Drawing from my personal experience in mathematical physics and professional baseball, I outline a meritocratic architecture predicated on first-principles risk management, complex adaptive systems, and closed-loop validation.

Outsmart the paradox and lead with evidence: Read the full Forbes piece for the blueprint.

https://www.forbes.com/councils/forbesfinancecouncil/2025/09/15/the-endowment-committee-paradox-why-smart-people-make-bad-investment-decisions/

1. Determine the value of your investable assets.

2. Determine your investment time horizon.

3. Determine the amount of quarterly income you’ll need from your investable assets for the duration of your investment time horizon.

4. Determine the cash reserves you’ll need in addition to your income.

5. Calculate the risk-adjusted performance of the investments you have access to (across all asset classes) as measured since January 2007 or earlier:

   1. Summers Total Risk-Adjusted Performance Measure (“S_Ω” )

   2. Maximum Drawdown Duration Required to Realize the Expected Return (“MDDD_S”)

6. Park your cash reserve requirements from Step 4. into a money market account.

7. Divide your quarterly income requirements from Step 3. by the highest annual percentage yield (“APY”)  of the fixed income investment(s) you have access to that have a duration less than or equal to your investment time horizon and have not cut dividends or distributions since January 2007 or earlier; allocate that amount to that/those investment(s).

8. Allocate what remains of your investable assets after Steps 6. and 7. to the investment(s) with the highest S_Ω and an MDDD_S that is less than or equal to your investment time horizon.

9. Re-evaluate and repeat steps 1. through 8. periodically.

Today at 3pm EDT, we will reveal what you need to know for before the smartest money’s 9 steps of investing will work for you…

Register Now

As yesterday’s sell-off pummels most investors, the unique value of our work is again brought into sharp relief.

Last week we reviewed the fifth of the seven best active asset managers our efforts have uncovered…

• Strategy #7 ( S_Ω= 43.61%) a diversified liquid currency and global equities multi-strategy

• Strategy #6 (S_Ω = 47.84%) an algorithmically-traded long-short equities strategy

• Strategy #5 (S_Ω = 119.68%) an algorithmically-traded noise-reduction equities strategy

• Strategy #1A (S_Ω = 747.23%) an algorithmically-traded foreign exchange market strategy utilizing contracts for difference

• Strategy #1B (S_Ω = ∞) a lower middle market value-add healthcare private equity strategy

• Strategy #1C (S_Ω = ∞) a short-term life insurance trading strategy capturing price differences between primary and secondary markets

• Strategy #1D (S_Ω = ∞) a residential real estate reverse repo strategy trading on disconnected comparable sales values and net operating income

Over the past 19 years, Adagio Group has been dedicated to searching the globe for the best investment managers and strategies in existence and utilizing the latest advancements in quantitative finance to accurately measure their risk-adjusted performance and optimize them. 

We’ve been hunting for the next Renaissance Technologies…

Renaissance Technologies’ Medallion Fund has averaged historical return of 62% without drawdown as measured since 1988. It represents the best investment performance of modern times. The problem is that it has been closed to outside investors since 1993.

With Renaissance out of the picture where does the real smart money go?

Today we continue our countdown of the best asset managers we’ve found—asset managers that approach Renaissance-level performance—and are currently open to investors… at least to institutional investors. To provide the retail market access, we’ve created structures that now make them accessible to high-net-worth individuals as well.

Each strategy’s overall performance is measured by dividing its expected return by its risk (the annualized probability of loss weighted by the expected degree of loss as measured since January 2007 or earlier) and scaling that measure against the risk of the S&P 500 (the “Summers Total Risk-Adjusted Performance Measure” or “S_Ω”.) For reference, S_Ω of the S&P 500 is equal to its expected return of 9.36%.

Here we discuss the first of our top 4 strategies without inter-year drawdown, Strategy #1A:

In addition to utilizing our quantitative expertise to measure and optimize the performance of individual strategies, we’ve developed an algorithmic portfolio construction tool...

It constructs a portfolio of the best performance possible for any given investment time horizon, income and cash reserve requirements (i.e., liquidity mandate) by strategically assembling the best asset managers in the world that we’ve been able to identify by our rigorous quantitative standards.

I decided to provide you, our high-net-worth and institutional investor following, a glimpse behind our curtain—an opportunity for you to construct your own portfolio to see how your money would perform if it were optimally employed by our quantitative standards…

You probably won’t believe what you see until you remember that we’re applying Renaissance-level sophistication and rigor. Simply input a few very basic parameters, and see for yourself:

Construct Your Own Portfolio Now

We’ve been hunting for the next Renaissance Technologies…

Renaissance Technologies’ Medallion Fund has averaged historical return of 62% without drawdown as measured since 1988. It represents the best investment performance of modern times. The problem is that it has been closed to outside investors since 1993.

With Renaissance out of the picture where does the real smart money go?

Today we resume our countdown of the best asset managers we’ve found—asset managers that approach Renaissance-level performance—and are currently open to investors… at least to institutional investors. To provide the retail market access, we’ve created structures that now make them accessible to high-net-worth individuals as well.

Each strategy’s overall performance is measured by dividing its expected return by its risk (the annualized probability of loss weighted by the expected degree of loss as measured since January 2007 or earlier) and scaling that measure against the risk of the S&P 500 (the “Summers Total Risk-Adjusted Performance Measure” or “S_Ω”.) For reference, S_Ω of the S&P 500 is equal to its expected return of 9.36%.

We left off reviewing the strategy with the sixth lowest risk-adjusted performance of the seven we’ve identified:

• Strategy #7 ( S_Ω= 43.61%) a diversified liquid currency and global equities multi-strategy

• Strategy #6 (S_Ω = 47.84%) an algorithmically-traded long-short equities strategy

• Strategy #5 (S_Ω = 119.68%) an algorithmically-traded noise-reduction equities strategy

• Strategy #1A (S_Ω = 747.23%) an algorithmically-traded foreign exchange market strategy utilizing contracts for difference

• Strategy #1B (S_Ω = ∞) a lower middle market value-add healthcare private equity strategy

• Strategy #1C (S_Ω = ∞) a short-term life insurance trading strategy capturing price differences between primary and secondary markets

• Strategy #1D (S_Ω = ∞) a residential real estate reverse repo strategy trading on disconnected comparable sales values and net operating income

Today we continue with Strategy #5:

In addition to utilizing our quantitative expertise to measure and optimize the performance of individual strategies, we’ve developed an algorithmic portfolio construction tool...

It constructs a portfolio of the best performance possible for any given investment time horizon, income and cash reserve requirements (i.e., liquidity mandate) by strategically assembling the best asset managers in the world that we’ve been able to identify by our rigorous quantitative standards.

I decided to provide you, our high-net-worth and institutional investor following, a glimpse behind our curtain—an opportunity for you to construct your own portfolio to see how your money would perform if it were optimally employed by our quantitative standards…

You probably won’t believe what you see until you remember that we’re applying Renaissance-level sophistication and rigor. Simply input a few very basic parameters, and see for yourself:

Construct Your Own Portfolio Now

We’ll continue this countdown in subsequent posts, but today I’ll highlight how to turn these great investments into the best possible portfolio in nine brief steps:

1. Determine the value of your investable assets.

2. Determine your investment time horizon.

3. Determine the amount of quarterly income you’ll need from your investable assets for the duration of your investment time horizon.

4. Determine the cash reserves you’ll need in addition to your income.

5. Calculate the risk-adjusted performance of the investments you have access to (across all asset classes) as measured since January 2007 or earlier:

   1. Summers Total Risk-Adjusted Performance Measure (“S_Ω” )

   2. Maximum Drawdown Duration Required to Realize the Expected Return (“MDDD_S”)

6. Park your cash reserve requirements from Step 4. into a money market account.

7. Divide your quarterly income requirements from Step 3. by the highest annual percentage yield (“APY”)  of the fixed income investment(s) you have access to that have a duration less than or equal to your investment time horizon and have not cut dividends or distributions since January 2007 or earlier; allocate that amount to that/those investment(s).

8. Allocate what remains of your investable assets after Steps 6. and 7. to the investment(s) with the highest S_Ω and an MDDD_S that is less than or equal to your investment time horizon.

9. Re-evaluate and repeat steps 1. through 8. periodically.

We’ve given you the means to effortlessly put these steps into practice with our algorithmic portfolio construction tool...

It constructs a portfolio of the best performance possible for any given investment time horizon, income and cash reserve requirements (i.e., liquidity mandate) by strategically assembling the best asset managers in the world that we’ve been able to identify by our rigorous quantitative standards.

I decided to provide you, our high-net-worth and institutional investor following, a glimpse behind our curtain—an opportunity for you to construct your own portfolio to see how your money would perform if it were optimally employed by our quantitative standards…

You probably won’t believe what you see until you remember that we’re applying Renaissance-level sophistication and rigor. Simply input a few very basic parameters, and see for yourself:

Construct Your Own Portfolio Now

With Renaissance out of the picture where does the real smart money go?

Over the past 19 years, our entire firm has been dedicated to searching the globe for the best investment managers and strategies in existence and utilizing the latest advancements in quantitative finance to accurately measure their risk-adjusted performance and optimize them. 

We’ve been hunting for the next Renaissance Technologies…

In this series of posts, we’re reviewing the best asset managers we’ve found that approach Renaissance-level performance and are currently open to investors… at least to institutional investors. To provide the retail market access, we’ve created structures that now make them accessible to high-net-worth individuals as well.

Each strategy’s overall performance is measured by dividing its expected return by its risk (the annualized probability of loss weighted by the expected degree of loss as measured since January 2007 or earlier) and scaling that measure against the risk of the S&P 500 (the “Summers Total Risk-Adjusted Performance Measure” or “S_Ω”.) For reference, S_Ω of the S&P 500 is equal to its expected return of 9.36%.

Last week we started with a review of the strategy with the lowest risk-adjusted performance of the seven we’ve identified.

• Strategy #7 ( S_Ω= 43.61%) a diversified liquid currency and global equities multi-strategy

• Strategy #6 (S_Ω = 47.84%) an algorithmically-traded long-short equities strategy

• Strategy #5 (S_Ω = 119.68%) an algorithmically-traded noise-reduction equities strategy

• Strategy #1A (S_Ω = 747.23%) an algorithmically-traded foreign exchange market strategy utilizing contracts for difference

• Strategy #1B (S_Ω = ∞) a lower middle market value-add healthcare private equity strategy

• Strategy #1C (S_Ω = ∞) a short-term life insurance trading strategy capturing price differences between primary and secondary markets

• Strategy #1D (S_Ω = ∞) a residential real estate reverse repo strategy trading on disconnected comparable sales values and net operating income

Today we continue with Strategy #6:

In addition to utilizing our quantitative expertise to measure and optimize the performance of individual strategies, we’ve developed an algorithmic portfolio construction tool...

It constructs a portfolio of the best performance possible for any given investment time horizon, income and cash reserve requirements (i.e., liquidity mandate) by strategically assembling the best asset managers in the world that we’ve been able to identify by our rigorous quantitative standards.

I decided to provide you, our high-net-worth and institutional investor following, a glimpse behind our curtain—an opportunity for you to construct your own portfolio to see how your money would perform if it were optimally employed by our quantitative standards…

You probably won’t believe what you see until you remember that we’re applying Renaissance-level sophistication and rigor. Simply input a few very basic parameters, and see for yourself:

Construct Your Own Portfolio Now

In earlier posts, I’ve discussed the surprisingly esoteric definition of investment risk and meaningful, accurate risk-adjusted performance measurement.

Over the next few weeks, I’ll show you how the application of these abstract concepts translate into tangible investment performance with several of the best performing asset managers we’ve found across the globe.

We’ll review one of our asset managers’ strategies per post starting today with the lowest risk-adjusted performance of the seven and finishing this series with the best.

Each strategy’s overall performance is measured by dividing its expected return by its risk (the annualized probability of loss weighted by the expected degree of loss as measured since January 2007 or earlier) and scaling that measure against the risk of the S&P 500 (the “Summers Total Risk-Adjusted Performance Measure” or “S_Ω”). For reference, S_Ω of the S&P 500 is equal to its expected return of 9.36%.

• Strategy #7 (S_Ω = 43.61%) a diversified liquid currency and global equities multi-strategy

• Strategy #6 (S_Ω = 47.84%) an algorithmically-traded long-short equities strategy

• Strategy #5 (S_Ω = 119.68%) an algorithmically-traded noise-reduction equities strategy

• Strategy #1A (S_Ω = 747.23%) an algorithmically-traded foreign exchange market strategy utilizing contracts for difference

• Strategy #1B (S_Ω = ∞) a lower middle market value-add healthcare private equity strategy

• Strategy #1C (S_Ω = ∞) a short-term life insurance trading strategy capturing price differences between primary and secondary markets

• Strategy #1D (S_Ω = ∞) a residential real estate reverse repo strategy trading on disconnected comparable sales values and net operating income

So here we begin by discussing Strategy #7:

In addition to utilizing our quantitative expertise to measure and optimize the performance of individual strategies, we’ve developed an algorithmic portfolio construction tool...

It constructs a portfolio of the best performance possible for any given investment time horizon, income and cash reserve requirements (i.e., liquidity mandate) by strategically assembling the best asset managers in the world that we’ve been able to identify by our rigorous quantitative standards.

I decided to provide you, our high-net-worth and institutional investor following, a glimpse behind our curtain—an opportunity for you to construct your own portfolio to see how your money would perform if it were optimally employed by our quantitative standards…

You probably won’t believe what you see until you remember that we’re applying Renaissance-level sophistication and rigor. Simply input a few very basic parameters, and see for yourself:

Construct Your Own Portfolio Now

The first order of business has been to install the philosophy of merit and quantitative standards utilized by the likes of Renaissance Technologies while unwinding the counter-productive heuristics that govern retail financial advice—not the least of which is the belief that the S&P 500 represents the standard for investment performance.

So let’s start by taking a look at the S&P 500—particularly its liquidity characteristics—as a means to begin making responsible, merit-based investment decisions…

As measured since January 2007, the expected return of the S&P 500 is 9.36%, and its probability of loss weighted by its expected degree of loss (its risk) annualized is 19.94%. We talk about these measures extensively elsewhere, and we’ll continue to, but the issue for today is its liquidity characteristics.

Most financial advisors will tell you that you can’t time the market and that indexing (i.e., buying a fund that is comprised of stocks that mirror the S&P 500) is the best way to invest, but timing is everything with indexing…

If you happened to have invested in the S&P 500 around October 2007 expecting just under a 10% annual rate of return, you’d be sorely disappointed. It’s generated right at 4% annually since then.

So, how do you use this insight?

When people invest, they do so planning to realize a given expected return, and we operationally define liquidity based on this expectation: under the worst case scenario, how long will it take to realize the expected return.

That’s how long you should be prepared to hold an investment.

In other words, the maximum drawdown duration required to realize an investment’s expected return as measured since January 2007, or earlier, should be less than the investment time horizon of the mandate. That—as closely as possible—guarantees the investment expectation will be realized.

Despite the traditional definition of a liquidity, it doesn’t matter if an asset can be traded intraday. I can take a hundred dollar bill and exchange it at any time for a twenty with someone else. That’s not a helpful transaction no matter how quickly or how often I can execute it.

As I mentioned in our last post, Daniel Berger joined Daltok Capital Managment as a managing partner and provides invaluable education to investors and investment professionals as a contributor to Adagio Institute. Here’s an excerpt of his discussion on investment quality, liquidity, and maximum drawdown duration:

We’ve talked about risk and return measures extensively in previous posts, and we’ll revisit them in later posts.

To put all of this into practice now, we’ve developed an algorithmic portfolio construction tool for Redwood Family Office.

It constructs a portfolio of the best performance possible for any given investment time horizon, income and cash reserve requirements by strategically assembling the best asset managers in the world that we’ve been able to identify by our rigorous quantitative standards.

I decided to provide you, our high-net-worth and institutional investor following, a glimpse behind the curtain into our family office—an opportunity for you to construct your own portfolio to see how your money would perform if it were optimally employed by our quantitative standards…

You probably won’t believe what you see until you remember that we’re applying Renaissance-level sophistication and rigor. Simply input a few very basic parameters, and see for yourself:

Construct Your Own Portfolio Now

Here’s how we’ve continued to provide you the opportunity to substantially improve your experience with financial services:

Adagio Group has been named chief investment officer (“CIO”) of Redwood Family Office, a division of Redwood Private Wealth.

• Smart and driven investment advisers now have an RIA where they can access, advise on, and implement institutional-level solutions unmatched by any other retail firm. Redwood requires its family office IARs to operate with a higher level of expertise than other firms and in turn provides them effectively unlimited high-net-worth client referrals generated through its insurance and CPA partnerships.

• Life insurance agents now have an RIA partner (via solicitation agreements) where they can get paid annually on their clients’ total assets, which is typically about double the value of the life insurance policies and annuities insurance agents see.

• Emerging alternative asset managers know that family offices represent the best channel for them to raise capital, yet it is very difficult for them to actually generate family office investment. Redwood Family Office proactively seeks to invest in deserving alternative asset managers based exclusively upon their risk-adjusted performance.

• High-net-worth retail investors have access to investment, tax and estate planning solutions that are otherwise only available within the most sophisticated single-family offices. Here’s an illustration of a sample portfolio (note that past performance is not indicative of future results):

• To learn how Redwood Family Office can help you, let us know a little bit about yourself and schedule a call: https://familyoffice.redwoodprivatewealth.com

Schedule a Call with Redwood

Daltok Capital Management, an investment management firm that provides select accredited investors access to exclusive investment performance driven by the latest advancements in quantitative finance, has engaged Adagio Group to engineer its fund offerings.

• Daltok manages a fixed annuity alternative that generates an Effectively Guaranteed 8% annual dividend with no early withdrawal charges.

• Daltok manages a growth fund that generates an expected return in excess of 24% without drawdown as measured annually since January 2007 by applying innovative GP stakes solutions to best-in-class asset managers.

• Life insurance agents can be paid commensurately with traditional annuity commissions for providing their clients access to these products via solicitation agreements with Redwood Family Office.

• Daniel Berger joined Daltok as a partner and provides invaluable education to investors and investment professionals describing how Daltok generates its exceptional performance and how other investors can do the same. Here’s a brief example:

• Let Daltok know a little bit about you and schedule a call with Daniel to learn more:  https://www.daltokcapital.com

Schedule a Call with Daltok

Adagio Group has engaged the University of California, Santa Barbara (“UCSB”) to develop a Division of Quantitative Finance and Economics under the College of Letters and Science that solves the biggest problems facing financial services with three symbiotic initiatives.

• Department of Financial Engineering hosts the best faculty and students in the world providing them the budget and facilities to conduct and implement uncompromised research.

• Dedicated endowment applies the department’s research in asset management to bridge academia and practice while providing faculty and students unique incubation and distribution opportunities.

• Center for Quantitative Asset Management provides the solutions developed through the applied research of the department to the financial services industry. Such services include endowment fund management, financial engineering & compliance, capital marketing & distribution, etc.

• All of the economics and financial engineering principles that enable us to achieve and build upon these accomplishments are introduced within the international best-selling book The Shadow Banker’s Secrets: Investment Banking for Alternatives.

Order Your Free Copy Now

We’ve identified several niche asset managers over the past month with competitive performance, but we have capacity for substantially more.

If you currently manage an investment firm that allocates within any asset class (e.g., hedge fund, private equity, private credit, real estate, commodities, currencies, etc.), can demonstrate the ability to generate highly competitive risk-adjusted performance, and are actively working to raise capital, we’ll provide you as much capital as you can responsibly deploy without forcing you to compromise your fee structure.

To get started, schedule a call.

SCHEDULE NOW

We’ve seen that most investors—novice and professional alike—don’t require, or even include, quantitative risk characteristics into their investment analysis.

Much of the stuff we pass on is capitalized outside of our ecosystem (by investors who prioritize asset class), which is not ideal for us or the sponsors who come to us seeking capital.

We’ve decided to fix that…

Instead of letting the good investments that don’t fit our strict quantitative parameters go to our competition, we’ve decided to provide you access to them.

If you’re an accredited investor (institutional or individual) looking for high-quality direct or portfolio investments, we can almost certainly provide you exactly what you’re looking for, and we‘ll do so without charging brokerage.

In the unlikely event we don’t have what you’re looking for, it will probably come across our desk soon.

Schedule a quick call to let us know your investment mandate, and we’ll provide it to you.

SCHEDULE NOW

One prong of that effort is reaching out to our asset manager following here. If you meet the following criteria, I want to speak with you personally:

• Manage an investment firm that allocates within any asset class (e.g., hedge fund, private equity, private credit, real estate, commodities, currencies, etc.) with a strategy that can generate highly competitive risk-adjusted performance,

• Can deploy more than $100 million, 

• Have tapped out friends & family and are actively working to raise capital,

• Have enough experience to know that regardless of what you do there is no RIA, family office, or other financial institution out there who is going to give you the amount of capital you need or marketing firm that will raise it for you (although there are plenty who will lead you on ad infinitum and/or take your money claiming they’ll try).

Beyond friends & family, it’s almost impossible to raise institutional-levels of capital.

We see firsthand how the biggest institutions have molded the entire investment industry to serve their interests on their terms to the point they will—on occasion—even openly state that they use their stacked deck to bet against their clients en masse.

We’re not in that club and wouldn’t take advantage of that luxury even if we had it...

As asset-class-agnostic quants running a smaller firm—by Blackstone standards—and driving academic progress in the field, we are able to fill the tremendous holes in the capital markets created by the hubris and position of the biggest institutions (i.e., trillion dollar AUM) by applying their level of expertise to the design of merit-based solutions: on the buy side, we capitalize deserving asset managers; and on the sell side, we engineer objectively better investments.

The capital commitments we received this year within the institutional space have pushed us to deploy several billion additional dollars with the same performance expectations they’ve seen from our current asset managers (which are very high). If your strategy is good enough, we’ll provide you as much capital as you can deploy without exceeding its capacity or diluting it.

After following us for as long as you have, we trust you understand how to measure your risk-adjusted performance; we just need to verify it…

I know it’s the holiday season, but time is of the essence. We will not expose our allocators to diluted performance via cash drag or otherwise, and we are making every effort as to not delay accepting the capital.

Further, while we do have substantial capital to deploy, the amount is not infinite, so there is a first-mover advantage. My calendar will be blocked for only a couple days over the coming weeks, so if you believe your firm fits the bill, please schedule your call as soon as you reasonably can.

There is an expectation within the industry that if your AUM does not exceed $1 billion, then you’re not a serious asset manager. That is simply not true. Those types of heuristics are established by the oldest, biggest financial institutions for the single purpose of stifling competition.

Anyone who has “passed” on your offering because of your AUM is simply parroting a cultural expectation with the sole focus of staying in the good graces of their overlords without applying any independent critical thought.

As a matter of fact, every academic study on the relationship between AUM and performance clearly illustrates an inverse relationship. We thoroughly understand risk, and won’t penalize your firm for being small.

The regulatory environment has evolved under the same motivations. Securities law is arguably negligently vague. This is not by accident. Sure, it provides some protections to investors sometimes, but more so, it provides traditional firms and conforming issuers a highly expensive mysterious gauntlet preventing competition and booby trapping neophytes who try.

The nature of our firm has driven us to be heavily vested in understanding and effectively navigating even the most esoteric securities law. One initiative within our Institute for Quantitative Asset Management is to drive regulators to provide greater clarity, delineate cultural expectation from law, remove misguided rules and regulations, and ultimately simplify the codes with the intent of achieving the SEC's stated mission, which is “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation”.

The biggest firms easily raise capital despite mediocre, if not poor performance because they have tremendous AUM and wear the right clothes to the party in the form of regulatory compliance with operational and structural conformity. If that’s not you, we’ll solve each of those problems as need be (and not necessarily by conforming).

Again, all you have to do is demonstrate the ability to generate competitive performance, and you qualify to have us provide your strategy an effectively blank check without forcing you to compromise your fee structure.

Schedule your call with me before the new year. I look forward to speaking with you.

SCHEDULE NOW

Classical economics is predicated on the notion that people are rational beings. Most people believe this is at least approximately true.

After millions of dollars invested in marketing and thousands of conversations with people from every socioeconomic strata, I can tell you this statement is patently false. Regardless of whether you’re dealing with Fortune 500 CEOs, heads of state, or working-class citizens, rationality is the extreme exception—not the rule.

The overwhelming majority of people will choose self-destruction before releasing the false beliefs that drive their self-esteem. In other words, they value their socially-constructed identity more so than their own well-being—and often even more so than their own lives.

Our marketing machine learning algorithms can find only 15,000 or so people across all of Google and LinkedIn users who meet the criteria of truly rational decision makers: people who possess the ability to objectively assess their beliefs and change course in the pursuit of what demonstrably best serves their own stated self-interests.

In short, that means people don’t make decisions based upon objective, fact-based messaging.

This is why most commercial messaging is so blatantly dishonest. It’s designed to appeal to people’s false beliefs, internal narratives, and tribalistic adherences—all various flavors of a visceral drive to conformity. People complain about the dishonesty, but in the aggregate, their wallets send a very different message.

I have dedicated my life to learning and doing what is objectively best. That is the cornerstone of my identify, and Adagio Group is the manifestation of that principle.

In everything we do, we are driven by the belief that truth is more important than conformity.

The way we challenge conformity with truth is by driving advancement in accurate, easy-to-use risk-adjusted performance measurement and accessible asset-class-agnostic financial engineering.

We just happen to create great investments and capitalize deserving asset managers in the process.

It’s the exceptionally rational and impactful few who recognize what we are and what we do—as kindred spirits—that keep us going.

If that’s you, we’d like to have a conversation…

Schedule Now

• Currently run or are making serious moves to run an alternative asset management firm (i.e., asset-based/bridge lender (real estate or SMB), private equity or credit fund, hedge fund, fund of funds, endowment, family office, RIA, etc.), or are successful capital raisers/third-party marketers.

• Are highly intelligent, curious, and independently-minded, in other words, have the wherewithal to recognize, understand, and pursue merit in lieu of peer pressure.

• Are decisive and motivated to do what is within their power to overcome the challenges they face in reaching their business objectives.

• Appreciate or are open to the Austrian economic perspective.

If this describes you, we want to talk. Schedule a free 15 minute call to determine whether our resources can be suitably deployed on your behalf to help you efficiently reach your goals—from quickly raising capital/scaling AUM to successfully executing an investment mandate.

As a reminder, here are a few (but certainly not all) of the resources we have to share:

• Over 120,000 accredited investor followers (including over 15,000 financial institutions and RIAs) with an extremely robust marketing infrastructure,

• The latest academic research in quantitative finance to accurately measure the risk, return and liquidity characteristics of any investment or portfolio—regardless of asset class—with the ability to construct meaningful theoretical track records across market cycles (that do not allow for cherry-picking or fitting data),

• Access to private market arbitrage opportunities (including GP stakes) that generate substantially higher risk-adjusted performance (decoupling risk and return) than what’s otherwise available through traditional markets,

The financial engineering expertise to design financial instruments that allow for virtually any position to be taken in virtually any market (including fund formation tailored to bridge an investment strategy’s performance characteristics with capital market demand—fixed income or growth)…

SCHEDULE NOW

Here are a few things investors and asset managers need to know about investing and fund management:

To start, no matter how much is spent on fund legal documents, by themselves, they’re not worth the paper they’re printed on….

People talk about the banking system creating money out of thin air as if it’s backed by nothing. This is simply not true.

The monetary base created by central banks is backed by the GDP of their respective countries and enforced with the full might of their militaries.

Money created through fractional reserve banking is backed by borrowers’ willingness and ability to pay on promissory notes that are backed by collateral.

Fund docs can also be thought of as a form of money, but to be useful, they must be backed by something of value too: the risk-adjusted performance of the underlying strategy. 

Are there people who start funds and succeed at raising capital based upon little more than a story? Yes, but they are successful because they have close relationships with affluent people who like them. That’s not a sound business model, and it’s one that’s not even possible for most people.

To successfully raise money for a fund at scale, asset managers must be able to compete in the capital markets based on merit. 

Despite what most retail financial advisors say, within the capital markets, the ruler for measuring the quality and value of a fund is its accurately measured and verifiable risk-adjusted performance.

When starting a fund, step one is not paying a lawyer; step one is engineering a strategy with risk-adjusted performance good enough to successfully compete in the capital markets.

Step two is engineering the optimal capital and fund structure that accounts for the risk-adjusted performance and liquidity characteristics of the strategy (e.g., maximum drawdown duration required to achieve the expected return informs the lock-up period) while meeting capital market demand.

Once that’s done, then it’s time to start thinking about which regulatory exemptions to operate under based on how much capital can be deployed, then getting legal docs drafted around the strategy, structure, and appropriate regulatory exemptions. This is where terms like “PPM”, “Reg D” and “506(b)” or “506(c)” start to come into play. They say nothing about the quality of a fund… they’re just terms that pertain to the exemptions being utilized.

In short, legal docs don’t give a fund value; they just translate what the asset manager is doing into compliant legalese. Again, the accurately measured and verifiable risk-adjusted performance of the strategy is the fund’s source of value.

So what if an asset manager doesn’t have a track record?

First, it’s a myth that starting with syndications is the best way to build a track record. 

Syndications just make the story easier to communicate. So if an asset manager already knows people who are willing to give them money, it can be easier to raise money by syndicating individual, tangible projects.

For those who want to be serious players, though, forget syndicating deals on a one-by-one basis. 

Develop a scalable strategy that can perform across market cycles; distill that strategy into a set of objective rules; then plug actual historical data into those rules to create a credible theoretical track record.

You can think of the theoretical track record as a pro forma in retrospect. Because this process requires the strategy to be effectively converted into an algorithm, there is no opportunity for data fitting or cherry picking. When executed rigorously, the risk-adjusted performance measures of the theoretical track record are as reliable as the measures of an actual track record.

How do asset managers get paid running a fund?

The two basic components of fund manager compensation are management fees and performance fees. 2% of assets under management (“AUM") per year and 20% of the fund’s annual gains, or “2 and 20”, with a hurdle and high-water mark is the traditional fee structure for private equity and hedge funds. 

Real estate and some private equity funds may have a slightly different compensation structure that includes a waterfall to account for the various activities required to run them.

In short, asset managers can get paid in many different ways, but the greater the risk-adjusted performance of their strategy, the greater their compensation can be—and vice versa—as should be the case.

Despite what others may say, fund managers don’t need a license to earn a management fee on a fund out of the gate. Once a fund hits $150 million in AUM, the manager will likely need to register with the SEC as an Investment Adviser, but until that time, no license is needed.

For those not in real estate, a performance fee probably can’t be taken unless all the fund investors are Qualified Clients, but that’s a topic for another time…

While the powers that be would like everyone to believe otherwise, people don’t have to be super rich to do these things. Anyone can create an institutional-grade fund from scratch with a little hard work and know-how. 

Knowledge is the key…

When an asset manager has only observed the conventional capital raising experience, the underwriting and financial engineering required to affect capital formation at institutional scale while preserving autonomy can often seem dauntingly complex and potentially demotivating. The desire for the goal can get lost in feelings of overwhelm.

That is why we have stripped the process down into two palatable steps…

1. We measure the risk, return, and liquidity of your strategy.

2. We introduce you with the risk, return, and liquidity measures of your strategy to the over 100,000 accredited investors and 10,000 financial institutions in our ecosystem.

From there, whatever incremental steps—if any—that are required to raise the capital you need to reach your goals will present themselves at the appropriate time and with the context required to understand why those steps need to be taken. The ultimate solution is necessarily bespoke per each firm’s circumstances, and we’ll do the heavy lifting.

Alternatively, the process could simply end with capital introductions.

The one commonality I’ve seen in all the asset managers I’ve spoken with—without exception—is that to have a productive conversation, they must have first either read The Shadow Banker’s Secrets: Investment Banking for Alternatives or watched the book’s companion masterclass. Those who have tend to wrap their minds around the ostensible complexity with relative ease, and the discussion progresses to individual-specific solutions rather quickly. Those who haven’t tend to force the conversation into frustrating dead-ends characterized by conventional questions seeking conventional answers with an inability and unwillingness to recognize anything that deviates. This is the reason I insist that asset managers get through The Shadow Banker’s Secrets before scheduling a call with me: it protects my time and yours.

To get introduced to the 100,000+ accredited investors and 10,000+ financial institutions in our ecosystem and scale to institutional-level AUM, take The Shadow Banker’s Secrets: Investment Banking for Alternatives Masterclass (upgrade your free book order) to learn the technical fundamentals you’ll need, then schedule your free private consultation.

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Fractional reserve banking does create new money “out of thin air”, but that new money is backed by real value: future debt payments supported by verified creditworthy borrowers and collateral.

Verifiably accurate risk-adjusted performance backs the value of investments. Without knowing a fund’s risk-adjusted performance, it’s just an expensive—but hollow—set of documents.

Most people who successfully raise money for their private funds do so by calling in favor cards from friends via a good story. Their capital raising strategy is little more than tapping established networks and creating sufficiently strong new friendships (reaching “know, like, and trust” status). When their capacity to generate new friends runs out, so does the money.

Others completely submit to the whims of family offices who confuse their status with actual financial expertise…

To create and monetize capital at scale—to actually compete in the capital markets—requires highly esoteric knowledge that spans three domains:

• Financial Engineering (Math): Design or identify an investment strategy that generates high risk-adjusted returns as measured by all four statistical moments (mean, variance, skewness, and kurtosis) across a minimum of one complete market cycle.

• Securitization (Law): Create a compliant investment vehicle that fills performance holes in capital markets (regardless of the traditional structures adopted by each asset class).

• Distribution (Marketing): Compliantly sell the investment vehicle to institutional allocators or retail investors at scale by providing them the irrefutably best solutions per their individual needs.

…and all of it is covered in The Shadow Banker’s Secrets: Investment Banking for Alternatives.

To get started in the game of capital creation and monetization, read The Shadow Banker’s Secrets, then schedule your free private consultation.

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The process by which banks create money is so simple that the mind is repelled.

~ John Kenneth Galbraith

After learning the mechanics of money creation and its impact on society, most people feel resigned to a state of subjugation… but many shouldn’t.

Those who are smart, curious, independently-minded, and perseverant have the opportunity to create and monetize capital in a perfectly analogous manner to the banking system.

The barrier to entry is highly esoteric knowledge that spans three domains:

• financial engineering (math)

• securitization (law)

• distribution (marketing)

…and all of it is covered in The Shadow Banker’s Secrets: Investment Banking for Alternatives.

To get started in the game of capital creation, read The Shadow Banker’s Secrets, then schedule your free private consultation.

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We’ll explain our strategies for substantial growth and real income across periods of both inflation and deflation and field all of your substantive questions.

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When I reached out to the NYU Department of Finance and Risk Engineering (which interestingly falls under the Tandon School of Engineering as opposed to the Stern School of Business), I learned that their chair had recently passed. The interim chair, Dr. Agnes Tourin, expressed sincere interest in collaboration but was concerned about the timing given the transient circumstances of the department…

Concurrently, I reached out to the LSU Office of Research and Economic Development requesting they connect me with mathematics or physics faculty with an interest in interdisciplinary studies, the only people I expected would possess the mathematical chops to understand my work. Instead, they introduced me to the Dean of the E.J. Ourso College of Business, Dr. Jared Llorens. He quickly looped in the Department of Finance, its chair and senior faculty. Among them was Dr. Kurtay Ogunc, the Director of Undergraduate Studies & Research who had been working in both the public and private sectors for over three decades…

Kurtay has two graduate degrees: Master of Applied Statistics (Binary Choice Models and Bayesian Theory) and PhD in Decision Sciences (Asset Management, Stochastic Processes and Econometrics).

His research has been published in the Journal of Financial Transformation, Journal of Investment Consulting, Review of Quantitative Finance and Accounting, International Review of Financial Analysis, Journal of Behavioral Finance, Investments and Pensions Europe, Global Pensions, and Handbook of Corporate Governance.

Kurtay employed his quantitative expertise as investment manager of the LSU endowment from 1994 to 2000. He later served as senior researcher and consultant at Watson Watt & Company (now Willis Towers Watson) in Washington, DC before taking the role of senior investment officer for risk management and asset allocation in the Mayor's Office for Pensions and Investments at the New York City Retirement System ($100 billion AUM).

Since meeting Kurtay, it’s been off to the races…

Every ambitious initiative I hoped to pursue with LSU, Kurtay had already been working towards—with limited support—for years:

Kurtay created and serves as the Director of LSU’s Asset Management Academy. He developed the second discipline in asset management program for math majors. He serves as faculty advisor to asset management program students, all undergraduate finance majors and the Quantitative Finance Club, which he created for high-achieving students from various fields such as math, computer science, economics, finance, et al. He also works with Honors College students on their theses.

Kurtay just needed an equally motivated collaborator with similar expertise, vision, and values to help his initiatives—and LSU as a whole—realize their ultimate potential. After reading my paper and quickly into our first conversation, he was as thrilled to meet me as I was to meet him.

To gain a better understanding of each other’s work, he asked to see examples of Adagio’s risk analytics reports, structures, and performance, and he shared his research with me. As we dove into all of it, I expressed my frustration with the current best practices of institutional finance. To my surprise, not only did he share them, but he suggested that we collaborate to take the best from our respective research and asset management expertise to establish a Center for Quantitative Finance to assist pension funds and endowments in replacing uncertainty with best practice processes and techniques to improve their risk-adjusted performance… and to make LSU’s endowment the standard-bearer.

After reaching out to and determining several key asset manager LSU alumni greatly appreciate and support our effort, we have initiated engagement with the office of LSU President William Tate…

Over the following weeks and months, I will post updates on our efforts as a case study for meaningful change in the world of institutional finance.

In the meantime, everything I know has been distilled into The Shadow Banker’s Secrets: Investment Banking for Alternatives book and masterclass. It was written for everyone from smart non-financial professionals to chief investment officers. If you’d like to create and manage capital like the most sophisticated financial institutions in the world, order your free copy of the book and read it to get introduced to the financial engineering principles you’ll need for a productive conversation, then schedule your free private consultation.

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• Currently run or are making serious moves to run an alternative asset management firm (i.e., asset-based/bridge lender (real estate or SMB), private equity or credit fund, hedge fund, fund of funds, endowment, family office, RIA, etc.), or are successful capital raisers/third-party marketers.

• Are highly intelligent, curious, and independently-minded, in other words, have the wherewithal to recognize, understand, and pursue merit in lieu of peer pressure.

• Are decisive and motivated to do what is within their power to overcome the challenges they face in reaching their business objectives.

• Appreciate or are open to the Austrian economic perspective.

If this describes you, we want to talk. Schedule a free 15 minute call to determine whether our resources can be suitably deployed on your behalf to help you efficiently reach your goals—from quickly raising capital/scaling AUM to successfully executing an investment mandate.

As a reminder, here are a few (but certainly not all) of the resources we have to share:

• Over 120,000 accredited investor followers (including over 15,000 financial institutions and RIAs) with an extremely robust marketing infrastructure,

• The latest academic research in quantitative finance to accurately measure the risk, return and liquidity characteristics of any investment or portfolio—regardless of asset class—with the ability to construct meaningful theoretical track records across market cycles (that do not allow for cherry-picking or fitting data),

• Access to private market arbitrage opportunities (including GP stakes) that generate substantially higher risk-adjusted performance (decoupling risk and return) than what’s otherwise available through traditional markets,

• The financial engineering expertise to design financial instruments that allow for virtually any position to be taken in virtually any market (including fund formation tailored to bridge an investment strategy’s performance characteristics with capital market demand—fixed income or growth)…

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