E15. Stacking Returns Without Sacrificing Core Exposure: Introducing RSSX

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Hey, everyone.
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Corey Hofstein here.
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I wanna personally invite you to an event
that's all about rethinking portfolio
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construction.
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On October 8, we're hosting the return stacking
symposium at Cboe Global Markets in Chicago.
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It's a one day in person deep dive into capital
efficient strategies, and we're featuring
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speakers like Jonathan Glidden, CIO of Delta
Airlines, Patrick Casley from One River, and
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Mark Horbul, managing director of the
Systematic Strategies Group at Canada Pension
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Plan.
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This is your chance to hear directly from the
institutional allocators leading the charge on
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portable alpha and return stacking.
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But space is limited, so head over to
returnstacked.com/symposium to learn more and
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register.
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Hope to see you there.
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Hello, and welcome to the GetStacked Investment
Podcast, where we delve into the exciting new
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world of return stacking.
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Join us as we break down complex financial
concepts into accessible insights, speak with
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leading experts in the space, and analyze real
world applications for return stacking.
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GetStacked is here to help you break out of the
traditional portfolio construction mold and get
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you to start thinking differently about the
path to successful investment.
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Corey Hofstein is the co founder and chief
investment officer of Newfound Research, and
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Rodrigo Gordillo is the president and portfolio
manager of Resolve Asset Management Global.
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Due to industry regulation, we will not discuss
any funds managed or sub advised by these firms
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on the podcast.
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All opinions expressed by podcast participants
are solely their own opinion and do not reflect
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the opinion of neither Newfound Research or
Resolve Asset Management Global.
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This podcast is for informational purposes only
and should not be relied upon as a basis for
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investment decisions.
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Clients of these firms may maintain positions
and securities discussed in this podcast.
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For more information, visit returnstack.com.
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Good afternoon, everyone, and welcome to
today's webinar.
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I'm Rodrigo Gordillo, President of Resolve
Asset Management and co founder of the Returns
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Suite of Funds.
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And today we are fortunate to be joined by
Corey Hastie, the CEO of Newfound Research and
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fellow co founder of the ReturnsTac suite of
funds.
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And if you haven't heard of the ReturnsTac
lineup before, ultimately what this suite aims
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to do is to unlock the benefits of
diversification by really allowing you to
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introduce alternative investment strategies and
exposures into your portfolio without having to
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sacrifice your core holdings, your favorite
stock and bond exposure.
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Each fund in the suite follows the same simple
formula.
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For every dollar that you invest, you are,
we're going to provide a dollar of either a
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core stock or a core bond exposure, sometimes a
combination of both, plus an extra dollar
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exposure of an alternative asset class or
investment strategy.
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So we launched these funds in The US back in
February 2023.
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And the whole suite has grown up to
$850,000,000 in assets, give or take.
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Today, I'm really pumped to have Corey talk
specifically about the latest launch, The US
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stocks in gold Bitcoin ETF, ticker RSSX trading
in the CBO exchange, not to be confused with
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one in Canada that trades in the Toronto Stock
Exchange.
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That's a different thing.
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We're gonna get a chance to walk through the
many ways that this ETF works and can be
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utilized to enhance portfolio diversification
and allow for all sorts of different types of
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stacking opportunities and strategic
allocations.
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And as I mentioned earlier, please do feel free
to ask questions throughout over the chat bot.
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If I see one that's kind of particularly useful
at the time that Corey's answering it, I'll go
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live and ask them otherwise we'll answer them
either through the chat or at the end of the
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presentation.
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So with that said, let's talk about what return
stacking is.
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So the slide that you're seeing currently is an
interesting slide that really defines how
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historically we've talked about
diversification, right?
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It's always been this process of what we like
to say addition to subtraction.
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In the industry, we disagree on a lot of stuff,
but we certainly agree on one thing, all things
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held equal, that more diversification is a
better thing than less diversification.
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Historically, what we've had to do in order to
get that diversification is we've had to make
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room, we've had to sell a little bit of our
bonds, little bit of our stocks, and add a
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diversifier into what is considered kind of the
new modern sixtyforty, which is a 50
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thirtytwenty.
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And while this may look good on paper,
particularly if you look at the returns over
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the long term, where there's a lot of back
tests that show that ADUEZ diversifiers are
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great, in the short run and not, and maybe in
the medium run, this can be very painful,
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right?
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So in this slide here, what we're observing is
kind of an experience of adding a diversifier
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in the fiftythirtytwenty when compared to the
sixtyforty.
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So this line just shows the excess returns
above the sixtyforty when in the first, you
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know, from 2,000 to 02/2008, when equities were
really struggling, bonds weren't doing so
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great.
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And if anybody that was allocating during that
period would remember, there was a lot of
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emphasis on emerging market exposure, global
exposure, gold, systematic macro, you know,
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market neutral strategies that were all working
because they were outperforming that
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sixtyforty, right?
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That 20% was doing better than the fifty and
thirty.
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And so people loved alternatives up until they
didn't, The second half, what we've experienced
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up until 2022 is a period where there's only
been one game in town where your equities and
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bonds drastically tended to outperform the
diversifiers in your portfolio.
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So we've seen a bear market in diversification.
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And what tends to happen is it makes it very
hard to maintain a diversified portfolio in the
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face of this headwind.
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So in the suite, what we're trying to do to
solve this problem is this is kind of really
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the magic of the whole suite.
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So we're going to talk about the specific stack
today of gold Bitcoin.
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But I think that what if you take anything away
from return stacking is that we created a
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framework for you to understand how we can
stack things on top and keep you and your
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clients invested while giving you those
diversifiers on top.
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And it's a really simple approach here.
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We've made it so that for every dollar that you
invest, you're going get a dollar of a beta and
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a dollar of a diversifier.
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And therefore using these as tools for
portfolio construction, you do not have to give
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up your core stocks and bonds that the client
knows and loves and appreciates to get exposure
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to that beneficial diversifier.
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So on the far left here to illustrate how this
works, you have your traditional portfolio,
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which is sixtyforty, right?
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And this is your kind of traditional benchmark.
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In the middle, we show that old school
approach, what we call kind of like that, that
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fiftythirtytwenty that I just described was
really difficult to hold on to in the last
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decade or so.
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And with the advent of return stacking, what
we're kind of showing you can do is you can get
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to keep your 60 or 40, and then really stack
that extra diversifier on top.
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And this is an example of just a 20 stack.
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But again, given that we can stack up to a 100%
on all, like one to one, you can do as much as
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a 100% stack, but most people are looking at
the 10 to 30% range here.
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And so what this does importantly, and it's
just hopefully aims to mitigate some of the
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behavioral issues that come along with
accessing these diversifiers.
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Right?
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So if we go to the next slide, what we find
now, now instead of comparing the
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fifty-thirty-twenty, what we are doing is doing
sixty, forty, 20 versus the sixty, forty,
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right?
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So we get to have kind of a diversification
cake and eat the returns too in some ways,
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right?
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You see the first ten years here, when you're
stacking that diversify on top, you're still
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getting that benefit of having things in your
portfolio stacked on top that did better than
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equities and bonds.
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But then the second period where the
diversifiers in this case, we highlight the
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SocGen trend index did, you know, low single
digit returns throughout, you're still stacking
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those over a long enough period on top of your
sixtyforty.
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So your clients get to live through what they
know is a similar return profile plus something
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extra that makes them appreciate the
diversifiers that you're putting in their
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portfolio.
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So ultimately, you know, there's two ways to
really look at this concept.
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The first is by taking alternative allocations
and stacking them on top of your core stocks
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and bonds.
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What it actually does is it helps with
outperformance, right?
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So if you have a conviction that whatever
you're stacking is gonna have excess returns,
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then you're really adding another unique,
hopefully diversifying return stream on top of
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your stocks and bonds.
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It's what we say it's a different way to try
and outperform your benchmarks.
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And by adding something more on top, you know,
it's just a different way than just security
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selection within equities or security selection
within bonds.
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And the second thing that's important here is
that you can stack for just simply
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diversification.
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And that's really what we've spoken about
before when it comes to stocks and bonds, that
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should be the core element of the portfolio.
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But as 2022 laid absolutely bare, is that in an
inflationary shock environment, stocks and
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bonds tend to go down at the same time.
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And so when we look for other options to
diversify into, what return stacking can enable
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is to add different types of diversifiers that
are helping, you know, provide different return
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streams in periods where equities and bonds
don't do well.
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And we see it, we see it in 2025 as well, gold,
you know, making new highs and Bitcoin making
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new highs as well.
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So with that said, I would like to pass it over
to Corey, and he is going to talk about, you
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know, the practical implementation of this
return stack and idea specifically within the
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return stack to US stocks and Bitcoin ETF.
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So over to you, Corey, and I am happy to answer
any questions over the chat in the meantime.
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Thank you for that introduction Rod.
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As Rod mentioned, with the whole ReturnsTac
suite, we are keeping a very similar structure.
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A dollar invested is going to get you a dollar
of core beta plus a dollar of some sort of
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diversifying strategy or asset class on top,
and that structure remains consistent in our
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newest ETF.
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This is the seventh ETF in our suite and,
frankly, probably one of the easiest to
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understand.
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You'll find that this presentation here is
incredibly simple.
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We'll probably get through it very quickly.
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I think the meat and potatoes off actually will
come in a lot of the Q and A.
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A lot of the conversations we've been having
with advisers already about this product since
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it launched a few weeks ago, there have been
some really interesting dialogues around, well,
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why do we expect gold to go up?
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What sort of purpose does this serve in my
portfolio?
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Is it a currency hedge?
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Is it an inflation hedge?
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Is it a compounder?
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How much exposure do I need?
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Bitcoin's really volatile.
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Gold's really volatile.
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What should I expect from a product like this?
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So we're gonna get through this presentation
pretty quickly.
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I would certainly urge you to, submit your
questions if you have any.
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Rod and I have compiled a tremendous number of
questions that we've already received from
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advisers before this call, and we'll work
through those as well.
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But please don't hesitate to ask any questions
you have.
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So as I mentioned, RSSX, this new ETF that we
recently launched, The US stocks and gold
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Bitcoin ETF, for every dollar invested is going
to provide you a dollar of exposure to large
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cap US equities.
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There is no active strategy being run here.
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This is meant to be as passive exposure as we
can provide to large cap US equities.
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There's no security selection or anything like
that.
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Just pure market cap weighted, as well as a
dollar of exposure to a gold and Bitcoin
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strategy.
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And that strategy in and of itself is meant to
be very simple.
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The idea is when you invest a dollar in that
gold Bitcoin strategy, it's going to allocate
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to gold and Bitcoin such that each of them
contributes an equal amount of risk to the
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portfolio.
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And we'll go through that a little bit.
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One of the first questions that naturally comes
up is, well, why gold and Bitcoin?
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And this is where, frankly, this is a great way
to make enemies online.
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As you say to people who are are gold bugs,
Bitcoin is digital gold.
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And you say to people who love Bitcoin, well,
you know, Bitcoin is digital gold.
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For whatever reason, it tends to offend both of
them.
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But the reality is though, from our
perspective, we see gold and Bitcoin having
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very parallel roles and parallel narratives in
the investment landscape.
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Both of them seek to preserve the long term
real purchasing power of investments for their
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holders.
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Both of them share a large number of
commonalities.
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What gold benefited from in its physical
aspects in many ways were recreated by Bitcoin
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in its digital aspects.
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But I think what's really important here, and
again, this is probably the number one way to
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offend people who love both gold and Bitcoin,
is in many ways both of these are what I would
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consider to be narrative driven assets.
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Gold has very limited industrial use.
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I think about 10% of the mining supply actually
goes outside of jewelry and investment to
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actual aerospace and computer engineering and
other medical devices.
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Just 10% of the mined supply every year goes to
those industrial uses.
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The vast majority of the supply goes to jewelry
and investments.
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And I would argue a lot of that jewelry is a de
facto investment.
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You're willing to pay up so much because you
think it will hold its value.
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Gold in and of itself as a metal, what ended up
being used in certain parts of the world as a
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base currency because of its really attractive
physical properties.
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It's much more durable, say than something like
silver.
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It is scarce, but it is highly divisible.
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As physical asset, there's no credit risk to
it.
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So it has these really nice properties.
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It has a very low inflation rate.
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So all these things about gold made it
naturally a great base currency, but it's worth
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noting it was not the only currency used in the
world.
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Right?
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There were places where seaships were used and
all sorts of other physical devices as
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currency.
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Gold happened to take strong foothold in
certain parts of the world.
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In the 1500s, as euro really expanded to take
over most of the world in its colonization,
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gold proliferated as a primary currency.
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But gold in and of itself was not the only
currency ever adopted.
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And the point there being the reason gold works
as a currency is because people accepted it as
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a currency, and they expected other people to
accept it.
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So when I talk about a narrative based
investment, a lot of what gives gold value is
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our expectation that other people will continue
to see it has value.
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And why do we continue to believe it has value?
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Because as a society, we find value in the idea
of an asset that exists outside of the control
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of any given nation state.
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It exists outside any particular political
influence.
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And for a lot of people that has tremendous
power, gold represents something that they can
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technically transport with them, that they know
they can liquidate for almost any currency at
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any time.
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At this point, it's got incredibly deep markets
that are highly efficient.
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And as we've seen in the last couple of years
especially, this is something that is supported
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as being a purchase for macroprudential reasons
by central banks.
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So the narrative that this is an asset that has
value, as a store of value, continues to take
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hold.
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Bitcoin is a much more nascent version of that.
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I say nascent.
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It's obviously been around for well over a
decade at this point and in many ways tries to
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echo a lot of the features of gold, but people
always say, well, why can't you spin up Bitcoin
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version two point zero?
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You absolutely can.
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What gives Bitcoin version one, its moat, is
that it has already been accepted.
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And the more it continues to be accepted, the
larger its moat gets.
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In theory, there's no reason you couldn't
replace gold with some other metal if we all
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simply accepted that other metal as having more
value, But we don't.
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We accept.
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Gold is what we've all narratively accepted.
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Bitcoin holds much the same place in the
digital currency space.
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And as it continues to gain further adoption,
it will become much more entrenched.
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00:16:51,820 --> 00:16:57,735
And again, in serving many of the common
features of gold, also serves to solve some of
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the problems of gold.
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It's much more transportable than gold.
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You only have to memorize your key phrase.
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You don't have to carry it around.
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On the other hand, right, it is purely digital.
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It isn't a physical thing and some people have
a preference for a physical.
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00:17:10,179 --> 00:17:14,660
So when we were putting this product together,
we said we see the commonalities, we see the
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00:17:14,660 --> 00:17:19,539
parallels, we think there's incredible power in
both of these narratives for the real term
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00:17:19,539 --> 00:17:24,744
purchasing, for maintaining real term
purchasing power and fighting against currency
269
00:17:24,744 --> 00:17:28,904
debasement and all these other really
interesting features that gold and Bitcoin have
270
00:17:28,904 --> 00:17:32,424
exhibited over time that we'll get into in the
Q and A.
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But we don't know how gold is going to perform.
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We don't know how Bitcoin's going to perform.
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The design of the strategy is ultimately going
to be really important here.
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What we find is that both gold and Bitcoin
maintain fairly low correlations to the S and P
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00:17:47,299 --> 00:17:52,474
500 over time as well as maintain fairly low
correlations to each other.
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00:17:52,474 --> 00:17:58,875
And so we think that this combination of gold,
Bitcoin, and equities is one that internally is
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fairly robust and has a considerable amount of
internal diversification.
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00:18:02,650 --> 00:18:07,049
We often hear the argument that
cryptocurrencies are getting more and more
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correlated to equities.
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00:18:08,490 --> 00:18:12,490
I think the empirical data doesn't necessarily
support that.
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00:18:12,490 --> 00:18:16,345
It certainly seems to be a little bit more
regime driven, but long term, we just simply
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00:18:16,345 --> 00:18:21,065
don't have enough data to suggest that it is
increasing or decreasing or going to have a
283
00:18:21,065 --> 00:18:23,784
structurally higher correlation than say gold.
284
00:18:23,785 --> 00:18:29,349
What we did find is 2021, 2022, it seemed to
have the same liquidity bubble in
285
00:18:29,349 --> 00:18:33,829
cryptocurrencies that equities also went
through, and so correlations seem to spike
286
00:18:33,829 --> 00:18:34,789
during that period.
287
00:18:34,789 --> 00:18:39,349
But trailing one year correlations only got as
high as point six and have collapsed much
288
00:18:39,349 --> 00:18:41,029
closer toward zero since then.
289
00:18:41,805 --> 00:18:45,485
So in actually designing the strategy, you
know, again, what we're trying to do is take
290
00:18:45,485 --> 00:18:49,884
that core US stocks and put this gold Bitcoin
strategy on top.
291
00:18:49,965 --> 00:18:54,765
Now to do that, if you give me a dollar, I
can't buy a dollar of stocks and a dollar of,
292
00:18:54,765 --> 00:18:59,190
you know, physical gold bars, spot gold and
spot Bitcoin.
293
00:18:59,190 --> 00:19:05,589
We obviously have to use some sort of futures
market exposure to get that embedded capital
294
00:19:05,589 --> 00:19:06,389
efficiency.
295
00:19:06,710 --> 00:19:12,325
So what we do is we use a combination of S and
P 500 futures, Bitcoin futures and gold futures
296
00:19:12,325 --> 00:19:16,964
to make sure that we're able to maintain that
dollar of equity in that combo dollar of
297
00:19:16,964 --> 00:19:17,924
Bitcoin.
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00:19:18,325 --> 00:19:21,684
In this graph, what we see in the black line is
US stocks.
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00:19:22,085 --> 00:19:27,660
We see the green line is a hypothetical gold
Bitcoin strategy that holds gold and Bitcoin in
300
00:19:27,660 --> 00:19:31,739
a risk parity allocation, and then gray is the
stack on top.
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00:19:31,900 --> 00:19:37,019
We start this line in 2017 only because we
think going back earlier doesn't really
302
00:19:37,019 --> 00:19:39,579
represent the more modern characteristics of
Bitcoin.
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00:19:39,579 --> 00:19:44,815
Obviously, there was huge growth from the early
twenty eleven through 2017 period.
304
00:19:44,894 --> 00:19:46,894
Growth we don't think is going to be repeated.
305
00:19:46,894 --> 00:19:52,014
Is not necessarily a fair comp for what Bitcoin
has the potential to do going forward.
306
00:19:52,174 --> 00:19:56,440
That said, when we look at the market
capitalization of gold versus Bitcoin being
307
00:19:56,440 --> 00:20:02,200
still somewhere around 11 times higher, we
still think there's a huge potential for that
308
00:20:02,200 --> 00:20:04,680
to reach parity over the next decade or two.
309
00:20:04,680 --> 00:20:10,255
And so we think that this sort of post 2017
period represents a much more realistic modern
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00:20:10,575 --> 00:20:12,974
expectation for how Bitcoin should behave.
311
00:20:12,974 --> 00:20:16,095
The other thing we've done in this graph, and
and we'll talk about this a little bit later,
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00:20:16,654 --> 00:20:21,054
is accessing Bitcoin in a capital efficient way
has historically been fairly expensive.
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00:20:21,134 --> 00:20:27,339
It's worth reminding ourselves that spot
Bitcoin ETFs didn't even come to market until
314
00:20:27,339 --> 00:20:28,059
recently.
315
00:20:28,220 --> 00:20:33,580
And we'll talk about spot gold ETFs and how
those affected gold futures markets.
316
00:20:33,994 --> 00:20:38,315
Expect spot Bitcoin ETFs to have much the same
impact on Bitcoin futures markets.
317
00:20:38,394 --> 00:20:42,075
But historically, the embedded cost of
financing in Bitcoin futures was incredibly
318
00:20:42,075 --> 00:20:42,795
expensive.
319
00:20:42,875 --> 00:20:47,835
Here, we've added a onerous thousand basis
point per year cost.
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00:20:47,835 --> 00:20:50,940
We think the go forward cost is substantially
lower.
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00:20:50,940 --> 00:20:55,500
But just as a hypothetical example, we wanted
to be overly onerous in our expectations of
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00:20:55,500 --> 00:20:58,940
what would it have historically looked like to
potentially stack a strategy like this
323
00:20:58,940 --> 00:20:59,500
together.
324
00:20:59,740 --> 00:21:01,259
So how do we actually achieve this?
325
00:21:01,625 --> 00:21:07,545
Well, the first thing we do is we get our US
equity exposures through a mixture of
326
00:21:07,545 --> 00:21:11,225
underlying US equity ETFs as well as US equity
futures.
327
00:21:11,225 --> 00:21:16,184
So when you invest a dollar in this fund, we're
gonna take 70¢, and we're gonna basically buy
328
00:21:16,184 --> 00:21:23,009
the lowest cost large cap US equity ETF we can,
the highest liquidity, lowest cost we can
329
00:21:23,009 --> 00:21:23,730
possibly find.
330
00:21:23,730 --> 00:21:29,809
Then we're going to use the other 30¢ as
collateral, collateral for both 30¢ of S and P
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00:21:29,809 --> 00:21:35,914
500 futures to fill out that S and P 500
exposure, as well as collateral for her gold
332
00:21:35,914 --> 00:21:37,194
and Bitcoin program.
333
00:21:37,835 --> 00:21:40,154
Now, does the actual gold and Bitcoin program
work?
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00:21:40,154 --> 00:21:42,715
I've mentioned this idea of risk parity.
335
00:21:42,715 --> 00:21:47,115
The basic idea is we're going to look at the
trailing volatility of gold and the trailing
336
00:21:47,115 --> 00:21:52,789
volatility of Bitcoin and weight those
exposures in inverse proportion.
337
00:21:53,029 --> 00:21:57,109
In this graph, we show a hypothetical example
of what that would look like if you simply did
338
00:21:57,109 --> 00:22:01,349
it based on the trailing sixty three days or
about three months of realized volatility.
339
00:22:02,204 --> 00:22:06,684
In the actual portfolio, we use a much longer
look back horizon.
340
00:22:06,684 --> 00:22:12,365
We actually use a close to 500 trading day
exponentially weighted moving average to
341
00:22:12,365 --> 00:22:13,325
measure volatility.
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00:22:13,980 --> 00:22:18,299
And the reason we do that is because what we're
trying to really capture is not the short term
343
00:22:18,299 --> 00:22:25,179
blips of relative volatility, but the long term
transition of Bitcoin's adoption as an asset
344
00:22:25,179 --> 00:22:25,420
class.
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00:22:25,865 --> 00:22:30,345
What we find is if we use the short term
volatility measures because Bitcoin's
346
00:22:30,345 --> 00:22:36,025
volatility can jump so quickly, we can end up
overtrading the portfolio and you can end up
347
00:22:36,025 --> 00:22:37,865
incurring a substantial amount of TCOS.
348
00:22:38,289 --> 00:22:43,170
Really what we're just simply trying to capture
is the long term historical vol and especially
349
00:22:43,170 --> 00:22:47,650
how that vol transitions over the next five or
ten years between gold and Bitcoin.
350
00:22:47,650 --> 00:22:53,924
And so we find using a much longer, slower
moving measure of volatility helps us capture
351
00:22:53,924 --> 00:22:54,404
that.
352
00:22:54,804 --> 00:22:58,964
The other thing we don't do, this has come up a
couple of times and I'll preempt a Q and A, is
353
00:22:58,964 --> 00:23:01,524
we don't take into account the correlation to
equities.
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00:23:01,924 --> 00:23:03,605
And that's not because we can't.
355
00:23:03,919 --> 00:23:07,759
We could look at this and say, well, how do we
knowing that we're going to hold a dollar of
356
00:23:07,759 --> 00:23:13,599
equities, how much gold and Bitcoin should we
hold in proportion to each other such that they
357
00:23:13,599 --> 00:23:17,679
each contribute an equal amount of marginal
risk to the portfolio taking that correlation
358
00:23:17,679 --> 00:23:18,240
into account?
359
00:23:18,934 --> 00:23:24,694
What we ultimately found is measuring that
correlation introduces a noise term that
360
00:23:24,934 --> 00:23:29,255
doesn't seem to be particularly static over
time and again, it increases the amount of
361
00:23:29,255 --> 00:23:33,979
trading and does not move you off the long term
average significantly.
362
00:23:33,980 --> 00:23:40,220
And so in trying to come up with a simpler
model that would reduce TCOS and also be robust
363
00:23:40,220 --> 00:23:45,625
to a variety of measurement errors, we went
with this longer term slower moving average of
364
00:23:45,625 --> 00:23:50,184
volatility, again, to simply try to capture
that relative vol change of gold and Bitcoin
365
00:23:50,184 --> 00:23:50,984
over time.
366
00:23:51,304 --> 00:23:53,144
So how can you use this in a portfolio?
367
00:23:53,144 --> 00:23:56,505
Well, again, as Rod showed with the
hypothetical examples with all the return
368
00:23:56,505 --> 00:24:03,200
stacking products earlier, the idea is you can
very easily take some of your equity exposure,
369
00:24:03,839 --> 00:24:06,399
replace it with RSSX.
370
00:24:06,480 --> 00:24:11,440
RSSX will give you your equity exposure back
and overlay this gold Bitcoin exposure on your
371
00:24:11,440 --> 00:24:12,159
portfolio.
372
00:24:12,319 --> 00:24:18,474
And the amount of equity that you sell to buy
this ETF directly is proportional to the size
373
00:24:18,474 --> 00:24:19,275
of that overlay.
374
00:24:19,275 --> 00:24:25,035
So if you sold say 20% of your equity to buy
RSSX, you would end up with a 20% overlay of
375
00:24:25,035 --> 00:24:26,634
this gold Bitcoin strategy.
376
00:24:26,875 --> 00:24:32,000
If you sold say 40% of your equity and bought
40% RSSX, you would end up back with your
377
00:24:32,000 --> 00:24:34,880
original portfolio, but a 40% overlay.
378
00:24:34,880 --> 00:24:39,759
And so the sizing hopefully is very intuitive
through the design of the product.
379
00:24:40,559 --> 00:24:45,359
So in review, the goal of RSSX here is long
term capital appreciation.
380
00:24:45,359 --> 00:24:50,025
The strategy that we deploy is that, and again,
this is consistent across our entire return
381
00:24:50,025 --> 00:24:55,304
stacking suite, is that for every dollar
invested, this ETF is going to seek to give you
382
00:24:55,304 --> 00:25:00,184
a dollar of exposure to large cap US equities
and a dollar of exposure to its Bitcoin gold
383
00:25:00,184 --> 00:25:00,585
strategy.
384
00:25:01,140 --> 00:25:06,900
And those large cap US equities are as
passively exposed as we can give them, just
385
00:25:06,900 --> 00:25:12,659
market capitalization weighted, trying to be
low cost, very liquid, very efficient.
386
00:25:13,140 --> 00:25:16,019
It's the gold Bitcoin strategy where there's
any activity.
387
00:25:16,019 --> 00:25:21,144
Here, again, we're just trying to do a slow,
simple transition over time, inverse
388
00:25:21,144 --> 00:25:27,545
volatility, weight the gold in Bitcoin to make
sure that as if Bitcoin grows in popularity and
389
00:25:27,545 --> 00:25:32,400
we expect that volatility profile to come down,
and we could talk a little bit about that Q and
390
00:25:32,400 --> 00:25:36,960
A as well, these gold and Bitcoin's exposure
will normalize to each other.
391
00:25:36,960 --> 00:25:43,025
If on the other hand, it does not and the vol
of Bitcoin spikes as it goes the other way and
392
00:25:43,025 --> 00:25:47,265
perhaps there's government censorship against
it or it gets outlawed, we would expect the
393
00:25:47,265 --> 00:25:51,105
volatility profile to pick way up and the
amount of Bitcoin in the portfolio to shrink
394
00:25:51,105 --> 00:25:53,105
way down in preference to gold.
395
00:25:53,105 --> 00:25:58,119
So again, we think that that long term adoption
cycle and the inverse volatility is a very
396
00:25:58,119 --> 00:26:00,039
important property of what we've designed here.
397
00:26:00,039 --> 00:26:03,640
This is a portfolio that is going to rebalance
potentially daily.
398
00:26:03,640 --> 00:26:08,440
It rebalances using threshold bands to try to
avoid overtrading, especially where Bitcoin can
399
00:26:08,440 --> 00:26:09,240
jump around so much.
400
00:26:09,585 --> 00:26:15,424
We expect it to rebalance sort of every two
weeks to a month given the bands and it will
401
00:26:15,424 --> 00:26:18,784
distribute any taxes on an annual basis.
402
00:26:19,024 --> 00:26:23,825
With that, Rodrigo, I will turn it over to you
for any Q and A.
403
00:26:23,825 --> 00:26:28,220
I know we have quite a bit that we got before
the call so we can work through We
404
00:26:28,380 --> 00:26:29,099
have plenty.
405
00:26:29,420 --> 00:26:29,900
Why don't we
406
00:26:29,980 --> 00:26:33,180
I'll just say before I take a sip of water,
again, if you want to learn more about our
407
00:26:33,180 --> 00:26:35,740
ETFs, go to returnstackedetfs.com.
408
00:26:36,140 --> 00:26:37,420
There's a contact form there.
409
00:26:37,420 --> 00:26:43,115
You can get in touch with your local wholesaler
or you can submit information request online.
410
00:26:43,115 --> 00:26:43,514
Yeah.
411
00:26:43,674 --> 00:26:46,234
Can answer some of these too while you rest
your voice.
412
00:26:46,234 --> 00:26:47,835
Corey and I are both sick.
413
00:26:47,835 --> 00:26:51,595
We think we have versions of COVID at this
point, but here we are for you guys.
414
00:26:51,859 --> 00:26:55,539
One of the first kind of simple questions here
is how often we rebalance?
415
00:26:55,859 --> 00:27:01,859
Well, we just mentioned kind of the exponential
moving average and we do trade within bands
416
00:27:01,859 --> 00:27:04,945
that roughly ends up being around once a month,
right?
417
00:27:04,945 --> 00:27:07,105
So we're keeping the trading costs as low as
possible.
418
00:27:07,105 --> 00:27:08,144
There's not a lot of movement.
419
00:27:08,144 --> 00:27:14,384
It really is about, again, capturing the long
term adoption in between these two asset
420
00:27:14,384 --> 00:27:15,025
classes.
421
00:27:15,105 --> 00:27:22,650
And as Corey alluded to, if Bitcoin becomes the
most prominent way to deal with debasement and
422
00:27:22,650 --> 00:27:27,529
currency issues, then it'll get a higher and
higher allocation, but slowly rather than
423
00:27:27,529 --> 00:27:28,250
suddenly.
424
00:27:28,890 --> 00:27:30,409
All right, next question.
425
00:27:31,210 --> 00:27:34,595
You detail that every dollar invested sees to
provide $1 exposure to U.
426
00:27:34,595 --> 00:27:40,515
Equities in $1 Bitcoin of what the initial
dollar requires borrowing costs for the excess
427
00:27:40,515 --> 00:27:41,634
Bitcoin gold exposure.
428
00:27:41,634 --> 00:27:45,475
I think we can kind of actually just chat
about, because you went through how you
429
00:27:45,475 --> 00:27:48,595
structure that using, we have the option of
using futures.
430
00:27:48,890 --> 00:27:56,250
We have the option of using spot everything,
but let's talk about, let's just kind of
431
00:27:56,250 --> 00:28:00,009
crystallize how we allocate and then I'll have
the website here to show people where they can
432
00:28:00,009 --> 00:28:01,369
see the actual holdings.
433
00:28:01,850 --> 00:28:04,315
Yeah, so I'll talk a little bit about this.
434
00:28:04,714 --> 00:28:06,315
Let me and I do apologize for my voice.
435
00:28:06,315 --> 00:28:07,994
Getting worse by the second.
436
00:28:08,154 --> 00:28:10,394
Sounds like I'm gargling gravel over here.
437
00:28:10,875 --> 00:28:14,875
So for every dollar you invest, we're gonna
take, again, 70¢ of that, and we are gonna use
438
00:28:14,875 --> 00:28:16,794
it to buy the underlying US equities.
439
00:28:16,794 --> 00:28:19,729
And then we're gonna have 30¢ in cash.
440
00:28:20,450 --> 00:28:26,369
That 30¢ is going to be used both to buy US
equity index futures as well as our gold and
441
00:28:26,369 --> 00:28:27,889
Bitcoin exposure.
442
00:28:28,609 --> 00:28:36,015
Now here, because the financing costs within
Bitcoin futures have historically been fairly
443
00:28:36,015 --> 00:28:42,894
high and today remain high, several 100 basis
points, our preference is to buy as much spot
444
00:28:42,894 --> 00:28:45,535
Bitcoin as we can via ETFs.
445
00:28:46,240 --> 00:28:51,919
And so when Rod shows our holdings, he will see
that we will actually have a spot Bitcoin ETF
446
00:28:51,919 --> 00:28:52,559
in there.
447
00:28:53,039 --> 00:28:59,964
And we make that trend, that preference to hold
more S and P 500 futures versus the Bitcoin
448
00:28:59,964 --> 00:29:06,365
futures as much as we can to minimize the
overall financing costs of this structure.
449
00:29:06,365 --> 00:29:13,230
So our gold is held 100% gold futures, and then
instead of having less S and P 500 futures, we
450
00:29:13,230 --> 00:29:17,150
have more S and P 500 futures so that we can
hold more spot Bitcoin.
451
00:29:17,390 --> 00:29:22,430
One of the questions I've received is, well,
why don't you just hold 100% spot Bitcoin?
452
00:29:22,830 --> 00:29:28,625
You know, if you only need 20% of the portfolio
in Bitcoin, why not put that all into something
453
00:29:28,625 --> 00:29:30,785
like a Bitcoin ETF?
454
00:29:30,785 --> 00:29:34,944
The answer is because you run into tax risks.
455
00:29:34,944 --> 00:29:38,544
I won't get into the nitty gritty details, but
there's something called subchapter M.
456
00:29:38,545 --> 00:29:44,069
And if you have bad income from a product like
a Bitcoin ETF, which are typically structured
457
00:29:44,069 --> 00:29:49,909
as a grant or trust, if you get enough bad
income coming out of that, it can bust the
458
00:29:49,909 --> 00:29:52,389
registered investment company status of your
ETF.
459
00:29:52,389 --> 00:29:53,429
That's a very bad thing.
460
00:29:53,944 --> 00:29:59,304
And so what we need to do is take that Bitcoin
ETF and we put it into a Cayman blocker, which
461
00:29:59,304 --> 00:30:01,865
is also where we trade our Bitcoin futures and
gold futures.
462
00:30:01,865 --> 00:30:07,224
That's how almost all commodity related funds
work, by the way, whether you're managed
463
00:30:07,224 --> 00:30:08,904
futures or just a generic commodity fund.
464
00:30:09,529 --> 00:30:11,450
But we can only hold so much of it.
465
00:30:11,450 --> 00:30:16,089
You can only hold so much of that commodity
blocker and holding the Bitcoin ETF outside of
466
00:30:16,089 --> 00:30:20,649
the commodity blocker represents a potential
tax risk to the ETF itself.
467
00:30:20,649 --> 00:30:25,255
So there's a lot of that we're structuring
around from a design perspective saying we want
468
00:30:25,255 --> 00:30:31,494
to minimize the financing costs, but never at
the risk of busting the RIC status of the ETF
469
00:30:31,494 --> 00:30:32,134
itself.
470
00:30:32,695 --> 00:30:33,174
Yes.
471
00:30:33,174 --> 00:30:34,134
Thank you for that, Corey.
472
00:30:34,134 --> 00:30:35,815
I mean, lot of nuance there.
473
00:30:35,815 --> 00:30:39,950
If anybody ever wants to see the holdings,
they're available on the website.
474
00:30:39,950 --> 00:30:47,229
So you can go to the returnstacktfs.com site
and then scroll all the way down here or go to
475
00:30:47,549 --> 00:30:52,005
the other right, to top 10 holdings, because we
don't have many holdings are all there, but you
476
00:30:52,005 --> 00:30:53,444
can also download the Excel.
477
00:30:53,444 --> 00:31:01,125
So you can see that we have a gold futures
contracts for 74% S and P 500 direct ETF
478
00:31:01,125 --> 00:31:05,599
holding for around 70, E mini futures for the
other 30.
479
00:31:05,599 --> 00:31:09,200
And then you have micro Bitcoin, iShares Trust.
480
00:31:09,200 --> 00:31:11,200
This is the one that holds spot Bitcoin.
481
00:31:11,200 --> 00:31:13,679
So we don't have a lot of the carry issues and
so on.
482
00:31:13,679 --> 00:31:13,759
Right?
483
00:31:13,759 --> 00:31:17,839
So everything that Corey just discussed as it
evolves, you can see it there.
484
00:31:18,345 --> 00:31:24,184
All right, let's one of the questions here is,
I think this is Borges, there's a few
485
00:31:24,184 --> 00:31:26,105
overlapping questions about the same thing.
486
00:31:26,505 --> 00:31:28,585
Unless you want to talk about something else,
Corey?
487
00:31:28,585 --> 00:31:28,825
No?
488
00:31:28,825 --> 00:31:29,384
Nope, go ahead.
489
00:31:30,640 --> 00:31:35,359
So given the track record of gold versus
Bitcoin, what was the thinking of equal risk
490
00:31:35,359 --> 00:31:37,519
between the two versus a higher weight goal?
491
00:31:37,519 --> 00:31:42,079
So I think we talked a little bit about this
before, but when this idea started kind of
492
00:31:42,079 --> 00:31:46,054
percolating in our heads, one of the
experiments that I did is I said, what would
493
00:31:46,214 --> 00:31:51,575
have happened to an investor in gold had you
levered up a futures contract, a gold futures
494
00:31:51,575 --> 00:31:53,094
contract versus Bitcoin?
495
00:31:53,575 --> 00:31:57,894
And what you found was that if you lever the
futures contract to the same volatility as
496
00:31:57,894 --> 00:32:00,829
Bitcoin since 2018, it's actually outperformed.
497
00:32:00,910 --> 00:32:05,869
But broadly speaking, you know, had similar
responses to what's been happening on the
498
00:32:05,869 --> 00:32:07,150
global macro space.
499
00:32:07,309 --> 00:32:10,910
And so what it shows is that they're both
valuable.
500
00:32:12,125 --> 00:32:14,444
Useful as a hedge.
501
00:32:14,845 --> 00:32:19,565
And instead of us levering up the gold, we
basically lever down the Bitcoin in risk
502
00:32:19,565 --> 00:32:23,804
weights between the two so that the maniacs
aren't taking over the asylum.
503
00:32:23,804 --> 00:32:25,484
The maniac of this case became Bitcoin.
504
00:32:26,130 --> 00:32:30,450
And then the second part to this, which is a
second question here in the past fifteen years
505
00:32:30,450 --> 00:32:36,369
of having, sorry, the second question being,
you know, why not allocate more to gold given,
506
00:32:36,529 --> 00:32:37,970
you know, how crazy Bitcoin is?
507
00:32:37,970 --> 00:32:43,285
Well, because we are explicitly making sure
that the maniac doesn't take over, that we want
508
00:32:43,285 --> 00:32:48,404
equal amount of impact of the portfolio of the
two and that roughly today, you know, is
509
00:32:48,404 --> 00:32:49,684
eightytwenty.
510
00:32:49,845 --> 00:32:53,549
And as Bitcoin becomes less of a maniac, right?
511
00:32:53,950 --> 00:32:56,269
Then you'll get a more a higher allocation.
512
00:32:56,269 --> 00:32:58,909
And if Bitcoin becomes more of a maniac, you
get a lower allocation.
513
00:32:58,909 --> 00:33:01,869
So it's a self regulating waiting scheme here.
514
00:33:02,269 --> 00:33:05,789
So that you as the allocator don't have to be
worrying about what is Bitcoin still working?
515
00:33:05,789 --> 00:33:06,429
Is Bitcoin now?
516
00:33:06,429 --> 00:33:08,755
You can go home and, you know, do your own
thing.
517
00:33:08,755 --> 00:33:12,914
You've strategically allocated to somebody else
in, you I think what a thoughtful manner using
518
00:33:12,914 --> 00:33:19,075
volatility is monitoring the evolution of these
two asset classes and weighing them
519
00:33:19,075 --> 00:33:19,634
appropriately.
520
00:33:19,634 --> 00:33:21,075
Anything you would add to that, Corinne?
521
00:33:21,075 --> 00:33:22,355
No, I think that's right.
522
00:33:22,355 --> 00:33:24,869
Mean, there are some people who have a
preference for more gold.
523
00:33:24,869 --> 00:33:26,549
Some people have a preference for more Bitcoin.
524
00:33:27,109 --> 00:33:31,829
It will look like not a lot of Bitcoin relative
to gold, but it's simply saying, well, Bitcoin
525
00:33:31,829 --> 00:33:34,309
is four times the vol that gold has.
526
00:33:34,630 --> 00:33:39,565
And so if we want them to have the same impact
on the portfolio, we need to hold them in
527
00:33:39,565 --> 00:33:40,445
relative proportion.
528
00:33:40,445 --> 00:33:46,045
So this is our way of saying, it looks like you
owe notionally more gold, but from an actual
529
00:33:46,045 --> 00:33:50,204
portfolio impact perspective, we expect it to
be fiftyfifty between Bitcoin and gold.
530
00:33:50,605 --> 00:33:55,349
I will say, the last thing I'll say there is we
partner with Quantify Funds to bring the
531
00:33:55,349 --> 00:33:58,149
stacked Bitcoin Gold ETF to market.
532
00:33:58,549 --> 00:34:02,549
For every dollar you invest there, you'll get a
dollar of gold plus a dollar of Bitcoin.
533
00:34:02,549 --> 00:34:07,429
So if you do want more Bitcoin, that's a highly
capital efficient vehicle that you can explore,
534
00:34:07,429 --> 00:34:08,949
ticker BTGD.
535
00:34:09,109 --> 00:34:13,795
It's been out for I think six months now,
looking over 30,000,000 in assets.
536
00:34:13,795 --> 00:34:18,114
So if you are keen on having a capital
efficient strategy that is pure gold, pure
537
00:34:18,114 --> 00:34:21,795
Bitcoin, and it has more oomph with the
Bitcoin, BTGD is one to explore.
538
00:34:22,309 --> 00:34:22,710
Yeah.
539
00:34:22,710 --> 00:34:27,030
And that was one of the questions here, how we
should think about RSSX versus BTGD.
540
00:34:27,109 --> 00:34:30,150
And it's just a matter of like how much more
weight do you want?
541
00:34:30,150 --> 00:34:33,030
Like that's just a matter of building blocks,
right?
542
00:34:33,190 --> 00:34:39,244
You have the option of having as much of the
Bitcoin building block and of the equity
543
00:34:39,244 --> 00:34:40,525
building block as you want.
544
00:34:40,684 --> 00:34:47,565
The RSSX, what's been interesting in the last
week or so since we've launched is that when
545
00:34:47,565 --> 00:34:53,320
you actually take into account the three
allocations, so the S and P 500, gold and
546
00:34:53,320 --> 00:34:58,280
Bitcoin, I think Paul Tudor Jones came out
recently and said, gun to head, what should you
547
00:34:58,280 --> 00:35:00,679
be allocating in this environment?
548
00:35:00,679 --> 00:35:05,605
And he said equal risk between gold, Bitcoin
and stocks.
549
00:35:05,605 --> 00:35:09,364
And we did a back of the envelope calculation
and it just so happens that our existing
550
00:35:09,364 --> 00:35:11,045
allocation is very close to that, right?
551
00:35:11,045 --> 00:35:15,605
So it's just kind of an odd, it seems to be an
all in one, could be an all in one solution for
552
00:35:15,605 --> 00:35:16,405
this environment.
553
00:35:16,485 --> 00:35:23,150
But again, it can be used as just stacking a
thoughtful risk managed approach to Bitcoin
554
00:35:23,150 --> 00:35:26,349
Gold on top of the S and P 500 that you already
own.
555
00:35:27,150 --> 00:35:29,789
But but yeah, there's flexibility there between
the two.
556
00:35:30,269 --> 00:35:30,590
Okay.
557
00:35:31,545 --> 00:35:36,264
So one of the things here that gets brought up
a lot when it comes to return stacking, this
558
00:35:36,264 --> 00:35:40,425
particular question from Nick is with the past
fifteen years or so having very low borrowing
559
00:35:40,425 --> 00:35:45,545
costs, how much will the increased borrowing
costs affect returns across all strategies?
560
00:35:46,800 --> 00:35:47,440
Thoughts on that?
561
00:35:47,440 --> 00:35:49,119
Yes, this one comes up a lot.
562
00:35:49,119 --> 00:35:56,160
So I think this goes back to sort of a finance
101 question, which is the idea that every
563
00:35:56,160 --> 00:36:00,960
investment asset class or strategy should earn
the risk free rate and then a premium above
564
00:36:00,960 --> 00:36:01,119
them.
565
00:36:01,394 --> 00:36:05,715
And so the idea with stacking is we're always
just trying to add the premium on top of
566
00:36:05,715 --> 00:36:07,635
whatever the base stack is.
567
00:36:08,114 --> 00:36:12,594
So, right, we would expect gold to earn the
risk free rate plus a risk premium goal.
568
00:36:12,594 --> 00:36:15,969
We'd have Bitcoin to earn the risk free rate
with a risk premium.
569
00:36:15,969 --> 00:36:17,170
Actually, those are that's debatable.
570
00:36:17,170 --> 00:36:18,050
We can discuss that.
571
00:36:18,130 --> 00:36:18,450
You know?
572
00:36:18,450 --> 00:36:23,090
But, like, trend following, for example, as a
strategy, you invest a dollar in a trend
573
00:36:23,090 --> 00:36:23,809
following strategy.
574
00:36:23,809 --> 00:36:28,930
They're explicitly gonna invest that dollar in
T bills and use it as collateral for the actual
575
00:36:28,930 --> 00:36:29,570
trading strategy.
576
00:36:30,054 --> 00:36:35,015
When we stack trend following on top of stocks
or bonds, all we're doing is getting rid of the
577
00:36:35,015 --> 00:36:38,215
T bills and buying stocks, getting rid of the T
bills and buying bonds.
578
00:36:38,375 --> 00:36:43,735
So in that sense, our financing cost truly is
just what we sold, which is T bills, for what
579
00:36:43,735 --> 00:36:44,135
we bought.
580
00:36:44,469 --> 00:36:48,390
And so long as we think stocks are gonna
outperform T bills or we think bonds are gonna
581
00:36:48,390 --> 00:36:51,910
outperform T bills, right, we we think that it
can be accretive.
582
00:36:51,910 --> 00:36:57,910
None of that affects the actual strategy, the
trend strategy or the actual return of gold or
583
00:36:57,910 --> 00:36:58,949
or whatever it is.
584
00:36:58,949 --> 00:36:59,110
Right?
585
00:36:59,344 --> 00:37:03,664
Another way you could think about this to make
life easier nor the whole Bitcoin complication
586
00:37:03,664 --> 00:37:05,585
is let's say we were just stacking gold.
587
00:37:06,144 --> 00:37:07,744
One way to do it is buy spot gold.
588
00:37:07,744 --> 00:37:10,704
The other way to do it is I could buy cash plus
gold futures.
589
00:37:11,184 --> 00:37:14,224
Those returns are nearly identical with how
efficient the market is.
590
00:37:14,159 --> 00:37:18,559
We could talk about market evolution and how it
applies to Bitcoin going forward.
591
00:37:18,559 --> 00:37:19,119
Yeah.
592
00:37:19,119 --> 00:37:25,519
But those markets are so hyper efficient and
similar now that, again, if I've got, you know,
593
00:37:25,519 --> 00:37:31,635
T bills plus gold futures and all I do is I
sell the T bills to buy stocks, it hasn't
594
00:37:31,635 --> 00:37:32,994
affected the gold futures.
595
00:37:33,875 --> 00:37:39,474
So the question to ask yourself is, again, do
you think stocks are gonna outperform T bills,
596
00:37:39,635 --> 00:37:42,275
and do you think gold is gonna outperform T
bills?
597
00:37:42,275 --> 00:37:45,659
If you don't think gold's gonna outperform T
bills, well, you wouldn't buy spot gold or gold
598
00:37:45,659 --> 00:37:46,219
futures.
599
00:37:46,219 --> 00:37:46,380
Right?
600
00:37:46,380 --> 00:37:47,980
The excess return is negative.
601
00:37:48,300 --> 00:37:52,940
But the reality is the level of interest rates
really shouldn't matter.
602
00:37:52,940 --> 00:37:57,179
And the other way to sort of come at this is
when you say, does stacking work in this
603
00:37:57,179 --> 00:37:58,380
environment versus not?
604
00:37:58,460 --> 00:38:03,875
Really, what you're asking is, is there a
market timing strategy based solely on short
605
00:38:03,875 --> 00:38:04,675
term rates?
606
00:38:05,394 --> 00:38:08,195
And and to me, the answer is almost trivially
no.
607
00:38:08,195 --> 00:38:10,515
Well, not trivialize, but it's it's almost
certainly no.
608
00:38:10,515 --> 00:38:14,994
There's there's not a simple market timing
strategy for any of this based on the level of
609
00:38:14,994 --> 00:38:15,715
short term rates.
610
00:38:16,210 --> 00:38:22,610
All of this works as building blocks regardless
of where rates are because what we're trying to
611
00:38:22,610 --> 00:38:24,450
stack is the excess return.
612
00:38:24,610 --> 00:38:25,090
Yeah.
613
00:38:25,090 --> 00:38:26,210
And I think that's a crucial thing.
614
00:38:26,210 --> 00:38:28,369
Think the word excess return we use a lot,
Corey.
615
00:38:28,894 --> 00:38:34,094
And I think it's just useful to just say like,
what is the return above, you know, the cost of
616
00:38:34,094 --> 00:38:34,494
borrow?
617
00:38:34,494 --> 00:38:35,695
That's the excess return.
618
00:38:35,695 --> 00:38:40,335
When we talk about in the industry of the
equity risk premia, right?
619
00:38:40,335 --> 00:38:42,255
We're not saying that's the return of equities.
620
00:38:42,255 --> 00:38:46,409
We're saying it's the return of equities above
the cost, above cash, right?
621
00:38:46,409 --> 00:38:48,489
It's that excess return.
622
00:38:48,890 --> 00:38:54,170
And then if you start thinking about that as a
building block, as a Lego block, as we like to
623
00:38:54,170 --> 00:38:55,289
use here, right?
624
00:38:55,449 --> 00:39:02,565
You got your first equity excess return block,
3.5 to 4.5%, depending on the global stock
625
00:39:02,565 --> 00:39:03,045
market.
626
00:39:03,045 --> 00:39:08,325
Then you have your term premium, which is the
excess return of fixed income for taking
627
00:39:08,325 --> 00:39:09,445
duration risk.
628
00:39:10,085 --> 00:39:14,590
Then if you think that's going to exist, if you
think people are going to get compensated for
629
00:39:14,590 --> 00:39:20,349
taking for putting their assets in a long term
borrow, then you can stack that next one on
630
00:39:20,349 --> 00:39:20,990
top.
631
00:39:21,070 --> 00:39:22,989
See if I can find some other color blocks here.
632
00:39:23,474 --> 00:39:25,075
But then it goes on and on, right?
633
00:39:25,075 --> 00:39:28,355
Does gold exhibit a positive risk premium?
634
00:39:28,355 --> 00:39:33,075
Have, maybe we can talk about that a little
bit, Corey, what's the expectation in terms of
635
00:39:33,075 --> 00:39:35,075
excess returns for both gold and Bitcoin?
636
00:39:35,075 --> 00:39:39,299
We think there is, and we have seen the
compensation happen, especially in modern
637
00:39:39,299 --> 00:39:42,739
times, where in terms of excess return, you're
putting it on top.
638
00:39:42,739 --> 00:39:46,980
What you hope for is as you put these blocks
together, that they all zig when the other ones
639
00:39:46,980 --> 00:39:47,940
zag, right?
640
00:39:48,179 --> 00:39:54,034
Instead of having to time interest rate
movements, you're in essence mitigating against
641
00:39:54,034 --> 00:40:00,034
the portfolio of a level of volatility by
having things that tend to act differently when
642
00:40:00,034 --> 00:40:02,275
those interest rate moves happen, right?
643
00:40:02,900 --> 00:40:07,699
And you know, any other strategy, whether it's
commodities or systematic macro or managed
644
00:40:07,699 --> 00:40:13,300
futures or carry, you know, if you expect them
to you're taking risk and you're going to
645
00:40:13,300 --> 00:40:16,500
expect an excess return, then it's a good idea
to start stacking.
646
00:40:17,204 --> 00:40:23,285
Any thoughts on what I said with regard to
whether gold and Bitcoin should have a positive
647
00:40:23,844 --> 00:40:25,445
expected risk premium?
648
00:40:26,005 --> 00:40:30,325
Yeah, so this has been actually one of the most
eye opening parts of the research for me
649
00:40:30,325 --> 00:40:35,800
because when you look at academic studies on
gold, you will almost certainly find that they
650
00:40:35,800 --> 00:40:41,400
all say gold has historically been an excellent
way to preserve capital but not compound
651
00:40:41,400 --> 00:40:42,119
capital.
652
00:40:42,760 --> 00:40:48,605
I'm sure we've all heard the you know, however
much gold buys you a nice suit at any point in
653
00:40:48,605 --> 00:40:49,324
time, right?
654
00:40:49,324 --> 00:40:54,684
Like whether it was a Roman toga or, you know,
you're in the nice streets of London, the same
655
00:40:54,684 --> 00:40:56,364
amount of gold would always buy you a nice
suit.
656
00:40:56,960 --> 00:41:02,079
The reality is when we look at gold, it's gone
through many, many, many different regimes from
657
00:41:02,079 --> 00:41:11,204
a currency, right, in antiquity, pegged to $35
per ounce, right, And there it's more acting
658
00:41:11,204 --> 00:41:16,644
like insured cash to the post peg period where
it was allowed to float.
659
00:41:16,644 --> 00:41:20,884
And if you think about what happened in the
post peg period, you basically pushed all of
660
00:41:20,884 --> 00:41:24,210
this risk onto holders of gold.
661
00:41:24,210 --> 00:41:25,730
You push inflation risk.
662
00:41:25,730 --> 00:41:27,170
You push policy risk.
663
00:41:27,170 --> 00:41:28,610
You push currency risk.
664
00:41:28,929 --> 00:41:34,929
And the rational expectation would be that for
anyone buying gold, that they would demand a
665
00:41:34,929 --> 00:41:35,969
risk premium.
666
00:41:35,969 --> 00:41:41,325
So what we actually saw was that pre peg, there
was no realized risk premium.
667
00:41:41,485 --> 00:41:47,485
Post peg, the realized risk premium has been
about two fifty to 300 basis points annualized.
668
00:41:48,204 --> 00:41:51,805
Again, this is a contradiction for a lot of
people who go, this is something that doesn't
669
00:41:51,805 --> 00:41:57,059
have cash flow, really doesn't have a lot of
intrinsic value other than this arbitrary value
670
00:41:57,059 --> 00:41:59,219
we collectively as a society give it.
671
00:41:59,460 --> 00:42:01,219
Why would there be a risk premium?
672
00:42:01,219 --> 00:42:05,859
Well, again, we have accepted in general that
we believe it has value.
673
00:42:05,859 --> 00:42:09,035
We push that risk onto investors and so it has
value.
674
00:42:09,035 --> 00:42:13,994
The other thing that seems to give value to
gold, if you don't believe the risk premium
675
00:42:13,994 --> 00:42:16,875
argument, is what we call convenience yield.
676
00:42:16,875 --> 00:42:23,650
And this comes from central banks continuing to
purchase gold and often purchase it during
677
00:42:23,650 --> 00:42:25,410
periods that gold is selling off.
678
00:42:25,410 --> 00:42:27,809
This is what's called the official sector put.
679
00:42:28,530 --> 00:42:31,170
We've seen it in particular in the last couple
of years.
680
00:42:31,170 --> 00:42:36,474
It's been the highest tonnage of gold purchased
by central banks record setting every single
681
00:42:36,474 --> 00:42:41,514
year for the last four or five years,
particularly among EM countries who are
682
00:42:41,514 --> 00:42:43,114
concerned about sanction risk.
683
00:42:43,835 --> 00:42:49,034
That positive demand creates a positive
convenience yield in gold and has driven helped
684
00:42:49,034 --> 00:42:49,914
drive the price up.
685
00:42:49,914 --> 00:42:52,559
So even if you don't believe that there's a
risk premium, you might believe there's
686
00:42:52,559 --> 00:42:57,119
positive convenience yield coming from central
bank macro prudential purchases, that makes
687
00:42:57,119 --> 00:42:59,920
gold continue to appreciate price.
688
00:43:00,079 --> 00:43:04,835
The other interesting regime shift in gold, and
I'm going to tie this to Bitcoin, is the launch
689
00:43:04,835 --> 00:43:12,355
of the spot gold ETFs in the early 2000s had a
dramatic impact on the futures markets.
690
00:43:13,315 --> 00:43:20,750
Prior to the launch of the spot gold ETF, what
tethered futures markets to spot gold was
691
00:43:20,750 --> 00:43:26,910
ultimately the cash and carry arbitrage that
could be put in place by traders around the
692
00:43:26,910 --> 00:43:27,470
globe.
693
00:43:27,789 --> 00:43:32,815
This is the idea that when the futures are
trading too rich to where spot is trading, you
694
00:43:32,815 --> 00:43:36,574
would short the futures and buy spot or or vice
versa.
695
00:43:36,574 --> 00:43:44,015
The problem is when the only way to buy spot is
the least vault space, true Boolean VARs, and
696
00:43:44,015 --> 00:43:48,019
it's incredibly expensive to do that to
actually lease the vault space, and you have to
697
00:43:48,019 --> 00:43:51,940
do it in a certain amount of size, that
arbitrage is very difficult to do.
698
00:43:51,940 --> 00:43:56,980
When you all of a sudden have a liquid
transparent low cost ETF come out, that cash
699
00:43:56,980 --> 00:44:02,355
and carry trade becomes much more accessible
for arbitragers around the globe and you see
700
00:44:02,355 --> 00:44:05,075
that spot futures basis collapse.
701
00:44:05,474 --> 00:44:13,750
So the actual embedded financing costs of gold
dropped dramatically post 02/2002, 2004 when
702
00:44:13,750 --> 00:44:17,670
GLD was launched and continues to remain very,
very tight.
703
00:44:18,230 --> 00:44:20,789
We expect that same thing to happen with
Bitcoin.
704
00:44:21,109 --> 00:44:23,750
Bitcoin spot ETFs just came out.
705
00:44:24,434 --> 00:44:29,394
Bitcoin cash and carry trade should become
much, much more efficient over time,
706
00:44:29,394 --> 00:44:32,355
particularly as Bitcoin becomes less volatile.
707
00:44:32,914 --> 00:44:36,195
We would expect the implied cost of financing
Bitcoin to go down.
708
00:44:36,195 --> 00:44:40,114
And many of the same arguments as to why gold
should have a risk premium or gold has a
709
00:44:40,114 --> 00:44:45,289
positive convenience yield, we think will
continue to get applied to Bitcoin insofar as
710
00:44:45,289 --> 00:44:47,530
Bitcoin continues to see adoption.
711
00:44:47,530 --> 00:44:51,130
The more adoption it has, we think the more
those arguments apply from a logical
712
00:44:51,130 --> 00:44:51,530
perspective.
713
00:44:52,664 --> 00:44:53,305
Yeah.
714
00:44:53,785 --> 00:44:58,025
I mean, this is really answering a bunch of
questions here with regards to the cost going
715
00:44:58,025 --> 00:44:58,824
forward, right?
716
00:44:58,824 --> 00:45:03,625
So one of the questions was why did you
discount a thousand points on the Bitcoin?
717
00:45:03,785 --> 00:45:05,465
You were just trying to be conservative, right?
718
00:45:05,465 --> 00:45:11,460
What we're actually seeing contemporaneously
now on the Bitcoin futures is what, 4.5%,
719
00:45:11,460 --> 00:45:11,940
right?
720
00:45:12,579 --> 00:45:19,825
Of carry, that is as goal as it happened to
gold, as more things kind of play out and more
721
00:45:19,825 --> 00:45:24,785
instruments are built around Bitcoin and more
financialization happens, you're going to
722
00:45:24,785 --> 00:45:26,385
expect that to get lower and lower.
723
00:45:26,385 --> 00:45:28,625
So the backtest is being conservative.
724
00:45:29,105 --> 00:45:34,329
Think we think that going forward, the cost of
putting these together and using this type of
725
00:45:34,329 --> 00:45:35,849
structure is going to get lower and lower.
726
00:45:36,250 --> 00:45:42,969
So I hope that answers that question on the
cost of carrying these things on top of a
727
00:45:42,969 --> 00:45:44,250
traditional S and P 500.
728
00:45:46,275 --> 00:45:50,514
Let's talk a little bit about tax.
729
00:45:50,994 --> 00:45:56,994
So there's been a few questions with regard to
whether this is a tax efficient structure, as
730
00:45:56,994 --> 00:46:02,530
well as the K-1s that tend to happen, that one
tends to receive with a guarantor trust.
731
00:46:02,929 --> 00:46:05,650
Any thoughts on both of those things?
732
00:46:05,650 --> 00:46:10,849
Yeah, so to specifically avoid K-1s, we trade
all the commodities within a Cayman blocker.
733
00:46:11,324 --> 00:46:16,605
Again, this is very common for any managed
futures fund or any commodity ETF that's a non
734
00:46:16,605 --> 00:46:18,445
K1 commodity ETF.
735
00:46:18,445 --> 00:46:23,565
They're trading all their commodities in the
Cayman blocker and the benefit is you avoid all
736
00:46:23,565 --> 00:46:25,565
the bad income, you avoid the K1.
737
00:46:26,230 --> 00:46:32,309
The downside is any realized gain bubbles up to
the fund as ordinary income, and that's why
738
00:46:32,390 --> 00:46:36,469
commodity ETFs tend to have poor taxes.
739
00:46:36,469 --> 00:46:40,390
You avoid the K1, but you get ordinary income
at any of your gains.
740
00:46:40,469 --> 00:46:40,710
Yeah.
741
00:46:41,735 --> 00:46:45,335
Just some kind of ETF based trading questions.
742
00:46:45,335 --> 00:46:51,494
So current implied liquidity of the ETFs,
market orders to buy have been gappy.
743
00:46:51,735 --> 00:46:54,054
How should we think about trading this thing?
744
00:46:54,690 --> 00:47:00,929
Yeah, and this is part of the true problem of
having a nascent ETF is the market makers just
745
00:47:00,929 --> 00:47:01,969
aren't paying attention.
746
00:47:01,969 --> 00:47:06,130
So if you are a financial advisor and you're
looking to place a big trade, this is something
747
00:47:06,130 --> 00:47:13,074
that should trade very, very, very tight, These
are very vanilla, very liquid exposures.
748
00:47:13,554 --> 00:47:20,195
S and P, S and P futures, gold futures, Bitcoin
ETF that's what, 75,000,000,000 at this point,
749
00:47:20,275 --> 00:47:23,474
and Bitcoin futures, they're all very, very
liquid.
750
00:47:24,119 --> 00:47:30,280
And so if you work with your institutional desk
to do an RFQ from the market makers, you should
751
00:47:30,280 --> 00:47:31,880
get very, very, very tight fills.
752
00:47:31,880 --> 00:47:34,039
If you've never done that, give us a call.
753
00:47:34,039 --> 00:47:35,320
We'll help walk you through it.
754
00:47:35,320 --> 00:47:36,119
It shouldn't be an issue.
755
00:47:36,534 --> 00:47:42,614
If you are looking to trade this, you should be
able to trade with a limit order tight to mid.
756
00:47:42,614 --> 00:47:45,494
It should not be difficult for the market
makers to fill this order.
757
00:47:45,494 --> 00:47:46,775
We do apologize.
758
00:47:46,775 --> 00:47:49,735
We wish we could artificially create liquidity
for you.
759
00:47:49,735 --> 00:47:50,614
Unfortunately, can't.
760
00:47:50,614 --> 00:47:54,809
It's sort of chicken and an egg problem when it
comes to liquidity, but the underlying are so
761
00:47:54,809 --> 00:47:55,449
liquid.
762
00:47:56,170 --> 00:48:02,089
Anyone trying to do a sizable allocation should
be able to get a very, very, very tight to mid
763
00:48:02,089 --> 00:48:03,289
fit from market makers.
764
00:48:03,585 --> 00:48:05,184
Yeah, just a little patience.
765
00:48:05,184 --> 00:48:07,744
And if it's a large order, reach out.
766
00:48:07,905 --> 00:48:09,505
Just one more thing on fees.
767
00:48:09,505 --> 00:48:13,905
Are the fees capped at 68 basis points,
especially given that you have low AUM to begin
768
00:48:13,905 --> 00:48:14,385
with?
769
00:48:14,945 --> 00:48:18,224
How is the management fee going to change or
the all?
770
00:48:18,224 --> 00:48:21,050
Yeah, so ETFs operate with a unitary fee
structure.
771
00:48:21,050 --> 00:48:25,450
So that was 65 basis point management fee is
the all in fee.
772
00:48:26,010 --> 00:48:31,210
Then the reason it goes to 68 is because
there's acquired fund fees for us buying an
773
00:48:31,210 --> 00:48:33,050
underlying S and P 500 fund.
774
00:48:33,050 --> 00:48:38,244
So I mentioned 70% of every dollar that goes in
goes into S and P 500 exposure or large cap
775
00:48:38,244 --> 00:48:39,364
secondary exposure.
776
00:48:39,764 --> 00:48:45,684
Instead of us buying the underlying ETFs, we
actually just buy an S and P ETF that bubbles
777
00:48:45,684 --> 00:48:47,364
up as what's called the acquired fund fee.
778
00:48:47,364 --> 00:48:52,369
The reason we do that is that we actually think
long term it is cheaper and more efficient to
779
00:48:52,369 --> 00:48:57,329
just buy that as an ETF rather than us trading
the underlying stocks and hiding that three
780
00:48:57,329 --> 00:49:01,409
basis points, but probably incurring more costs
in our replication with the underlying stocks.
781
00:49:01,664 --> 00:49:03,905
So yes, that should be an all in cost.
782
00:49:03,905 --> 00:49:05,425
There's no fee waivers.
783
00:49:05,425 --> 00:49:06,385
There's no nothing.
784
00:49:06,545 --> 00:49:10,945
The unitary fee is 65 and that is all
encompassing.
785
00:49:11,905 --> 00:49:15,659
Perfect, so let's talk about sizing here.
786
00:49:15,659 --> 00:49:23,500
We're getting a few questions on what we
consider to be a good stack on top of equities,
787
00:49:23,659 --> 00:49:27,980
on top of bonds, even on top of equities, bonds
and some of the other alternative sleeves that
788
00:49:27,980 --> 00:49:28,380
we offer.
789
00:49:29,144 --> 00:49:34,025
What do you think would be a reasonable way to
think about allocating to the Bitcoin for the
790
00:49:34,025 --> 00:49:36,025
average client profile?
791
00:49:36,105 --> 00:49:39,945
Yeah, let's just start with the acknowledgement
that this is spicy.
792
00:49:40,025 --> 00:49:42,585
You're taking equities and you're adding gold
and Bitcoin.
793
00:49:42,750 --> 00:49:49,469
Of all of our ETFs, this will likely be the
most volatile, probably around a 20 vol.
794
00:49:49,949 --> 00:49:55,655
And so I think for anyone allocating on behalf
of others, you need to first be aware of that
795
00:49:55,655 --> 00:49:56,695
sizing issue.
796
00:49:56,695 --> 00:50:01,494
Before we even get into the theoretical, what's
optimal, be aware that this thing is going to
797
00:50:01,494 --> 00:50:04,295
be volatile day to day just by the nature of
what it's holding.
798
00:50:04,775 --> 00:50:09,094
And if your clients are concerned about
volatile positions, you're gonna wanna
799
00:50:09,094 --> 00:50:09,815
downsize.
800
00:50:10,309 --> 00:50:13,590
That said, it being volatile also means it's
very potent.
801
00:50:13,670 --> 00:50:13,989
Right?
802
00:50:13,989 --> 00:50:16,309
You don't need a lot to make a big difference.
803
00:50:16,309 --> 00:50:21,030
So one of the most interesting use cases I
think that there is for both gold and Bitcoin
804
00:50:21,030 --> 00:50:23,030
is as a currency hedge.
805
00:50:23,474 --> 00:50:28,515
I think both gold and Bitcoin can be thought of
currencies that exist without permission
806
00:50:28,515 --> 00:50:30,115
outside of any government.
807
00:50:30,195 --> 00:50:33,954
That's what makes them so They're decentralized
currencies that are accepted around the globe.
808
00:50:33,954 --> 00:50:35,394
That's what makes them so powerful.
809
00:50:36,449 --> 00:50:43,170
But when you compare to other currencies, it's
got five or six times the vol, gold does at
810
00:50:43,170 --> 00:50:43,489
least.
811
00:50:43,489 --> 00:50:45,489
Gold has a 15 to 20 vol.
812
00:50:45,730 --> 00:50:53,255
You look at the IMF's special drawing rights
basket, which is the dollar, euro, yen, pound,
813
00:50:53,255 --> 00:50:57,015
Swiss franc, I think that basket has a vol of
like four or five.
814
00:50:57,015 --> 00:50:57,494
Right?
815
00:50:57,735 --> 00:51:01,494
So if you're an investor saying, hey, I've got
a whole bunch of US equities and I'm concerned
816
00:51:01,494 --> 00:51:07,335
about US dollar debasement or I'm concerned
about underperforming international stocks
817
00:51:07,969 --> 00:51:12,609
because a lot of that return comes from
currency, you can do a currency hedge overlay
818
00:51:12,849 --> 00:51:16,769
and you would need a pretty sizable amount of
actual currency hedge, which is pretty
819
00:51:16,769 --> 00:51:22,609
expensive, or you can do like one fifth of that
with a gold overlay and get the same potency.
820
00:51:23,414 --> 00:51:25,815
So it really depends on what you're trying to
do.
821
00:51:26,375 --> 00:51:32,934
I think this is the sort of thing that easily
five, six, 10% can be a very potent addition.
822
00:51:33,335 --> 00:51:38,579
At that 10, you end up talking about having
about 2% of the portfolio of Bitcoin, which
823
00:51:38,579 --> 00:51:42,739
tends to be, at least in my experience, I'm
talking to many financial advisers, hitting
824
00:51:42,739 --> 00:51:46,500
their limits of comfortability of how much
Bitcoin they want.
825
00:51:46,500 --> 00:51:48,500
So, you know, again, you bring that all
together.
826
00:51:48,500 --> 00:51:51,140
I think that five to 10, it is potent.
827
00:51:51,140 --> 00:51:51,780
It's volatile.
828
00:51:52,514 --> 00:51:56,594
Anything above 10% clients are really going to
notice it and how much it moves.
829
00:51:56,594 --> 00:51:58,194
Again, it's like a 20 ball thing.
830
00:51:58,194 --> 00:52:01,795
So only have that if it's a growth client who
can tolerate it.
831
00:52:02,034 --> 00:52:07,019
But even for the retirees who are concerned
about inflation or currency debasement or all
832
00:52:07,019 --> 00:52:12,140
the other reasons why you might include gold as
a diversifier, I think gold or Bitcoin is a
833
00:52:12,140 --> 00:52:12,780
diversifier.
834
00:52:12,780 --> 00:52:15,740
I think that 5% to 10% range is prudent.
835
00:52:15,820 --> 00:52:16,460
Yeah.
836
00:52:16,460 --> 00:52:21,574
And I think just to add to your, the currency
hedging part, I think what people don't, there
837
00:52:21,574 --> 00:52:26,535
are a bunch of currency hedge ETFs out there
that are trying to, you know, minimize the
838
00:52:26,535 --> 00:52:30,295
impact of global currencies, but there's a cost
to those hedges.
839
00:52:30,840 --> 00:52:31,239
Right?
840
00:52:31,239 --> 00:52:34,200
There is an actual, like that's a legitimate
cost to hedge.
841
00:52:34,200 --> 00:52:38,440
I don't think people realize you're not, you're
basically wiping out any of the returns that
842
00:52:38,440 --> 00:52:42,920
you would get from the currency that you're
trying to get exposure to.
843
00:52:42,920 --> 00:52:48,364
So gold, Bitcoin, if indeed they have a
positive risk premium, it should be a decent
844
00:52:48,364 --> 00:52:51,565
hedge that actually has positive effect.
845
00:52:51,724 --> 00:52:55,085
It's something to consider as you're thinking
about it as a currency hedge.
846
00:52:55,405 --> 00:53:02,440
With regard to the volatility, yes, again, a
one plus one, like single solution, it is very
847
00:53:02,440 --> 00:53:03,159
spicy.
848
00:53:03,400 --> 00:53:08,839
As Corey alluded to though, as part of a
portfolio, you know, if you're adding that 5%
849
00:53:08,839 --> 00:53:15,894
allocation to 10% allocation, and then you add
up the volatility of the, let's say sixtyforty
850
00:53:15,894 --> 00:53:21,494
versus sixtyfortyten, the overall portfolio
volatility doesn't budge that very much.
851
00:53:21,815 --> 00:53:21,974
Right.
852
00:53:21,974 --> 00:53:27,339
But it does, like we always talk about how
return stacking done correctly can help
853
00:53:27,339 --> 00:53:32,219
increase returns, but not necessarily like
you're stacking returns, unnecessarily stacking
854
00:53:32,219 --> 00:53:33,260
the same amount of risk.
855
00:53:33,260 --> 00:53:38,859
So if you think about stocks of 15 to 20 ball,
gold Bitcoin from, you know, 15 to 20 ball,
856
00:53:39,485 --> 00:53:40,844
that adds up to 40.
857
00:53:40,844 --> 00:53:45,164
You're not getting 40% ball here because of the
non correlation between those three asset
858
00:53:45,164 --> 00:53:45,724
classes.
859
00:53:45,724 --> 00:53:50,045
Your volatility is more towards the 18 to 20
ball, right?
860
00:53:50,364 --> 00:53:58,010
So it is spicy, but the diversification should
make it palatable over different cycles.
861
00:53:58,409 --> 00:54:03,369
So just make sure you're not putting too much
tracking error in your portfolios so that
862
00:54:03,369 --> 00:54:06,170
you're not forced to redeem this allocation.
863
00:54:06,730 --> 00:54:07,210
Okay.
864
00:54:07,849 --> 00:54:12,905
So yeah, we talked about like the spiciness of
people asking about drawdowns.
865
00:54:12,905 --> 00:54:16,505
Of course, when you have a 20%, I've talked
about this as well.
866
00:54:16,664 --> 00:54:22,585
If you have a 20% standard deviation strategy
that is reasonably normally distributed, you
867
00:54:22,585 --> 00:54:25,099
should expect three standard deviation.
868
00:54:25,180 --> 00:54:31,500
This is a decent heuristic, which is if, you
know, if it's 20% volatility, it's, and let's
869
00:54:31,500 --> 00:54:37,019
say it's a sharp ratio of one, it's 20% return
20 minuteus 20 is zero minuteus 20 is negative
870
00:54:37,019 --> 00:54:38,460
20 minuteus 20 is negative 40.
871
00:54:38,765 --> 00:54:42,204
So what should you expect is a good possible
heuristic?
872
00:54:42,204 --> 00:54:43,805
Probably a bit more than that.
873
00:54:44,204 --> 00:54:47,244
At some point, once every seven years, right?
874
00:54:47,565 --> 00:54:51,885
And so again, talking about the spiciness, but
this can happen in equities.
875
00:54:51,885 --> 00:54:52,765
This can happen in gold.
876
00:54:52,765 --> 00:54:53,644
This can happen in Bitcoin.
877
00:54:53,644 --> 00:54:57,909
Like when you combine them together, this is
something that is in the cards and hence why
878
00:54:57,909 --> 00:55:01,109
the kind of the five to 10 allocation makes
sense.
879
00:55:02,230 --> 00:55:02,630
Okay.
880
00:55:02,630 --> 00:55:06,389
I think we've answered all the major ones to
see target volatility, Bitcoin gold equal to
881
00:55:06,389 --> 00:55:07,909
gold volatility.
882
00:55:08,875 --> 00:55:11,595
Yeah, it'd become never done or some mix
between the two.
883
00:55:12,075 --> 00:55:16,635
So we haven't levered everything down to gold
volatility.
884
00:55:16,635 --> 00:55:22,075
We've just done an equal risk allocation
between gold and Bitcoin with the $100 that we
885
00:55:22,075 --> 00:55:23,139
have left top.
886
00:55:23,139 --> 00:55:27,460
So that is slightly higher than gold and
significantly lower than Bitcoin.
887
00:55:28,099 --> 00:55:30,579
I think we have a couple more minutes left.
888
00:55:30,579 --> 00:55:37,780
You know, we are, we're working on a bunch of
articles and white paper on gold that I think
889
00:55:37,780 --> 00:55:42,744
would be very useful for people who are
interested in understanding why Bitcoin, why
890
00:55:42,744 --> 00:55:44,824
gold that are coming out soon.
891
00:55:44,824 --> 00:55:45,864
Keep an eye out for that.
892
00:55:45,864 --> 00:55:46,585
You know, sign up.
893
00:55:46,585 --> 00:55:51,784
If you want to sign up to our newsletter, go to
returnstack.com and you'll see an option there
894
00:55:51,784 --> 00:55:53,750
to subscribe at the bottom of the page.
895
00:55:53,750 --> 00:55:57,909
If you're an investment advisor and want to
look at model portfolios that we run on the
896
00:55:57,909 --> 00:56:01,750
Returnstack site, go to the model portfolio
section and register.
897
00:56:01,750 --> 00:56:06,474
We'll have to have an approval process, but
then you can get access to see what we're kind
898
00:56:06,474 --> 00:56:08,954
of putting together in terms of model
portfolios.
899
00:56:08,954 --> 00:56:15,515
Corey, is there any parting words here for the
audience on this ETF?
900
00:56:15,835 --> 00:56:24,210
My parting words would be I have probably been
a gold skeptic for my entire career, and it
901
00:56:24,210 --> 00:56:31,409
really took digging into gold to understand how
gold has changed over time.
902
00:56:31,809 --> 00:56:34,465
I read all the papers on gold.
903
00:56:34,465 --> 00:56:38,224
I saw all the academic evidence that suggested
it had zero real return.
904
00:56:38,224 --> 00:56:43,905
It took a tremendous amount of effort from
Resolve's team and my team and myself digging
905
00:56:43,905 --> 00:56:47,980
into understanding how these assets really have
changed over time.
906
00:56:47,980 --> 00:56:53,659
So if your perception of something like gold or
Bitcoin is that it should have zero real
907
00:56:53,659 --> 00:56:56,460
return, reach out, let's have a conversation.
908
00:56:56,619 --> 00:56:58,779
As Drawn mentioned, we have this white paper
coming out.
909
00:56:58,779 --> 00:57:03,355
I think there's some pretty compelling evidence
that a lot of the academic studies overlook the
910
00:57:03,355 --> 00:57:10,155
very distinct regime shifts that have happened,
and the gold that you buy today in 2025 is not
911
00:57:10,155 --> 00:57:18,360
the same global gold concept you would have
bought in 1925 or 1825 or 1525.
912
00:57:18,679 --> 00:57:20,360
They are just different things.
913
00:57:20,360 --> 00:57:25,159
It's the same physical metal, nothing about the
properties of it have changed, but the
914
00:57:25,159 --> 00:57:29,664
investment properties have changed dramatically
as it has matured.
915
00:57:30,144 --> 00:57:32,224
I think that's going to happen with Bitcoin as
well.
916
00:57:32,224 --> 00:57:36,304
So if you find yourself as someone who's a gold
sceptic thinking, well, how could I use this?
917
00:57:36,304 --> 00:57:37,585
There's no cash flow.
918
00:57:37,664 --> 00:57:40,864
This isn't a traditional productive asset.
919
00:57:41,105 --> 00:57:42,130
Set up some time to have a call.
920
00:57:42,130 --> 00:57:45,250
Let's have a conversation because I think
there's some really interesting aspects of how
921
00:57:45,250 --> 00:57:50,130
gold can fit in a portfolio that really as an
investment professional surprised me as I
922
00:57:50,130 --> 00:57:51,250
really dug into it.
923
00:57:51,250 --> 00:57:51,889
Yeah.
924
00:57:51,889 --> 00:57:59,264
And we had to bring Corey biting, kicking and
scratching into the whole gold thing, but to me
925
00:57:59,264 --> 00:58:02,944
it's evident even from a portfolio construction
perspective, like let's assume that there's a
926
00:58:02,944 --> 00:58:04,224
zero rate of return, right?
927
00:58:04,224 --> 00:58:10,730
The fact that we can stack a zero cost hedge on
top of your stock and bond portfolio, even that
928
00:58:10,730 --> 00:58:11,849
would be useful, right?
929
00:58:11,849 --> 00:58:18,570
If you're not losing money on it, then you have
something that we've empirically seen and we
930
00:58:18,570 --> 00:58:23,525
can just behaviorally just ask ourselves when
is gold likely to do well, like just
931
00:58:23,525 --> 00:58:25,684
intuitively, is gold likely to do well?
932
00:58:25,684 --> 00:58:29,045
And then you look at the empirical evidence and
you'll see that yeah, your intuition was
933
00:58:29,045 --> 00:58:29,765
probably right.
934
00:58:29,844 --> 00:58:35,579
And so just the understanding of the intuition
is when gold does well, if you can stack it on
935
00:58:35,579 --> 00:58:39,739
top, even if it does provide you zero returns,
which we think it'll provide a positive ish
936
00:58:39,739 --> 00:58:40,300
premium.
937
00:58:40,460 --> 00:58:45,659
But even if you are a skeptic from a hedging
perspective, I think it makes a ton of sense.
938
00:58:45,659 --> 00:58:47,820
So those are my parting words.
939
00:58:47,985 --> 00:58:52,385
Corey, thank you for struggling through the
presentation, with a
940
00:58:52,625 --> 00:58:54,945
Thanks for everyone listening, struggling
through my voice.
941
00:58:54,945 --> 00:58:55,744
I appreciate it.
942
00:58:55,744 --> 00:59:00,385
We'll get AI to fix you over the last hour, but
thanks everybody for attending today.
943
00:59:00,385 --> 00:59:02,224
Thanks for your very thoughtful questions.
944
00:59:02,820 --> 00:59:08,099
If there's any further questions that you guys
have, again, go to returnstack.com and click on
945
00:59:08,180 --> 00:59:13,860
the team section or the contact us section and
just book a time with one of our sales
946
00:59:13,860 --> 00:59:19,204
representatives and we can help you out with
any lingering questions about the product,
947
00:59:19,204 --> 00:59:22,085
about the suite, or about gold and Bitcoin.
948
00:59:22,244 --> 00:59:24,644
Thanks again, everybody, and we'll see you on
the next round.
949
00:59:30,809 --> 00:59:35,690
Platform and leaving us a rating or review and
sharing us with friends or on social media.
950
00:59:36,010 --> 00:59:38,650
It helps new people find us and helps us grow.
951
00:59:38,969 --> 00:59:43,769
Finally, if you'd like to learn more about our
extensive research on the concept of return
952
00:59:43,769 --> 00:59:47,464
stacking, please do head over to
returnstack.com.