Alex Shahidi and Damien Bisserier – Uncorrelated Return and Balanced Risk at Evoke-ARIS (Capital Allocators, EP.179)

Episode Summary

Executive Summary: Alex Shahidi and Damian Bessarier explain how Evoke Wealth/Aris Consulting builds portfolios around reliably differentiated return streams across public markets, hedge funds, and private assets. Their framework prioritizes diversification, risk control, and client behavior over forecasting, using risk parity, market-neutral alpha, and idiosyncratic private strategies to deliver smoother outcomes net of fees and taxes.

Main Topics: Founding the firm and client-first independence (Priority: 5/5): Alex describes leaving Merrill Lynch after effectively operating as an independent advisor inside a brokerage. The move to start the firm with Damian was driven by a desire to expand tools available to clients and to build a platform unconstrained by brokerage limitations. Diversification as the core portfolio philosophy (Priority: 5/5): The central investing idea is to assemble return streams that are reliably different from one another. They argue that most portfolios are more correlated than they appear and that true diversification is the best path to attractive returns with less risk. Public markets and risk parity implementation (Priority: 5/5): Their public-market portfolio centers on a risk parity mix of equities, nominal Treasuries, TIPS, and commodities. They emphasize balancing risk contributions, using leverage in bonds via futures, and focusing on growth and inflation as the primary macro drivers. Hedge fund selection for true alpha (Priority: 4/5): In hedge funds, they seek market-neutral managers with durable skill, strong alignment, and capacity discipline. They avoid high-fee strategies that simply deliver market beta and instead target managers that can genuinely hedge and diversify portfolio risk. Private markets and idiosyncratic return streams (Priority: 4/5): They use private markets to access opportunistic, less-correlated opportunities such as distressed credit, industrial real estate, healthcare royalties, life settlements, and reinsurance. The team is thematic, looking for mispriced or under-followed sectors with clear downside protection or uncorrelated characteristics. Behavioral coaching and client-specific allocation (Priority: 4/5): A recurring theme is that portfolio design must account for human behavior. They calibrate how far to push clients toward pure diversification based on each client’s ability to tolerate tracking error, volatility, and relative underperformance. Decision process, research, and culture (Priority: 3/5): The firm relies on a small investment team, a broader investment committee, client referrals, and deep due diligence. They value humility, independent thinking, and managers who are skillful, closed to excess capacity, and willing to share real downside risks.

Key Arguments: True diversification comes from owning return streams driven by different economic environments, not from holding many superficially different line items. Risk parity is not simply a levered bond trade; it is a balanced portfolio designed around growth and inflation sensitivity, with equalized risk contributions across assets. Long-duration Treasuries and TIPS can still be valuable even when yields are low because portfolio balance matters more than forecasting rates. Most hedge funds do not deliver true hedging; the useful subset is market-neutral or near-market-neutral managers with demonstrable skill and alignment. Private markets can supplement public-market premia by offering leverage, operational complexity, and idiosyncratic niches that are less correlated to traditional assets. Client behavior is a major portfolio variable; the best strategy is useless if the client cannot endure relative underperformance and stick with it. The firm believes investing should be net-of-fees and, for taxable clients, net-of-fees-and-taxes, which raises the bar for any strategy it includes.

Data Points: Firm assets under management: $19 billion - Size of the broader registered investment advisor / group mentioned in the intro and discussion Assets overseen by Alex and Damian: about $13 billion - Portion of the firm’s assets managed by the two co-CIOs Clients handled by Alex and Damian: about 70 clients - Their direct client roster within the broader firm Total clients at the firm: about 350-400 clients - Approximate size of the larger client base Dedicated full-time investment professionals: 3 - Part of the research/investment team besides the co-CIOs Investment committee members with part-time research responsibilities: about 10 - Broader decision-making and research support group Hedge fund managers in the portfolio: about 10 - Number of hedge fund managers currently used Client minimum: $10 million - Minimum account size for the firm’s client relationships Risk parity portfolio categories: 4 asset classes - Equities, nominal Treasuries, TIPS, and commodities Index history for ETF strategy: back to 1998 - Their custom index for the ETF tracks the strategy to 1998, with proxies extending it further Average portfolio return uplift from rebalancing: about 1% higher - Portfolio-level return benefit relative to the average of underlying components Bridgewater trade success rate cited: 55% to 60% - Damian’s description of the best investors’ hit rates being far from perfect Historical asset allocation lesson period: 1980s and 1990s vs 2000s - Contrast between the easy 60/40 era and the more difficult post-2000 environment Typical bond exposure point: 30-year point - Damian notes they hold most treasury exposure at the long end of the curve Largest public-market allocation range: about one quarter to all risk parity - Range across clients from mixed portfolios to pure risk parity Reference to a distressed credit allocation timing: earlier this year, immediately following the dislocation - Example of a thematic private-market allocation after market stress

Pivotal Quotes: "“We’re part psychologists, part asset allocators.”" — Alex Shahidi: Explaining that client behavior and emotional reactions are as important as portfolio construction "“The big driver… is just this observation that most of the industry is populated by salespeople.”" — Alex Shahidi: Describing why the firm differentiates itself through investment solutions rather than marketing "“You got to figure out what clients can hold on to.”" — Damian Bessarier: On why portfolio design must account for clients’ ability to endure volatility and relative underperformance

Implications: The episode argues for a more disciplined, behavior-aware approach to portfolio construction: diversify by true economic drivers, demand real alpha, and use private markets selectively. For investors, the lesson is to optimize for resilience and client stickiness, not just headline returns.