Remember back in 2021 when Rodrigo Gordillo (@RodGordilloP), Adam Butler (@GestaltU), and Corey Hoffstein (@choffstein) introduced us to “Return Stacking“? What started as an intriguing whitepaper has blossomed into something much bigger, transforming how many of us think about portfolio construction. Let’s dive into how this concept has evolved and why it matters even more today.
The Basics Haven’t Changed (But The World Has)
At its heart, return stacking remains beautifully simple – it’s about using leverage intelligently to enhance returns across non-correlated assets. Think of it like building a layer cake instead of dividing up a pie. Rather than choosing between different investments, you’re combining them in ways that can actually reduce portfolio risk while improving returns. Pretty neat, right?
From Paper to Practice
What’s really exciting is how this concept has moved from theoretical discussions to real-world applications. Corey Hoffstein and the team at Resolve haven’t just talked the talk – they’ve walked the walk by launching a comprehensive suite of Return Stacked ETFs. These aren’t just any ETFs; they’re carefully designed tools that make sophisticated investment strategies accessible to everyday investors.
The lineup includes combinations like U.S. Stocks & Managed Futures (RSST), Bonds & Managed Futures (RSBT), US Stocks & Futures Yield (RSSY), Bonds & Futures Yield (RSBY), and Global Stocks & Bonds (RSSB). Each one represents a different way to stack returns and manage risk in today’s complex market environment.
Why It Matters More Than Ever
The investment landscape has changed dramatically since 2021. We’ve seen inflation surge, interest rates climb, and traditional investment relationships get turned on their head. Remember when bonds were supposed to zig when stocks zagged? Those correlations haven’t been as reliable lately, which can make return stacking even more relevant.
Here’s what’s particularly interesting about today’s environment: While the original paper discussed return stacking as a solution for low yields, it’s proving equally valuable in our current higher-rate environment, just for different reasons. The higher rates have actually made the T-Bill component of return stacking strategies more meaningful, adding an extra layer of return potential that wasn’t available in 2021.
Real-World Impact
The proof is in the pudding, as they say. Earlier this year, we had Rodrigo and Adam back on our podcast for what turned out to be our most popular episode of the year. They dove deep into how return stacking fits with other strategies, particularly the carry trade. What was fascinating was hearing how these concepts have performed in actual portfolios during some pretty turbulent market conditions.
They shared some really interesting insights about how different types of carry work across various asset classes – from bonds to commodities, currencies to equities. But what really caught our attention was their discussion of how carry strategies can work alongside trend following approaches, creating something potentially more robust than either strategy alone.
Looking Forward
As we wrap up 2024 and look ahead to 2025, return stacking feels more relevant than ever. The investment community has embraced and built upon these ideas, with the return stacking principles and products applied in all sorts of creative ways – from sophisticated institutional portfolios to do it yourself retail investors yearning for a more efficient approach. .
Markets aren’t getting any simpler, and the need for sophisticated yet implementable investment strategies continues to grow. The beauty of how return stacking has evolved is that it’s now accessible to almost any investor through the suite of ETFs.
The conversations around return stacking have evolved too. They’re less about whether it works and more about how to implement it most effectively. Questions like how to optimize the stack, which combinations work best in different environments, and how to integrate it with existing portfolios are now at the forefront.
It’s even become part of the popular lexicon, as heard in this holiday TV ad:
https://youtu.be/yJQcysK89u0?t=22
For those who’ve been watching this space evolve since 2021, it’s been fascinating to see theory turn into practice. And for those just discovering return stacking now, you’re joining the conversation at an exciting time. The tools are more accessible than ever, and the strategy has been battle-tested through some pretty challenging market conditions.
The investment world rarely gives us true innovations – most “new” ideas are just old ones repackaged. But return stacking feels different. It’s taken a sophisticated concept and made it practical and accessible, which might be the most innovative part of all.
Check out the Return Stacking whitepaper for more on this topic: https://info.rcmalternatives.com/return-stacking
