm your host, Melanie Schaefer.
Welcome to Lead Lag Live.
Now, markets are sitting nearall-time highs, even as the Fed
has begun cutting rates, andinvestors are trying to look
(02:26):
past 2025 and into what policygrowth and inflation could look
like into 2026.
There's a lot of confidence onthe surface, but also plenty of
uncertainty underneath when itcomes to regime shifts and risk
management.
My guest today is Greg Bobby,co-founder and chief investment
officer at Sundial.
Greg runs a multifamily officewith a very deliberate adaptive
(02:49):
approach to portfolioconstruction.
Greg, it's great to have youhere with me.
Thanks for hosting me, Melanie.
So let's start with the bigpicture.
Given where rates are today, theFed's recent cuts, and what
markets are pricing into 2026,how are you thinking about the
current market environment givenequity prices and valuations?
SPEAKER_01 (03:06):
Well, Melanie, we like to rely on the sundial
framework when assessing themarket environment.
Concepts like portfoliomanagement's a probability game,
not a prediction game, so wedon't try to make predictions.
And valuations are not a goodtiming tool, but they do matter
over the longer term.
So getting more granular,there's a popular regression
(03:28):
going around of the S P 500valuations and the subsequent
10-year returns that havehappened historically.
And it would imply that thereturns over the next 10 years
might be something around plusor minus 2% on an annualized
basis.
What that tells us is theprobability of the 10% annual
returns every year in the S P500 is a lot lower.
(03:49):
Additionally, the marketmicrostructure has changed.
The options market has nowbecome a bigger market than the
equity market.
And 60% of the options volume iswhat's called zero data expre
options.
So that tells us we betterexpect bigger shifts and swifter
moves in the markets.
So that means we should havemore tactical strategies, more
(04:12):
non-correlated strategies, andwe should be less excited to
simply buy and hold the S P 500,expecting a repeat of the past
three years.
SPEAKER_00 (04:20):
Yeah, so great from that macro backdrop, I want to
move into how Sundial actuallyexpresses those views.
Uh, you two run core equity, yourun, sorry, two core equity
strategies internally.
First your single name equitymomentum strategy.
Walk us through what that is andwhat you're looking for when you
allocate capital there.
SPEAKER_01 (04:39):
Yes, so we do run a few different tactical equity
strategies.
And they're all designed to be acomplement to passive equity
exposure.
And when thinking about totalequity exposure, we like to
think about it as you woulddrive a car.
In good conditions, you'll driveit faster and you'll feel
completely safe.
And in more treacherousconditions, you slow down and
you drive it more cautiously.
(05:01):
So if that's how we drive tokeep ourselves safe, why would
we want to drive our portfolioat full speed at all times?
Doesn't make a lot of sense tous.
Defense is much more importantthan offense when it comes to
portfolio management.
And avoiding those big losersand drawdowns is more important
than trying to optimize for thewinners.
(05:21):
So our equity momentum strategyis simply a concentrated
portfolio of the strongeststocks.
We're looking for stocks thatare in uptrends, have positive
price momentum, and have strongearnings momentum.
It's a long-only portfolio, butit does dial up the exposure in
good conditions, and it doesdial down the exposure in more
treacherous conditions.
(05:42):
It is a fully rules-basedportfolio management process,
which makes it repeatable in ouropinion.
Howard Marx actually said it thebest when he said all portfolio
managers only do two things.
They try to identify and buy thebest securities and they and
avoid or short the worstsecurities.
And they also try to figure outwhen to put their foot on the
(06:05):
gas and when to put on theirfoot on the brake.
And that's what our strategydoes.
SPEAKER_00 (06:09):
Yeah, and Greg, so this the second is your US index
performance or outperformancestrategy.
How does that differ from asingle name approach?
And how how do you decide whento uh dial risk up or take it
down?
SPEAKER_01 (06:22):
Yeah, so we do also run an outperformance strategy
on the equity indices, and we'llrun it on either the SP 500 or
the NASDAQ 100.
It's available in both forms forclients.
And the core holdings are indexETFs.
But it generates theoutperformance primarily by
truncating the large drawdownsand very occasionally using
(06:43):
modest leverage on the upside.
So it'll again decrease exposurebased on market conditions when
they're more unfavorable.
And the way we are assessingwhen to increase or decrease
exposure is just by simplylooking at the health of the
market.
Much like when you would go tothe doctor and he would take
your blood pressure and listento your heart and uh take a
(07:04):
different vital signs, he willfind out how healthy you are.
So we do the same sort of thingon the equity markets.
Breath is a good example.
Advances versus declines, highsversus lows.
We try to understand the marketinternals and if it's a more
dangerous or more constructivemarket.
SPEAKER_00 (07:20):
Greg, those strategies also they sit inside
a broader framework that you useat Sundial, and you call it the
two lenses.
Can you start with the firstlens and talk about how growth,
recession, inflation, anddeflation factor into how you
build these portfolios?
SPEAKER_01 (07:35):
Sundial at its core is a multifamily office.
So we do build completeportfolios for our member
families.
And when building completeportfolios beyond our equity
strategies, we like to look atthe world through our two
lenses.
And the first is there's onlyfour macroeconomic regimes:
growth, recession, inflation,and deflation.
And we want to have someinvestments for each.
(07:55):
And the second lens is allinvestments either fall under a
stability-seeking type ofinvestment or an
instability-seeking type ofinvestment.
And some people call those shortvolatility and long volatility.
And we recognize we need to haveboth types of those investments
in portfolios.
What this means is we have aheavy use of alternatives.
(08:18):
Often they are non-correlated tostocks.
We're big believers in nichestrategies.
Uh we choose niche strategiesbecause alpha decays into beta
as a fund size tends to grow.
And um ideally want to have aportfolio of non-correlated
revenue streams, publics,privates, and asymmetric risk
(08:42):
reward.
SPEAKER_00 (08:43):
And then the second lens is one that I think really
differentiates your your processand stability seeking versus
instability seeking assets.
How does thinking in terms ofconvexivity uh change how you
size risk across a portfolio?
SPEAKER_01 (08:56):
Of course.
Stability-seeking investmentsare things that we're all very
familiar with.
Stocks, bonds, commercial realestate, private equity, venture
art.
They all tend to move together,particularly in a crisis, down.
Instability assets tend to bemore like strategies of tail
hedging or systematic trendfollowing.
(09:18):
As they say, offense wins games,defense wins championships.
So we're looking to pair themtogether as an elegant
combination.
That way we don't need topredict the markets.
And in environments like 2020,which is the COVID crash, the
tail hedges do really well andwe can rebalance into our other
investments.
And in environments like 2022,where it's just a slow bleed
(09:41):
lower in the equity markets, thesystematic trend following does
really well.
And again, we can then rebalanceout of that and into some of our
other investments.
SPEAKER_00 (09:49):
Yeah.
So from what I understand aswell, that framework also has
shaped how Sundial evolved itsequity bucket over time,
balancing passive, always longexposure with more tactical
strategies.
How did that evolution comeabout and what problem uh is it
solving?
SPEAKER_01 (10:03):
Sure, great question.
Uh and it came about simplybecause we found a lot of
families were uncomfortable withsimply having a lot of long
equity exposure in all times,all conditions.
And uh they were constantlyseeking to either dial up or
dial down risk on their own, butnot actually having a framework
(10:25):
on it.
So we decided instead, why don'twe see if we could put together
a framework or a series offrameworks that allow us to do
that more in a systematicfashion, meaning we don't have
to have high stress as we'redoing it.
SPEAKER_00 (10:37):
You also allocate heavily into emerging managers
and run some strategiesinternally while outsourcing
others.
What determines whether astrategy belongs in-house versus
with an external manager?
SPEAKER_01 (10:48):
We will run internally any strategies if we
can't find them elsewhere, andwe have the expertise in-house.
Otherwise, we're happy toallocate externally to other
managers.
And we have very many greatmanagers in our portfolios.
Additionally, I've been aportfolio manager for more than
three decades, and that allowsus to do deep due diligence on
these external managers, and weend up generating a pretty good
(11:09):
relationship with them.
SPEAKER_00 (11:10):
Yeah, and just Greg, before we wrap up, for anyone
watching who wants to learn moreabout Sundial, read your
research or connect with youdirectly.
Where's the best place for themto go?
SPEAKER_01 (11:19):
Of course.
They can find us atwww.sundialwealth.com.
We also have a Substackavailable.
And on that website, you'll notonly find information about the
multifamily office and ourequity strategies, but we do
have two other businesses aswell.
We have a private equitybusiness where we buy decade-old
B2B economically resilientcompanies that are too small for
(11:40):
the traditional private equity.
And we also have a commercialreal estate business where we
buy existing value addproperties or we develop
commercial real estate.
For example, we're now currentlydeveloping a series of luxury
garage properties.
These are condo communities.
It's not about storage, it'sabout a lifestyle where people
go there, socialize with peers,attend events.
SPEAKER_00 (12:02):
Fantastic.
Well, Greg, I really appreciatethe conversation and thanks to
everyone who's been watching.
Be sure to like, follow, andsubscribe for more episodes of
Lead Live Live.
We do build complete portfolios for our member
families.
And when building completeportfolios beyond our equity
strategies, we like to look atthe world through our two
lenses.
And the first is there's onlyfour macroeconomic regimes:
growth, recession, inflation,and deflation.
And we want to have someinvestments for each.
And the second lens is allinvestments either fall under a
stability-seeking type ofinvestment or an
(00:57):
instability-seeking type ofinvestment.
And some people call those shortvolatility and long volatility.
And we recognize we need to haveboth types of those investments
in portfolios.
SPEAKER_00 (01:20):
Alright, well, it's the holidays, and I'm officially
going to be spoiling one of you.
I'm giving away this duffel bagpacked with a bunch of our
signature Few Crew branded merchthat has all the inside jokey
slang that you only get if youactually get it.
So what's inside?
Well, a men's What Up Butcheshoodie, an exquisite hoodie for
(01:42):
her, and a few other things totake you from, I think I get it,
to Few Crew certified.
Now, if you want in, here's thedeal.
You have to follow at Lead LegReport on X.
Follow me, Mela underscoreSchaefer on X.
Subscribe to Lead Leg Media onYouTube, and like and share this
video.
You do that and boom, you'reentered.
(02:03):
No gimmicks, no funnels, and nononsense.
One winner gets the wholepackage.
The rest of you stay f untilnext year.
Happy holidays from the FewCrew.
I'm your host, Melanie Schaefer.
Welcome to Lead Lag Live.
Now, markets are sitting nearall-time highs, even as the Fed
has begun cutting rates, andinvestors are trying to look
(02:26):
past 2025 and into what policygrowth and inflation could look
like into 2026.
There's a lot of confidence onthe surface, but also plenty of
uncertainty underneath when itcomes to regime shifts and risk
management.
My guest today is Greg Bobby,co-founder and chief investment
officer at Sundial.
Greg runs a multifamily officewith a very deliberate adaptive
(02:49):
approach to portfolioconstruction.
Greg, it's great to have youhere with me.
Thanks for hosting me, Melanie.
So let's start with the bigpicture.
Given where rates are today, theFed's recent cuts, and what
markets are pricing into 2026,how are you thinking about the
current market environment givenequity prices and valuations?
SPEAKER_01 (03:06):
Well, Melanie, we like to rely on the sundial
framework when assessing themarket environment.
Concepts like portfoliomanagement's a probability game,
not a prediction game, so wedon't try to make predictions.
And valuations are not a goodtiming tool, but they do matter
over the longer term.
So getting more granular,there's a popular regression
(03:28):
going around of the S P 500valuations and the subsequent
10-year returns that havehappened historically.
And it would imply that thereturns over the next 10 years
might be something around plusor minus 2% on an annualized
basis.
What that tells us is theprobability of the 10% annual
returns every year in the S P500 is a lot lower.
(03:49):
Additionally, the marketmicrostructure has changed.
The options market has nowbecome a bigger market than the
equity market.
And 60% of the options volume iswhat's called zero data expre
options.
So that tells us we betterexpect bigger shifts and swifter
moves in the markets.
So that means we should havemore tactical strategies, more
(04:12):
non-correlated strategies, andwe should be less excited to
simply buy and hold the S P 500,expecting a repeat of the past
three years.
SPEAKER_00 (04:20):
Yeah, so great from that macro backdrop, I want to
move into how Sundial actuallyexpresses those views.
Uh, you two run core equity, yourun, sorry, two core equity
strategies internally.
First your single name equitymomentum strategy.
Walk us through what that is andwhat you're looking for when you
allocate capital there.
SPEAKER_01 (04:39):
Yes, so we do run a few different tactical equity
strategies.
And they're all designed to be acomplement to passive equity
exposure.
And when thinking about totalequity exposure, we like to
think about it as you woulddrive a car.
In good conditions, you'll driveit faster and you'll feel
completely safe.
And in more treacherousconditions, you slow down and
you drive it more cautiously.
(05:01):
So if that's how we drive tokeep ourselves safe, why would
we want to drive our portfolioat full speed at all times?
Doesn't make a lot of sense tous.
Defense is much more importantthan offense when it comes to
portfolio management.
And avoiding those big losersand drawdowns is more important
than trying to optimize for thewinners.
(05:21):
So our equity momentum strategyis simply a concentrated
portfolio of the strongeststocks.
We're looking for stocks thatare in uptrends, have positive
price momentum, and have strongearnings momentum.
It's a long-only portfolio, butit does dial up the exposure in
good conditions, and it doesdial down the exposure in more
treacherous conditions.
(05:42):
It is a fully rules-basedportfolio management process,
which makes it repeatable in ouropinion.
Howard Marx actually said it thebest when he said all portfolio
managers only do two things.
They try to identify and buy thebest securities and they and
avoid or short the worstsecurities.
And they also try to figure outwhen to put their foot on the
(06:05):
gas and when to put on theirfoot on the brake.
And that's what our strategydoes.
SPEAKER_00 (06:09):
Yeah, and Greg, so this the second is your US index
performance or outperformancestrategy.
How does that differ from asingle name approach?
And how how do you decide whento uh dial risk up or take it
down?
SPEAKER_01 (06:22):
Yeah, so we do also run an outperformance strategy
on the equity indices, and we'llrun it on either the SP 500 or
the NASDAQ 100.
It's available in both forms forclients.
And the core holdings are indexETFs.
But it generates theoutperformance primarily by
truncating the large drawdownsand very occasionally using
(06:43):
modest leverage on the upside.
So it'll again decrease exposurebased on market conditions when
they're more unfavorable.
And the way we are assessingwhen to increase or decrease
exposure is just by simplylooking at the health of the
market.
Much like when you would go tothe doctor and he would take
your blood pressure and listento your heart and uh take a
(07:04):
different vital signs, he willfind out how healthy you are.
So we do the same sort of thingon the equity markets.
Breath is a good example.
Advances versus declines, highsversus lows.
We try to understand the marketinternals and if it's a more
dangerous or more constructivemarket.
SPEAKER_00 (07:20):
Greg, those strategies also they sit inside
a broader framework that you useat Sundial, and you call it the
two lenses.
Can you start with the firstlens and talk about how growth,
recession, inflation, anddeflation factor into how you
build these portfolios?
SPEAKER_01 (07:35):
Sundial at its core is a multifamily office.
So we do build completeportfolios for our member
families.
And when building completeportfolios beyond our equity
strategies, we like to look atthe world through our two
lenses.
And the first is there's onlyfour macroeconomic regimes:
growth, recession, inflation,and deflation.
And we want to have someinvestments for each.
(07:55):
And the second lens is allinvestments either fall under a
stability-seeking type ofinvestment or an
instability-seeking type ofinvestment.
And some people call those shortvolatility and long volatility.
And we recognize we need to haveboth types of those investments
in portfolios.
What this means is we have aheavy use of alternatives.
(08:18):
Often they are non-correlated tostocks.
We're big believers in nichestrategies.
Uh we choose niche strategiesbecause alpha decays into beta
as a fund size tends to grow.
And um ideally want to have aportfolio of non-correlated
revenue streams, publics,privates, and asymmetric risk
(08:42):
reward.
SPEAKER_00 (08:43):
And then the second lens is one that I think really
differentiates your your processand stability seeking versus
instability seeking assets.
How does thinking in terms ofconvexivity uh change how you
size risk across a portfolio?
SPEAKER_01 (08:56):
Of course.
Stability-seeking investmentsare things that we're all very
familiar with.
Stocks, bonds, commercial realestate, private equity, venture
art.
They all tend to move together,particularly in a crisis, down.
Instability assets tend to bemore like strategies of tail
hedging or systematic trendfollowing.
(09:18):
As they say, offense wins games,defense wins championships.
So we're looking to pair themtogether as an elegant
combination.
That way we don't need topredict the markets.
And in environments like 2020,which is the COVID crash, the
tail hedges do really well andwe can rebalance into our other
investments.
And in environments like 2022,where it's just a slow bleed
(09:41):
lower in the equity markets, thesystematic trend following does
really well.
And again, we can then rebalanceout of that and into some of our
other investments.
SPEAKER_00 (09:49):
Yeah.
So from what I understand aswell, that framework also has
shaped how Sundial evolved itsequity bucket over time,
balancing passive, always longexposure with more tactical
strategies.
How did that evolution comeabout and what problem uh is it
solving?
SPEAKER_01 (10:03):
Sure, great question.
Uh and it came about simplybecause we found a lot of
families were uncomfortable withsimply having a lot of long
equity exposure in all times,all conditions.
And uh they were constantlyseeking to either dial up or
dial down risk on their own, butnot actually having a framework
(10:25):
on it.
So we decided instead, why don'twe see if we could put together
a framework or a series offrameworks that allow us to do
that more in a systematicfashion, meaning we don't have
to have high stress as we'redoing it.
SPEAKER_00 (10:37):
You also allocate heavily into emerging managers
and run some strategiesinternally while outsourcing
others.
What determines whether astrategy belongs in-house versus
with an external manager?
SPEAKER_01 (10:48):
We will run internally any strategies if we
can't find them elsewhere, andwe have the expertise in-house.
Otherwise, we're happy toallocate externally to other
managers.
And we have very many greatmanagers in our portfolios.
Additionally, I've been aportfolio manager for more than
three decades, and that allowsus to do deep due diligence on
these external managers, and weend up generating a pretty good
(11:09):
relationship with them.
SPEAKER_00 (11:10):
Yeah, and just Greg, before we wrap up, for anyone
watching who wants to learn moreabout Sundial, read your
research or connect with youdirectly.
Where's the best place for themto go?
SPEAKER_01 (11:19):
Of course.
They can find us atwww.sundialwealth.com.
We also have a Substackavailable.
And on that website, you'll notonly find information about the
multifamily office and ourequity strategies, but we do
have two other businesses aswell.
We have a private equitybusiness where we buy decade-old
B2B economically resilientcompanies that are too small for
(11:40):
the traditional private equity.
And we also have a commercialreal estate business where we
buy existing value addproperties or we develop
commercial real estate.
For example, we're now currentlydeveloping a series of luxury
garage properties.
These are condo communities.
It's not about storage, it'sabout a lifestyle where people
go there, socialize with peers,attend events.
SPEAKER_00 (12:02):
Fantastic.
Well, Greg, I really appreciatethe conversation and thanks to
everyone who's been watching.
Be sure to like, follow, andsubscribe for more episodes of
Lead Live Live.
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