TTU115: Building a Bulletproof Portfolio with Jason Buck of Mutiny Fund
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 670 Ratings
🗓️ 1 June 2021
⏱️ 78 minutes
🧾️ Download transcript
Summary
What happens when an unexpected major event occurs and all of your supposedly diversified investments suddenly become correlated, before heading sharply to the downside? Jason Buck and his partner at Mutiny Fund have been thinking about this question for a long-time, and have created a portfolio designed to protect against these ‘Black Swan’, high-volatility events. Jason has been a long-time listener of the show, so it was only right that I invited him on to discuss some of the methods and thinking behind Mutiny Fund, and how these approaches can provide protection and profits during all market environments.
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In This Episode, You’ll Learn:
- How Jason got to where he is today
- If the initial risks Jason set out to protect his clients against, have changed
- Why CTAs could be considered ‘long-volatility’ assets that provide protection during broad market selloffs such as 2020
- The benefits of ‘ensemble’ investing
- The opposite requirements of building wealth versus keeping wealth
- Why a sample size of 100 years is still just an anomaly
- Why the typical ‘diverse’ portfolio might be riskier than investors realise
- What a ‘long-volatility’ asset looks like
- The history of long-volatility assets
- The term ‘crisis alpha’ and what it means to him and his clients
- How to overcome the challenges of educating investors about volatility-event risks
- Whether the addition of long-volatility components to portfolios today has affected his initial approach
- Why the Sharpe Ratio is often misunderstood as a risk measurement tool
- How much, and why, returns vary among different long-volatility managers
- How to approach position sizing with black swan events in mind
- Some of the common investor mistakes
- How to choose between different Trend Following managers
- How to create a strategy for inflationary and deflationary environments
- If less-liquid assets can be safely incorporated into a portfolio
- How to analyse backtests properly
- If Jason uses Gold and Bitcoin in his long-volatility strategies
- What keeps Jason up at night in terms of risks
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Transcript
Click on a timestamp to play from that location
| 0:00.0 | When you sit down with the financial advisor, they're going to show you your pie charted |
| 0:09.1 | diversification. It always kind of makes me laugh a little bit because if you look at that pie |
| 0:13.1 | charter diversification, it ends up being all long GDP assets, right? You have stocks, bonds, private |
| 0:19.1 | equity, real estate, venture capital. All of these things are long GDP. |
| 0:22.6 | And what I mean by that is when we're awash with liquidity, when credit conditions are loose, |
| 0:26.6 | all these things are going to do exceedingly well in a risk-on environment. |
| 0:30.6 | And when we're in that risk-on long GDP times, you're looking at diversification in your portfolio. |
| 0:35.6 | The problem is, although those things are implicitly short volatility, meaning they are harmed by volatility in the markets. And so when we |
| 0:43.5 | have any sort of sell-off or an endogenous liquidity event, like March 2020, we see that the correlations |
| 0:50.0 | of that uncorrelated pie chart go to one. And they all sell off at the same time, which really |
| 0:56.7 | shows what the diversification is there or lack of diversification. Imagine spending an hour with |
| 1:02.6 | the world's greatest traders. Imagine learning from their experiences, their successes, their successes, |
| 1:07.4 | and their failures. Imagine no more. |
| 1:13.2 | Welcome to Top Traders Unplugged, |
| 1:16.9 | the place where you can learn from the best hedge fund managers in the world, |
| 1:21.3 | so you can take your manager due diligence or investment career to the next level. |
| 1:23.5 | Before we begin today's conversation, |
| 1:25.3 | remember to keep two things in mind. |
| 1:28.1 | All the discussion we'll have about investment performance is about the past, and past performance does not guarantee or even infer anything about future |
| 1:33.5 | performance. Also understand that there's a significant risk of financial loss with all investment |
| 1:38.2 | strategies, and you need to request and understand the specific risks from the investment |
| 1:42.9 | manager about their product before you |
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