Michael Green of Simplify Asset Management - The Rise of Liquid Alternatives

Episode • Nov 14, 2023 • 50m

Historically, investors have predominantly relied on traditional assets such as stocks and bonds to build portfolios. These classic investments have undoubtedly proven their worth over time. However, the modern era has ushered in new opportunities that challenge the status quo. Liquid alternatives, also known as alternative investments, are at the forefront of this revolution.

In this episode, Rusty and Robyn talk with Michael Green, Portfolio Manager and Chief Strategist at Simplify Asset Management. Michael has been a student of markets and market structure for nearly 30 years. His proprietary research into the shift from actively managed portfolios and investment funds to systematic passive investment strategies has been presented to the Federal Reserve, the BIS, the IMF, and numerous other industry groups and associations. Michael joined Simplify in April 2021 after serving as Chief Strategist and Portfolio Manager for Logica Capital Advisers.

Known for his expertise in alternative investments, Mike talks to Rusty and Robyn about the rise of liquid alternatives, such as ETFs and managed futures, and their benefits to investors. He emphasizes the need for diversification and the opportunity to do something different in a market dominated by passive equity and bond exposure. Mike also shares insights on the role of commodities in portfolios.

Key Takeaways

[02:18] - Mike's background and how he got to his current position.
[03:38] - How Simplify differs from other investment firms.
[05:02] - Why investors should consider investing in alternatives.
[06:33] - Mike's thoughts on liquid alternatives such as ETFs.
[08:13] - Challenges and reasons for the limited number of ETFs in the alternative space.
[09:49] - Examples of alternative strategies that work well in an ETF format.
[11:27] - The pros and cons of managed futures as a strategy.
[14:38] - Mike's view of commodities from a strategic standpoint.
[21:03] - The recommended strategic weight for alternatives in portfolios.
[23:08] - The concept of crowding out in passive investing.
[29:23] - The catalysts for a shift in portfolio construction.
[32:34] - Mike's take on the credit markets.
[37:18] - Mike's thoughts on how AI impacts the markets and financial advice.
[39:27] - How Mike maintains his physical and mental energy to perform at a high level.
[42:12] - The people Mike is thankful for professionally.
[43:44] - Mike's recommendations for content.

Quotes

[05:26] - "The opportunity to do something different is actually a chance to get in front of the crowd in terms of changing the allocation." ~ Michael Green

[11:54] - "The real core behind managed futures is simply to reinforce momentum trends and the strength of those trends. It's a strategy that does really well in periods of uncertainty, moving to the resolution of that uncertainty." ~ Michael Green

[15:13] - "Commodities are something that we require on a go-forward basis. It's one of the better vehicles for protecting yourself against potential inflationary outcomes. It's also one of the more powerful tools for effectively isolating very significant changes in either supply or demand characteristics in the global economy." ~ Michael Green

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