<![CDATA[Arete Asset Management - A better way to invest

<![CDATA[Arete Asset Management - A better way to invest - Quarterly reports]]>Tue, 14 Apr 2026 17:02:50 -0400EditMySite<![CDATA[Areté Quarterly Q1 26]]>Tue, 14 Apr 2026 19:22:05 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q1-26

Areté Quarterly Q1 26
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Business update

One of my core beliefs is that knowledge is a good thing. This idea is formalized in the book, The Origin of Wealth by Eric Beinhocker. He defines wealth as physical arrangements of matter that are “fit” in the sense of serving human purposes. While he argues that evolution is the most effective process to achieve “fitness”, it is fair to think of that state as “knowledge”.

While this may come across as especially abstract, it is actually quite relevant for investors. After all, what investors are ultimately trying to do is capture the rewards of knowledge creation machines (i.e., companies).

From this perspective, it might be shocking to discover that stock indexes can move dramatically based on decidedly unknowledgable things like social media posts by the president or on rumors that can easily be disconfirmed. However, that is exactly the world in which we currently live.

I bring this up for two reasons. One is that the fundamentals of a company are absolutely critical to its long-term wealth creation. As a result, developing insight into the stream of cash flows a company is likely to produce is also knowledge – which is fit for the purpose of efficiently allocating capital to the most productive companies.

A second reason is that such analysis may not matter for long periods of time – during which stocks trade based on stories of what might be rather than what is most likely. This is the state we find markets in today – always looking for the next interesting trade, but at the expense of the longer-term journey.

As a result, the eventual outcome is quite likely to be a significant decline in stocks. Companies that engage in financial engineering to boost the stock price instead of profitably serving human purposes deprive both the shareholders and the economy of long-term value creation. These types of problems become quite evident when the financial tide rolls out.

The main point is the process of creating wealth and reliably harvesting it is essentially one of ongoing knowledge development. Stick with that and the short-term zigs and zags just don’t matter very much. Veer away from that, and the potential for permanent losses escalates.

If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q4 25]]>Wed, 14 Jan 2026 18:47:53 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q4-25

Areté Quarterly Q4 25
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Business update

There probably wasn't a bigger story than AI (artificial intelligence) last year but where the story mostly failed was in regard to providing tangible benefits to businesses. That was not the case with Areté, however, as the year started with some regular experimentation, and ended with AI functionality increasingly seeping into workflows.

Initially, the benefits were sort of odd one-offs that were useful, but not transformative. For example, I could create bespoke graphics for articles that I used to pay a graphic designer for. AI is also great for tech support -- which can be a huge time sink for a small business person.

In the last several months, I have increasingly incorporated AI tools into my thought process. This started with simpler things like simple clarifications; some technical experts aren't so great at writing or making their point. It also helped me work through slang, playful (though sometimes incomprehensible) word play, and terms and ideas that are specific to certain knowledge domains. In short, it made a lot valuable insights a lot more accessible.

I also found that AI allowed me to cast a far wider net for useful bits of information. I had relied on social media to do a lot of that, but I also determined over last year that it was no longer worth the effort -- too much toxicity for too little genuine insight. Besides, AI tools cast the net even wider and frequently highlight things like public speeches and pronouncements which can be extremely important but often don’t make the news headlines.

Increasingly I have also been using AI to tease out arguments. Sometimes two different strategists, both of whom I respect, have opposing views on an issue. It's often useful to use AI to dig into the arguments in order to find why they differ. I have experienced situations where modest signals in the language or structure of the argument reveal differing assumptions. This is extremely useful to know.

I also like to use AI to challenge theses and hypotheses. I pride myself on being fairly creative and open-minded in trying to understand unusual paradoxes and enigmas. Subjecting such ideas to AI interrogation reveals their strengths and weaknesses so I can investigate further. This helps me ensure the objectivity of my own arguments as well as those of others. It also helps to attenuate some of my more crackpot theories ;-)

In addition, one of the precepts of my investment philosophy is that it is important to view things from multiple perspectives in order to achieve a more comprehensive understanding. AI is a wonderful tool for synthesizing many different perspectives.
Relatedly, one of the bigger challenges of analysis is disentangling insights from narratives. Since nearly everyone is trying to "sell" their analysis to an audience, they almost always do so by packaging it in the form of a narrative. AI provides the functionality that can help strip away the story from the thesis.

A couple of key points stand out from my experience with AI so far. One is that the tools that exist today are extremely useful without any consideration of AGI (artificial general intelligence). It’s not necessary to dream the impossible dream to consider AI helpful.

Another is that AI provides the kind of support for small, scrappy, resourceful business people that they could only dream about in the past. This creates a big opportunity for talented individuals to punch way above their weight.

Finally, I'm a curious guy and I am always asking questions. Having the ability to get really good answers the vast majority of the time, without hundreds and hundreds of costly subscriptions, is really fun, and really stimulating.

If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q3 25]]>Wed, 15 Oct 2025 19:10:40 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q3-25

Areté Quarterly Q3 25
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Business update

One of the more noticeable phenomena of the investment environment over the last few weeks is the scene of analysts and journalists tripping all over themselves trying to explain the rise in the price of gold.

Normally I wouldn’t really care. The more others feel compelled to tout their ignorance, the better for Areté most of the time. In this case, however, there is a teaching opportunity so I will take it.

The story of gold, insofar as it’s an incredibly useful diversifying asset, isn’t an incredibly complicated one or one that is especially hard to find. You do have to look a little bit though, as it’s not one that is normally told in the headlines of financial journals or investment books. It is more common to learn about gold in the “History” section.

Likewise, it’s not super-hard to incorporate exposure to gold into an investment portfolio. There are plenty of publicly-traded vehicles that facilitate that activity.

So, this is the conundrum: Despite having ample evidence of the utility of having gold exposure in a portfolio and ample vehicles by which to accomplish that, the investment advisory industry is still woefully under-invested in gold. Why?

One reason is that advisors themselves don’t understand the case for gold. Others feel gold is risky. Still others don’t see the profit opportunities for themselves. Others are worried about career risk, i.e., the possibility they may get fired if they don’t match the performance of key indexes. There are plenty of others.

What you will find is that none of the reasons on that list has anything to do with ensuring the best outcomes for clients. Indeed, this is one of the main reasons I founded Areté: I thought there was a lot of good investment knowledge and insight that wasn’t making its way into client portfolios and helping to improve outcomes. So I decided to try my own way.

The story of gold highlights many of the shortcomings of the advisory business writ large as well as the special strengths that Areté brings to the table with its All-Terrain strategy. If you are interested, I’d love to have a chat about how Areté can help!

If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q2 25]]>Wed, 16 Jul 2025 18:29:49 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q2-25

Areté Quarterly Q2 25
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Business update

One of the comments that caught my attention the other day was the mention by Brent Donnelly in his Friday Speedrun that the phrase, “US debt is unsustainable,” is “aggravating”. Apparently, the source of his irritation is that “unsustainable” suggests a reckoning is due imminently.

Now, I happen to like Brent’s work because he truly has valuable experience and because I think he is legitimately trying to be helpful. However, Brent is a trader and for most traders, if an insight is not actionable in seconds, minutes, hours, or days, it is usually just not very useful. This is probably why he doesn’t like the phrase, “US debt is unsustainable”; because it is normally not actionable in his abbreviated time horizon.

This is a shame for a large swath of long-term investors, however, because the notion of financial “unsustainability” does have useful information content for them. The reason is the consequences of unsustainability start appearing well within an investment horizon of decades, if not in a trader’s miniaturized horizon.

Those consequences can take many different forms, but the main idea is that they represent constraints on public policy as I wrote in the last market review. The more policymakers get involved in markets, the less markets are likely to look “free” and the more they are likely to serve the needs of policymakers.

The single biggest thing to remember is that when a reckoning finally does come, which is quite likely to happen within the investment horizon of most long-term investors, the eventual bailout will come at the expense of those very same investors. The reason is because they have the money.

This means 1) long-term investors are quite likely to experience a major drawdown within their investment horizon, and 2) the risk of that event keeps increasing.

This seems like useful information to be aware of, not least of which is because there are things that can be done to avoid the brunt of the fallout.

One thing is to reduce/minimize exposure to the most popular and overvalued assets because that is where the greatest downside is likely to come from. In this case, it means US stocks and bonds.

Another thing is to be well diversified. Diversification has become a hackneyed phrase that investors nod their head to but fail to think carefully about. For one, the vast majority of assets that claim to be “diversifying” such as real estate, credit, and private equity really aren’t. When financial trouble strikes, they all go down.

So, diversification deserves fresh attention and that is exactly what Areté’s All-Terrain strategy does. It both seeks exposures that are unrelated or are even inversely correlated and minimizes exposure to US stocks and bonds when they provide unattractive prospects such as at the current time.

Finally, it is true that no one rings a bell at the top. But for long-term investors watching the signs along the way, there is no need for a bell. The existing message of unsustainability provides enough information to set one’s investment course in a way that minimizes the greatest hazards.

]]><![CDATA[Areté Quarterly Q1 25]]>Tue, 15 Apr 2025 19:01:21 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q1-25

Areté Quarterly Q125
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Business update

The news the last few weeks has been focused on tariffs, tariff rates, tariff exemptions, and tariff negotiations. If you haven’t checked the news in the last twenty minutes, you’re behind. You may have even missed a move of a few percent in the market. Indeed, it is exactly this type of uncertainty that leads me to start every quarterly report off with the preface:

“As it becomes progressively more apparent that the investment landscape presents unique challenges, it is also becoming progressively more apparent that conventional investment approaches are not sufficient for meeting those challenges.”

The heightened level of uncertainty only captures part of the set of “unique challenges” though. This is about way more than a couple of bumps in the market; this is about a fundamental re-ordering of geopolitical and public policy priorities.

The biggest and most notable impact will be on US financial assets. These assets have been beneficiaries of a truly exceptional set of tailwinds. One of those tailwinds was the persistence of low volatility, which was super-charged by public policy.

Low volatility not only created a sense of low risk, but also allowed market participants to aggressively increase leverage.

Such highly leveraged positions, however, are incompatible with the much higher level of uncertainty manifesting under the Trump administration. Higher uncertainty forces deleveraging, although it can be in either an orderly or disorderly manner.

Not only is this problematic for US stocks and bonds in particular, it is problematic for portfolios that have a high exposure to US public capital markets and/or financial engineering. This includes private equity, venture capital, real estate, and most hedge funds.

In other words, most portfolios that claim to be diversified, aren’t diversified at all. This is going to be an enormous problem for a lot of portfolios, but it is also a problem the Areté All-Terrain allocation strategy is designed to solve.

Finally, I expect a lot of people will get this wrong. I also expect a lot of people to get distracted by the unimportant details of various policy prescriptions. I also expect a lot of people will be very reluctant to embrace the new, much harsher reality.

However, for those who are willing to keep an open mind and who recognize the need for a different investment approach, Areté is here to help avoid a lot of pain and to show up when it is needed most.

If you have any questions about what I do, about the transition to Altruist, or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q4 24]]>Wed, 15 Jan 2025 19:01:27 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q4-24

Areté Quarterly Q4 24
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Business update

As I have noted several times in the past, business prospects for Areté are closely connected with the investment landscape. Shortly after introducing the All-Terrain allocation strategy in August 2021, interest rates started going up and the strategy not only avoided the considerable losses of the 60/40 benchmark, but posted modest gains in 2022 (see performance table on page 6).

This period demonstrated significant “proof of concept” for the All-Terrain strategy, especially as an antidote to the conventional “balanced” strategy.

While the All-Terrain strategy has underperformed its benchmark the last two years, that has only been due to the performance of stocks which have now reached historically extreme valuations.

As it turns out, other voices calling out with warnings for the 60/40 strategy have been getting louder lately. Notable among them is Harley Bassman who recently suggested the inverse correlation between stocks and bonds, upon which the 60/40 allocation depends, “may soon end as interest rate[s] near 5.0%”.

He cites higher discount rates, more competitive yields from bonds, and slower earnings growth (due to higher rates) as the three primary reasons.

I believe this is right and also serves as solid validation of the All-Terrain concept. While the weakness in bonds was the big problem with the 60/40 portfolio in 2022, the impending problem will be weakness in stocks. It’s very interesting that for the first time in years, short sellers are starting to talk about opportunities again.

In addition, with neither stocks nor bonds providing very attractive expected returns at the time, it will become increasingly important to manage risk by avoiding selloffs and by finding other noncorrelated and even inversely correlated assets to keep driving returns even when stocks and/or bonds aren’t able to.

In short, as Bassman described, it looks like we are finally entering an environment in which investors will really need to work to earn their returns. That should be good for Areté and pretty tough for most of the rest of the industry.

On a separate note, the transition to Altruist as custodian has continued to move ahead. While there have been a number of little glitches along the way, they are all getting ironed out.

The statement package clients receive has a different look but contains mostly the same information. You will also notice a slightly different asset allocation chart in this publication.

Looking ahead, I think there is a good chance I will be able to produce all the same information for clients I did before, but it may take a little time to get there. That said, I am already starting to see how a number of my workflows will be substantially faster and easier than before.

If you have any questions about what I do, about the transition to Altruist, or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q3 24]]>Mon, 07 Oct 2024 18:14:37 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q3-24

Areté Quarterly Q3 24.pdf
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Business update

The big news on the business side is the merger of Areté’s custodian, Shareholders Service Group (SSG), with Altruist. As a result of the merger, client portfolios will be transitioned off the Pershing platform and onto the Altruist platform at the end of October.

As I stated in a client letter, I think this will mainly be a good thing. Assets will remain safe and be protected by all the same safeguards and insurance policies as larger custodians, so that is not a concern of mine.

Clients will have a new user interface but shouldn’t see any major functional differences. I will have to make a few modifications on the operations side, but nothing major.

From a higher level perspective, I have two major thoughts. First, there is definitely potential for upside over the longer-term. Altruist was founded on the premise that technology can be leveraged to make the experience for advisors and investors far more efficient and effective. This is completely consistent with Areté's founding principles and also a welcome development.

In my opinion, the financial industry has been ripe for technological disruption for a long time and has been no small part of Areté’s proposition. I’m glad to see someone bringing that effort to the custodial services business and am glad to be a part of it. There is a lot of low-hanging fruit that can improve the well-being of both investors and advisors.

In addition, I have been really impressed with the team at Altruist all around. They have a lot of quality people and they all seem oriented to customer service. This is an accomplishment in any business, and especially so in financial services.

The second thought is one of some caution. I believe the business model of venture capital often forces businesses to try to grow more than they should. Since Altruist is funded by venture capital, I do have some concern aggressive growth targets could potentially undermine service or cause other problems at some point in the future.

To be sure, this is a general concern and I don’t have any evidence that it applies to Altruist at this point. But be assured, I will be watching.

Finally, while I must admit I don’t like spending time on things I didn’t ask for – like preparing to transition accounts to Altruist – it’s also not the right comparison. SSG was increasingly constrained by what it could do in terms of technology services so something would have had to change sooner or later anyway.

In addition, prior to the merger, I had already been exploring ways to streamline my operations. The development roadmap for Altruist dovetails nicely with that effort. In addition, I am excited about some of the new offerings from Altruist – such as their new fixed income trading platform.

So, I’m sure there will be at least a couple of glitches along the way, there always are in a transition like this. But, it’s also good to keep in mind that sometimes change is a good thing – and sometimes it’s even a very good thing!

If you have any questions about what I do, about the transition to Altruist, or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q224]]>Tue, 16 Jul 2024 10:45:07 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q224

Areté Quarterly Q224
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Business update

If you ask just about anyone who has been in the investment business for more than thirty years what the keys to success are, they are likely to focus on subjects that seem almost ridiculously abstract to newcomers. Subjects like philosophy, politics, history, and psychology don’t seem to have much relevance at all to the finance, economics, and math favored by young go-getters.

While the finance and economics and math help with modeling and calculating things, those other subjects matter over the course of long periods of time. After all, prices fluctuate due to lots of individual decisions being made (psychology), the trend of legislative priorities (politics), and patterns that often recur through time (history). In short, prices depend on context. This is something people who manage to survive the industry for several decades learn to appreciate.

This bit of reflection comes up as I try to find a way to convincingly describe current market extremes. Yes, valuations are at all-time highs, but if you don’t regularly look at the numbers, read the footnotes, do the modeling, and compare to history, you just can’t really appreciate how meaningful the statement is.

Perhaps market extremes are easier to understand in less formal terms. There are certainly well-known periods in history when extremes were reached. It wasn’t just a function of exuberance. It was also a function of social norms and conventions, political trends, and geopolitical conditions, among others.

This is abundantly clear in the book I am currently reading, Taming the Street by Diana Henriques. It tells the story of FDR’s New Deal efforts to reign in the massive conflicts of interest and other dubious practices that proliferated during the Roaring Twenties.

One of the most interesting lessons is that most of the egregiously manipulative behavior of the era was simply a function of the times. Pro-business politics, captured government, light regulation, and virtually no enforcement were just elements of the environment. It wasn’t about good or bad so much, but what you could get by with.

Interestingly, many of the practices of questionable ethics, such as operating stock pools to manipulate prices, were so common place many actors didn’t even bother trying to cover up their participation. There was no need really; everybody was doing it.

What causes society to change? It’s usually a function of things having swung too far in one direction or another. In the Roaring Twenties, corporations accrued an enormous amount of power and influence. By the early 1980s, government and labor unions had accrued too much power and influence. In both cases the pendulum had swung too far and voters clamored for change.

On that note, I thought we may have been on the threshold of major change in the investment industry in the financial crisis of 2008. The crisis revealed a lot of problems such as excessive management fees, poor transparency, and conflicts of interest that infuriated investors. I founded Areté to provide a better alternative.

As it turned out, however, investor fury quickly dissipated when a variety of monetary and public policy measures reversed the market decline, and then went on to steadily drive the market higher and higher. Essentially, investors got bribed – and they took it.

I get the sense this is changing though. With stock valuations at all-time highs and the costs of wealth inequality rising, the pendulum of pro-market policies is starting to swing back. Further, federal deficits running at persistently at high levels and rising geopolitical tensions substantially reduce the room for public policy to maneuver. Importantly, a lot of investor portfolios are not well positioned for what is coming.

As a result, I feel like a lot of pieces are falling into place for Areté. If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q124]]>Mon, 15 Apr 2024 17:13:33 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q124

Areté Quarterly Q124
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Business update

When I started Areté over fifteen years ago, one of the founding premises was that investors should be able to have access to high quality investment services at a fair price. One of the determinants of fairness was the minimization of unnecessary sales, marketing, and distribution fees. My thinking was (and is) that such fees only hurt investment performance. Further, investors who do just a little bit of work can avoid them almost completely.

Recently, a blog post by Wes Gray of AlphaArchitect brought a lot of memories flooding back. In characterizing the model of distributing financial services by big banks, he draws an analogy between big bank investment platforms and the railroad monopolies of the past. Both monopolize proprietary platforms in order to extract high rents from consumers.

In particular, Gray notes, “banks, and their powerful distribution capabilities, have managed to limit the competition’s advance. They continue to push high-fee, tax-inefficient, opaque, non-client-friendly products into the financial services marketplace.” In other words, they don’t care nearly so much about clients meeting retirement goals as themselves meeting profit goals. As Gray puts it, “From the bank’s perspective, the quality of a product is secondary to its profitability.”

To be fair, things are better today than they used to be. Fee-only advisors have displaced some of the worst advisory practices. Further, access and information are both better as well.

That said, things could be so much better than they are. Arguably most fintech has been designed to gamify investing, enable speculative activity, or both. Efforts to “democratize” finance have mainly had the same effects. Further, the big banks still run platforms that still charge excessive middle man fees for access.

The causes of this suboptimal situation can be debated, but I think there are just a few key factors. One is that most people don’t feel comfortable pressing hard on the business models of advisors and other providers. Another is that extraordinary monetary policy and strong markets have undermined the desire and the need to pushback against such deleterious practices.

As a result, this discussion is both timely and relevant. Increasingly, it is looking as if the environment that proved so amenable to the 60/40 (stock/bond) strategy is in the process of changing dramatically. Indeed, strategist Russell Napier recently described “a profound structural change in geopolitics and in how the international monetary system works”.

The main antidote, as I have been saying for some time, is to find the “anti 60/40” in the form of active strategies and diversifying asset classes that are often well off the worn path. By the same token, they are often NOT on big bank platforms.

The goods news is finding such investment services is eminently doable. The other good news is such services are often a good deal because they don’t involve excessive middle man fees. The only bad news is that some modicum of effort is required.

Very few investors made that effort after the GFC largely because the market rebounded so quickly and strongly they never felt compelled to follow through. I think the forces this time will be stronger and last longer.

While I have believed in the notion of providing very high quality investment services at a fair price for a long time, I am thrilled to hear someone of Wes Gray’s stature and expertise also making the same case very publicly. Maybe it’s finally time for this very basic consumer proposition to take off!

If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

]]><![CDATA[Areté Quarterly Q423]]>Tue, 16 Jan 2024 19:44:51 GMThttps://www.areteam.com/quarterly-reports/arete-quarterly-q423

Areté Quarterly Q423
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Business update

Russell Clark ($) described in a recent Substack post, “Fund management is about two different things - making money and raising money.” While he is mainly talking about the hedge fund business, the statement still provides useful perspective from which to assess other investment propositions.

The “raising money” part essentially boils down to solving an investment problem for a certain group of investors. In the hedge fund world this can include strategies like short selling, various arbitrage strategies, and carry trading. Each of these can help diversify large portfolios and can also provide their own return streams.

The proposition for individual investors has always been far more pedestrian. Way back in the day, brokers simply provided access to financial assets. Since then, discount brokers, internet trading, and mobile apps have simply advanced the same basic proposition: improving access.

On the product side, mutual funds provided access to professional managers and the potential for better diversification, but costs tended to be high and performance unexceptional. Since then, index funds have helped trim excess costs, but have done nothing to help on performance.

The disproportionate focus on “raising money” vs. “making money” for retail investment services is often under-appreciated because performance hasn’t mattered much for the last forty-some years. Healthy global growth and declining interest rates ensured all financial assets did exceptionally well. Success was not so much a function of outperforming as simply being there.

I bring all this up because I think this is about to change in a pretty significant way. Now that the seeds of inflation are planted, the Fed has a lot less flexibility to maintain “super-abundant” reserves. Less liquidity – and less tailwind for stocks. Given extremely high valuations, stocks have a long way to fall before looking cheap.

In addition, the vast majority of financial assets are highly correlated with stocks. That means not only is the return on stocks likely to be much lower in future years, but it won’t be easy to find truly diversifying return streams either.

So, I think investors are right on the threshold of having a big investment problem to solve: How do you generate decent returns and establish effective diversification in an environment where nearly all the winds are blowing in your face?

The answer isn’t that hard in a sense; it involves doing something very different than what got you to this place. More specifically, it involves recognizing all the flaws in the standard 60/40 approach and correcting for them. For one, it involves a more selective approach to stocks that mitigates the valuation risk of major indexes. It also addresses the risk inflation poses to fixed income investments. Finally, it reaches beyond conventional asset classes to incorporate truly diversifying assets. In short, it involves all the things I have done in developing the All-Terrain strategy.

I am increasingly convinced that the main investment problem for most investors is going to be “making money”, i.e., generating sufficient returns. Simple access to risk exposure ain’t gonna cut it any more. As the problem of lower returns becomes increasingly evident, I expect my proposition to become much more appealing. Or, as Clark puts it, “the investment case is also the business case”.

I expect the appeal to be broad-based. It will be appealing to older investors who have done well with their investments but are nervous about losing what they have accumulated. It will be appealing to people who are still working but have only a tenuous hold on funding their retirement. It will also be appealing to younger investors who have been alienated by a financial system and a financial services industry that doesn’t work for them. Moreover, this will be especially appealing to do-it-yourselfers who discover investing is a lot harder than they thought.

I expect the transition to a more difficult investment environment to transpire over years and quite possibly decades. As result, there should be some really nice tailwinds for Areté’s business.

If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at drobertson@areteam.com. I look forward to it!

Thanks for your support!

David Robertson, CFA
CEO and founder, Areté Asset Management

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