Explore the intriguing world of portable alpha, an investment strategy that enhances returns by blending traditional and alternative assets. Learn how capital-efficient ETFs like RSSB enable investors to stack returns and optimize portfolios. The discussion dives into strategies for maximizing portfolio efficiency, using U.S. Treasury futures, and achieving diversification. Discover innovative ways to construct portfolios that tackle common funding challenges while enhancing performance. Get ready for a fresh perspective on investment strategies!
Portable alpha allows investors to combine alternative strategies with traditional stock and bond exposure, enhancing overall portfolio returns efficiently.
The Return Stacked Global Stocks & Bonds ETF (RSSB) exemplifies return stacking by offering core equity and Treasury futures exposure in a cost-effective manner.
Deep dives
Introduction to Return Stacking
Return stacking aims to revolutionize traditional portfolio construction by allowing investors to maintain core stock and bond exposure while introducing alternative investment strategies. This concept involves investing a dollar with a structure that provides a dollar of core equity or bond exposure alongside an additional dollar dedicated to alternative assets. The Return Stack suite of exchange-traded funds (ETFs) reflects this strategy, having shown rapid growth by nearing $840 million in assets shortly after its launch. With these tools, investors can enhance their diversification and rethink investment allocation to achieve improved returns.
Understanding Portable Alpha
Portable alpha is a sophisticated investment strategy designed to generate excess returns by allowing investors to leverage their cash reserves while maintaining traditional exposure to asset classes like bonds or stocks. Originating from strategies used by institutions like PIMCO in the 1980s, this approach uncouples alpha generation from asset classes and helps investors avoid traditional challenges in outperforming benchmarks. By using derivatives like futures, investors can deploy leftover cash creatively to enhance overall portfolio returns without the need to outperform the historical performance of stocks or bonds. This flexibility in capital allocation gives investors an edge by allowing them to stack alternative strategies on top of their existing core investments.
The Mechanics of RSSB
The Return Stacked Global Stocks and Bonds ETF (RSSB) exemplifies the principles of return stacking by providing exposure to both global equities and U.S. Treasuries simultaneously. By investing in this ETF, a dollar invested yields an equivalent dollar's worth of core equity exposure and another dollar's worth of treasury futures while maintaining a cost-efficient funding structure that historically aligns with T-bill rates. This innovative structure allows investors to achieve greater exposure with a smaller capital outlay, enabling the stacking of alternative assets without the need to liquidate existing stock and bond positions. The design gives investors the freedom to customize their portfolios and incorporate alternative strategies that match their unique investment goals.
Strategic Stacking for Diversification
Using the return stacking framework, investors can think of alternative strategies or asset classes as modular building blocks for their portfolios, allowing for customization based on diverse objectives. Whether seeking to improve performance, achieve diversification, or safeguard against macroeconomic uncertainties, the various stacking options available provide flexibility in portfolio construction. Stacking can include risk-managed strategies like trend following or market risk transfer, alongside traditional equities and bonds to create a more resilient investment mix. This modular approach highlights the importance of considering correlations and choosing alternatives that complement rather than compete with existing weighted assets.
Instead of trying to pick stocks better, what if you simply added the return of high-conviction, alternative strategies on top of your asset allocation?
That’s the opportunity portable alpha unlocks for allocators.
Join us for an exclusive webinar where we reveal how capital-efficient ETFs can be used to “port” the returns of any alternative investment on top of your asset allocation.
In this educational session, we will:
Explain what portable alpha is, where it came from, and what problems it solves for allocators
Demonstrate how the Return Stacked® Global Stocks & Bonds ETF (RSSB) enables anyone to implement portable alpha
Discuss key considerations in running a portable alpha approach
Provide a live demonstration of how investors can evaluate different portable alpha ideas
Perfect For:
Investment professionals seeking to enhance their portfolio construction toolkit.
Advisors looking to provide better diversification solutions for their clients.
Advisors looking to introduce unique sources of alpha for their clients.
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