Show Us Your Portfolio: Eric Crittenden

Episode Summary

Executive Summary: Eric Crittenden explains his personal investing philosophy as maximizing "true wealth"—after fees, taxes, inflation, and slippage—per unit of drawdown pain. He invests almost entirely in his own all-weather fund, which blends global equities, T-bills, and a systematic macro sleeve to create multiple uncorrelated return streams, manage sequence risk, and improve long-term outcomes.

Main Topics: True wealth per unit of risk (Priority: 5/5): Crittenden defines his investing goal as maximizing compounded returns after all costs and inflation, relative to the drawdowns and volatility endured along the way. This framework drives both his personal portfolio and the fund he runs. All-weather portfolio construction (Priority: 5/5): The portfolio combines roughly 50% global equities, 30% laddered T-bills, and a systematic global macro program across commodities, rates, currencies, and metals to diversify return streams and smooth the experience for investors. Risk management and sequence risk (Priority: 5/5): He emphasizes minimizing downside and sequence-of-returns risk, arguing that this approach is especially valuable for retirement investors even if the industry does not widely embrace it. Tax efficiency and implementation choices (Priority: 4/5): Crittenden explains why he uses ETFs for the equity sleeve and futures for tactical macro exposure, focusing on tax deferral, lower friction, and higher true wealth creation. Role of international diversification and valuation (Priority: 4/5): He argues for global diversification because the U.S. can underperform for long periods, and he downplays valuation as a reliable timing tool, calling it mostly noise for shorter-term decision-making. Behavioral fit and investor communication (Priority: 4/5): The conversation covers why many investors struggle to hold true diversifiers, how blending assets reduces statement risk, and how advisors and clients should think about underperformance as a trade-off. Personal values, health, and legacy (Priority: 3/5): Crittenden discusses spending on health, food, sleep, housing, and family support, stressing incentives, avoiding harmful subsidies, and making choices that improve long-term well-being.

Key Arguments: His North Star is maximizing "true wealth"—real compounded return after costs and inflation—per unit of drawdown/pain rather than simply maximizing raw return. An all-weather portfolio with multiple uncorrelated return streams is superior to a simple stock-bond glide path because it broadens diversification beyond the two traditional assets. A systematic macro sleeve can provide upside/downside balance by going short when structural trends deteriorate, without forcing the long-only equity sleeve to be sold into weakness. International diversification matters because U.S. leadership is not permanent; base-rate history shows long stretches where non-U.S. markets outperform. Valuation is not a useful short-term timing signal; it may matter eventually, but it provides little actionable information over the horizons most investors care about. Tax efficiency and implementation details matter: ETFs for buy-and-hold equities and futures for tactical macro help preserve after-tax returns. For investors, the hardest part is emotional tolerance for underperformance; understanding what is being given up by exiting a strategy is key to staying disciplined. Leverage should be viewed as an output of risk targeting, not a goal in itself; the portfolio aims for a specific risk level and uses cash or modest leverage as needed. Wealth transfer/subsidies can be harmful when they remove incentives; support should alleviate suffering and enable productive behavior rather than create dependency.

Data Points: Personal allocation to fund: 90% of liquid net worth - Crittenden said his personal mandate is to invest only in the fund he manages. Other liquid assets: Balance in a couple pieces of real estate - He keeps the remainder of his wealth in real estate holdings. Expected downside risk: 18% to 22% worst downside - Based on simulations and scenario analysis going back to 1970 for the overall program. Target downside tolerance: 20% - Approximate downside risk constraint he calibrated for the program. Age: 52 - He said he already feels effectively retired because the business is his dream job. Portfolio mix: ~50% global equities, ~30% laddered T-bills - Approximate visible structure of the portfolio before the macro sleeve. Macro sleeve uncorrelated streams: 6, 7, 8, sometimes 9 or 10 - He described how the macro sleeve creates multiple uncorrelated return streams. Macro program live track record: 5 years - He said the macro sleeve had done very well for five years. Stock-market exposure target mentioned by advisors: 80% upside capture / 40-50% downside capture - He cited advisor feedback on what they consider an ideal alternative strategy. Correlation with equities: 65% - He noted the fund’s correlation with equities while stating its beta is only 0.3. Beta: 0.3 - Described as the fund’s equity beta despite significant equity correlation. Sharpe ratio: 1+ since inception/live period - Mentioned as impressive performance on a risk-adjusted basis. Rebalancing/roll frequency for futures: 4 times a year - Reason he prefers ETFs for buy-and-hold equity exposure rather than futures. Construction job wage in 1989/1990: $19.50 per hour - Used to illustrate changes in wages versus housing prices over time. Median household income: $69k-$71k - Referenced in discussion of affordability and economic pressure. Top 1% income threshold: Over $400k/year - Cited to show how income distribution compares with high housing costs. Weight change: 240 lbs to 180 lbs - He credited diet and health changes with major physical improvement. Health-related lifestyle: Falls asleep in 7 minutes - Used to illustrate improved sleep after changing diet and habits.

Pivotal Quotes: "I wanted to maximize what I call the true wealth per unit of risk." — Eric Crittenden: Defines the central objective behind his personal investing approach and fund design. "I think it's incomplete. By my calculus, it's incomplete." — Eric Crittenden: His critique of the standard stocks-and-bonds glide path as insufficiently diversified. "Don't get ahead of yourself." — Eric Crittenden: His closing advice to investors: master the basics, avoid complexity-first thinking, and focus on base-rate statistics.

Implications: The episode argues for broader diversification, tax-aware implementation, and behaviorally survivable portfolios. For investors, the lesson is to optimize for long-term after-tax, after-inflation results and avoid overreacting to short-term underperformance.