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Hi Franck, hi everyone. Hello Caesar. Hello everyone. We have a new topic, a new person we're going to talk about today, which is Redalio, who is obviously one of the best-known investors since he founded one of the most important funds on the planet called Bridge Water, and who has now left that fund and is appearing a lot on TV sets.
So we're going to talk about it a little bit, and first question before we get into the heart of the matter, how would you describe his appetite for risk? Uh, it's a well- rounded investor in the sense that, uh, their objective is to be exposed to, uh, many different asset classes that don't necessarily have a positive correlation.
So they allow for a rebalancing afterwards. I think it's inspired by de Grone's portfolio. So uh I think you've studied the subject more than I have, but generally there are four or five asset classes that manage it which allow for rebalancing and which help reduce volatility. So, uh, it caters to a certain type of profile because reducing volatility isn't necessarily interesting when you're in the long term, able to absorb it, and want to seek more performance.
His performance target is approximately 8-9% with a volatility half that of the stock market. Is that it? Yeah. We're going to come back to the video on what is the old weazer so I was going to say the all-weather wallet with the four dials. Next, we'll talk a little bit about what's being said in the news today, how this portfolio, this type of portfolio, would behave, and then you might also come back to a comparison with Charles Gav, and it will be interesting to see how Gav integrates his predominances into his portfolio.
Absolutely, you're completely right . Perhaps, to return to the topic of the dials, what he will be looking at is whether inflation is high or whether we are rather in deflation or an inflation that is low ? Is there weak growth or strong growth? And based on all these elements, well, it will allow him to say whether he should be more focused on raw materials, non-real assets, stocks, productive real estate, or bonds ?
So, to give a few examples, when there is significant inflation and weak growth, we tend to focus on real assets such as metals and raw materials. With inflation and weak growth, we are rather on long-term trend lines around quality bonds, which is what bonds are, so bonds can gain value. Uh, strong growth, lower inflation, stock, business and productive real estate because there are profits, so consumption rises.
Low growth plus lower inflation, rather quality bonds and cash. So it's interesting and we were wondering what the historical allocation of his portfolio was. Overall, it's 30% long-term bonds during periods of deflation, 40% short-term and medium-term bonds, uh 15% equity more growth-oriented, 7.5% in gold to have that systemic protection side and 7% 7.5% in commodities for protection against inflation and the cycle.
I think what's a bit complicated is knowing where we are in the cycle. So there is a big macroeconomic bet and today, where does it stand? We experience growth, decline, inflation, and deflation. How does it operate at the macroeconomic level, uh, what is its current orientation? Well, in any case, what we're seeing, and on almost every TV show, is that he's talking about a bubble.
So that's almost the slightly sensationalist side of it. He is almost compared to Michael Burry on this and it is both surprising to talk about it a little bit off the record but he is less aligned because obviously he is more at the head of the Bridge Water fund today. In any case, he says several rather interesting things.
He says we're in a bulk scheme. This does not mean that you should sell, but you should take into account the valuation level of a number of asset classes to reallocate your capital. So, in fact, when we look at and dig a little deeper into how he wants to allocate what would be his ideal capital on a base of 100, today on the gold and precious metals part, which would be a kind of macro edge, well, it would be more around 15%, which actually corresponds to what we indicated earlier by saying we are 7 and a half on gold and 7 and a half on raw materials, so close to 15%.
Regarding the stock market, he believes that one should not focus on trendy sectors, especially at the moment. So, in particular, the American technique, and more specifically, because we are on a bubble scheme and he talks about it. However, he says that being involved in quality stocks that are not necessarily highly valued makes sense .
Specifically, this could include stocks of emerging market countries. So we were discussing it, you were asking me off the record, saying, " But yes, but what does that mean, and what are emerging countries?" and we had noticed that he was quite a fan of Emerging Markets ETFs. So, that could be one way to address that problem.
Then, can we find the value quality aspect in an emerging market ETF? It's not necessarily certain. There may be other possibilities. But in any case, that was at 35-40%. Obligation to be safe with low credit risk instruments 20-25%. But uh he specified that it was necessary to avoid the debt of uh at-risk countries.
And he talks about the United States' debt, which he considers to be, uh, a significant risk. And so it's ultimately something to keep in mind because a lot of people will consider the dollar brand and US debt to be ultra safe. And for him, it's not so obvious. And I would like to draw an analogy with the French debt, which is at a somewhat complicated level in relation to the situation, the deficit and the French economic situation.
There are probably better options, or at least the risk-return ratio of government bonds in countries that are more attractive, and I know you have an opinion on this, so you can obviously say something. and the liquidity part, uh, 10-15% of the portfolio to keep flexibility, cash, tibil, so it's really uh short term and alternative real assets , so it's raw materials, strong jump, prudent real estate, geographical diversification 5-10% a bit like a kind of umbrella to protect against inflation, to be able to have uh bills a little later.
And how does he rebalance? Do you know how it rebalances what happens when there's a pocket that's, uh, more than 5-10% every 6 months? How does he manage to keep this envelope, uh, this structure a little bit rigid? Because I imagine there are variations, or that's a good question. Well, actually, since he relies heavily on the four major macroeconomic sites, I imagine these are trends.
It's like when people do technical analysis with the MACD that passes through certain levels. I imagine it's a trend, with inflation moving to a level where it's expected to be above what was predicted and to really have a clear trend. I imagine it works more in terms of trends, saying, well, if there is inflation, if there is a form of disinflation, because in the quadrant I saw deflation, but I think it's more disinflation, I think it's more those trends.
If there is a clear trend that is either changing or accelerating, I think that gives him a signal. Uh, the same way, low growth, knows what that means. Strong growth, we also know what that means. If at some point there is a strong trend of going from 4% growth to 3.2, 3, 2.7 and so on, that also gives signals.
And then at what level he anticipates them, that's a good question. OK. So in fact it is the change of scenario or its macroeconomic vision that actually causes this to vary in allocation in the different asset classes. Okay then. Yeah, exactly. I think he follows them, or rather, at the time he must have followed them daily, and when there is a change of scenario, well, that's when he says to himself, uh, I have to readjust my strategy to stay within my conceptual framework.
OK. So that means having the right indicators and then having the right timing, well that still requires some effort. It's still quite subjective and complicated unless you have really good indicators and can react quickly to your asset allocations. Yeah, you know what that makes me think of in terms of the study?
I think we talked about this together a while ago. By the way, we haven't made a video about it yet, and you can tell us in the comments if you're interested. But a study by Verdad on countercyclical investment was extremely interesting and allowed, in the long term, to beat the market. There was also this notion of a quadrant and it was quite interesting because there was a very statistical approach and basically I think the SNP 500 over the total period was 10.7% and the portfolio, by the way, there was the Redalio 6040 portfolio which was 10% and the countercyclical portfolio was 15.8%.
So we could even make a video about it because there was this notion of a little bit of a framework but which went much further and was much more nuanced in the fact of investing, for example, in small caps in deep value companies and not simply quality value. So there was a level of detail that was quite interesting, and where I agree with you is that he often gives a lot of information on TV sets, but digging a little deeper, well, when he talks about emerging markets, knowing that he was very focused on China, does he still talk about it today?
We don't have all the information. Now, we can perhaps draw a parallel with Sher, who is quite present in the financial media due to his history and the institute he set up. Well , he put in place a strategy that is simple but quite powerful. In fact, it all comes down to the process, not the quality of the analysis.
It's about saying, uh, I'm going to set up four asset classes that have a low correlation, or even a negative correlation, between them, and I'm going to do a rebalancing. They can criticize afterwards, by the way, I find it a difficulty, it's when do we rebalance because every time it starts again from its rebalancing, it hasn't been done yet.
So, actually, he has one pocket, he has four pockets, gold. 25% or 25% Asia ETF. He doesn't bother, he buys an ETF, he's not there to do stock picking. 25% Asian ETFs excluding Japan, 25% that consider it to be an abnormally undervalued currency and 25% an oil producer ETF . And uh, in 2025, that's quite interesting.
I had looked at the figures a little, I'm just checking them again so I don't say anything stupid. So, roughly speaking, that makes 40, gold was worth 40% when talking in euros. Uh, the TF Pool is up 4%. Uh, the TF Asia excluding Japan, uh, it's +19 and the yen was -19. Overall, there for 2025, you're at approximately +15%.
So it's still really quite good with fairly low volatility. And uh, I thought he said recently that he needed to rebalance his gold gains into the oil producer, but he hasn't done it yet. So be careful, it seems simple on paper, but when do I rebalance? Do I rebalance every 6 months or when my 25% in a certain category has become 35 or 40%?
It's not obvious enough. Perhaps it needs to be done in advance. Writing about writing is part of this process. When I reach a certain pocket which is at 30-35%, I shift to another which is at 15%. Uh, and uh, and I find it quite powerful because you don't actually ask any questions . You manage your thing, you're going to take yours, his objective is to make 8%, uh, complicit inflation, so 8% net.
What's pretty good, huh, is the performance of the stock market with such low volatility. So, a quick question: why is 25% of it invested in yen? And why does n't he decide to say to himself, "Well, I'm invested, let's say, 20 to 50% in Asian ETFs, including Japan, and to, in quotes, outperform the yen value?" Because I think he doesn't actually want to select stocks or select countries, and he says, if I understand correctly, that future growth will be in Asia.
So in fact, it's the growth side of his portfolio, it's Asia, and he considers Japan not to be a growth area. He's not wrong, is he? Yeah. No, no, personally he is very invested in Japan, but because we select the stocks ourselves, one by one, and it worked very well, taking 2000 listed stocks . There are things to be done even if it's not a country in great shape, and it's a very modern exporting country that's very good in many niches, and there are things to be done, but it's true that I wouldn't buy a Japanese ETF, for example, as we've said, and again this isn't investment advice, but if people don't want to overthink things and want a compound effect, which is still interesting, I repeat, I insist on the fact that this is n't advice, but we made a video on Iarits Win, which has a good conglomerate, a kind of Japanese Berhier ATAW, which is quite interesting in this context for value creation, but you remember, we're more oriented towards deep value, so we're not looking for growth companies at all, but rather companies that are listed on their own capital, that have very large cash reserves and that will be revalued by the market, so it's obviously a very different logic.
I 'm willing to buy the growth kits if I don't have to pay for the growth. If I pay 10 times the profits and there is extra cash, that's net cash in the company. Please note, we are not anti-growth because I have, of course, friends who tell me "Yes, but you only buy basic nuts and rubbish." Yes, but I also buy growth-related things, but without paying for the growth.
I am not anti-growth, on the contrary. And that's the case with a superb gem you found in Korea called Cookbo design, which is exactly that case, a box that is full of cache but also has a pretty significant RE. So, that's not the topic of the video, we might make a dedicated video about that, but it's interesting because sometimes you really tick all the boxes on that box.
Small cap, DLC, no follow-up, no analyst but the topic of potential is " Yeah". Uh, a small point of comparison. If I go back to the points you were talking about at the beginning of the video on the Allweazer wallet from Redalio. So you were saying annualized performance 7.5 %, we are one to two points below the MSI World.
volatility 7% versus 15 %, so the volatility is divided by 2 . Max draw - 12%, where the stock market can be at -45-55%. So in fact, probably Redalio's typical portfolio is aimed a priori more at people who have an aversion to volatility and loss, which is greater by reducing performance a little bit.
So in the very long term, if we are not afraid of the inferior products on the market, then the TF MSI Wild World may be more efficient. And for those who really want to have a portfolio that suits all weather conditions and who know how to rebalance as you said, it can be interesting. How would you compare Redalio's portfolio and Charles Gav's portfolio in terms of performance, volatility, and drawdown ?
Well, regarding Charles Gav, we don't actually have much history, it's a model portfolio, so I can't really answer. Uh, on the other hand, I think that the profile you highlighted corresponds, in my opinion, to two rather typical types of people . I would say for example someone who is retiring in 2 years and who is very invested in the financial markets, typically a standard American who has his 420 case, I think it's called, well he, he has every interest, I think, in being in a market that is a little less volatile, to go and look for something more serene at 8% per year, not almost sure but more certain.
and with less significant drops, especially if he has deadlines or I don't know if he has rental applications or loan repayments. But for a young person who is 20 years old, uh, I think it makes less sense. Then there's the psychological aspect, his personal risk. But otherwise, for sure, I prefer, well, we are rather passionate, we are going to seek higher returns with the associated risk and the time it requires because what is the time to manage a portfolio like Sharl Gaf type or Redalio's ?
That's 5 minutes per month. So it has nothing to do with it. So it also corresponds to an appetite and a desire to do the work of selecting assets oneself. Yeah, absolutely. And if we come back because we have a dial that is relatively clear for Redalio's selection , do we have the same thing on Charle Gave's side with a matrix?
Yes, he also has a matrix depending on how he positions himself on the same, he has the same vision as Redali, moreover he says that it is rather inspired by Brone, it seems to me that he is an academic so the same depending on the inflationary deflationary environment. I find it very complicated, these macroeconomic parameters, because they can change in a month.
So how do you do it, do you rebalance? You change everything. Uh yeah , I know, it's me, it's my share, it's not critical, it's about how to have the right indicators and how to position oneself on these portfolios. Yeah, absolutely. Well, in any case, I'm interested to hear what you think in the comments.
Does Brown's portfolio, Redalio's H weer, Charle Gav's distribution, do all of that inspire you? Overall, these are more like the portfolios you mentioned, a bit more defensive or at least they allow you to protect yourself against many different types of situations that seek a little less performance, but as you also said, they are not necessarily aimed at the same person or even the same person at any given moment.
So it would be interesting to have your take on this in the comments. Um, on the forum, there's a subscriber named Gill Bros. He too has a portfolio that he's put a little bit of his own spin on; he has gold from emerging markets and he also has shares that he calls uh three continents, five continents shares.
So he's being chased away in his own way. It's interesting to follow. So feel free to consult it. Perhaps we'll include a link to the video. So if Jill Bros is watching, please share and feel free to comment on this video. Absolutely. We'll see if he's OK so we can put the link and it's always interesting to see how the Dobass members are inspired to then try to improve these wallets in their own way. Well, I'll see you very soon. Hi Franck. Ciao Ano.
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