Host: Welcome back to ETF Rundown. Time to look at our ETF spotlight. And this week we're diving into ANTW, that's the Anthropic AI Lab Ecosystem ETF. Now Anthropic, which is the company behind Claude, has officially filed to go public as of yesterday, setting the stage for what could be one of the largest IPOs in history, upwards of $2 trillion. But there is already an ETF built around the company's growing ecosystem. It was launched in August and the fund investing companies positioned to benefit from anthropic's growth, including chip makers, cloud providers, and data center operators. Now its holdings include companies like Amazon, Alphabet, Microsoft, and Broadcom. But remember, because Anthropic has not gone public yet, ANTW does not currently own Anthropic itself. Instead, it offers exposure to the company's helping power its expansion. And as Anthropic prepares for its public market debut, the The question is whether the biggest opportunity in AI will be owning the model developers themselves or the companies building the infrastructure behind them, and then that is why we are watching ANTW this week. I want to turn now to our second guest and welcome in Shayna Sissel, founder and CEO at Panian Capital Management. Shayna, thank you so much for joining us today. I always love chatting with you, the queen of alts, and also a good friend, so. I want to start with some of these stats. So alternative strategies with low correlation to the S&P 500 returned 4.47%. So let's call it 4.5% in the third quarter, while higher correlation strategies actually lost 1. 1 3/4 percentage points. Let's just call that 2%. So that's about a gap of more than 6% points. So I'm curious to know if this shows that the real value of alternatives isn't just, you know, generating returns but also providing diversification when those traditional assets really aren't doing their job anymore.
Shayna Sissel: Yeah, so when I talk about building alternative portfolios, I always talk about the alternatives that are alternatives on liquidity, which are your private equity, your private credit, your venture capital, things of that nature. They're highly correlated to equity markets, and because they're highly correlated to equity markets and, uh, subsequently highly correlated to the AI trade, they're gonna trade in line with that. But when I am building an alt portfolio and when I'm helping Folks learn how to build all portfolios. I focus on what I call the diversifying alternatives, and that's exactly what you're talking about. These are the low to no correlation or negative correlation, uh, strategies. They're things like managed futures, equity market neutral, anything that is going to provide an additional diversification to your traditional fixed income and public equities. And these are the types of strategies that I build. Our models on and that's how I talk about building them because also as as a diversifier are more like hedge fund strategies they're not the the things that most advisers uh attribute to alternatives which is private equity venture capital private credit those are just those fixed income and equity market. It's in a different liquidity structure and a different wrapper, but they're still highly correlated to those markets, whereas these diversifying, um, strategies that are often implemented by hedge funds are the ones that are gonna provide the most potential for risk reduction, risk management, uh, for client portfolios.
Host: I want to pick up on what you were saying about managed futures. It gained about 7% in the third quarter, only 2.5% in the S&P 500. Curious to know what's driving that outperformance and if there's something about this current market environment that's allowing those strategies to work so well right now.
Shayna Sissel: So, I want to start by saying that managed futures are the allocation you'll have in your portfolio that you will love and hate at different points in time. Uh, you will love them at times like now, where there's a clear trend, because they are a systematic trend following strategies. Global macro also falls into this bucket. It's just the difference between managed futures and global macro is how they go about achieving that system. trend following, but ultimately what they're doing is making macro bets on trends in the economy. And as long as there's a consistent trend like we're seeing now with rates rising and the correlations between equity and fixed income actually being high, they're moving together, these strategies will outperform, but there's very narrow parts of the market where that. Happens it doesn't tend to persist over time and when they work they work great, but when they don't work, they're the thing, uh, advisors have to explain to their clients why they own over and over and over again. I think it was Michael Kitches who said diversification means always having to say you're sorry and managed futures are the poster child for that saying, um, so right now they're working really well, but I would. caution investors to jump into it when it's worked so well, because that's usually the time when they won't work so well, but as long as there continues to be this trend, They should continue to work. They have negative correlation most of the time to traditional equities and low to no correlation with fixed income. So there's a diversifier and a risk management tool, they're excellent protection in a portfolio. I like to think of managed futures as insurance. You don't know you need it until that time happens, but most of the time you're just paying into it and not getting anything back.
Host: So if an investor already has the traditional stock and bond portfolio and they don't have alts right now, how should they think about adding alts? Now.
Shayna Sissel: So, I always talk about alts being a 20% sleeve. There's a lot of different ways to do that math. I like to do it as if I had a million dollars, I would put $800,000 in my 60 to 40 and take $200,000 and put it in an alt sleeve. It doesn't end up with really smooth percentages, but that's what I recommend. Um, if you take 10% out of equity. And 10% out of fixed income that doesn't always work as well. It usually works a little better if you're gonna do that to take more out of fixed income than to equities because equities are gonna be able to give you juice to your returns. Um, Alt will do better than fixed income in most cases but not substantially. And so you kind of have to think about it that way, but that's how I look at it, the 800,000. Or $80,000 if it's $100,000 and traditional 60,000 to $40,000 and then $20,000 or $200,000 depending on, you know, what your total assets are, um, into, uh, um, alts and then I always say you would build an alts portfolio like you would build an equity portfolio or a fixed income. You don't just choose one strategy. You have to be tactical about it, so. Bonan manages a model for Wisdom Tree called the Bonan or the Wisdom Tree and Bonan Alternatives model, and that model is exactly how I would recommend building it. It's a, it's a, uh, uh, several different funds. They are all, um, chosen because of how they behave as a group, as well as to the broader markets, and they are all things that are going to provide. diversification. I tweak up and down things depending on market conditions, but overall it's gonna be that fully diversified bucket just like when you buy equities you typically buy large cap, small cap, midcap, maybe growth value, fixed income, you're gonna do um investment grade, high yield, government, um, possibly floating rate, short term, long term, whatever it is you would build an alternative. Portfolio the same way. It is a little tougher. The categorizations are very difficult and not well defined in the ETF world. Um, so it often helps to have a baseline. Like I said, you can find ours on Wisdom Tree's, uh, website and you can inquire there. But, uh, that, that's how I would recommend building it. You really have to think about it in the same way you would build equity or fixed income as building blocks.
Host: The queen of alts. I always love chatting with you. I wish I had a little bit more time. Shayna Sissle, founder and CEO of Von Ran Capital Management, thank you so much for joining us and for helping everyone build that alt portfolio at home.
