YouSaid · the spoken record

Andrew Beer

lines on the record: 130
first: 2023-09-14
most recent: 2023-09-14
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“But imagine if everything goes up and you're the guy who's down. Looking for new job. And so that's the very, very, very human and structural reason why you have 10% of your portfolio in something that doesn't care what it doesn't, these are computers. They don't have to retract research statements. They don't have to talk to clients. They decide a month ago they decided crude oil was going down. This month they decided it's going up and they can decide it's going down again in three months. And that nimbleness, that ability to change your mind to do it efficiently is a great complement to a portfolio that is slow moving.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“We're selling all of our bonds. We're selling our growth stocks. We're buying bonds. We're doing all this other stuff. You're going to be like, God, that's really, really, really interesting. I'd like to find money back now, please. Because you've lost your mind, right? You're not the steady hand of the wheel anymore. I'm supposed to be the one, or as I should say, you know, you as the client are supposed to be the one who's who panics about this stuff. Your advisor is supposed to be the one, the steady hand through the seas. And now let's say the advisor does change their mind and they're wrong. Had a great business, you just blew it up You've got clients who, if everybody goes down like last year and you go down, Your clients aren't happy, but you're okay. They don't expect you to be a hero.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“It's making money in areas that you wouldn't otherwise invest in yourself. But what they really make the big money is when the world changes faster than advisors, model allocators, et cetera, can react. Because it's really hard to go back to your client and tell them that you think the world may have changed and you're going to make a wholesale change in your portfolio. So I go back to you, Jack, and I say, okay, so I know last December we told you and we showed you data that showed that 60% of economists in September thought that there would be no rate hikes next year. I know we told you it was transitory. We know told you this. It's going to be disrupted away. There's never inflation's ever coming back. Well. We've totally changed our mind.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Was this esoteric area where some people went into it. Today, it's pretty commoditized, but the fee structure, like I mentioned about hedge funds, where still a lot more of it goes to them than we wanted when we were looking at investing in the space. But the reason it generates its value additive to your portfolio over time is because it's going to react in a way that your financial advisor is not going to react. Your financial advisor, first of all, is not going to bet on crude oil collapsing 20% over the next six months. So it's something they can bet on that.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Right. So it goes back to this idea that this business is designed to move slowly and it's run by human beings. And I would just say to make a point about managed futures. Guys who've gone into the Manichutra space are technical and they want to talk to guys who are technical. They are engineers by training and so they want to describe things like Contango and roles and this and that other things. I find that totally uninteresting from an invested perspective because to me it's about, as you say, why should this thing do well over time and why and how is it good for me? And in a sense, but the people in the space, this whole space has been on a 30-year path toward commoditization, right? These guys are using computers to figure out whether futures contracts are going up or down. Who knew how to do that in the early 1990s? You know, like when I started at this firm called Bao Post, I mean, you couldn't get, it's really hard to get good data. You had Bloomberg, but even getting the”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“So go just you buy a futures contract, you buy an ETF. But the way these guys are set up is basically, you know, if you want to bet that oil is going up or you want to bet it's going down, right? Waves go up or down, then this is the way that we implement it. And so in 2015, we basically said this is the best damn strategy we've seen from a diversification perspective. And it's one of the worst strategies to actually try to get to make into a good investment for a variety of reasons. So let's try to build a better way to do it.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Three weeks later, it's at 85. A lot of people are going to sell it, cut back. When I was managing portfolios, it's so hard not to take chips off the table because I just bought it lower from here and I can totally see it coming back, going back to that level. So what these guys do is they basically kind of scan the markets and they're looking for these kind of the beginning of waves. And so when interest rates start going up, they detect it early and they jump on it. When the dollars started to get strong, they jump in it. When equities started to go down, they jump on it. And so they're not first into the trade, but they tend to ride it a lot longer than a normal human being can ride it. So it's a little bit different from equity longshore. The reason it's called futures is because if you want to bet that crude oil prices are going up, it's a really bad idea to go buy barrels of crude oil and put them in your garage.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“So it's just Mana Chutr. So Mana Chutr's, I just wrote a paper on this in an institutional investor. These guys build wave detectors, right? They are a much smarter, modern version of those chartists who would say this thing is breaking out and therefore it's going to keep going up. So they hopefully apply a bit more math to it and try to come up with. But what they do is they build these wave detectors. And so what happens is when prices move, I mentioned this very human response, right? So you bought a stock yesterday at 100. Forget the stock. Let's say you bought crude oil, right? And you bought it at 75. You bought an ETF that does it.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Problem is, you don't have a good third leg to the stool when you have real estate, but then real estate's going up with stocks and bonds. When you've got this, when everything's going up and down together, you effectively have just, you know, you're buttressing the existing legs of the stool. You're not adding a third leg. Manichutras is really a third leg. So it creates your, it does give you a better chance of having your clients a staple ride, not a scary roller coaster, but a smoother ride because it kicks in when you need it the most. But it's also a very challenging space to invest in and to describe, which is why we came at it from a very different perspective.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so this is a strategy called Manage Futures, or some people call it as CTAs. And basically, it's the most valuable diversifier. That you can put into portfolio if you care about liquidity and stuff like that. So just the rough characteristics of the strategy, guys who've been doing this for a living over the past 20 years have had no correlation to stocks and bonds. They've had returns of between stocks and bonds, not quite as good as stocks, but better than bonds. And they've had, and they went up during the dot-com crisis. They went up a lot during the GFC, and they went up a lot last year. So it is from a diversification perspective. You just say, I'm going to try to construct the right.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“So that 26 performance of the long short basket, you're saying they charge 600 basis points of fees, and that's 2% management or maybe a little bit less management fees. And then the carry of 20% or something like that of the carry. So that's why it was 600 basis points because when they do well, they get that, yeah.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“From Russian oligarchs or selling their yachts or something. And we went up 23. We didn't do quite as well as they did before fees, but again, we're charging a quarter of the fees, six of the fees that these guys were charging last year. And so our view is that if you want to be in the space and you want to be happy in five years or ten years, you got to pick a strategy that's going to really do, it's going to actually have some demonstrable benefit as opposed to something that just looks like a disaster relative to stocks and bonds in the 2010s. So you got to really focus on that. And then you got to find the right way to invest.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Hedge funds do a lot of different things. Let's boil it down into, first of all, what do they do that's valuable? There's some things they do that are really valuable that we can't copy. There are a couple things they do that are really valuable that we can copy, and let's do that, and so we manage an ETF in the US that was up 23% last year. Not because of us, you know, not our great picks and our calls, but because the underlying managers Got inflation right. And so they were up 20, which was amazing. We were up 23 because we were cheaper because they're up 20 was really up 26, let's say, right? And then they took 600 basis points of fees and they all went and bought, you know.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“I wrote an editorial for the Financial Times several years ago. 80% of the value creation goes to them, not you. You take 100% of the risk and get 20% of the benefits, and 80% of it goes to them. Why? Why do that? And so there are, if you, but if you look at 100 of these guys, you can always find the guy who looks unbeatable today. The problem is that guy is your embarrassing, awkward conversation in six months or a year. And so, but it persists because a lot of people are in that business, right? They tell their clients, we're going to find the best guy. What they do is they find the guy who was the best. And back to your point about Peter Lynch and Magellan, you can make the same analysis with ARC. You can do all sorts of different things. So take a step back. So we... Not product sales guys, right? Rather, what we do is we say.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Oh, absolutely. I mean, it's basically look the hedge fund industry has gone through a very. It's gone through a process of institutionalization. But the fees that people pay You shoot yourself in the foot, right? There is a, so while walk us through”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“And so even beating this year, it's like last year was awful. Look what happens to rates. Oh, but don't worry. By the end of this year, we'll be back to the old party. Now we're not. And so as time goes on, it's sinking into people that wow, something really, really big has changed. And this is going to reverberate through portfolios, through markets, through all these different things. And I think that's the most fascinating intellectual question today if you're an advisor.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“And clients don't want a scary roller coaster, but what do you do when all of your tools, all of your diversification tools that used to kind of offset each other now seem to be moving up and down? They all went up in January. They all went down in February. They all went up last month. Maybe they'll go down, or they all went down last month, maybe they'll go up again this month. And so there's an existential crisis on the wealth management side in terms of how do you plan for the next 10 years. And people aren't talking about it nearly as much as they should because I think people were basically, you know, I think one of the, when the world changes fast, everyone hopes it's not going to stick.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Equities get crushed again. Bonds don't really go up a lot, but they don't go down a lot either. Last year they both go down. So, what do you do when you're sitting in front of a client and say, How do I give you a smoother ride? And the old playbook is now a scary roller coaster”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“I've got a 5% allocation emerging markets not doing well this month, they shouldn't be tinkering in it and selling it and buying it or moving in and out of funds, et cetera. So it's a really, really positive force about 80% of the time. But 20% of the time they're pointing in the same direction when everything's gone the wrong way. And that's what happened last year. Stocks and bonds both went down. And the most interesting thing right now is that we've gone through this, everybody, you and I and everybody else has grown up in this world where stocks and bonds hedge each other. One goes up this year, then the other one goes down. In 2000 through 2002, equities go down 50% bonds soar during that period of time. And you get a smoother ride. In 2008,”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“People couldn't believe that inflation was in because it required them to go to their clients and say, hey, that stuff I told you six months ago was wrong. I'm changing my mind. Remember, I was only putting you into tech stocks because those were going to be the best opportunities. I've got all these fang stocks. They'll never go down when interest rates are zero. I'm buying 10-year AA-rated bonds for you with a 1.5% yield, and you should be happy about it. And so six months later, that's looking really scary for people. I criticize it, but I think one of the best things that's been done on the asset management side in the wealth management side is actually the growth of these stable model portfolios because they are designed to help that person say”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Between now and when you die or when you retire, with the least stress amount along the way. You know, we've got this chart that we show where we say, hey, we've got to, you know, we love this particular hedge fund strategy. It can statistically have a big impact on your portfolio. And I show kind of these charts, these kind of statistically inclined charts on it. And then I say, I will tell you that there's not a single client in America. Hugged to their advisor after 20 years for raising their sharp ratio. And so when you're thinking about investment opportunities and you're thinking about why people make the decisions they've been, it's, yes, there's an economic side to it, but it's the other side that's really powerful. And so what happened if you just think about the past few years? In early 2022,”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. Right. And that's, and I, and so, I mean, the genius trade, right? If you wanted to be one of the best performing hedge funds out there, you would have loaded up on Nasdaq in 2010 and gone home and charged people 20% a year for that, which frankly kind of, I mean, you look actually a lot of hedge funds kind of actually look like that. And those guys, you know, are now multi-billionaires. The issue of changing performance, it's just a wired end to us, right? It's exciting, right? You feel like you found, because again, the whole, I think if you're thinking about investing, right? Investing is not something that is cold and objective, that happens on paper. Objective, it's a very emotional experience. And you talk to your financial advisor and your financial advisor is trying to assure you that I can help you grow your money.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Inflows and outflows. There are a lot of anecdotes of folks who made over 100% last year or 30%, 40% last year, shorting treasuries, going long oil, all sorts of strategies that are a lot of volatility last year and a lot of room for outperformance just because the range of outcomes was so wide, but have hedge fund managers, and it matters how you define the hedge fund community. Have they, we know they have underperformed the market, including their very high fees, but have they outperformed the market without fees at all? Because even though you could say, oh, yes, these hedge fund managers, they're so precious, they went out of large cap stocks and they did these strategies. Having a lot of those alternative strategies underperformed over the past decade when the real thing to do was just go to sleep.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“So, yeah, I am familiar with the chase the, you know, the horse that just won the last race type of strategy that's familiar on financial networks. It's familiar with financial strategists. And I'm sure it's familiar with asset allocators. And I'll give the perfect example is not a lot of people were talking about floating rate strategies. I mean, I'm sure they were, but not a lot in 2021. And now everyone wants floating rate strategies, but it's like, guys, you missed it. Rates are at 5.5%. The time to get into floating rate strategies was two years ago. And oh, growth has been outperforming. Everyone is always chasing performance. I suppose one narrative is Pewter Lynch, fantastic investor, mutual fund manager, so much of the money went into Peter Lynch's fund right after they just had a phenomenal year. And so actually the realized returns of the managed dollar was much less than the returns of the fund if it didn't have those hot.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“They don't change their mind every quarter in their portfolios. They want to put things in and not change it for the next 10 years. But about 20% of the time, the world changes a lot faster. And those are the times like 2022 where you really need certain hedge fund strategies that can adapt to those market conditions.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“Hedge funds can. And so a lot of hedge funds in early 2022 said, Oh, this is getting real. And so they did some things. They said, you know, we're not going to own bonds anymore. We're going to short treasuries and bet that rates are going up. The US is going to keep raising rates. That's going to have all sorts of impacts in the currency and other markets. The alpha, this thing that we all want that comes from active management is often because people change their mind. And the thing is most of us, most of the asset management industry in general, like you think about the pension plan down the street.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“And so, boom, inflation starts to come back. What did they do? Nothing at first. At first, they have to say, oh, no, no, no. It's ephemeral. It's the ports in LA. It's this, it's that. It's all these different things. And so people didn't believe inflation was coming back because they needed to believe it wasn't coming back because they told their clients the year before it wasn't coming back and they're not supposed to change their mind every year.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“The great advantage hedge funds have is that they are less constrained, that they can change their minds. So the really fascinating thing about the asset management industry is that the whole industry is built to move slowly. You know, if you go talk to your financial advisor and your financial advisor is going to give you a 10-year plan, and we're going to own this much S&P and this much, these things. And as though anybody has any clue what these things are going to do over the next 10 years. But the whole ethos of it is were the steady hand at the wheel. And so you get to the end of 2021 and the steady hands at the wheel all were betting that rates would stay low forever.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“So we do something called hedge fund replication, which is actually a really simple idea, which is that if you can identify what these hedge funds are doing, but you can do the same thing that they're doing, but do it more cheaply, you do better over time. You get the same quality of what they're doing. And then what we try to do is then also deliver it in ETFs. In Europe, we deliver it in the versions of mutual funds. And so as a result, what you want is people to you want to take the good things that heads are doing, but then simply repackage it in a simple and straightforward, easy-to-access way. And so this only works in certain circumstances. There are a lot of things that hedge funds do that are truly esoteric. But I've been in the hedge fund industry for nearly 30 years. It's not that mysterious a lot of people try to frame it as mysterious because it's great for justifying high fees and things. But you talk to actual hedge funds about what they do.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT
“That's a good question. So, actually, we just changed our name to DBI officially as of last week. I think people often talk about alpha and beta being separate. Beta is the cheap, easy thing that anybody can get, whereas alpha is this esoteric thing. The reality is they're interconnected. If you buy equities at the right time or you buy bonds at the right time, you can generate an enormous amount of alpha through those kinds of regular decisions over time. So for us, dynamic beta, what it really meant was that if you want to understand how hedge funds are making money, then the thing you want to understand what their beta's exposures are because they change over time. So the guys who liked value stocks before might like tech stocks now, they might like emerging market stocks later. It's really trying to understand that. And so our business is really built around the idea of you want to find the right betas at the right time and invest in them. And then we have a particular way of approaching that.”
2023-09-14 · Forward Guidance · Andrew Beer: Hedge Funds Charge Way, Way Too Much · IDENTIFIED FROM THE TRANSCRIPT