About the Author
Alex Shahidi is a Managing Partner and Co‐Chief Investment Officer at Evoke Advisors, a $21 billion registered investment advisor. Alex has more than 20 years of experience as an investment consultant managing billions of dollars for institutional and ultra‐high‐net‐worth clients. He began his career at Merrill Lynch, where he led one of the firm's largest institutional consulting groups, advising more than $10 billion in assets with an average client size of approximately $300 million. After Merrill, Alex co‐founded Advanced Research Investment Solutions (ARIS), where he, along with co‐founder Damien Bisserier, oversaw the firm's research and client service efforts.
Alex is a Chartered Financial Analyst (CFA®), a Certified Investment Management Analyst (CIMA®), a Certified Financial Planner (CFP®), and a Chartered Financial Consultant (ChFC®). Barron's magazine has repeatedly ranked him as one of America's Top 100 Independent Financial Advisors, Top 1,200 Financial Advisors, and Top 1,000 Financial Advisors.
Alex graduated cum laude from the University of California, Santa Barbara, with degrees in business economics and law. He earned a JD from the University of California, Hastings Law School, and is a member of the bar in California.
Alex's first book, Balanced Asset Allocation: How to Profit in Any Economic Climate, was published by Wiley in 2014. The article introducing the premise of the book was recognized with the IMCA 2012 Stephen L. Kessler Writing Award as well as in the Wall Street Journal, Market Watch, Money News, Fidelity.com, and Wall Street Daily.
Alex has been interviewed on Bloomberg Television and Radio, BBC World News, and Yahoo Finance and for articles in the Wall Street Journal, Barron's, and other major publications. He has also been featured in numerous podcasts including Capital Allocators, The Investor's Podcast, and Seeking Alpha.
Introduction
My business partners and I have been on a multidecade journey to discover the optimal portfolio. We recognize that we will never reach the destination of this lifelong crusade – investing is like an impossible puzzle that has no perfect solution. But we have set out as our mission to endlessly progress toward the ultimate goal. Fortunately, we have the opportunity to explore potential answers with some of the most sophisticated investors in the world. As Co‐Chief Investment Officer of Evoke Advisors, a multibillion‐dollar SEC‐registered investment advisor in Los Angeles, I regularly engage with well‐respected investment managers and industry thought leaders. We at Evoke have also been blessed to build a network of some of the greatest investment minds of our time, including CIOs of leading institutional investors and founders of the world's largest and most successful money managers. As students of the market with an intense focus, we have gleaned insight over the years from repeated interactions with the smartest investors who are also searching for similar investment answers.
Investing can be incredibly humbling. Mistakes are inevitable and seem to conveniently transpire just when you think you've figured it all out. This is evidently one of those industries in which the more you learn the more you realize how little you know. It is interesting to take a step back and observe that we know so much more now than we did 20 years ago, but that only means that we will certainly be more knowledgeable 20 years from now. This simple recognition is imperative because it prevents complacency and forces us to march on and continue the search. The crystallization of the end goal also makes it easier to find other like‐minded individuals from whom we can expand our learning.
For me, a monumental step forward occurred in 2005 when I was first introduced to Bridgewater Associates. As an institutional investment consultant at Merrill Lynch, I was seeking insightful investment managers to allocate the billions of dollars that were entrusted to my team and me. Our group was founded and led by John Ebey, one of the brightest investment minds I have met to this day. John is also one of the most genuine, charming, and generous individuals I have ever known. However, his greatest talent may be his remarkable storytelling abilities. He's the one who originally discovered Bridgewater, which he eloquently conveys in a story that I repeat next.
Bridgewater is the largest hedge fund in the world and typically only works with major pools of capital such as sovereign wealth funds, enormous pension plans, and college endowments. Unlike most investment firms, they typically do not cater to high‐net‐worth individuals, evidenced by their current stated minimum client size of $5 billion! John had known of Bridgewater by reading about them and hearing good things from investors he highly respected. John is not bashful, particularly when it comes to pursuing solutions to investment problems for clients. He called Bridgewater's front desk and asked to speak with an investment professional who would answer his questions about their strategies. No one returned his call. He tried again and again without success. He concluded that the likely reason for the lack of response was that he worked at Merrill Lynch, which is better known for advising wealthy families (rather than institutions with over $5 billion in assets).
John's persistence eventually paid off and he was able to set up a time to meet with someone at the firm. He flew from Los Angeles to Bridgewater's campus in rural Westport, Connecticut. Thanks to his charming demeanor, the meeting swiftly transitioned from the normal discussion about investment philosophy to him instantly gaining favor. He was introduced to the top professionals in the firm shortly thereafter and eventually became one of Bridgewater's favorite clients. They even studied his presentation style and asked for tips to better inform how they interacted with clients.
The next time Bridgewater was in Los Angeles, John set up a time for me to meet them. I was captivated by their unique approach from that initial meeting, and I set out to learn as much as I could from this organization. John started to allocate our client capital to Bridgewater's strategies, officially launching my multidecade relationship with this firm.
Bridgewater is first and foremost a research organization. They have been publishing their “Daily Observations” every business day for over 30 years. These deliberately private pieces are reserved for their clients, and they are designed to provide an over‐the‐shoulder peak into the firm's latest thinking. The Daily Observations are widely considered so insightful that they have essentially become required reading for managers of the largest pools of capital across the globe and for leading central bankers and policymakers. My first task upon discovery of this gold mine was to download and print every Daily Observations in their client archive. My reading stack of past “wires,” as they are commonly termed, measured over six inches thick and continued to grow since new wires came out every day. I read every single one and attained more investment knowledge in three months than I had collected in my previous six years.
Ray Dalio founded Bridgewater in 1975. Ray is among the most successful and highly regarded investors of all time and one of the wealthiest individuals in the world. Ray hired my business partner, Damien Bisserier, at Bridgewater in 2004, when the firm had about 200 employees (today they have over 1,500). Damien started his Bridgewater career in the research department and worked his way to a client‐facing role because of his passion for helping sophisticated institutions solve complex investment problems. I was one of Damien's clients, which is how we originally connected.
The year 2007 was a major turning point. Damien set up a meeting with Ray and me, which was the first time that I had ever met him in person. He explained the origins of his investment philosophy and what led to his work that formed the foundation for his All Weather portfolio, which is commonly referred to as “risk parity” today. Ray had been searching for years for a simple portfolio that could be used to manage his family's assets for generations. As a professional investor he appreciated the difficulty of timing markets and generating “alpha,” so his goal was to identify an investment solution that was completely passive: a set‐it‐and‐forget‐it portfolio that is designed to deliver attractive returns while surviving all the bumps along the way. He walked me through the logical sequence for his pioneering work and creation of All Weather.