Episode 453: Managed Futures, Bengen's New Book, And Vanguard Personal Advisor Follies
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Sep 11, 2025
Dive into the world of managed futures, a powerful yet misunderstood tool for diversifying investment portfolios. The hosts explore Bill Bengen's latest insights on retirement strategies, emphasizing the importance of incorporating uncorrelated asset classes. They also critically assess the pros and cons of Vanguard's personal advisory services, highlighting the complexities and pitfalls of relying on a single institution for financial advice. Listener engagement adds a personal touch, as discussions revolve around achieving financial independence and optimizing portfolio strategies.
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insights INSIGHT
Managed Futures As True Diversifiers
Managed futures have essentially zero correlation to stocks, bonds, and gold, making them powerful portfolio diversifiers.
Frank argues they fit Ray Dalio's 'holy grail' principle and now have accessible ETFs like DBMF.
insights INSIGHT
Research Supports Managed Futures Benefits
Recent research (Dunn Capital) shows managed futures improve risk-reward when used as a 20% alternative sleeve.
Higher-volatility managed-futures variants can add more portfolio benefit, and new ETFs (HFMF) replicate that approach.
volunteer_activism ADVICE
Choose Managed Futures For Stability
Prefer managed futures over REITs when you want lower volatility and shallower drawdowns in a diversified portfolio.
Use managed futures to improve safe withdrawal rates rather than chasing extra long-run equity returns from REITs.
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In this episode we answer emails from Adam, Private Cowboy, and Jose. We discuss managed futures (again with references!), Bill Bengen's latest book and how it integrates into our approach, and the pros and cons of a Vanguard Personal Advisor-created portfolio and the hypocritical quandaries it creates with the gods of Simplicity.
The perfect asset allocation isn't a formula—it's a framework built on uncorrelated assets that dance to different drummers during market storms. This episode dives deep into managed futures, one of the most powerful yet misunderstood portfolio diversifiers available to individual investors.
Three listener questions explore how managed futures fit within retirement portfolios, particularly for those approaching their post-career years. Frank breaks down why managed futures have essentially zero correlation to stocks, bonds, and even gold, making them uniquely valuable during both inflationary crises (like 2022) and deflationary periods (like 2008). He references new research from Dunn Capital comparing various alternative strategies and explains how ETFs like DBMF have democratized access to institutional-quality diversification.
Beyond managed futures, the episode synthesizes Bill Bengen's latest safe withdrawal rate research with Ray Dalio's "Holy Grail" principle of uncorrelated assets. While Bengen's new book doesn't explicitly analyze alternatives, Frank connects these complementary approaches to formulate practical guidelines: maintain 40-70% equity exposure divided between growth and value, use 15-30% treasury bonds for recession protection, allocate 10-25% to alternatives, and limit cash to under 10%.
The discussion takes a critical look at cookie-cutter financial advice, particularly questioning whether paying 0.3% annually to a Vanguard advisor provides value when their recommendations often involve overlapping funds and questionable international bond allocations. Frank challenges the "worship of simplicity" that permeates financial discussions while exposing the irony that these same advisors often recommend complex multi-fund portfolios.
What emerges is a call for "system two" thinking—the willingness to incorporate new information rather than clinging to outdated formulas out of consistency.
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