YouSaid · the spoken record

Damien Bisserier

lines on the record: 43
first: 2020-12-20
most recent: 2020-12-20
sittings or episodes: 1
sources: podcast

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“It's hard. You'd rather hear nice things about yourself. Even today, I've been doing this for many years, and I still, I'd rather hear nice things, but the reality is I also really value that, you know, critical feedback. That's how I get better. And the good stuff I kind of already know, the insightful stuff are things that maybe I didn't notice or I'm blind to. And that's how I'm going to then reach that next level.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It is. I mean, I think you want to be efficient though as well. And so you have to balance the desire to provide feedback, which can be done on a regular basis with those longer, more meaningful conversations, which might be done on more of a periodic, quarterly, or semi-annual basis. But I think it's important that you spend the time to do that, that you're going to achieve a much better outcome if you create the space to evaluate these things and figure out how to improve.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Hard thing to do. And so they avoid those things, and therefore, they don't really evolve. What I found most rewarding about Bridgewater, and I think the reason why I fit in there is because I actually enjoyed the challenge of facing the things I wasn't good at and trying to improve upon those things. And sometimes it's also just acknowledging that I'm never going to be able to do those things well. That's just not who I am as a person. And so I have to design around my flaws. But you're going to get to the place you want to arrive at much quicker if you're honest with yourself about those weaknesses or those flaws or those mistakes. And that's the environment that he tried to create there. Alex and I have tried to create in our own business because that's how you drive rapid evolution. That's how you drive improvement. And frankly, that's how I think you drive fulfillment in whatever endeavor you're approaching is constantly trying to achieve better outcomes.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So, radical transparency just means that there is an active effort to constantly evaluate bad outcomes, whether that's something that resulted from a weakness that I had personally or a bad process. You want to stare at the bad outcomes and understand what contributed to those outcomes. Be very honest with each individual as to their strengths and weaknesses. Be very honest about what parts of the process are not working as desired and constantly improve and iterate. And that's how you drive an organization that continues to compete at the highest levels. It's not about just finding the magic formula and utilizing that to get rich. Organizations that are successful face challenges all the time. And if you hide from those challenges, most people don't want to look at uncomfortable truths about themselves. That that is a”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Really forged my approach not just to investing, but to life in general and how to think about what's important to me. And a lot of that came directly from him challenging me on personal choices that I was making, not just investment choices that I was making.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Doctor to coordinate all of our specialist appointments. He called her personally to this day when I talk to my mom, she asked me how Ray is doing. And I left Bridgewater in 2013. That's the kind of individual he is. He just cares. Literally, everything stopped for him and he's a busy guy. And he called my mom, who, you know, for somebody to work for him for two and a half years. And really that was the most important thing to him at that moment. And so the loyalty that people have to Ray is real and it's tremendous. And so that culture that he's created there, it's not just a cold, harsh environment where you're berated constantly. Of course, they're high standards. And he's tried to create an environment that drives excellent outcomes. And so you have to have high standards. But it's also a very caring community. And the support I got from him, from my colleagues, was really tremendous. And ultimately, I went back after a year and I moved back to the West Coast for personal reasons. But my experience there was great.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Individuals and then squeezing every ounce of productivity out of them. So it's a challenging environment, but it's incredibly enriching. And part of what he does in order to achieve that is that he really cares about the community and the members of that community. So an example was when I was there, I was three years in and I joined Bridgewater back at a time when Ray hired everybody. And so I had a personal relationship with him. But I wasn't very senior three years into my Bridgewater tenure. And my mother was diagnosed with colon cancer, was living on her own in San Diego. She was going to have to go through chemo. It was pretty advanced. At the same time, my father was going through a triple bypass and recovering from that. And I basically said, look, I need to be with my family. And Ray was very understanding. He actually allowed me to live out with my mother for a year as she went through chemo and work from there. But not only that, he gave her his personal.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There are a few people that did it, but they were at the more junior levels. And so finding people like Bob Prince and Greg Jensen, who are some of the most phenomenal investors on the planet, and having them contribute for as long as they have and continue to be completely invested in Bridgewater is an exceptional talent that Ray has. And I'll tell you, as somebody who worked for him, the reason why that happens is because Ray has an incredibly big heart. that that culture obviously drives excellence and this is a very competitive game trying to beat the markets. And so you have to find the best talent and then you have to get that talent to work harder than everybody else. That's just the reality of it. You know, Kobe Bryant wasn't what he was because he was just talented. He also worked harder than everybody else. The same thing with Michael Jordan or anybody you think about Tiger Woods, et cetera. And the same thing would go in our business. And so Ray was really talented at finding these exceptional.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There's an asp, you know, the principals talk about kind of how he approaches the job of management. And I think they're phenomenal. But what I found most enriching at Bridgewater was the community that he was able to build and cultivate, the talent that he was able, not just to find, but to retain. So it's interesting when you talk about Bridgewater, there are no senior investment professionals that ever left Bridgewater and started their own hedge fund.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I think so, Ray is a phenomenal person in many regards. The thing that he's obviously very well respected for his investment acumen and his views on things. And you're absolutely right. I think you had a good distillation of what makes him unique, that he's able to see these very compelling and very simple frameworks out of the noise of investing. And these oftentimes are frameworks that nobody else has acknowledged prior to Ray coming up with these frameworks to explain how the world works. It's like he's identifying the laws of gravity. And that's really his mission is finding truth. And that applies to the markets as well as it applies to people and how to manage people. And so I think actually, though, the thing that's underappreciated about Ray is how great of a leader he is.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It's a long-winded way of saying that I think to the extent you can find it great, but I think it's actually quite rare and that most investors we better serve by just having the right allocation to start.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Going to be able to do this on a long term sustainable basis. And this is what I was referring to as this notion of things don't just keep quadrupling and quintupling because they make a great product. That's not how the markets behave. And so there's some pretty extreme outcomes, which I think have resulted partially because of the stimulus you mentioned, partially because a lot of people are at home and there's a lot of speculative enthusiasm around certain stocks, partially because of good fundamental reasons that interest rates are low and you have a lot of technology disruption that's impacting all industries. And so you have these big differences between winners and losers. But those things can't persist forever because eventually the price reflects that optimism. And then at some point, the price is so high that you're more likely to disappoint relative to that optimism, even if the company is wildly successful. The price is basically over-reflected that very attractive outcome. And so”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A lot so that they have an edge and they're able to translate that edge into something that's attractive, but they're also wrong a lot. So the idea that individuals or the average person or even the average manager can be more right than wrong after fees and taxes is a tall order. And in our experience, most don't accomplish that. And so we view this as kind of your core set it and forget it buy and hold approach. And then if you can find alpha or managers that can concentrate and generate market outperformance, go ahead and access those managers. That would be great. And you can complement, or if you do it yourself, you know, you want to form your own views on what stocks might be the next market leaders as we come out of this pandemic. That's certainly something that I think many people have found profitable this year. And so we think there's merit in that, but also be humble about your ability to do that consistently. That one good year doesn't mean that you're”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And if you have the ability to access those managers, or if you have the ability to do it yourself, great. But in general, that's a very, very difficult thing to do. Even Buffett has underperformed the S&P for more than 10 years. So Alpha is a hard game. Alpha meaning, because I know a lot of listeners may not know what alpha is, alpha is what we refer to as active management return. So it's the return that's generated by you deviating from the market. When you say you try and join Alpha, it means you're trying to generate outperformance versus the market. And getting alpha is a hard game. There are very few people in the world that have done it successfully for long periods of time. Even the legends that you've quoted now a few times have gone through long stretches where they haven't generated any alpha. And so this was Ray's acknowledgement early on that at Bridgewater, in their alpha portfolio, their active management portfolio, their individual trades were right about 60% of the time. They were wrong 40%, which is”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“No, I would refer to that as something different than what we're trying to capture here. So, what Buffett is referring to is how do you translate skill in identifying those undervalued or undermanaged companies that are about to turn the corner and concentrating your views to try to outperform the market in those few stocks, that is an active decision. And there are some people like Buffett and others that are exceptionally good at that and they can generate a return stream that looks very different than the markets. It's going to be much more of a function of the behavior of those companies that they're concentrating in. And there are a few people in the world that can generate very attractive returns doing that. So I think that is absolutely viable. We've allocated to some of those managers over time and had success doing so. The challenge is getting access to those managers. Not a lot of them exist within the mutual fund universe, which is what most retail investors can access. There might be a handful.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Or 70% in subsequent periods. And so our view is that you're just much better off having a balance mix and not being so dependent on trying to time the bottom or the top in a particular asset class. And when you have a portfolio structure like this, it's just less sensitive to those timing concerns because usually within that portfolio, something might be doing great, but many things are doing poorly. And so it's not like you're buying everything at a top or trying to time the bottom, you know, you're basically capturing bottoms and tops at the same time and you're just less sensitive to that timing decision.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It's funny. Obviously, our advisors ourselves, and we talk to a lot of advisors, and it was interesting how stressful the crash was in February, March, and then how equally stressful the rally was because a lot of advisors were out of the market. When the rally happened and they were incredulous that this is a real thing in the midst of this historic recession to have the market rallying to that degree. And so that market timing decision is inherently difficult and very stressful. And in my experience, very few people are actually any good at it. And you see it on the positive side as well, you know, in terms of where everybody's investing today. It's the tech stocks and things that are up four or five times this year. Those are the things that people want to buy. And I can tell you, having been in this industry for a while now, that's not how things normally behave. Things don't quadruple and quintuple in a year. It's nice when it happens. But the challenge is a lot of those things can equally fall by half.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Then the average of the underlying component return. So if you took the average of the stock component, the treasury component, the tips component, et cetera, that average is a percent lower than the portfolio average return, which is really powerful from an investment perspective. And something that we don't think a lot of investors appreciate to the degree they should, partially because when you rebalance across similar things, you don't have nearly the same benefit. That that benefit exists. It's proportional to how lowly correlated the components are. This gets back to your original point of the holy grail. The holy grail isn't just a risk-reducing phenomenon. It's also, if you can find things that are lowly correlated to one another and individually are quite risky and combine them in a portfolio, you actually get a portfolio that's higher returning than the underlying components. So that is a really powerful aspect that we've been able to take advantage of in the context of the ETF.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“One thing that Alex mentioned, I think, is an important point that a lot of investors maybe don't fully appreciate, which is the benefit of rebalancing regularly. And what that means from a return perspective at the portfolio level. So we've looked at this mix of assets because we created this index going back to 1998. So we've looked at this since 1998 explicitly in the index context. We've also looked at it with similar exposures back 100 years. And what we found is by rebalancing regularly,”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So, if our part is holding all of those, say, low cost ETFs from Vanguard, which adventures would it give me as a retail investor to hold the APAR ETF compared to buy up the underlying ETFs that APAR is holding in the first place and thereby saving the cost for your ETF?”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We've built this portfolio to target about a 10% annual volatility. That's in line roughly with a 60-40 portfolio. And we think we can generate a return competitive with equity, so in excess of a 60-40 portfolio. So that's how we've designed this. And Bridgewater has a number of ways that they implement this portfolio. So it depends on how they package it. But that's how we've structured it.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Similar. Frankly, I saw that I was still at Bridgewater when that came out, and I'm not exactly sure where Tony got his allocation from. I think there was some interpretation that went into that. It wasn't literally from Ray's lips, but I'm not 100% sure about that. But there's obviously similarities to what we're doing. And again, the idea is this was the genesis of all weather for Ray, which was to create a strategy that would last for generations in his family and would not require active management. So it was the ultimate investment strategy. And that framework, even though we implemented differently, that framework is really the governing framework on how we think about asset allocation as well. And that informs how we do our risk parity portfolio.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Robbins wrote this book Money Master the Game, and the best part of that book, at least if you ask me, was this interview with Ray Dalio. And Robbins asked Dalio there in the book, if you could leave a portfolio for your kids that could not be changed, what would the asset allocation be? And Dalio allegedly said something like 40% long-term bonds, 15% medium-term bonds, 30% in equities, and 7.5% in commodities and 7.5% in gold. Is that similar to what you guys are doing in your ATF? And are those percentages even correct?”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And then the ETF has been our really a kind of a continuation of that effort, but really taking some of those concepts, refining them, and then putting them in an easy to invest liquid package.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“One of the reasons why I decided Years ago, he noticed this. So, after those initial conversations with Bridgewater, his reaction was, this is a really interesting concept. Let me try to figure this out on my own. And so he ended up writing a book on the topic of asset allocation. Balanced asset allocation. It was published by Wiley in 2014. That's how he approached the advisory business, which was roll up your sleeves, do your own independent research, and only then recommend it to your clients. And in this particular case, he thought this deserved to get better recognition than just for the few sophisticated institutional investors that were adopting this approach. And so he wrote that book to really provide that transparency to the masses to be able to implement these concepts on their own.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“When people today allocate to fixed income in general, advisors, individuals, they're unhappy with the yields they get from government bonds and the really safe stuff, the investment grade stuff. And so normally those fixed income portfolios are much riskier than what's implied by the broader bond market, which is the more conventional 40% that most investors would target years ago. So today that 40% is invested in things like high yield and sometimes REITs because they generate income and things like MLPs, which are master limited partnerships that invest in pipelines and things like that. So there's all sorts of income generating things that get thrown into the fixed income bucket that are very equity-like because investors are reaching for yield.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“To happen in an inflationary environment, real estate struggles because it's such an asset that people buy with leverage. And so the cost of leverage goes up in that environment. And so there's a headwind there associated with rising interest rates that you don't have with some of the other inflation hedges we mentioned. But as a component of that inflation hedging portfolio, I think it could make sense. It's just in our view it didn't benefit the portfolio to the degree necessary to include it.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So we've looked at public market reads and the reality is they tend to be very correlated with the broader stock market. So similar to what we discussed earlier, they tend to be more equity-like than real estate-like. And so we've looked at it as a potential inflation hedging exposure, but what we found is that it's not as tight of a fit to inflation as the other things that we hold in the portfolio, namely commodities, different types of industrial commodities and gold. So we made the choice to utilize those exposures as opposed to REITs, but it's certainly something we continue to look at. And for, I think, retail investors, it could make sense as a small allocation as part of their inflation hedging portfolio that challenge with REITs and real estate generally is that it's not clear that it's a pure hedge to inflation in the way the commodities are because of the sensitivity to interest rates. So as interest rates rise, which tends”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Related to real estate or royalties or different types of credit and equity securities that might be different in profile or different in terms of active management aspects of it that could be complementary to this. But from a retail investor perspective where it's harder to access those alternatives, we believe all roads do lead to this as a more efficient way to hold assets.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The perspective of a retail investor, we believe that this approach or some derivation of this approach is the most efficient way to hold assets, that this will lead to the most reliable outcome over the long term. And it's for the reasons we discussed related to the diversification to different economic outcomes that you can establish a portfolio that can meet a return objective that just has less variation year to year, decade to decade over time. And so from our perspective, all roads do lead to this as the most efficient way to hold public markets. There are, of course, other return streams that investors can access that would be classified as alternative return streams, maybe hedge funds, which are more related to manager skill rather than holding markets or potentially in private assets where you can get pretty unique return streams.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Traditional approach and why it's made up the way it is. I think the way most people think about building a portfolio is they have two menu items.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Time. And so you can ask how would that be if it's a better path, if it's less volatile? And it's because it is the less traveled path. You ask somebody how they're doing. It's all about the market. And the market means the stock market. That's what's in the news. That's what's on TV. That's what's advertised. And so the focus is on that market, which is what Damon described as the traditional portfolio, which is dominated by the stock market. And so when you're on this less volatile path and you're looking over the ravine to the other side where the other investors are in that more volatile path, it's hard to hold on when you're focused on maybe the shorter term results or how others are doing. So I think that's a very important distinction here is just make sure everybody's aware that we're talking about two different types of portfolios. And so let's go back to the traditional approach. It's understandable why that's the traditional.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Why don't we start at a high level and work our way down just so that we all end in the same place? So you can think of it as like a traveler. Every portfolio sets on a journey to go from point A to point B and hopefully point B is higher than point A. And these journeys go through peaks and valleys. And you can think of that as volatility, right? There's ups and downs. And the journey ends when the strategy is abandoned. And hopefully it's not at the trough. And so investors have a choice of what path they want to take from A to B. And we can divide it up into two. There's the traditional path, which I'll describe. And then there's the risk parity. We can think of it as like an independent path. That's the path that managers like Ray Dalia follow because they think it's a better path and better meaning less volatile way to get from point A to point B. The big risk of taking that route is abandoning it at the wrong”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Of that in the broader equity allocation we have. So that's how we adjust for that. But we found that in the context of this portfolio, the ETF that we're managing, that is a more efficient higher returning way to get the commodity exposure.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We hold gold on a direct basis. So we invest in the physical metal. Whereas with the other commodities, we access them through the commodity producer equities. And we do that for a couple reasons. Commodity producer equities, in our view, based on our research, have higher returns long term than commodity futures. So some risk parity strategies utilize the futures. We think we're going to generate a higher return with the commodity producing equities. There's also, from a taxable investor perspective, some pretty significant tax advantages to utilizing the equities. So you can essentially get deferred long-term cap gains instead of realized income from the futures. That's a pretty big deal over time. And then we can, you know, we can build the portfolio in such a way that we can be cognizant of the equity risk we're picking up in the commodity equity exposure and either hedge that through the gold or hold a little bit less.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“When you think about diversification, you really want to consider it during the worst of times because that's when it's there to protect you during the worst periods. And if you think about the 08s and the first quarter of this year in 2020, when you had a massive sell-off, just about every stock went down. And it's the real diversifiers like treasuries. And we'll get into this in gold and inflation protected bonds, like TIPS that go the other way. And so you've heard this saying of during a crisis, diversification doesn't work because all correlations go to one. It's true for a lot of these assets, but for many others, the correlation actually goes to negative one. It actually does its best during the worst of times. And those are the diversifiers that are truly valuable. And so we'll talk about that a little bit later.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Today. And so when you look across different sectors, they tend to be very correlated to one another. You don't usually find different equity sectors that have zero correlation just because of those common risk factors. Now that said, you will benefit by having as much diversification as you can within your equity allocation. And it is important to think about equities that behave differently across different environments. So earnings that are different across different economic environments. And that's why we do utilize commodity producer equities in that way, but we are also honest with the fact that those are not zero correlated to stocks. They are probably 0.6 correlated to stocks. And so what we also hold is gold. And gold is pretty close to zero correlated with stocks. And so when you put the two together, you get a package of commodity exposures that are actually quite lowly correlated to the broader equity markets. The one thing I would add is”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A great observation. So that's true And businesses have earnings that are driven by different factors. So you're right that there is diversification across different industry sectors. But the challenge is that when you invest in equities, you also have certain risk factors in common, namely economic risk. So all of those earnings tend to be better in a strong economy and they tend to be lower in a weak economy. So that is a common factor across all equities, no matter what sector you invest in. Similarly, interest rates can have an impact. So if you think about what an equity is, it's a present value of all those earnings. And that's impacted by how you discount those earnings. And many companies utilize leverage as well. So they're very directly sensitive to the cost of leverage, which is the level of interest rates. So those common factors tend to dominate the behavior of equity markets data.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And the idea of the Holy Grail is finding a few things that are unrelated to each other and taking a much greater advantage of diversification. And it's a simple concept, but in practice, very few people do it. So risk parity is our approach to implementing that with liquid public markets. And so essentially, if you think about the asset classes we use there, in addition to equities, we identify other assets that are reliably different than equities but still have attractive returns on their own. And then to the degree that they come packaged up in a lower returning form, we actually make adjustments, which we can describe. But essentially the other asset classes would be treasuries, would be inflation protected securities, different types of commodities, both commodity-related equities as well as gold. And all of those things are relatively lowly correlated to the stock market. So when you combine those things with stocks, you get something that's a”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It's probably not possible for a retail investor to find $15 uncorrelated bets. There is the possibility to incorporate four or five uncorrelated return streams. You just accessing liquid public markets in an inexpensive, efficient way. And that's essentially what risk parity is. So if you think about the traditional approach 60-40 or some derivation of that, that is primarily invested in equity and equity-like risk. And so you have to check one number to figure out how you did day to day in your portfolio. Just look at what the stock market did. That's why when you turn on the CNBC, they talk about stocks primarily. All that anybody cares about because their portfolios are concentrated to that one thing.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And so that was about as high praise as I've heard from Ray after initial meeting. And so I gave Alex a call. I gave him the feedback. And Alex said, you know, I'm flattered. I would love to spend time working with you guys out there. But my family is here in Los Angeles. And so could I open an office in Los Angeles? And I said, no, I've been trying that for years. And I don't think it's going to work. And so he said, well, while we're on the topic, would you ever consider working with me? And so that was the genesis of what ultimately became the firm that we launched, which was Advanced Research Investment Solutions. And we later combined forces with Evoke Advisors. But that was, I think, the initial seed to the idea.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A memorable meeting because Ray had a unique reaction after the meeting. It was the first time he had met Alex and Alex had had a good back and forth with him. And he grabbed me in the hallway afterwards and said, hey, that guy I was talking to has good common sense we should hire.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Going back in time, I started at Merrill Lynch as a financial advisor. And what's interesting is when you come in, they give you a phone and a computer and they say, go get clients. And as more of an investor rather than a salesperson, I set out to try to find what I thought was the best portfolio for clients. And it's been this lifelong journey. So this is over 20 years ago. And as I was going through this process, I discovered a firm that I thought was particularly insightful Bridgewater Associates, largest hedge fund in the world. And they're just very thoughtful about how they build portfolios. And so I started spending a lot of time learning about their perspective, which I thought was different and unique and made a lot of sense to me. And I met Damien at Bridgewater. And he was there for nine years. It all kind of came together at a particular meeting, Damien and I had with Ray Dalio.”
2020-12-20 · We Study Billionaires · TIP328: Balanced Portfolio Allocation - w/ Damien Bisserier & Alex Shahidi (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT