Mar 1, 2021 · 1h 8m · capital-allocators
Alex Shahidi and Damien Bisserier – Uncorrelated Return and Balanced Risk at Evoke-ARIS (Capital Allocators, EP.179)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Alex Shahidi and Damien Bisserier, co-CIOs of Evoke-ARIS, who explore their multi-asset portfolio philosophy combining public risk parity, market-neutral alpha, and idiosyncratic private investments. They discuss how mathematical diversification, behavioral discipline, and fiduciary independence allow investors to achieve resilient compounding across diverse economic regimes.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 19% of the talking time here. How this is scored →
Ted as informed peer 4.4 Guest teaching 4.2 Guest disagreement 1.4 Ted pushing back 1.8
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:28 Alex critiques wealth management sales orientation
Alex forcefully condemns the wealth management industry for being dominated by high-fee salespeople rather than authentic investment minds.
Hardest push from Ted ▶ 22:18 Ted confronts risk parity reliance on falling yieldsTed challenges the core foundation of risk parity by questioning whether its historical success was just an artifact of a 40-year bond bull market.
Biggest teaching moment ▶ 26:25 Damien explains the quantitative rebalancing premiumDamien educates the host with empirical data showing that balanced, uncorrelated assets generate an incremental 1% return above component averages purely via disciplined rebalancing.
Ted holds their own ▶ 38:36 Ted lists premier hedge funds and challenges termsTed displays his institutional allocator expertise by naming the exact elite multi-strat hedge funds matching their criteria and immediately questioning how they manage capacity and fee constraints.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Alex Shahidi's Early Career and the Drive for Independence | 3 | 2 | 1 | 1 | Ted guides the biographical opening on Alex's departure from Merrill Lynch to start an independent RIA, with Alex laying out his early career lessons during the dot-com crash. | |
| Portfolio Construction Logic and Mathematical Diversification | 4 | 4 | 1 | 1 | Ted inquires about the roots of their mathematical framework; Damien recounts his nine years at Bridgewater and his initial interactions covering Alex as a client. | |
| The Three Core Buckets and Overcoming Sales-Driven Industry Norms | 4 | 5 | 3 | 1 | Damien categorizes their three-bucket approach (public, alpha, privates) and esoteric diversifiers, while Alex forcefully critiques the wealth advisory space for being dominated by salespeople rather than investors. | |
| Engineering Access Vehicles Across Public, Alpha, and Private Markets | 4 | 5 | 1 | 1 | Alex discusses vehicle engineering (including the RPAR ETF), while Damien details the four fundamental economic quadrants of risk parity and repo leverage mechanics. | |
| Navigating Low Interest Rates and the Passive Beta Challenge | 7 | 4 | 2 | 6 | Ted directly challenges risk parity with a classic allocator critique, questioning if it is merely a levered bond bet that benefited from a 40-year secular rate decline, prompting Alex to defend balance over rate forecasting. | |
| Bond Yield Dynamics and the Rebalancing Return Premium | 4 | 7 | 1 | 1 | Damien educates listeners on how roll-down return worked in Japan despite zero yields and reveals a structural ~1% annual rebalancing alpha unlocked across 100 years of backtested data. | |
| Calibrating Risk Parity to Client Psychology and Behavioral Realities | 5 | 5 | 1 | 2 | Ted checks whether public allocations are pure risk parity or hybrid; Alex and Damien explain the necessity of behavioral psychology to keep clients from abandoning strategies during relative underperformance. | |
| Evoke-ARIS Scale and Implementation Spectrum | 5 | 4 | 1 | 1 | Ted reviews firm metrics and moves to hedge funds, where Damien outlines market-neutral mandates and highlights the 2020 divergence between quantitative and discretionary performance. | |
| Alignment, Capacity Constraints, and Net-of-Fee Performance | 7 | 4 | 2 | 5 | Ted lists premier market-neutral hedge funds (Citadel, Millennium, Elliott, D.E. Shaw) and challenges how they handle high fee structures and capacity limits, which Damien answers using strict net-of-fee screening. | |
| Tactical Thematics and Uncorrelated Assets in Private Markets | 4 | 5 | 1 | 1 | Damien outlines their private markets playbook, citing tactical distressed credit allocations after the March 2020 crash, industrial real estate, and healthcare royalties. | |
| Evaluating Crowded Trades and Underwriting Catastrophe Reinsurance | 5 | 5 | 1 | 2 | Ted asks how they evaluate capacity and crowdedness in niche assets; Damien illustrates the cyclical boom-and-bust cycle of catastrophe reinsurance post-Katrina. | |
| Evoke-ARIS Investment Team Architecture and Research Workload | 6 | 4 | 1 | 4 | Ted questions how a compact team can diligence global markets for $13B+; Alex justifies their lean model by explaining how strict screening filters naturally shrink the manager universe. | |
| Due Diligence Methodology, Downside Focus, and Leverage Dynamics | 4 | 4 | 1 | 1 | The guests describe underwriting downside scenarios over manager optimism and leveraging cheap debt in private equity and real estate to make up for low public yields. | |
| Investment Committee Governance and Leveraging Client Insights | 4 | 3 | 1 | 1 | Damien highlights how committee peer review and expert client insights weed out bad deals, while Alex explains why they merged with veteran partners David Ho and Mark Sear. | |
| Long-Term Firm Vision and Disrupting High-Fee Wealth Models | 3 | 3 | 2 | 1 | Damien attacks legacy RIA fee structures for taking muni bond yields as management fees, and Ted transitions into closing personal questions. | |
| Closing Questions: Life Lessons, Investment Biases, Mistakes, and Books | 3 | 3 | 1 | 1 | Alex and Damien answer reflection questions on career errors, book recommendations, and warning against crystal ball investing. | |
| Manager Outreach: Identifying Authentic Partners vs. Marketing Machines | 3 | 4 | 2 | 1 | Alex and Damien distinguish authentic investment-led managers from marketing-driven operations by looking at research-to-sales staff ratios. |
Statements from this episode (28)
Shahidi: Minimizing portfolio risk mathematically requires reliably uncorrelated return streams
“And mathematically, the way to do that is to own a bunch of return streams that are different from one another, meaning they go up and down at different times. And the more reliable that differentiation, the better.”
Bisserier: Alex Shahidi was among Bridgewater's most sophisticated institutional clients
“In fact, at Bridgewater, I would say he was one of our most sophisticated investors, including all the sovereign wealth funds and pension plans that we worked with.”
Bisserier: Ray Dalio sought to hire Alex Shahidi after an initial meeting
“Early on, he was meeting with Ray in our office in Westport, and afterwards, Ray grabbed me in the hallway and said, that guy I was talking to, he's got good common sense, we should hire him, which is about the most positive thing I've ever heard from Ray afte…”
Bisserier: Most investment portfolios lack true diversification during crises
“If you think about most investment portfolios, they have lots of line items, but those line items are actually very closely related, particularly in really bad environments like 2008 or Q one of 2020. And so in practice, investors don't have that much diversif…”
Bisserier: Most hedge funds fail to hedge, lock up capital, and overcharge
“There's alpha, which we really refer to as hedge funds that actually hedge. Most hedge funds don't. Most hedge funds give you more like the first category and they charge high fees and they lock you up.”
Shahidi: Wealth management is dominated by salespeople, not investment professionals
“The big driver, you know, the thing that really pushes us the most is just this observation that most of the industry is populated by salespeople. It's a business where those who can bring in the clients are the kings of the world. And you can do that by being…”
Bisserier: Leveraged credit fails to provide true diversification against equities
“Risk parity in our mind is not just holding a bunch of line items at similar risk because a simple example is credit is if you hold credit in a leveraged fashion, you could make it have a similar risk level to equities, but it actually performs very similar to…”
Shahidi: Investable assets deliver four to five percent above cash long term
“And over time, assets give you four or five percent above cash or something in that ballpark over the long run.”
Bisserier: Japan shows low-yield bonds deliver attractive returns via steep curves
“There are historical examples in Japan, for example, where yields have been low for a long time. And returns have actually been quite attractive because you've had persistently steep yield curves. And as you've rolled down the yield curve, you get the yield pl…”
Bisserier: Evoke-ARIS holds most bond exposure at the 30-year point
“We tend to hold most of our exposure at the 30 year point.”
Bisserier: Balanced index achieves 1% rebalancing premium over underlying components
“What we found is that the average portfolio return is about a percent higher than the average returns of the components. And that comes from a rebalancing benefit that you're consistently buying assets that have fallen in the process of rebalancing and selling…”
Bisserier: Very few investors can truly hold through market downturns
“And so a lot of people have this philosophy that I can hold through the bad periods, but in practice, very few can. And you end up with the very worst outcome if you have a client or an investor that sells at the lows and changes course.”
Shahidi: Evoke-ARIS manages $19 billion, with $13 billion across 70 clients
“So as a firm, we manage about nineteen billion in assets. Damien and I handle about 70 clients or so. That makes up about thirteen billion of those assets.”
Shahidi: Only a small fraction of clients allocate 100% to risk parity
“It's a very small percentage. That's all risk parity. Those tend to be the most sophisticated clients. And those are really the only ones we would feel comfortable going that far because they're just asking for it and they want it and they understand it. So we…”
Bisserier: Evoke-ARIS requires hedge fund managers to be their own largest investors
“So we specifically look for managers that are their own largest investors, that close their strategies, that are not distracted by other businesses, that are terrified of losing money”
Bisserier: Bridgewater's win rate on trades was 55% to 60%
“Bridgewater's success rate with any given trade in a given year was 55 to 60%.”
Bisserier: 2020 quant hedge funds fell 20-40% while discretionary gained 50-100%
“You have really well-respected, very well-resourced organizations in the quantitative space that are down 20, 30, 40%, and then you have discretionary managers who are up 50, 60, 70, 8000% this year.”
Bisserier: Evoke-ARIS buys healthcare royalties and explores affordable housing bonds
“For instance, right now I'm looking at affordable housing bonds, which is a very unfollowed space, but actually has the potential to generate very attractive tax exempt yields, or earlier this year we did healthcare royalties.”
Bisserier: Capital outflows make now a good time to enter reinsurance
“And now all the capital's leaving, it's probably a good time to come back into the space.”
Bisserier: Reinsurance losses can be equity-like, triggering investor capitulation
“In the case of reinsurance, the losses can be equity like, and they're different and people don't, they're not as familiar with that. They're less likely to hold on.”
Shahidi: Evoke-ARIS rejects managers who claim to see no downside
“And when we sit in front of a manager who says, we don't really see a downside, we start running the other way because that is not a recipe for long-term success.”
Bisserier: Inexpensive near-zero debt creates a major market mispricing
“I'd say also that there is a major mispricing in markets that exist today in the sense that debt is very inexpensive. It's pretty close to zero to borrow, and private strategies utilize that to their benefit.”
Bisserier: Evoke-ARIS leverages client relationships to access exclusive venture funds
“Access too is very helpful if we have some clients who are in the venture space and those funds would be otherwise inaccessible to us, but we can leverage that relationship to gain access.”
Shahidi: Asset managers must stay in the sweet spot between too big and too small
“If you're too big, you can't access the best managers. If you're too small, You're not on their radar.”
Bisserier: The traditional high-fee wealth management model is no longer sustainable
“Allocating to active equity managers and muni bonds. That is not going to justify the fees in our industry, which are frankly too high. Especially now that assets are all time highs and interest rates are near zero. You're almost taking the entirety of the yie…”
Bisserier: Most investment success is driven by luck rather than skill
“I think skill or success in investing isn't something you can measure over short timeframes. People love to attribute success to skill. Most of your success, sorry to break it to the listeners, is probably a function of luck. And some skill, but there's a lot …”
Shahidi: Research-to-marketing headcount ratio reveals an investment manager's true focus
“A simple measure is how many research people do you have? And how many marketing people do you have? It tells you what business you're in. If you got a hundred marketing people and four on research versus four and a hundred the other way, it tells you what bus…”
Bisserier: Evoke-ARIS prefers investment managers who do not market at all
“I'd say we are more attracted to the managers that don't market at all, that just do what they do at the highest possible level, and that we get referred to by, as I said, clients or friends or other investors that we respect.”