Get Think Tanked Distilled with Bob Elliott

Bob Elliott spent 15 years at Bridgewater Associates working as Ray Dalio’s right hand man, creating investment strategies across all major asset classes. Today, he is the CEO and Chief Investment Officer of Unlimited, which uses machine learning to replicate some of the same hedge fund strategies but does so in a more cost-effective way. He joins the ETF Think Tank to talk about the challenges of entrepreneurship and why he believes the 2/20 strategies should be available to more investors.

The overall problem that Unlimited is looking to solve is how do you find a way to marry the investment returns of hedge fund managers to an investment vehicle that manages to lower fees and creates tax efficiencies for everyday investors. He found ETFs to be the ideal vehicle for this and wants to bring low-cost index ETFs to the 2/20 world.

Elliott is essentially trying to solve two problems – how do you lower fees and how do you lower taxes. The traditional hedge fund is very expensive to mine alpha. His company uses technology to “look over the shoulder” of analysts and build long/short positions in his own portfolios. He believes that his company can offer 2/20 style returns to retail investors at a cost of under 100 basis points. His goal is to reduce fees by ¾ and reduce tax liabilities by half.

What was the lightbulb moment that made Elliott take the plunge? He believed that creating access in a better structure was better than creating more wealth for wealthy people. His goal was always about bringing that understanding and making it available to everyone. His company actually started building that strategy before it even knew the benefits of the ETF structure. They looked for the best wrapper after they had the strategy.

What about positioning in today’s markets? Elliott’s systematic process looks back 30 years. He finds this period interesting because hedge fund managers have as low confidence today as they ever have. They are running low risk and low leverage. Having low risk in a highly uncertain environment is itself an inherently alpha-generating process. They have low risk equity positions. They have low duration risk in fixed income. They are adding some gold and commodities. Some are shorting tech stocks, but there is a general trend of expanding outside of mega-cap tech.

Other key takeaways:

  • What are Bridgewater investment committee meetings like? The process is centered around the fundamental rules that drive markets. Then, the ideas are tested and assessed to see 1) if it works and 2) if it is repeatable. We needed a rigorous approach that is durable and viable over time.
  • Alternatives do not work all the time, but Elliott believes that retail investors shouldn’t necessarily be locked out of access to them. These strategies have traditionally only been available to endowments or sovereign wealth funds. It is about access to these strategies.
  • Elliott emphasizes one main point – He is not worried about the return piece of these strategies. He’s focused on the tax and fee piece of it. Hedge funds do not have a performance problem. They have a fee problem and a tax problem.
  • Why does Elliott focus on Vanguard funds? They’ve made it easy to get exposure to sectors, indices, or factors for almost no cost. You also get the benefit of the efficiency and liquidity of those funds. We think investors are better off using those ETFs than trying to build up the securities ourselves.

You can watch a replay of this virtual happy hour on our YouTube channel here. While there, subscribe to our channel to stay up to date on our latest content.

Disclosure

All investments involve risk, including possible loss of principal.

The material provided here is for informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

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Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Toroso nor any of its affiliates guarantees any rate of return or the return of capital invested. This commentary material is available for informational purposes only and nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security and nothing herein should be construed as such. All investment strategies and investments involve risk of loss, including the possible loss of all amounts invested, and nothing herein should be construed as a guarantee of any specific outcome or profit.  While we have gathered the information presented herein from sources that we believe to be reliable, we cannot guarantee the accuracy or completeness of the information presented and the information presented should not be relied upon as such. Any opinions expressed herein are our opinions and are current only as of the date of distribution, and are subject to change without notice. We disclaim any obligation to provide revised opinions in the event of changed circumstances.

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Get Think Tanked with Bob Elliott

Get Think Tanked with Bob Elliott

Bob Elliott spent 15 years at Bridgewater Associates working as Ray Dalio’s

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