The real issue today is that the vast majority of investors have focused on an asset allocation decision based on their lived experience. Their lived experience, for the most part, has been the last 40 years, of which the vast majority of time has been spent with equity markets going up. Let us forget about the 2000 and 2010 period, but from 2010 even up to now, we are seeing nothing but easy investing with low cost and maximum value from doing that.

All Terrain is a recognition that our lived experiences are going to hurt us if we do not understand our history, we do not understand the reasons that equities go up, the reasons that bonds make money when they do, and the reasons why alternative assets like gold and possibly Bitcoin add a tremendous amount of value in diversification of the portfolio.

Also, certain alternative strategies make money when all those four lose money. You have to go back a couple hundred years and understand those dynamics in order to create a more balanced portfolio. And so the problem it is trying to solve, is twofold. Number one is to create a much more balanced portfolio so that a lost decade, like 2010, does not happen to you at the worst possible time.

Number two, with the changes in rules and availability of certain instruments to trade, you are now able to create not only a diversified, balanced portfolio—an equity line that is smooth and nice to see—but now you are also able to run it at a level of risk that is whatever risk you want. Global equities run at 15 to 20 percent volatility. Most portfolios that are well diversified, because of the diversification, run at five to eight. That is tough to win most years.

But if you are able to scale your overall exposures and your balanced exposures up so that you match the level of risk to equities, but you expect to get two to four times higher units of return for that risk, then all of a sudden you now have what everybody has been clamoring for, which is a hedge fund style of investing that can actually, or has a shot at, beating the index.

I think we have been stuck in a place where anything that was different from the S&P needed to be low volatility, and so it is trying to solve creating an equity line that has a good shot at being upward sloping in any decade, and also reducing the gravitational pull of not doing as well as the equity markets.

[00:03:35] Rodrigo Gordillo: I think we have all learned this concept of if you hold equities long enough, they are going to make you money. If you hold bonds long enough, they are going to make you money. People have been skeptical about gold forever, but if you just look at the empirical data, if you hold gold long enough, it is going to make you money. That, I think, we can all agree on. We can agree that it is up and to the right.

The basics is we need to all agree that that is true, that we should expect these things over a full lifetime to be up and to the right for reasons like risk-taking requires a higher expected rate of return on the equity side. Taking risk on duration demands a higher return than Cash for taking that duration risk. Gold—we wrote a white paper on gold on the ReturnStacked.com® site if anybody wants to read it—that really does make a case for the fact that gold was non-risk from a retail perspective before the seventies. But once it got decoupled, the risk was transferred over to individuals for taking global political risk and taking the risk that there will not be inflation. And so when there is inflation, you get paid, and that premium is very similar to what we see in equities.

If we truly at least believe that, then you can create a more balanced portfolio because it turns out that all those three asset classes respond differently to different things. The last category that people may disagree on is whether non-correlated alternative strategies that are directional, like Managed Futures, Trend Following, Carry strategies, or Systematic Macro strategies—which is what we lean on here for our fourth asset class—make money over time.

Now, there has been an index around since 1997 that shows that it does make money, and it actually does as well as equities, bonds, and gold over a long period of time, or in that same realm of returns of excess returns. You can go back even further with the Turtle Traders. It is just that we can empirically observe that that is true. And so that is the basics. The basics is, equities are not the only thing that can make you money.

If any one of these can make you money over time. Can you predict which one of them is going to make the most money based on your prediction model or geopolitical models? We do not think so. We have yet to find a way to predict what is going to happen over the next 12 months. We used to write a newsletter every year that was called “Bold, Confident, and Wrong,” where we would assess all the predictions from the big banks on what was going to happen in the next 12 months, and how they were wrong.

The premises are that there are asset classes that make money over time, they do not make the money at the same time, and it is really tough to predict the future.

So the first step is at least creating the “do no harm” portfolio, which is something that is an equal risk weighting between those assets.

We are not predicting; we are just creating a fundamental diversification with risk balance, making sure that the maniacs are not taking over the asylum, and not giving too much weight to high volatility, giving more weight to things with low volatility so that we can create that “do no harm” portfolio to start with.

Then you can start getting fancy on them, rather than trying to predict which one is going to do better this quarter, this year, or these next 10 years. You can put something in place, fall asleep, wake up 10 years later, and you will be confident that in that 10-year period you probably did okay.

This is from our All Terrain brochure. You guys can go to ReSolve Asset Management’s website, in the All Terrain section, and you will be able to grab it from there.

We talked about four different categories of investments, but we did not really explain why it is important and why those things move differently from each other, but when you understand how markets work, markets work based on the interconnectivity between inflation and growth. Periods of high inflation and low inflation intersected by periods of high growth and slowing growth will define which asset class is likely to do well.

This is kind of intuitive. If you have a period of rising inflation and slowing growth, like a stagflation environment in the seventies, what would you expect to do well in that environment? Commodity markets are likely to outperform even cash.

You want things to outperform Cash; it is generally going to be commodities, it is going to be gold, it is going to be real assets and strategies that can go long those things—in short, the other things, like Systematic Macro and Managed Futures Trend Following.

We can do this exercise across the board. If we think about accelerating growth and low inflation, well, that is good for businesses. If it is good for businesses and there is no inflation, commodities are probably going to go down, and you are probably going to see equities do well and bonds do well.

And if you are going to see a period like 2008, where credit dries up and there is illiquidity, slow growth, and low inflation, well, that is when people are going to go toward bonds and sell out of equities and commodities.

All of these are intuitive things. When you look at that second page here, where we show examples of periods where we saw inflationary stagnation, like the 2022 period, inflationary growth periods, like the 2002 to 2007 bust, periods like the Global Financial Crisis, and disinflationary growth periods, like 2011 to 2020—you see that play out.

You see that in an inflationary stagnation period like 2022. We always knew—we had been talking about this before 2022—that when there was rising inflation and slowing growth, bonds and equities were going to lose at the same time.

What did well? Gold did okay. Systematic Macro—which can trade commodities and go long/short commodities, currencies, bonds, and equities globally, over dozens and dozens of markets—tends to do well.

In inflationary growth, gold did really well; it did the best. Equities were second, and bonds were okay. In 2008, equities were down, bonds were up, gold was up, and Systematic Macro was up.

Disinflationary growth is the best for the 60/40 portfolio. That is what has dominated 30 of the last 40 years. You are seeing equities be the best performer and bonds be the second best performer. Not surprisingly, everybody has a 60/40 portfolio.

But we have to think about all decades, not just the decade we have lived or the 40 years that we have been investing in. That is what this is trying to show: that you want structural diversification, and you have to be okay with the fact that diversification means that you are always having to explain your story about some elements of your portfolio. Ultimately, it is, in my opinion, the safest way to put portfolios together rather than focusing on equities alone.

This is just the visual of what gold, long-term Treasuries, and equities did. One of the things I want to get into here is that there is this view in the marketplace that has permeated across advisors, individuals, and boards that you have your equities for high returns, and you have your bonds for moderate returns and protection.

That is just not quite correct. Bonds can be just as good long-term as equities. You just have to be able to get exposure to bonds that provide the same level of risk as equities. You do not have to do anything fancy here to see the value of that.

You simply can buy that long-term government bond. Look it up to see how it did from 1990 to June 2025. For most of my career, people were like, “equities, I want to buy equities. We need to have an equity portfolio.” And I kept showing them this black line that outperformed equity markets from 1990 all the way through 2021, and not only that, but made money during the tech crisis, made a lot of money in October of 2008, and made money during COVID.

This is what happens when you put your risk goggles on and say, “If this is an interesting thing to invest in and I believe in it long term, what can I do to scale it to the risk that I am okay with, and then do an apples-to-apples comparison?” This is close. Long-term Treasuries, equities, and gold are roughly exhibiting the same volatility, but not quite.

Putting this together in an equity line, I believe everybody should have this as their base portfolio before they meet with any advisor, before they talk to ReSolve Asset Management or anybody else. People come to me and say, “What should I do?” I say, “You should consider grabbing these three asset classes and putting them together, but not in equal dollars.” I think equal dollars is misleading.

The way I describe it is: I have given you a three-piston motor. If you do equal dollars and one piston is thicker than the other piston, then you are going to have a three-piston motor that is unbalanced. You need to actually modify them so that each one of these three differentiated pistons has the same width.

If you really wanted to have a strategic portfolio of those three assets, instead of doing 33 percent across each, you want to look at the volatility and then do what is called inverse volatility.

With all the AI models, you can just search it up: “How do I create an inverse volatility portfolio of three assets?” and it will do it for you. But the numbers here over that period are that you want to have a little bit more to Treasuries—in this case around 39 percent—31 percent to gold, and 30 percent to global equities. This is not a wild deviation, but a little bit more. This may seem like so much risk to bonds, but in reality, it is equal risk, long-term.

When you put together a portfolio that simply, you actually end up with the dream: that equity line that everybody talks about, which is how do you smooth out a sequence of returns risk? How do you mitigate the chances that the day that you retire, you are going to have a lost decade?

This is not anything new. Harry Browne came up with this in the eighties. He added some cash in there, but then the volatility is way too low for my taste. But that is a good place to start, and that should red-pill a lot of individuals and advisors to say, “Okay, yeah, this seems better.” Then we can build on that as to how to make it so that you are competing with equity markets.

[00:14:29] Rodrigo Gordillo: We have a nice little acronym. When it comes to leverage, you want to avoid LICE. L stands for leverage, and I stands for illiquidity. So, levering illiquid assets is a risk that you need to take into account. C stands for concentration. Over the last couple of decades, we have seen these two-times and three-times levered ETFs that are doubling down and tripling down on the exact same risk.

I think we have all learned what the disadvantages are of just keeping that invested and never rebalancing out of it: you are tripling the risk, but you are not tripling the return because of rebalancing issues, and you are getting larger drawdowns.

E stands for excessive leverage. A three-times levered S&P is probably not a good idea. When we go back to the concept of All Terrain, you are not multiplying the same risk; you are adding different risks.

When you are adding things that zig when the other ones zag, what tends to happen is the leverage is increasing, but the volatility of the portfolio can remain the same or lower, and the peak-to-trough losses can also get lower if you put the right pieces together. If one or two markets are suffering, if you are diversified enough, the other two, three, four, or five pieces may provide the offset.

The key is in avoiding LICE, and the key is in defensive leverage. Once you put all that together and then decide how much risk you are really comfortable taking, those are the levers you can now pull, rather than just taking what you are given. You are really creating a robust model that I have not invented. This is a Nobel Prize-winning concept from William Sharpe that I have piggybacked off of, and many institutions have been actively using for decades.

What we do as a society is we borrow money to live with the same risk. People do not know it, but when you look at the S&P 500 and go all the way down to the balance sheet, those companies are borrowing two to three times what they are actually worth. So, you are implicitly borrowing by buying equities.

When you buy a house, you are using leverage; you are putting $20 down to buy five times the value of something. When you buy private equity, there are a number of studies that show that it is around 1.6 times levered small-cap equities. You just get to not see the volatility.

Leverage is all around us. Sadly, it is illiquid, concentrated, and excessive, in our view, and you want to diversify away from that if you can use leverage.

[00:17:06] Rodrigo Gordillo: These are things that have been around forever. You look at things like global tactical asset allocation, where you want to let the equity, bond, gold, and, in our case, Bitcoin—again, Bitcoin does not get a 33 percent weight here, it gets a significantly lower, very small weight—but in those major asset classes, you want to let those portfolios be. We believe that they are going to make money over time. And so that is kind of the first layer of extraction from what we just talked about.

Up until now, we have really talked about something anybody can implement in a non-levered way. The next level is then to say, “Okay, I want equity-like leverage. How do I do that?” Well, you do not do it by going to equities. Remember in our framework, we want balance. We want those pistons.

We have created a motor with three pistons; maybe the motor has low horsepower. Now we want to create a bigger motor with the same piston configuration, and you do that by scaling all those asset classes to a certain level of risk. With that horsepower comes some craziness, and you want to mitigate those potholes as much as you can.

The first level is that you scale the portfolio using derivatives that you need a derivative manager like us to manage. The second level is then to say, “Okay, add a filter so we get out of the worst periods.” Once we have that in place, that is your levered global tactical portfolio, that on its own is already pretty neat, but it does struggle in 2022 when all assets, including your core assets, are out and you are just sitting in cash.

Where else can we make money? My starting point is that first balanced portfolio, and now I am going to add the fancy stuff that moves very quickly. That is Systematic Macro, which has a bunch more opportunities to make money in bad inflation periods or bad bear markets.

Let me just show you the assets that it can trade.

In the world of futures contracts, we have dozens of bond markets, energy markets, equities, foreign exchange, grains, livestock, softs like cocoa, coffee, and cotton, metals, rates, volatility assets, and digital assets.

All of these are available to trade with that same framework of, “I want a full exposure to, say, corn, but I only need to give you a little bit of my money in order to get that full exposure.” Futures contracts are naturally capital-efficient and allow you to stack all of these things on top. Again, we can go long and short; futures contracts allow you very easily to take the opposite direction.

When you grab all of those and say, “I have this asset class set that is already more diversified than anything you have in your portfolio, and then I allow it to trade daily and I can be net long all of those things, net short all of those things, or net neutral. I can be long one day and then three days later I will be short.” It is much faster moving.

What does that look like? The Systematic Macro index from Pivotalpath is what I am showing here in dark blue. The key highlights here are that it has zero correlation to global equities—negative 0.02, to be exact—and a 0.05 correlation to bonds. That is not negative correlation; it is just independent of bonds and equities, which is what we want.

What other characteristics does this asset class tend to have? Well, if we look at periods like 2000, 2002, 2008, and 2020, you will see that it has reliably provided double-digit positive outcomes during periods where most assets, or all assets, lose money.

Is that surprising from a structural perspective? Probably not. If you can short, then you can find signals to say, “It is a good time to short bonds and equities, and a good time to go long energies.” You are probably going to come out on top in those periods.

Why does not everybody own this? Because when you look at this equity line, it has done the same as equities for the full period of the index being live. Well, because like gold, bonds, and equities, it can go through decades of dormant, low-returning periods. You see this throughout the index.

Especially with the FOMO that people are going to feel if they have to sell their equities to make room for an equity line like this, and you go through a period like 2004 to 2020, you are going to have a lot of clients really be upset.

So, the benefit of putting this equity line on top of your favorite market portfolio is that you get the full market portfolio return. If it goes through a five-year period of doing single digits, it is single digits on top, not subtracted. Then you get the benefit of when it is time, when there are clear and robust trends and everything is going down aggressively or going up aggressively—that is when it shines.

I am highlighting three periods where equity markets went down aggressively three times. Bond markets and equity markets in 2022 went down aggressively together, where Systematic Macro made a lot of money. But it can also make a lot of money if commodities do poorly for a long time, and that is 2014. You can see it there on the chart; it did really, really well.

Why? Because the energy complex was getting a clear signal to go short it, and the vast majority of these managers were able to capitalize on that.

You add this fifth piston to the portfolio, and you make it so that the motor as a whole has equal horsepower to equities, but is a much more efficient and more robust system. You are in good shape.

That is the second-to-last fancy thing that goes into our framework. The final thing is tail protection, or long volatility strategies.

Does that mean that the All Terrain will outperform equities every year? No. There could be a year where gold, Bitcoin, bonds, and Systematic Macro do worse than the equity side. But most years, because when you diversify that way, your return per unit of risk taken is significantly higher than any single asset class, including equities.

All-Terrain provides diversity while also attempting to minimize the FOMO of having sold equities, under the premise that we believe that every one of these asset classes has a high likelihood over a full lifetime to do positive returns above cash.

The brochure does not have any of the tactical models; anybody can really do this. So, the non-fancy version, but what I just described—this All Terrain here, you will see in the disclaimer—it is 48 percent global equities, 130 percent in seven-to-ten-year bonds, which is kind of the equivalent of 50 to 60 percent in long-term Treasuries. You just get more diversity in the middle of the curve.

So, 130 percent of Treasuries, 52 percent to gold, and 45 percent to the SocGen CTA Trend Index. Subtract the cost of 200 percent of the three-month T-bill for a cost to borrow. What you end up getting is you have stacked all these excess returns, they are non-correlated, and you are getting similar risk to equities here.

In this case, from 2000 to now, looks like global equities is at 18.5 percent, and you are seeing more than double the return than just investing in 100 percent equities, because with that 48 percent global equities, Treasuries, gold, and Trend, you are just stacking returns without necessarily stacking risk. And note that the peak-to-trough loss for equities during that whole period was a 58 percent drawdown. That is in 2008.

When you look at the All Terrain, it is negative 33 percent. So, you have a similar experience year-over-year in volatility, more than double the return, and half the peak-to-trough loss. You can verify all this. You can do it yourself, you can test it, and you can test it in different decades and regimes. Again, it is so crazy because it is not an outrageous thing; it has been there all along.

I think it requires a completely different reset of how we think. We continue to have to talk about dollar exposure, but that is not how institutions talk. If you talk to the CPP or Teachers’, they do not say, “Your limit is a hundred dollars. You get 5 percent, you get 7 percent, you get 22 percent.” That is not the discussion they are having. They are saying, “We are allowing 15 units of risk to happen to us. You get two units of risk, you get four units of risk, you get 10 units of risk.”

Leverage is not the discussion here. It is: are you using leverage to give me more returns per unit of risk within your budget that I gave you? You cannot exceed this 2 percent. And so those are the guardrails. The guardrails are no longer the hundred-dollar mark. The guardrails are: you get 2 percent of the 15 percent annualized standard deviation, or 20, or 10. They set that guardrail and they let allocations happen. They do not really get bothered too much about leverage.

You have to keep an eye on leverage. You have to do it right. You have to have experience managing derivatives and all that—of course, you have to do all of that—but the reframe is: how many units of risk do you want to take on? Then what happens underneath is less relevant.