Animal Spirits Podcast Talk Your Book: A Tactical Strategy That Actually Works
6 snips
Dec 22, 2025 Dan Russo, Co-Chief Investment Officer at Potomac Fund Management and expert in tactical asset allocation, joins Michael Batnick and Ben Carlson to explore the complexities of tactical investing. They discuss why diversification often fails, the intricacies of trend-following strategies, and the mechanics behind Potomac's quantitative approach. Russo highlights the importance of risk metrics, particularly maximum drawdown, and shares insights on how advisors can effectively combine different funds to meet client goals.
AI Snips
Chapters
Transcript
Episode notes
Composite Model Beats Single-Rule Timing
- Potomac uses a composite of multiple tested trading systems rather than a single rule to decide whether to be invested.
- The composite model blends uncorrelated systems to be regime-aware and answer the binary question: do you want to be invested?
Base System Plus Triggers For Regime Awareness
- Potomac layers a base system to define regime and trigger systems to exploit countertrend rallies within bearish environments.
- This design allowed them to capture short bear-market rallies in 2022 while the base system remained mostly bearish.
Use Futures And ETFs For Efficient Beta
- Use futures and ETFs to obtain cash-efficient leveraged exposure rather than gross borrowing.
- Achieve desired beta (~1.6) without large capital ties by combining futures and ETFs for efficient implementation.