Rethinking Asset Classes: A Clear Framework for Investors

Okay, let's go here. So, I'm super excited for you all

here. So, I'm super excited for you all to be here. We're kicking off this series of weekly calls advisor just to have some like weekly conversations

around a specific framework or structure. So, it's makes sense. It's

structure. So, it's makes sense. It's

quick. It's sweet. 45minut calls. The

idea is sort of get together, have a very dynamic conversation. This is not going to be just a presentation. This is

going to be a conversation. Um, and just for context, sort of you get a an idea of how it's going to look. And I emailed you guys all got emails about this and sort of the goal of what we're trying to to create here. But essentially, we're

trying to have these weekly calls to help us all be better wealth owners and investors. It's like I mentioned, not a

investors. It's like I mentioned, not a convers not a presentation. It's a

discussion. And we're not doing this like a typical webinar style. We're

doing it just like a meeting like it.

Everyone sees everyone. Everyone can

talk, chat, ask questions, raise hand, chime in, unmute themselves just to have a a conversation. And it's really important everything that happens here because it is a conversation and we are not financial adviserss obviously

anything is said here by anyone should not be considered financial advice. It's

important to emphasize that I know everyone every GP or fund says it as a disclaimer on their slides but I'm saying it anyway even though this is not a fund or anything. I just make it clear everything we say here is pure

experience and and insights. And so

every week the idea is to dive into sort of 10 minutes of recapping what's been happening in the markets and what is expected to happen not in the markets from a projection of like movements but

more things that we need to be aware that are going to be announced in the coming weeks like next week the Fed is going to announce you know the rate cuts um and so on. So those are type of things we're going to talk about

previous week upcoming week and then we're going to dive into a specific topic 20 30 minutes conversation every week it's going to be something else.

We're going to be hosting this Mike Rendorfer he's also on the call here and I Mike is a good friend of mine he's a LP investors like me been investing on his own for the past many years and he also coaches other people like me around

investing and so I thought it'd be really interesting to host these series with him. Some weeks we'll bring in a

with him. Some weeks we'll bring in a third person or fourth or fifth who's a professional in a specific uh uh side of the industry, an industry expert that will be able to dive into a specific

topic. So, next week, and we'll talk

topic. So, next week, and we'll talk about this at the end of the call, we're going to talk about optimizing taxes.

And so, uh we're probably going to bring in someone who's a professional in taxes because neither of us are professional uh tax advisers or CPAs, but like bring someone in who really understands that.

So the idea is to bring in when it makes sense an industry industry expert around that and then we'll find the idea is to leave as much time as possible just to have an open discussion. That

doesn't mean that during the deep dive into a topic you all can't interrupt us or ask questions. The idea is just to leave enough time so we can have a a conversation. I don't know. I I like to

conversation. I don't know. I I like to be sort of get push back and feedback and ideas and what we should do and not do and if either if it's about the specific topic we're diving into or something you guys want to talk about in

the following week. So if any topic comes up or anything you guys want to ask or or recommend feel free to put it in the chat and we'll dive into that as well. What else from housekeeping

well. What else from housekeeping perspective? Like I mentioned if you

perspective? Like I mentioned if you have any questions raise your hand type it in the chat or just unmute yourself and chime in. Uh, and I will emphasize it is really important for us to understand what would be interesting for

everyone to dive into from a from a topic standpoint. So, put it in the chat

topic standpoint. So, put it in the chat or you can drop me an email afterwards and we'll we'll get on that as well. Uh,

and as I mentioned at the beginning for those who who got in a bit late, we're we're recording this. We're going to be sharing it after the call. Anyway, feel

free to if you need to hop off, we we'll get it to you afterwards. Anything

before I get started, Mike? Anything I

forgot that I wanted to say that you want to say before we dive into this?

Nope. Sounds good.

>> All right, cool. Again, the idea is to do this every Thursday at 3 p.m.

Eastern. We might move the timing depend on sort of like if we feel like people it's easier for them different timing or or whatnot, but the idea is every Thursday at 3 p.m. we're going to do it next week and the following week and

then take a break for um you know, the holidays in the new year. Uh but that's the idea. Have a weekly cadence. All

the idea. Have a weekly cadence. All

right.

So, as I mentioned the first part of this 10 minutes, let's do a quick market recap. And same as I said before, if you

recap. And same as I said before, if you guys have anything that you think would be more interesting, let me know and we'll do that as well. But going going over the past week, so overall, there's been slight increase in the markets over

the past past week. S&P, NASDAQ, Dow have all gone up a bit. ADP, which is the employment, it's it's it's a payroll company that that sends out a weekly um

or monthly employment status, has dropped.

um 32,000 private sector jobs lost in November versus 47,000 added in October.

That's a huge decrease. Usually, this is an indicator in terms of what's going to come up tomorrow. We'll talk about this, but tomorrow there's going to be they're going to be releasing the the NFP, which is the non-farming, forget what it

stands for, but it's a >> sorry, >> non-farm.

>> Yeah, non-farm payroll. That's the jobs report that everyone usually relates to.

And so this is sort of an indicator to what we're going to see there as well.

On the flip side, jobless claims sort of have dropped and this is a week- overweek 191 this week versus 216 from last week. So that's actually a positive

last week. So that's actually a positive indicator in terms of sort of the 10-year yield uh treasury. So it's it's up 2.7% from last week, 4.1 as of when I

did this, I think an hour and a half ago. Last week was 3.99. So that's

ago. Last week was 3.99. So that's

that's a good a good sign. And generally

speaking, next week, like I mentioned, the FOMC is is having their their uh uh their meeting on the 9th and 10th. And

the there's a 80 85% this is sort of like the you know the betting markets.

85% chance of a 25 basis points cut next week. 85% last week it was 77%. So it's

week. 85% last week it was 77%. So it's

rising. So there's a obviously a good chance on that. We'll see what happens tomorrow. Now, in terms of tomorrow, we

tomorrow. Now, in terms of tomorrow, we have the NFP jobs report tomorrow.

That'll that'll sort of like finalize the jobs added and unemployment rates.

That'll obviously affect the Fed's decision next week. Same goes for the uh the services PMI. I don't know if you guys want to want to look at that tomorrow, but I I did some sort of research into this and and if you if you

dive into it, there's, you know, there's metrics on that that will also affect inflation pressure building and and obviously also the Fed's reactions to that. But I can send more information

that. But I can send more information offline for that. And obviously next week we have the FMC meeting on the 9th and 10th where you know chances are they're going to report it or or decide

on 25 point decrease. That's a quick rundown of the markets for the past week and what to look at next week. Anyone

have any questions, insights, input or want to add to this? Anything?

>> A couple of comments. So the you made a comment and I don't know if this is what you meant or not but with the 10-year rate up a little bit that that was good.

I think most people including me would say that's maybe not good, but being up it's really that the 4.1 it's that's still in the range of where it's been.

We've been the 3.99 was a low point recently. So I don't think we're too

recently. So I don't think we're too much to expect there. And with the Fed, we'll hear something. They're in their dark period right now. any the time that you know the public markets are predicting 60% or more I think you can

pretty much count that it's a lock unless you get somebody that's uh you know a past insider or something like that leaking a story. So the only time I would say that that's going to be

different would be like you know the non-farm payroll comes out and it's really hot or something and then some past Fed governor will send out a story that says oh maybe this means that they

aren't going to lower rates. that would

be your indication that yeah, it probably isn't going to happen because they do try to get the market in line ahead of time. And then if it is that high, you're really, you know, there's not that much of a market reaction from

that except it's going to be more from the um comments and things like that.

Sort of the forward-looking comments, what what the tone is, desents, that kind of thing.

>> Yeah, it's a good catch. Mike, you're

right. I got I sorry I flipped this whole thing upside down. You're right. I

agree with you on that. All right. So,

if there's nothing to sort of say about the market recap, we're just to keep this market recap format for next week as well, unless you guys have any ideas or input or or would want anything else.

Now, let's going to dive into sort of the topic of this conversation of of this call. And the topic sort of that

this call. And the topic sort of that that we we talked about is sort of the whole idea of asset classes. And this

might sound like totally trivial to to to many of you, but it isn't really. And

I'll give you I just got an email yesterday from a private credit fund and this is sort of the webinar they're doing or they did today and it's debt versus private credit and if you ask me

it'sn't private credit debt or debt private like it's all same thing for know same definition of the same or it's different I don't I don't understand what this is about now probably if we were on the call was on the call I would have learned more about it but just an

example of sort of like how terminology and asset class or asset allocation uh uh works or or affects our decision isions because it's became it's it's

basically turned out of whack. I think

if we if we look at all these reports that these different communities share about asset allocation and how other people allocate their their assets, you'll see like each one of these slices

has different titles for the slices and different definitions of what an asset class is. And if we're thinking about

class is. And if we're thinking about how we want to, you know, build our our portfolio, think about allocation, it's really hard to do this when there's no, you know, simple framework. The only one of the only frameworks that you know is

kind of standardized for the mass market is you know there's a stock bonds portfolio of let's say 60 40 7030 8020 depending on your age and risk appetite and that's like the I think the consensus across the mass market

industry but then once you get into more complex investing like a lot of us do then the the definitions of of asset classes becomes kind of irrelevant and hard to compare apples to apples and I

mean you can see here for example in this in this allocation pie you there's whatever there's real estate equity 17%.

Now if I go to another slide you'll see real estate 26% and then private equity 30 and here it's private company at 47.

Now what is what is real estate and private equity the same thing? Do people

put their private companies under private equity? And these are huge

private equity? And these are huge communities that that share survey data about how people allocate their wealth and yet it's really hard to learn practical

uh understandings from this like this is 60% real estate and and alternative investments which is another asset like so this sort of got me thinking about asset classes asset allocation and obviously you know when we're thinking

about visor like how do we set our own asset classes and we also see a lot of mess when it comes to how we see people allocating their wealth and and I thought it'd be really interesting interesting or important to set the

foundation of these calls moving forward at the basic level of what we're investing in. That usually means like

investing in. That usually means like what is an asset class and what is asset allocation and this is sort of like the way we see advisor and obviously we're very skewed towards privates specifically private equity and you see

like our our pies are big and and the reason I'm presenting it this way is this is kind of fundamentally how I personally look at asset allocation asset classes and how I thought it'd be interesting to share it and get your

all's input on it. Mike before I dive into that you wanted to talk about anything something specific across what we're seeing here on on these other slides. Well, I think that I mean and

slides. Well, I think that I mean and we'll get to what you have put together and I think what it is is it's a a framework to think about because when you look at these slides, they some of them look quite differently, but if they're using different terminology or

they're pulling from a different sample size, it may may not mean that much.

Like when I look at this one for me, private company, real estate equity, and public company equity, those are all sort of in that same equity bucket. And

so when you look to these different ones, they're not that far off depending on where you're at.

But it's something to just kind of figure out a framework that you can look at these that works for you because you know like Latan and I were talking about we know people that they'll say I I want

to have a 60/40 portfolio and that's the public markets you know between stocks and bonds but then they they don't consider their private company that they own or you know the real estate that

they own or the you know the LP investments is anything else and it's like that gets in there. So, it's like, okay, you're balancing out this 60/40 portfolio. But if that's half of your

portfolio. But if that's half of your portfolio is public and the other half is private and then you've got the private market stuff is all equity based, you don't have a 60/40 portfolio.

You've got, you know, something that is um what would that be? 40% of 50. So,

you got an 8020, right, is what you >> Yeah. And and and there's this sort of

>> Yeah. And and and there's this sort of there's this >> properties versus bonds.

>> Yeah. And and there's there's this uh I don't know if it has a name for it, but there's a sort of really rule of thumb, I'd say mass market relevant rule, which is if you want to understand what your

allocation to stocks should be, you do 130 minus your age, right? So if you're 45, you want 85% in stocks and 15% in bonds. If you're 70, you want 60. And

bonds. If you're 70, you want 60. And

this goes obviously from a, you know, risk mitigation standpoint. and and and obviously this is extremely rough but even looking at this like to Mike's point stocks and bonds

which what happen what if you have a bunch of other stuff in your portfolio like how does that reference into this and how do you think about that and so that's like what got me thinking about a whole different way to think or

framework to think about allocating asset classes and so I split the world into three buckets high level okay and this isn't rocket science but it is important to emphasize there three types

of investments on the highest level.

There's equities, there's bonds, and there's cash. And an important point

there's cash. And an important point which I've seen a lot of people I think mistakenly approach, which is everything all cash is liquid, but not everything liquid is cash cuz people say, you know,

but I have, you know, I have $2 million in in in a portfolio and that's that's what I'm going to use for my emergency fund. And like, all right, but that's

fund. And like, all right, but that's fine. It's liquid, but what happens if

fine. It's liquid, but what happens if the market tanks 40%. Is it still considered the same? Like, would you still consider it cash? And so I put cash like strictly cash in the bucket of cash and then equities and debt in a

different one. And I think there it's

different one. And I think there it's really important to emphasize what an equity and what a debt is. All right? So

if you look at returns equities typically have an upside potential, right? You buy a house, that's equity or

right? You buy a house, that's equity or you buy a a a publicly traded stock, that's an equity. And there's value ad potential, right? You and typically debt

potential, right? You and typically debt is fixed return. You give someone a loan, that's debt. You buy a bond that's these things have fixed returns fixed yields and and that's like one difference between equity and debt and

then you have the risk risk equity is typically higher risk debt is lower and hence the return is linked to that cash flow when you're investing in equity it's usually variable it's not something

you can really plan on you can expect it but not like in debt where it's usually a fixed cash flow from that debt asset and the time horizon and again there's obviously outliers to this right but

this is the fundamentals of equity and debt and and I I know this sounds really simple but it becomes more complex in a second but for equity it's usually a long long play and debt is a defined

term and the simplest way to look at this is if I give someone a loan it's there's a term or you take you you you invest in a debt fund or you buy you invest in a bond these are typically you

know predefined on time horizon and equity is usually a lot more uncertain and longer now this is the equity and debt now obviously and I mentioned this As I was explaining this, I look at this

is each of these now splits into privates or public positions. So every

>> Before you go there, Leon, I just want to make a comment on risk. I mean, this is like the basic risk, but there's also the risk if you have only debt that you lose to inflation over time from a you

know, a retirement portfolio that might be actually riskier in a certain sense because there's the risk that you fall behind inflation. Right now, you know,

behind inflation. Right now, you know, the S&P 500 is up over 100% the last seven years. If you were in bonds, you

seven years. If you were in bonds, you would not be nearly as well off and that would be a big risk to your retirement plan and and happiness at different kind of risk.

>> Even but also within uh debt there's vast differences of of how much risk you're taking. You know, I I have things

you're taking. You know, I I have things in my portfolio that's like venture debt that I'm getting paid 17% on and I've got stuff in a money market that I'm getting, you know, 3.8 or 4% on. And

those the risk profile in those two investments is vastly different. and the

amount the time horizon is very different. One I have, you know, very

different. One I have, you know, very liquid. I can get a hold of it right

liquid. I can get a hold of it right away. The other one, it's like it's

away. The other one, it's like it's going to get returned in a certain time frame, but I don't know exactly when.

And so that's that's one of these things that's sort of hard to go with. The

other thing on this slide, Laton, that I would say is under equity, your time horizon, it is longer and uncertain with that. But if you are in the public

that. But if you are in the public markets, you know, that actually is more certain and you've got more control versus if you're in the private markets, it's it's on that side of things. Things

get a little squishy. But this is a nice framework to kind of think about the two with it. But there are variations within

with it. But there are variations within all of these, >> right? But I think the vast majority of

>> right? But I think the vast majority of people who invest in equities do it for the long term. If you're doing it for the short term, you're a day trader. And

then it's it's it's it's by definition you're going to make money if you hold it long term usually if you're like a a common investor as opposed to short-term, right? That that's just I

short-term, right? That that's just I think the the but I think the more important part is the uncertainty of the term, right? It's like you don't know.

term, right? It's like you don't know.

You might want to hold the long-term you might hold.

>> Yeah. I mean the NASDAQ took 15 years to come back from their high in the was it 99 2000.

>> So that's a long that's very uncertain in terms of time horizon. That was just to break even.

>> And so and so then as I as I mentioned like Yeah. And then these each of these

like Yeah. And then these each of these I think splits into public and private positions and then each of these have their own integral parameters, right?

There's liquidity and there it's it's obviously a spectrum, but publics tend to be much more liquid than private investments. Yeah, you can say, well, if

investments. Yeah, you can say, well, if I'm a private debt fund that I have uh quarterly redemption periods, yeah, it's more liquid than a private equity investment that's in a seven-year lock

in. But still publics by definition are

in. But still publics by definition are much more liquid than private investments. And again each of these

investments. And again each of these sort of trade-offs has the premium you you you you pay you for the illquidity. So the

returns are usually or should be higher because the premium you're taking for this ili liquidity. Same goes for transparency, right? Public markets are

transparency, right? Public markets are much more transparent because all the data is out there in the open versus privates where there's more, you know, opacity. Return drivers. Publics are

opacity. Return drivers. Publics are

much more market driven, supply and demand, which is a good and bad thing.

And privates are much more driven by the person or the the operator, the the the company you're invested in and not as much as the market. Obviously, both

affect it, but they aren't the main driver.

And access, of course, publiclix is broad access by definition and privates tend to be much more limited with accredited qualified purchasers or whatever or even understanding how to

reach good opportunities. So just to recap this, if I look at asset classes, everything starts by equities, debt and cash. And then the equities and debt are

cash. And then the equities and debt are split out into privates and publics. And

then I think when you do that, you can then take any asset and put it in those buckets. And not just for the sake of

buckets. And not just for the sake of doing it, but in order to compare apples to apples and understand what we're investing in, what premiums I should demand to get or I should look to achieve when I allocate capital into

these different asset classes. Right?

Cuz for example, if I'm investing in in real estate, which I think is a great example cuz people say they invest in real estate, but it's so much broader than that cuz I might be investing in the real estate through public equities,

which let's just say REITs. Someone else

might investing in real estate by holding flipping homes, which is private equity obviously. And then when you take

equity obviously. And then when you take up all the real estate you have on the underlying assets, then you can really understand what your exposure is and look if your trade-offs for the liquidity liquidity and risk and return

make sense. So that's sort of like the

make sense. So that's sort of like the the overview of like how we see the asset class definitions and buckets.

Before I go into sort of an example, any questions on this? Any remarks, Stephen?

Other than sort of like your good comment there make sense? Is it totally whack? Like feel free to knock us down.

whack? Like feel free to knock us down.

All right. So I'll dive into an example of just a portfolio. Let's just say this is a all the the red over here is equity, the blue is debt, and then cash.

And so cash an example for cash is obviously pretty straightforward checking account savings money market and the reason we do this is we want the stability of cash the optionality which I think in this day and age when there's

so such uncertainty in the markets and there are probably going to be a lot of opportunities coming up we want the optionality and that's why we might have a lot of cash and emergency runway of course and so but this is pure cash this

is not you know liquid assets that could be cash this is just cash accounts then we'll go into private equity and private equity. Examples of that could be rental

equity. Examples of that could be rental properties, private equity, like proper private equity growth type investments, VC, having my own business that I operate. Those are all under the private

operate. Those are all under the private equity. And obviously, I expect to have

equity. And obviously, I expect to have a higher return profile or some other aspect based on these different dynamics that give me um a trade-off in

comparison to the public equity side of this pie chart. The public equity will be traded stocks, reads, crypto. Crypto,

I'm sure, is a big conversation we can have because crypto could be put in different buckets. But if we go through

different buckets. But if we go through the framework I just showed you guys, if you think about crypto, crypto is liquid. It's transparent. Like if I go

liquid. It's transparent. Like if I go up here, it's obviously it's equity.

There could be some debt like that's very, you know, on the sidelines, but predominantly equity. And then it's not,

predominantly equity. And then it's not, it's liquid, it's transparent. It's

driven by the market. It's broad access.

So if you look at crypto, it is a public equity holding. Some people might argue

equity holding. Some people might argue this is cash. Well, I don't know if you can if there's enough utility in crypto to use it as cash, fine. I don't think we're at that stage yet. So, I'd still put this in public equities, but we can

have that conversation.

>> Well, the only the only thing, Laton, that I think there's more and more stable coins and and that's crypto that is cash. And that I think I would

is cash. And that I think I would definitely put in as as actual cash.

It's it's liquid, it's stable, it's cash. You know, if you're talking

cash. You know, if you're talking Bitcoin or Ethereum, then I would agree completely. it it's liquid um and it's

completely. it it's liquid um and it's public but it's definitely not because it's going to vary a lot and it's you know that variability to it whether that's up or down takes it away from that um but I do think that stable coins

are becoming more of a thing and we'll see them more in my that's cash otherwise >> I like it Mike but let me ask you a question like USDT or something that's the equivalent of the dollar so it's not

crypto >> it is crypto that's crypto I mean it's it's how you're forming holding cash you've handed somebody a dollar and they've given you $1 worth of a stable

coin which will in the future more so but even now will allow you to make payments across countries hold things stuff like that but I I think that that stable coins are going to become more

and more useful and valuable and used on a regular basis and I think that we'll start doing things like that more often u but we'll see but that's that's my opinion I think in a lot of countries if

you're in Rwanda you know a lot of times you'll get paid in the local currency, but you you don't trust that currency and so you're able you're not worried about as much as of like your dollar going down. The dollar is so much more

going down. The dollar is so much more stable for them. So they're changing into things like the stable coins. But

that was my crypto cash, but most that we think of like Bitcoin or Ethereum or Salana, those are in my opinion too public equities.

>> Fair enough. I mean, I'd still put that as a currency once you look at it that way and then you put in the same bucket as just holding foreign currency or or not, but not not that important. I mean,

it's it's a fair point. And then we obviously have the private side of it, which is or the debt side of it. We have

private debt. Private debt can be hard money lending. It could be investing in

money lending. It could be investing in a debt fund, litigation, financing, anything that's under the debt obviously because it's lower risk, usually lower returns. It's private, so you should

returns. It's private, so you should expect higher returns in the public side of it just because of the premium you should be paid for that. And then we have obviously public debt. Uh and so so

when you look at at at a portfolio and you put it into these buckets, I just feel like it's a lot the framework helps easier to compare between different

portfolios and it reduces the amount of subjectivity to asset allocation in my mind. uh and this is how I look at it

mind. uh and this is how I look at it and I just thought it'd be interesting to share it with you all to number one give you my perspective and if you have any other thoughts on this um

feel like one one one question that might come up is when you look at how do you define gold where would you guys think gold fits anyone don't be shy >> I'll call it cash it's easy to sell >> is it

>> liquid I think you not that you get your money back but you can sell to somebody but they charge you a premium to go and premium to to leave So >> yeah, I wouldn't call it. I would I

would say that it is if it's an ETF and you've got it on an exchange, well then I would put it into public equity. And

if you have a gold bar in a vault or you know at home, then I would put that into private equity. But either way, I would

private equity. But either way, I would call gold equity. How about you, Laton?

>> Boris, wait. What did you think? Boris,

you were about to say something. So, I'm

having trouble with this conversation in general because to me this seems very hypothetical and very surface level and is not digging deep into anything. For

me, you have to define what are you talking about when you talk about gold.

Are we talking about hard assets, real gold, bars, coins, whatever, or we talk about paper? You know, an ETF is not

about paper? You know, an ETF is not gold. Not in my view. Okay? It's a

gold. Not in my view. Okay? It's a

completely different animal. Now, I own both plenty of them and I use them for different purposes. My gold bars are

different purposes. My gold bars are insured against chaos in the world. So,

>> pardon.

>> Yeah, that's that's a great thing. Where

where do you consider them in your portfolio, Boris? You know, I I agree

portfolio, Boris? You know, I I agree with you. They're very different ETF

with you. They're very different ETF versus a >> Yeah, that's that's what I'm that's what I'm getting to. So, I have different portfolios for different goals and different purposes. So, I have a safe

different purposes. So, I have a safe and secure portfolio. That is my chaos portfolio. It is all cash, all liquid,

portfolio. It is all cash, all liquid, capital preservation focused. it never

loses a dime. If it does, I'm going to have a real problem because that something's going on in the world that we didn't expect. That's where I would put hard assets like gold. A silver,

same thing. Okay. Now, that being said, we all know gold and silver can go up and can go down. That's where the paper markets come into play. So, in my speculation portfolio, I hedge out all

my risk. And so I use ETFs and puts and

my risk. And so I use ETFs and puts and options to to hedge out risk in my portfolio. So that's why this

portfolio. So that's why this conversation is kind of difficult for me because we're putting things into buckets that don't fit in naturally for me. Does that make sense? Cuz I build

me. Does that make sense? Cuz I build portfolios based on a purpose and a goal. I know my entry before my exit. I

goal. I know my entry before my exit. I

have a purpose that I'm trying to achieve with every trade. You know,

there's no discussion we're having here about things like capital rotation. So,

I mean, if somebody believes that the passive approach to investing, lowcost, passive indexing, no active management is the way to go, good luck to you. It's

okay. It's just not what I do and it's not what's working in this market for sure, right? I mean,

sure, right? I mean, >> we've lived through a unique period of time in my view, right? The last 42

years, let's take out from 2022 onwards, but the 40 years prior to 2022, has been a very unusual period in history. It's

been a period that's had lower and lower and lower interest rates, which has driven liquidity and driven equity markets and and a lot of the things that we've all benefited from and experienced

came from that. That's why the passive trade exists today. It's no longer valid. It hasn't been valid for two

valid. It hasn't been valid for two years. Look at a 6040 portfolio. People

years. Look at a 6040 portfolio. People

lost their shirt if that's what they had. So what's working today is a

had. So what's working today is a completely different model because the world has changed. Nobody's adapting to that conversation. So look, I'm not

that conversation. So look, I'm not complaining. My portfolios have done 200

complaining. My portfolios have done 200 plus% this past year. So I'm totally fine. But I don't do those types of

fine. But I don't do those types of investing. I follow capital because

investing. I follow capital because capital's always looking for a home. I

don't allocate money based on arbitrary asset classes or some historical performance. Would you say would you say

performance. Would you say would you say that most people >> no that most people lose money in the markets and they lose money investing?

So I don't know I don't know what to say about that. Like the the vast majority

about that. Like the the vast majority of the investing world statistically shows if you take the best investors in the world right 68% of them okay are

sorry let me rephrase that. 68% of the time the best investors in the world are right. If you took out the top 5% of

right. If you took out the top 5% of those, it's less than 5050. I mean, you could flip a coin otherwise. So,

otherwise. So, >> so I think I think one of the >> But one of the reasons I think is first of all, I agree most people make really bad decisions, but also because the mar

the it's it's becau if you ask someone 15 20 years ago how to allocate wealth, it'll always be some sort of percentage between stocks and bonds, right? A

common I don't know if I agree with that.

>> Yeah, go ahead. I wouldn't agree with it.

>> Okay.

>> I I completely agree with Boris. Here's

where I come from, right? If I were in my 20s, I have a different perspective to life and wealth as compared to somebody who's in his 60s. It's not it's like telling a football player to go

play basketball. They're built

play basketball. They're built differently. They This is how they are.

differently. They This is how they are.

I think it's a very personal question.

Where are you in your life with with regards to your family, your inheritance, and all the other stuff.

He's right. Capital should follow, you know, money should follow where the capital is needed. Irrelevant of the class. Some people are comfortable

class. Some people are comfortable putting 100% of their money in private equity versus some people who want to have diversification. It's just just a

have diversification. It's just just a matter of choice.

>> That's exactly that's exactly my point.

I agree with both of you. I just think that when you go down the I was just at a post exit founder event a couple days ago speaking with like founders who sold companies just like networking and and then the conversations that come up is

like who do you invest with in private equity and then what do you mean what do you define private equity or how much do you allocate to real estate I'm just saying even in a basic conversation how would you answer that question Boris you say you probably say it doesn't matter

just buy an >> AP but you can't right because everybody is different >> no no but even with the definition of what does that mean to invest in real estate or private equity if You're saying it doesn't matter. So then you

can't answer the question, right?

>> I think what matters to me is is it an investment I'm interested in right now?

For example, I love real estate, but I think it's a shitty investment right now. Just my opinion. I could be wrong.

now. Just my opinion. I could be wrong.

>> Any kind of real estate, >> I would say for the most part, most real estate today is well overvalued. I'm

looking for asymmetric opportunities when I'm investing. I'm not looking for opportunities that are overpriced. Okay?

I don't know who would be attracted to buying bonds today. Some people, I guess, are. I have no interest in bonds.

guess, are. I have no interest in bonds.

I have no no allocation to >> No, but you're but sorry to interrupt, but Boris, you're looking at a very subject like very what Boris is interested. I'm not asking what Boris is

interested. I'm not asking what Boris is interested in from an investing standpoint.

>> No, no, no, but let me answer the question you're posing because what I'm interested in is where the capital is going. That's my point. I don't care

going. That's my point. I don't care what the allocation's going to look like. I only worry about where is

like. I only worry about where is capital going. If capital is going into

capital going. If capital is going into precious metals, therefore I'm in precious metals. Whether I like precious

precious metals. Whether I like precious metals.

>> Yeah. No, I'm just asking how much is Boris allocated to private equity.

>> Private equity. Uh I would say probably about 25 30% max.

>> Okay. What's private equity in your mind?

>> Private companies period. I own private companies. Most some of them are in real

companies. Most some of them are in real estate related businesses, not necessarily real estate ownership. RV

parks, things of that nature. I don't

consider that traditional real estate.

>> So but you you understand that that that's a You you understand? You just

answered me and you just said, "Well, somebody define real estate. That's not

real estate." I'm just saying it it makes it hard to understand and learn from other people and how they're investing without understanding those fundamentals. That's all I mean.

fundamentals. That's all I mean.

>> That's what I'm trying to point out. The

fundamental that matters to me is where's the capital flowing? I'm not

interested in real estate as an asset class, but there are pockets of real estate that have interest for me because of the kind of cash flow I can generate and the types of opportunities that fit.

Give you an example, an RV park, a storage, self-s storage facility. Not

necessarily traditional type of a real estate investment, but I find there's value in those. Now whether I do that in the public markets or the private markets for me there has to be an

exceptionally high illi liquidity premium that I'm getting for the private markets otherwise I have no interest in it because I usually find something you were about to say something as well Shisad around that.

>> No I wasn't >> okay. Um I mean I I I first of all I

>> okay. Um I mean I I I first of all I appreciate Boris you know giving the the the argument that's that's a really important and interesting perspective. I

I I was I was just bringing this sort of approach where and I understand how you invest. My issue has always been around

invest. My issue has always been around the conversation around investing and and what you're saying basically is that if someone asks you like how much you allocate to a specific asset class, you won't really answer the question. You'll

just say, well, it depends. It doesn't

really matter how I'm investing the asset class. It's important what your

asset class. It's important what your objectives you want to achieve are.

Correct.

>> That's right. And I and I I can answer it in the context of right now, but I can't answer it in the context of six months from now because I don't know where the capital will be in six months.

>> No, that's fair enough.

>> Some people what they decide is they want to sort of like have a a structured portfolio where they're going to have certain amounts and different things or you're somebody who is beyond that and

you feel comfortable having a very flexible portfolio that just decides, you know, where the capital's flowing and then follow it. So if you end up 95% in, you know, in a certain asset class

or a type of thing, you're fine with that. And that that's one of those

that. And that that's one of those things like you've gone beyond to where you're not carrying what that looks like. What Latan and I are trying to do

like. What Latan and I are trying to do is sort of put a framework together so a lot of people can look at, you know, what is a way to look to see what other people are doing. Like back to the

slides that Latan had where you look at four different large groups with millions to billions of dollars represented and it looks as though they're investing very differently and maybe they are maybe they're not but

it's a way to kind of classify that because you said okay I'm not invested in like you're like okay I've got 25 to 30% private equity but then in our mind real estate whether that is a house or

that's a mobile home park or self- storage that in my mind is also private equity because it's a private market, you know, and it's equity that you have.

And so, it's just a different way to think about that because there are different general riskreward profiles.

But I agree with you within those big classes, there's vast differences on what it looks like. Even a it's like an apartment complex could be it's going to be private equity, but I can have that for three very different reasons. It

might be a development play, so that's going to be no cash, no depreciation, so no tax benefits. And it's going to be a high appreciation play. It might be something where I'm buying an existing

value ad where I'm going to get probably some cash flow, some depreciation, and some appreciation. Or it might be a

some appreciation. Or it might be a coupon clipping type thing. It's a fully stabilized deal, and I'm not really expecting much appreciation. I'm just

expecting a lot of cash flow and then some depreciation. So, within each of

some depreciation. So, within each of these, there's there's wide differences, and you're putting different options in for different reasons. Um, but we're trying to give people this overall structural framework of how to look at a portfolio and to think about creating

something to fit what their goals are.

But you're right, there's many layers more than this. This is the outer framework and you're talking about three levels deep.

>> So, so let me suggest something because if that's what you're looking for, let me describe it for you because I don't think you have a clear picture of how I operate anyway. But, uh, I developed a a

operate anyway. But, uh, I developed a a process around this when I was in the financial advisory business years and years ago. I haven't been in that space

years ago. I haven't been in that space for forever, but it's called a balance barbell strategy. And so you have four

barbell strategy. And so you have four buckets. You have a safe and secure

buckets. You have a safe and secure bucket, which is generally about 10% of the assets. You have a speculative

the assets. You have a speculative bucket, which is another 10% of the assets. And then you have what's called

assets. And then you have what's called an all-weather portfolio, which is the foundation. And then you have what's

foundation. And then you have what's called a dividend portfolio. And that's

it. Those four buckets. And so there's certain rules around how this operates in my mind that might be useful for people to know. So first of all, you never have more than 50% in private

investments or illquid investments in any one of those buckets regardless of which bucket you're in. So 50% liquidity or more in any bucket. Second rule is safe and secure bucket and the specular

bucket never can grow beyond 25% each which would mean that would be 50% of your portfolio is exposed to both ends of the barbell. And then the dividend versus the uh all-w weatherather

portfolio is broken down based on how much income you need. Do you need that income to be flowing to you? Are you in retirement phase? You you're drawing

retirement phase? You you're drawing down at capital or you don't need the income. And and that's how the larger

income. And and that's how the larger you know holistic view of how I manage things works. But my personal investing

things works. But my personal investing where I spend most of my time is with within the allocation of in my case it's 25% speculative. I don't go any more

25% speculative. I don't go any more than that and I manage the 25% speculative. I I don't worry about the

speculative. I I don't worry about the rest. My safe and secure is always safe

rest. My safe and secure is always safe and secure. It's always going to be the

and secure. It's always going to be the ballast that holds you know my portfolio together. The dividend and the capital

together. The dividend and the capital appreciation. I usually use third party

appreciation. I usually use third party managers for that. uh and I have a very specific mandate that I give to them around what I expect in terms of returns and risk profile and that's it and then

I manage the speculative myself. That's

how I do it with four four buttons.

>> So Boris, thanks for that that rundown and I really appreciate you chiming in giving your input. Uh we're at time here. Well, I just want to sum it up

here. Well, I just want to sum it up guys. This is the first call. I really

guys. This is the first call. I really

appreciate the back and forth. It's

helpful. Just, you know, we're just sharing our perspective and obviously there's a tons of perspectives out there and so it's healthy conversation. We're

going to have another conversation next week. Same time, same place. We're going

week. Same time, same place. We're going

to talk about the tax optimization or optimizing for taxes more from a strategic standpoint. Still staying high

strategic standpoint. Still staying high level. I want these first few calls to

level. I want these first few calls to be more, you know, setting the grounds for further deeper conversations around tactics. So,

tactics. So, I mean, you I'm going to send out this recording anyway and we can obviously uh touch base offline all of us. If if you have any questions or input or feedback, I'd love to receive it and uh we'll be

in touch next week. Thank you so much for all for joining.

>> Thank you.