Top Traders Unplugged OI16: Return Stacking: Form, Function & Friction ft. Corey Hoffstein and Adam Butler
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Jun 4, 2025 Corey Hoffstein, co-founder of Return Stack Portfolio Solutions and a pioneer in quantitative investment strategies, and Adam Butler, Chief Investment Officer at Resolve Asset Management, dive into the mechanics of return stacking in ETFs. They reveal how blending top-down and bottom-up strategies can enhance diversification and performance. The duo discusses the pitfalls of mutual funds compared to ETFs, liquidity challenges, and the intricate dynamics of trend-following strategies, unpacking what it truly means to package active strategies for public investment.
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Return Stacking Origin Story
- Return stacking encapsulates the concept of portable alpha, allowing investors to keep core beta exposures and seek alpha in more efficient ways.
- Corey Hoffstein and Adam Butler developed ETF products that implement this institutional idea for individual investors and wealth managers.
ETF vs Mutual Fund Constraints
- Mutual funds can trade a broader range of futures markets with ease than ETFs due to operational constraints in ETFs.
- ETFs offer benefits like tax advantages and intraday liquidity, but have to deal with more liquidity and market making challenges.
ETF Bid-Ask Spread Realities
- ETF bid-ask spreads can be around 20-30 basis points on average for less liquid markets, widening during market stress.
- Institutional investors can obtain tighter fills through desks, but retail investors might face wider spreads in active derivative-based ETFs.