BOB ELLIOTT | from Unlimited Funds

In this episode I'm joined by Bob Elliott the co-founder and CEO of Unlimited Funds, for an eye-opening exploration of hedge funds and their role in modern investing. With years of experience as a macro investor at Ray Dalio's Bridgewater Associates, Bob brings a wealth of knowledge, breaking down complex concepts into actionable insights for investors of all levels.

A key focus of the discussion is understanding the true cost of hedge fund investments, particularly the impact of fees. Bob demystifies the standard “2 and 20” fee structure—2% management fees and 20% performance fees—which can significantly reduce investor returns. He stresses the importance of evaluating returns “net of fees” to get a clearer picture of what you’re actually earning. This lesson is critical for anyone considering hedge fund investments.

Bob also shares a personal anecdote from his early days trading natural gas, highlighting the value of humility in investing. Without a unique edge or deep market understanding, even the most confident strategies can falter. This perspective serves as a reminder that success in investing often requires patience, discipline, and a willingness to learn from mistakes.

The episode also explores how Unlimited, Bob’s company, is revolutionizing access to hedge fund strategies. By offering ETF-based solutions, Unlimited enables everyday investors to tap into sophisticated, hedge fund-like strategies without the traditional barriers of high fees and exclusivity. This democratization of investing is a game-changer, making advanced portfolio management accessible to a broader audience.

Another highlight is the discussion on diversification. Bob explains that true diversification goes beyond holding a variety of stocks—it involves incorporating assets and strategies, such as long-short approaches, that can thrive in diverse market conditions. This approach provides a defensive buffer during market downturns, helping investors protect and grow their wealth.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Bob: What investors really care about is their net of fees, net of taxes, outcome. A manager may say 2 and 20 fees. I'll give a venture fund as an example. But it's not only that, but they'll also have fund fees, meaning operational expenses associated with the funds. And the manager will expense large portions of their operations to the fund. Every lunch that they do, they expense to the fund. You know, the management fees is sort 2% plus 20% fee plus a lot of those pass through expenses. They can eat up, uh, more than 50% of the prospective return and that's terrible for investors.

Phil: G'day and welcome back to Shares for Beginners. Um, I'm Phil Mascatello. What's a hedge fund and what's the special source in their strategies? How can you catch the long and the short of market moves? Today we're joined by Bob Elliott, the co founder, CEO and CEO of Unlimited, a company that uses innovative technology to make hedge fund like investments more accessible for ordinary people. Welcome Bob.

Bob: Thanks so much for having me.

Phil: Thanks very much for coming on. Bob Elliot is a macro investor with decades of experience, including 15 years at Bridgewater Associates. He ran Ray Dalio's investment research team, authored hundreds of Bridgewater's widely read daily observations, and directly counselled policyma makers at the Fed, treasury, ecb, PBOC and others on macroeconomic and investing issues. Directly counselling policymakers. Did that involve a lot of table thumping?

Bob: Ah, uh, no, I think, uh, you know, a lot of times when markets and economies are going haywire, the policymakers are like bring in the nerds who actually know what's going on. And uh, and I was one of the nerds they regularly called on. Okay.

Phil: With the discussions. Robust, for sure.

Bob: Yeah, I mean, I think m. I bet they were. Yeah, they were definitely, definitely robust and all the more robust as you got into, uh, more challenging conditions, let's say.

Phil: Yeah. Which particular periods of time are we referring to here?

Bob: Well, early in my career I worked particularly with the Fed and the White House around navigating through the use crisis. And a lot of my early work at Bridgewater was really focused on figuring out whether the financial crisis was gonna be a big deal or a small deal. Fortunately I said big deal well ahead, uh, of things unfolding. And so that led to some pretty interesting conversations. I uh, remember one distinctly this is in the public record of going and having lunch with Geithner, who was the head of the New York Federal Reserve and going through every single major US financial institution. Uh, this is in the winter of 2000, late 2007, so way before people were really talking about the financial crisis and basically showing how every financial institution in America was likely to be broke in the next 12 months. And you can imagine that made for interesting lunchtime conversation, uh, but involved very large sheets of paper with lots of small numbers carefully going through all the exposures of all of the banks and insurance companies. So it was a lot of fun.

Phil: A lot of fun. Yeah. Well. And uh, alcohol fueled, uh, coping strategies at the lunch, I assumee not for.

Bob: Me, but maybe for staff members of the Fed facing financial Armageddon square in the face at the time.

Phil: Yeah. So when did you start at Ray Dalio's Bridgewater fund? What year would it that have been?

Bob: Yeah, it was early in the 2000 when you know, in a lot of ways it's kind of now known as the sort of incumbent, the world's largest hedge fund and things like that. It was at a time when I started their right out of school where people said to me, why the heck would you go do that? I've never heard of it when you could, you know, go take a real job. But it worked out all right.

Phil: Yeah. So we're pitching this interview in this episode at beginners, as per the name of the podcast. Can you explain briefly what a hedge fund is for someone who has got absolutely no idea?

Bob: Yeah, yeah. I think, you know, most people, when they think about asset managers, they often are thinking about long only asset managers. So people who you create mutual funds or maybe ETFs obviously part of the education that you do. And those are mostly stock pickers. They're just taking, you know, they get hundred dollar one of capital and they invest that dollar one hundred and try and do it in the smartest way that they can, picking either the best stocks or the best sectors, et cetera, in the market. The thing that differentiates really hedge funds from sort of a traditional asset manager is the ability to go long and short positions. And in particular looking at positions that are not necessarily narrowly in one

00:05:00

Bob: area, but looking globally at all the different opportunities that are out there. So those two aspects being long and short and looking in a way that we call unconstrained, in a way that you could, you could basically pick any asset out there in the world are really the hallmarks of hedge fund asset management. I Think underneath that. There's lots of different ways in which investors, hedge funds sort of focus themselves. You can almost think about, uh, there's different styles or strategies in the same way. There's like stock sectors and things like that. And so most people probably have heard of equity long, short, you know, that's people focusing on equities going long and short. There's other strategies like global macro that are looking at sort of the big markets in the world, long and short, and others that are maybe focused on a particular geographic area, like emerging market managers that are really focused on just, you know, emerging market economy. So those are sort of some examples of different strategies that make it up. But it's really all about being long and short in position.

Phil: And just to clarify, long and short means you're taking a position based on whether you expect the underlying asset to go up or down. That's basically it, isn't it?

Bob: That's right. That's right. And I contrast it with sort of long only managers. They're basically always betting that asset prices, whatever they're invested in, are going to go up. Right. Whether it's stocks or bonds, they always are betting, they're pushing for, they're hoping for prices to rise and hopefully their prices are rising a bit more than their benchmark. By going long and short, you can benefit, you can make money whether prices go up or whether they go down.

Phil: So tell us a key lesson that you discovered when you'first you know, going back all those years ago and really learning about how markets operate. What's a key lesson that you'd like to share regarding what you've learnedt in the hedge fund world? Um, and that would be, you know, helpful for people beginning in the markets.

Bob: Yeah. Well, I think probably the biggest lesson learned by me actually, fortunately early in my career, but throughout my career is one of humility and what you realize very quickly as an asset manager. It is very hard to generate sort of uniquely good performance reliably over time. And so I like to talk about, you know, when I first got into macro, I started trading natural gas and this was like right out of college. And the reason why I started trading natural gas is because it was very volatile. Prices could go up a lot, they could go down a lot. And so you could make a lot of money if they go up a lot or go down a lot. But, uh, the reality is I didn't really know anything about natural gas. Right. I was gambling, I was speculating, right. I didn't have edge and certainly I had no Edge relative to, you know, if you talk to a real natural gas trader, they understand all of the intricacies of the supply and demand and the weather and all the dynamics that drive it. And I actually ended up basically blowing all of my first year's income, uh, on rogue natural gas trains. And that was a powerful lesson, which. It was a lesson many people sometimes take time to learn. I was fortunate enough to learn it early, which is that, you know, in order to do well, M. It's very hard to be right in markets. And to be right, you have to be pretty confident that you have a unique skill set relative to everyone else in the market. Unique insight, unique skills, unique information, unique ability to trade, et cetera. And so I think there's a lot of folks who sort of dabble in. In investing, and sometimes you'll get lucky. If anything, getting lucky is the worst possible outcome because you don't learn the humility you need. If you talk to people who have been in the markets, you can really tell people who have been in the markets for, like, decades, they will line up every trade that they've gotten wrong, and they will tell you at length all the warts and the scars and the challenges it is to make money over time. And that's very important because it. It flows into all. Everything that you do as an asset man.

Phil: Yeah, I think that's great. That's a really good lesson, Bob. And I know that's many years ago when I first started looking at this at markets, and you'd see price charts, and you see it going up and down. You go, oh, all I got to do is just catch those movements. Can't be. How hard can it be? And then further to that, I've had guests on the podcast who've worked at the Chicago Board of Exchange, where they're dealing with commodities like this, you know, and there are so many people that burn out so quickly, aren't there? And, you know, trying to do exactly that. Even experts that know, you know, the. The kind of market or commodity that they're trading in back to front.

Bob: Yeah, yeah. The key to being a good investor over time is to really think about how do you have edge? And edge mean meeting. How do you have, you know, unique insight or skills that others don't have, which allows you to, you know, outperform others in the markets? And then the other thing is, if you have that edge, how do you stay in the game as long as you can? And the way that you do that is through significant humility. Because if you've been around this investing long enough, you recognize the very, very best investors in the world, just for perspective, will get a single

00:10:00

Bob: trade, right? Something like 55% of any single month. And the thing is, if you take 55% any single month and then you do it over 40 years and you do it over 100 positions at any point in time, then you become the single best investor in the world, right? Federer has a good story about this where he's like, he only won 52% of the points that he ever played. But, um, if you reliably win 52% of the points that you ever play, that actually is the best tennis player arguably ever that's ever played, right? And so that's such a good example. And so, but the way you do that is by you can't, if you're gon Toa lose 48 or 45% of the time, you can't get blown out when you get those ideas wrong, right? You have to have the humility to recognize you're going to be wrong. You're going to be wrong a lot. And how do you build a strategy? How do you build approaches that allow you to be wrong a lot and still do well over time?

Bob: Super is one of the most important investments you'll ever make. But how do you know if you're in the best fund for your situation? Head to lifeshherrpa.com.au to find out more. Life Sherpa, uh, Australia's most affordable online financial advice.

Phil: So let's move on to unlimited and the funds that I believe invest in alternative assets. What are our alternative assets and what kind of alternative assets are the funds investing in?

Bob: Yeah, a lot of what we're focused on at unlimited is how does the everyday investor get access to these sort of hedge fund style strategies? I think when you think about hedge funds over time, they're mostly for big institutional investors. And you have to have, in my later years, uh, at the old shop, you had to have $500 million to invest in those. And our idea was, uh, how do we make those strategies accessible to the everyday investor? And the way that we do that is by drawing on our experience having built these strategies in our careers, to create technology that allows us to basically look over the shoulder of the managers, the hedge fund managers, in real time and see how they're positioned. And then we take that understanding and we package together those positions into exchange traded funds that allow, you know, the everyday investor to be able to invest in those strategies without paperwork, without minimums, without Illiquidity without lockups, and probably even more importantly, without the sort of fees that are typically associated with hedge funds. So I like to sort of joke that, uh, our strategies, we hired 25,000 hedge fund analysts. We understand how they're positioned and what their views are, except we're not paying any of them and none of them know what we're doing. And that's perfect. The everyday investor can have access to those strategies and those views and those positions without having to pay those sorts of fees.

Phil: How are you looking over their shoulders?

Bob: Yeah, so what we do is we infer how they're positioned from looking at their returns. And it's the sort of thing, if you've been around in markets for a little while, you've done this a lot of times where you see a, uh, manager's returns, you know, kind of what strategy they're pursuing, sort what assets that they invest in. And then you saw what happened in the asset markets and you kind of guess how they must be positioned. So you see, oh, that manager underperformed the s and P500. I bet they're underweight tech stocks. If it was tech stocks that drove the strong performance, the S&P 500, or that manager did well at a time when stocks were selling off. So they must have been short stocks during that time. And so what we do is we take that sort of core concept, which is inference of positions from looking at returns, and, uh, we just do that in a more, let's say, computationally rigorous way than eyeballing, taking a guess. And there's a lot of techniques that you have evolved over the course of the last five or ten years to become much more commercially viable that allow for that sort of computational intensity to do that inference in a way that is commercially viable at the scale that we're doing.

Phil: So because of that, uh, are you asset agnostic? So you're just basically mirroring and investing in whatever assets you feel that, or the, the computer is saying is what the hedge fund managers are, uh, doing either, uh, well in or not well in. Is that how it's kind of work?

Bob: Yeah, exactly. Exactly. What we're doing, you know, I like to say we're doing is drawing on the wisdom of the crowd. So hedge fund managers, if you look at managers in aggregate, they generate good returns, differentiated returns over time, particularly if you don't have to pay the fees you typically have to pay hedge fund managers. And so all we're doing is tracking those positions in real time and therefore tracking the returns of those Managers, and that creates a pretty compell because they can go long and short the benefits of their returns. They're often not

00:15:00

Bob: correlated, not well related to other things you might have in your portfolio. So a, uh, global macroman manager, say a 500 manager index of the best global Macroman managers that has a very low correlation to things like the S&P 500 or global bond indices as well.

Phil: So which kind of asset classes do you find yourself in generally?

Bob: Yeah, so what we try our best to do is mirror the asset classes that each one of the major hedge fund styles is investing in. And so if you think about something like equity long, short, those managers typically invested in, you know, particular stock sectors, factors. When I say factors, I mean things like, you know, growth or value or momentum. Those are concepts that are often in the literature related to stocks. Or they might invest in certain equity indices. They might find that Japanese stocks are looking better than, say, U.S. stocks, et cetera, versus something like, Ah, global macromanager. They're invested in a wide range of assets. So things like currencies and commodities and fixed income or credit or equity indices. So a wide range and looking globally, so as likely to be long or short Chinese stocks as Canadian bonds. And so what we're doing is we sort of tailor for each one of the different hedge fund styles the universe of positions that match where those managers are invested at any point in time.

Phil: It's fascinating, isn't it? I mean, it seems like you've got the world at your feet with all these kind of assets that just tell us of, you know, just a brief story perhaps, of, uh, one particular class that most investors would not even think of that are available through unlimited funds.

Bob: Yeah, well, I think most investors probably wouldn't think of sort of being able to get such tactical positioning in say, uh, a single ETF wrapper. So from an investor's perspective, you invest in an ETF and you see it as a single ticker with returns. But the great thing about using that as a wrapper is under the hood, we can shift the positions around quite efficiently, quite tactically, as frequently as every day. And that's neat because what it allows you to do is to sort of take advantage of those tactical position swings. Like, you know, the last, uh, three or four months have been pretty volatile, as we all know. And so a simple example is global macromanagers were very long gold headed into Liberation Day. Gold performed very well in April of 2025, and as a result, they then scaled back their positions. But as the new administration Then thought about basically running more stimulative, uh, fiscal policy, which came out really in May, as well as some of the re emergence of some geopolitical conflict. They've come back into gold positions more significantly and benefited from the most recent rise. That's the sort of tactical positioning that if you were trying to do on your own, would be hard to do. I mean, take it from a person whose professional career was focused on doing shifting of tactical positions, that, you know, it's all encompassing and hard work and you're gonna be right only, you know, 55% of the time. One of the nice things about drawing on the wisdom of the crowd is we get to infer that tactical positioning and put it into a wrapper where essentially it looks like a passive investment. Right. From the investor's perspective, they're just holding one asset. They're not shifting the positions around, but they get the benefits of you the active management of the most sophisticated managers in the world in real time.

Phil: Is liquidity ever an issue with any of the underlying assets? Are uh, they all very liquid markets, lots of money going in and out and easy to get in and out of?

Bob: Yeah, it's one of the great things about most hedge fund strategies are either directly or indirectly invested in the largest, most liquid markets in the world. And part of the reason why that is, is because if you're managing money of, you know, any reasonable size, say a billion dollars, which is small for hedge fund you, basically, there's not so many things that you can invest in. You have to invest in whatever big global stock, bond currency, commodity, fixed income markets. And so as we put together our products, we're trading those big large liquid markets that are some of the deepest in the world. And so the great thing about that is that allows us to be able to transact very efficiently, cheaply in the market, be able to do those shifts in positions and also with the use of things like futures contracts, really give investors the opportunity to effectively be positioned in dozens of the biggest liquid markets in the world.

Phil: You feel very passionately, I feel about the democratization of investing. Is that why you decided on using ETF rather than, say, a mutual fund, the products that you're now providing?

Bob: Yeah, I mean, I came from the private fund world for

00:20:00

Bob: most of my career from the typical sort of 2 and 20 hedge fund or 2 and 20 venture fund. And when I started unlimited with this, at, uh, some level was a nascent idea to just be like, how do we get, you know, the everyday investor access to those sorts of Returns at a lower cost point. I went and I looked at all the different options, you know, interval funds, closed end funds, ETFs, mutual funds, et cetera. And I really landed on the ETF structure because it is, for the vast majority of investors, the most efficient structure for them. And the reason why that is really a couple fold. One, you get to see a single security with a mix of assets under it. So it's got that nice clarity. You don't have to deal with all the underlying assets or even looking at all the underlying assets and it's clear, it's transactable. Two, it'very it's tax efficient. Part of the challenge often with these sorts of strategies is that either you have a combination of short term or long term capital gains which someone needs to pay on an annual basis, or you receive, at least in the US context, something called ordinary income, which is basically your gains. Your profits are taxed at your tax rate, which is very high relative to something like capital gains or a dividend. And so it's a much more tax efficient wrapper. And then of course, I think the ETF structure is compelling as well because it's very transparent. I think part of the challenge, whether you're looking at mutual funds or private funds, is at any point in time, you have no idea what's in there, what is in your mutual fund. Like you get a report about what it was six months ago, but you have no idea what's in there. If you want to understand what's in our products, it's very easy. Go to our product page. You get the full list of all those securities that back our ETFs as of yesterday. You can inspect them, you can look at them. You know it's publicly available. And so we're not trying to hide anything in terms of what we're doing. We're trying to make very clear and transparent what we're doing for the everyday investor.

Phil: So what is a 2 and 20 fund you refer to?

Bob: Uh, yeah, well, so 2 and 20. I mean, 220 is more a compensation scheme than it is anything else. And I often refer to it because it is the typical compensation scheme for something like a hedge fund or, uh, private equity or a venture capital fund. 2 in 20. What it stands for is 2% of the assets under management every year and then 20% of the profits. And I think one of the challenges with that is if you look back through time, what that means is that basically hedge funds are taking a significant portion of the profits that they're Generating I like to use the simple example. Say you're uh, invested in a hedge fund and it has a 10% return. The return of the manager is about 10%. Well if they charge 2 and 20, what that means is that 10% return turns into a 6% return basically. Okay, well that'a big difference between 10 and 6. And then on top of it, very important to recognize that tax inefficient structure, like a fund structure for taxable investor, you'll also be taxed. So at least in the US context, Uncle Sam takes about half of that. So now you're at three. And then usually if you're investing in these products as a smaller scale investor, meaning like you don't have $500 million m if you're elect $250,000, something like that, typically your advisor and the platform you invest through will also take a fee. So now what we have is we have a 10% manager return where the manager has s been paid, Uncle Sam's been paid, your advisor's been paid and the platform's been paid and everyone's been paid. And what do you get? Essentially zero for a pretty good return. Uh, and how is that a good deal for everyone? The great thing about an ETF structure is it has one single unitary fee. So in our case 95 basis point management fee, that's it. So about one quarter of the fees. And for our newest products, we're actually running them at a 2x target return. So it's about a tenth the fee load of uh, a typical hedge fund strategy. And then because of the tax efficiency, it's about half the taxes. And so what our idea was, our goal was, is bring the liquidity. You have liquid transparent, much cheaper, much more tax efficient accessibility to every investor. And that's what we've been able to do.

Phil: So 95 basis points, that's just a little bit under 1% which you know, compares favorably with a lot of mutual fund fees, for example.

Bob: That's right. And we really are focused on how do we provide value relative to if you were to go out and invest in a lot of those funds directly and particularly because of what we're doing is we're tracking indices. So we're manager diversified. What we compare ourselves to is not just investing in a single manager, but investing in a portfolio

00:25:00

Bob: of managers, something that's called a fund of funds. And that sort of structure typically not only charges the 2 and 20 fees, but often of the managers that they invest in, but often a fee on top of it. And so when you think about that, that is loaded with fees. And our goal is to really bring that feload down for the everyday investor. Because the reality is it may be hard for managers or any individual to generate differentiated returns over time, but what you can always be is cheaper than the alternative options. That's a reliable source of outperformance. And the reality is over time, that is one of the most compelling sources of outperformance.

Phil: It's really important to understand that fees do matter, don't they? And, uh, they compound. Just like gains can compound, fees can compound on your investing returns.

Bob: Yeah, that's exactly right. I mean what investors really care about is their net of fees, net of taxes, outcomes. And all too often say when an advisor brings an investment opportunity to a client, they're talking about the, uh, opportunity, they're talking about the prospective returns, they're talking about things like that. They're not talking about what is the fee structure, right. And how much of the returns is the investor actually going to see and how much are they going to see after the tax man takes their rake and everyone involved. And so I think it's really important when you're thinking about that to always be considering fees. I mean, in some cases a manager may say 2 and 20 fees. I'll give a venture fund as an example. But it's not only that, but they'll also have fund fees, meaning operational expenses associated with the funds. And the manager will expense large portions of their operations to the fund. Every lunch that they do, they expense to the fund. And like the people who are paying that are the unsuspecting investors in those funds, they're paying those. And so you get these funds where if you add in the actual, the management fees, the sort of 2% plus 20% fee plus a lot of those pass through expenses, they can eat, uh, up more than 50% of the prospective return. And that's terrible for investors.

Phil: Ditch the spreadsheets. Shareight is Investopedia's top tracker for DIY investors. Invest smarter, not harder. Grab four months free on an annual premium plan at sharesight.com sharesforbeginners. That's, that's awful, isn't it? That you'd be paying for someone else's lunches and not cheap lunches, I'd be assuming.

Bob: Uh, that's right, lunches, entertainment. You know, I've seen this. Not, uh, only was in the headdge fund space, but I also ran a venture fund and saw this firsthand. How the industry standard behavior is to basically stick your Clients, your fee, paying clients with as many expenses as you possibly can. And that's not okay. And it was one of the things I was focused on when I was in the seat running the fund, which was total intolerance to access fees. Uh, some you have to pay. You have to pay an auditor. That's the way it works. There's reasons, important reasons, why, say, an auditor or accountant is involved in a fund structure. But anything other than the most critical components of running a fund should be absorbed by the manager, not by the client. And the problem is load. These extra charges can add up so significantly that they're really not just. They're eroding the returns beyond what even the investor expected.

Phil: So someone who's putting together a portfolio, and often these days they're not portfolios of individual stocks, they're ETFs that people are putting portfolios together of and without giving. You know, we can't give financial advice. This is general advice only, obviously, because we don't know everyone's personal situation. But how would your ETFs, say, be positioned within a portfolio of other ATF's of, say, index hugging kind of ETFs, for example?

Bob: Yeah. So if you think about, if you start with sort of the standard 60:40 portfolio, which I think, you know is a good start for a lot of investors.

Phil: 60, what is that 6040 portfolio?

Bob: 6040 of 60% stocks and 40% of bonds. And so that's kind of a benchmark standard portfolio that a lot of investors and advisors start with. And I think the question you're going to invest in anything beyond that 60:40 portfolio, meaning you're going to take some of that 60:40 away and invest in other assets. What you want to do is you want to find those assets that are what we call most diversifying, which means that they aren't related, their returns aren't related to the 60 and the 40, and they help improve the consistency of your return over time. And when you look at the universe of assets, while there's so much conversation about private equity and venture capital and private credit and all of that stuff,

00:30:00

Bob: basically none of that in economic terms and in any time frame that most investors care about, really has any benefit in terms of diversification. There are basically three things that diversify your portfolio. One is gold, which very few Western investors hold, but is a highly diversifying asset relative to stocks and bonds. The next is diversified commodities, meaning things like copper and oil, et cetera. And they're particularly beneficial because they typically go up when inflation rises and when things like stocks and bonds are having worse returns in real terms, which is what investors actually really care about, which is your purchasing power. And then the last is if you can get alpha strategies, hedge fund style strategies, but at a low cost. Right. So if you invest in a, uh, hedge fund strategy and you have to pay the full two and 20, that's not a very good deal for your portfolio. But if you can bring the freeload down to under 1%, then that actually is a diversifying strategy with strong enough returns to improve your overall portfolio consistency. And so when I started Unlimited, basically I looked at the world and I said, if you want to buy gold, a lot of opportunities out there, you should absolutely explore those. If you want to buy commodities, lots of opportunities out there, but there's really no one bringing to the table diversified hedge fund strategies at a low fee to fit into that ETF portfolio.

Phil: Yeah, I think diversification is an interesting one because so many people think that if they're diversified across, uh, different companies in different sectors in the stock market, that they're diversified. But the diversification strategy can be much wider than that, can't it?

Bob: Yeah, that's exactly right. And I think one of the challenges for a lot of investors is that as I sort of talked about at the beginning, basically most investors are long only, meaning you only do well in your portfolio when asset prices are going up, when either stock prices are going up or where you see bond prices rising. And that's a pretty good bet. Like stocks go up over time, bond returns are positive over time, so there's good reason to be invested in those assets. But the challenge comes when you see circumstances where those asset prices don't continue to go up. So something like 2022 or the financial crisis or lots of other periods in between where what you want to have in your portfolio that's really beneficial is something that can go short assets and help protect you in those environments when other parts of your portfolio are falling. And so I think that's one of the real benefits of hedge fund style strategies is because they have the flexibility to go long and short. They also bring to the table what we call defensive properties, meaning when other things in your portfolio aren't doing well, they can defend the value of your portfolio all around. This idea of how do you create return consistency? Like, I think it's just such an important thing. It's easy to, you know, there's a lot of people will be like, oh, just invest in stocksuse stocks go up a lot over time. That's Absolutely right. Stocks go up a lot over time. The problem is you don't know when you're going to need the money. That's the real challenge because you don't know when you want to buy a house. I mean a kid going to college is kind of known that it's roughly 18 years after they're born. But you don't know, maybe you have unexpected, uh, life event, something happens where you need that capital. And if you can't draw on that capital because for instance, you know, stocks have gone down a lot, then that's a real challenge. Or if you pull capital out at a disadvantageous time, it can set you back in terms of your long term savings. And so that's why return consistency is such a critical component of compounding and building wealth over time in a savings portfolio.

Phil: And I think that's really important for uh, listeners to just think about it. There's when and what's the reason you're investing for, you know, what is your long term goal? And I think a lot of people just don't even think about, they just go and uh, go, I just want to make money without actually thinking about that. And duration, risk, as you're saying, and what time is it that you're going to be needing your funds, Right.

Bob: I mean so, so many people don't know when they need their money, right? And so positioning yourself in the best position possible so that in the inevitable time when you do need it, when you want to buy a house, when you get married or your kids get married, or you know, something as simple as if your car breaks down, you know, for investors, like those are all practical realities of life. You don't know when you need your capital and so you want to be in the best position. The last thing you need when you need that capital is to open up your statement and be like, wow, I'm down a lot and I need the money now, you know, and I think a lot of, of us who sort of live through the tech bust and live through the financial crisis have

00:35:00

Bob: seen people around us have that feeling. I know a lot of people who have only been investing for like 15 years are like, hey, stocks go up every day. What's the problem? What could go wrong? But lots can go wrong. And being prepared for that, those more challenging times is really important.

Phil: And uh, I think it also helps you to not panic as well. Like if you're going through one of those, you know, ructions which do happen sporadically with markets that you want to be able to approach that without fear and panic.

Bob: Yeah, I mean, the worst thing you can do in a, uh, drawdown environment for assets. So if you think about it, asset prices go up, stocks go up over time, bonds go up over time. The worst thing you can do is in the middle of a drawdown, panic and move that money to cash. Right. To get out of the market. But we are emotional beings, and it's totally normal for people who see, you know, say stocks are down 20% to start to say, oh, that's scary. I don't, I want to, I want to hold on to my capital. I don't want to lose my capital. And while every finance textbook and every financial advisor will be like, stay invested in the market, recognize that you may not be able to have the stomach for that. And part of the way that you reduce the risk that you get out of the market at the wrong time is by having that diversification. Right. Just a very simple example. Through the April volatility, some people I know were essentially all in on stocks, and some people I know had a combination of stocks and gold. Well, if you had stocks in gold, you're like, yeah, stocks are down, but gold's up. And so I'm fine. You know, it's not, it's not a great time, but hey, we're doing okay, you know, it's, it's fine. And the people were fully invested, stocks were like panicking. Right? Because, you know, we saw an almost 20% drawdown in the matter of a few weeks. And that's scary. And so they were panicking. And the terrible thing, even though if the people who are fully invested in stocks would have ridden it out, would have ended up roughly in the same place. So many people panicked and cut back, went into cash, sold their stocks, got out at just the inopportune time when if they had had some more defensive assets in their portfolio, like gold or hedge fund strategies are a good example, then they would have been able to weather that storm and be in a better position today.

Phil: So, uh, how many ETFs does Unlimited provide and what's the various emphases of each one?

Bob: Yeah, so we currently have two ETFs in the market. One is HFND like Edge Fund, which is a multi strategy. So it's all of our different strategies put into one product it's good for. It's as good as a bond alternative, and many advisors use it in that way. It's pretty low volatility, uh, bond alternative type strategy. And we're in the process of launching a series of the underlying strategies. The first is global macro, which is hfgm, like hedge fund global macro. Uh, that's in the market and those are targeted at a 2x target return. So they're bringing to the table returns that have low correlation, low relationship with stocks and bonds, but expected returns that are on par with stocks or better over time. And so HF gm, our global macro product in the market today is the first and we're launching an equity long, short and manage futures products in a couple of weeks. And then we'll launch a series of additional products of that 2x target return, including emerging markets, fixed income strategies and um, event oriented strategies later this year.

Phil: So if listeners and viewers want to find out more, and I'll just say at this point that you're very active on X, Twitter and whatever we're going to be calling it these days and I'd highly commend people following you on that particular platform because you're uh, releasing a lot of great information there.

Bob: Yeah, thank you so much. Part of our idea here is not just to bring sort of institutional quality returns to the everyday investor, but also bring institutional quality research and investment insights to every investor. And so as you mentioned, I'm very active on social media, Twitter, LinkedIn, YouTube. I even have a TikTok account where I, uh, do videos.

Phil: You've gone all in, haven't you?

Bob: I'm all in. I do videos every morning while I'm m walking my dog. She is in the other hand when I'm taking the videos. And so you can find me in any of those places, whatever your preferred way of accessing content is and obviously.

Phil: The traditional website as well.

Bob: Uh, yes. And if you're interested in our products, check out unlimited etf'dot com.

Phil: Bob Elliott, thank you so much for joining me today. It's been a great pleasure speaking with you.

Bob: Thanks so much for having me.

Bob: Thanks for listening to Shares for Beginners. You can find more at sharesfforbeginners.com. if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more

00:40:00

Bob: about investing for their future.

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