| Areté Quarterly Q2 26 |
Business update
Business development opportunities for active management often coincide with relative performance. When the S&P 500 keeps going up, as it did in the second quarter, there just aren't a lot of alternatives that look more attractive.
It is unfortunate that the business is so driven by short-term performance considerations, but that is also why most investors underperform the long-term averages of their corresponding asset classes. They chase returns at the top and bail out at the bottom.
This age-old phenomenon sits awkwardly in the context of a stock market that has been backstopped by policy for well over fifteen years. That backstop has done something unusual: it has washed out the instinct to sell.
The result is an unusual set of conditions. On one hand, flows, market structure, narrative, and the political environment have all continued to be conducive to rising stock prices. On the other hand, valuation excesses have become extreme, while risks in geopolitics, public policy, monetary policy, and international money flows continue to accumulate.
It presents a classic Faustian bargain: decent returns in the short term, but a heightened chance of permanent impairment of capital over a longer term that is still well within the investment horizon of most investors.
That bargain is what shapes investor behavior at the margin. There are exceptionally few alternatives to a standard 60/40 stock/bond allocation — few strategies genuinely designed to perform well across conditions, especially when conditions turn hostile to both stocks and bonds. As a result, investors who reach a natural decision point (like rolling a 401k into an IRA) tend to do one of two things: move into a standard target date fund, effectively 60/40, or stay in cash.
I'm sure there are plenty of investors happy to just go along with the flow. But it also seems like there are quite a few who would rather have better choices, and just haven't found them yet. That's the gap All-Terrain is built for: a strategy designed to deliver returns without depending on the policy backstop holding indefinitely.
If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at [email protected]. I look forward to it!
Thanks for your support!
David Robertson, CFA
CEO and founder, Areté Asset Management
Business development opportunities for active management often coincide with relative performance. When the S&P 500 keeps going up, as it did in the second quarter, there just aren't a lot of alternatives that look more attractive.
It is unfortunate that the business is so driven by short-term performance considerations, but that is also why most investors underperform the long-term averages of their corresponding asset classes. They chase returns at the top and bail out at the bottom.
This age-old phenomenon sits awkwardly in the context of a stock market that has been backstopped by policy for well over fifteen years. That backstop has done something unusual: it has washed out the instinct to sell.
The result is an unusual set of conditions. On one hand, flows, market structure, narrative, and the political environment have all continued to be conducive to rising stock prices. On the other hand, valuation excesses have become extreme, while risks in geopolitics, public policy, monetary policy, and international money flows continue to accumulate.
It presents a classic Faustian bargain: decent returns in the short term, but a heightened chance of permanent impairment of capital over a longer term that is still well within the investment horizon of most investors.
That bargain is what shapes investor behavior at the margin. There are exceptionally few alternatives to a standard 60/40 stock/bond allocation — few strategies genuinely designed to perform well across conditions, especially when conditions turn hostile to both stocks and bonds. As a result, investors who reach a natural decision point (like rolling a 401k into an IRA) tend to do one of two things: move into a standard target date fund, effectively 60/40, or stay in cash.
I'm sure there are plenty of investors happy to just go along with the flow. But it also seems like there are quite a few who would rather have better choices, and just haven't found them yet. That's the gap All-Terrain is built for: a strategy designed to deliver returns without depending on the policy backstop holding indefinitely.
If you have any questions about what I do or just want to learn more about the All-Terrain strategy, please reach me at [email protected]. I look forward to it!
Thanks for your support!
David Robertson, CFA
CEO and founder, Areté Asset Management
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