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Let's hop around to a few things today starting with a list of different investments that Christine Benz says people don't need. I'm not going to tit for tat argue in favor of what she says we don't need but will reiterate a point we make frequently which is that simply putting it all into a basic allocation fund like a 60/40 fund (VBAIX or AOR as examples) combined with an adequate savings rate and the ability to avoid panic selling should get the job done. 

Anything we might do beyond simply buying one fund needs to be considered in that context. Am I really adding value with narrower exposures, alternatives and/or any active decisions I make? Obviously I think there is value to be added in this context but more time invested in learning how to do this is pretty important. There are plenty of tools and exposures that are easy to use incorrectly. There is also a balance between slight enhancements to improve risk adjusted returns versus overtrading and chasing the thing that was previously hot. The way the blog has evolved, it's become a fun and I believe useful way to explore portfolio theory and understand how create more robust and resilient portfolios.

Speaking of things that many people probably don't need, here's the latest on the Granite Shares YieldBOOST Bitcoin ETF (XBTY). The fund is pretty new, it sells put spreads on BITX which is a 2X levered Bitcoin ETF. After four and half months, the distribution annualizes out to 100% payout.

BITY is a Bitcoin covered call ETF that "yields" 25%. The difference in the "yields" is obviously a big part of the story behind the difference in the respective price only returns. It's worth looking at the total return numbers too.

Again the time is short due to when XBTY listed. The total return comparisons aren't so bad but love them or hate them, the derivative income funds, XBTY and BITY in this example, are far more about selling/exploiting/harnessing the volatility of the underlying, Bitcoin in this post, than about tracking Bitcoin. 

Let's dovetail off that to go all alt to try to seek out a 75/50 result. 75/50 tries to capture 75% of the upside with only 50% of the downside. If you play with the numbers, you'll see it works out for a better long term result.

• Saba Capital Income & Opportunities (BRW) combo of relative value and event driven
• WisdomTree PutWrite Strategy Fund (WTPI) sells/exploits/harnesses volatility
• Absolute Convertible Arbitrage Fund (ARBIX) event driven

And the year by year;

2024 was the year it lagged VBAIX the most and that year the total return captured 71% of VBAIX' upside. The other three years it lagged, it captured more than 75% of VBAIX' upside. In 2022 it did far better than half the downside. 

The price only result shows that almost all of the return was from distributions. Both BRW's and WTPI's distributions have been a mix of ordinary income and ROC but with no real consistency in the percentages so the tax efficiency is a potential flaw worth noting. For someone utilizing some sort of depletion strategy, the portfolio has paid out 8-10% the last couple of years without eroding and someone just looking for a smoother ride would need to reinvest the distributions. 

It's an interesting idea but I'm always going to say what a bad idea it is put those kind of percentages into individual alt funds. 

Finally, lets marry a post from June that touched on infrastructure interval funds with the Lazard Infrastructure Fund (GLIFX) we looked at a few days ago. In the post this week, I said GLIFX appears to be alt-ish. On second thought, maybe not quite. 

The top table is correlation and the lower table is beta. The other symbols are infrastructure mutual funds that Grok found and VOO of course is the Vanguard S&P 500 ETF. There is more differentiation with the beta so maybe GLIFX is alt-ish. If you look at the year by year returns, the range does seem to be narrower, certainly they all held up very well in 2022 with low to mid single digit drops versus 18% for VOO. 

CAFIX and MIFAX are two of the infrastructure interval funds we looked at in June. At first glance, CAFIX appears to have it going on but it looks like much of its performance lead occurred in early 2024 while this year it's been in the middle of the pack other than MIFAX which has much lower returns.

I will watch these, there's not really enough data yet to draw a conclusion. I can't see using an interval fund but like I've said before, I think it is important to keep tabs. The reason to look at infrastructure funds, interval and otherwise, is that infrastructure is often pitched as being an alternative as touched on above. Alt-ish maybe, I'm not sure but the argument is far from being a slam dunk in favor of the niche being alternative. The one I own for clients is not alt-ish, it is heavy in materials and has a lot of equity beta.

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