Tim Barrett

Well, I got to put the money somewhere.

You can't put it all in locked up hedge funds because the market will draw down.

And then the guys that sold you the swap are going to want to get paid.

When it goes down, you got to pay money in.

So you need that for when a drawdown happens.

That's how portable alpha used to run for decades.

Um,

I ran it through the GFC that way at San Bernardino.

That was a pretty harrowing time.

And it really highlighted the faults in Portable Alpha, to be honest.

Because when the market goes down that fast and that long, you're constantly chewing through your collateral and you're getting to the bare end of your collateral.

So if you're going to run Portable Alpha that way, you also have to have the flexibility to completely take beta down.

You need wide ranges.

So if the market really gets in trouble, you need to be able to reduce your equity exposure by like 20%.

And having that kind of governance structure is also difficult to get.

So portable alpha is very tough for most people.

But the idea is beta and an index fund.

You take the cash, 70% in hedge funds, 30% in treasuries.

That's the old way of doing it.

That's exactly right.