Behind the Ticker: The Unlimited ETF Suite

Behind the Ticker offers investors a chance to get under the hood of newer or more niche ETFs. Brad Roth, Managing Partner and CIO of Thor Financial Technologies, talks strategy and the human side of investing and ETFs with the individuals bringing these funds to market. 

In this episode, Roth talks with Bob Elliott, co-founder, CEO, and CIO of Unlimited Funds, about the strategies driving the firm's suite of ETFs. While the Unlimited HFND Multi-Strategy Tracker ETF (HFND) is the flagship fund, the firm has recently expanded to include a unique 2x take on hedge fund replication. These ETFs include the Unlimited HFGM Global Macro ETF (HFGM), the Unlimited HFEQ Equity Long/Short ETF (HFEQ), and the Unlimited HFMF Managed Futures ETF (HFMF).

You can also listen to this episode on Spotify, Apple Podcasts, or your preferred streaming platform. 

Boosting Hedge Fund Replication Potential

Bob Elliott returns to the show to discuss the evolution of Unlimited's hedge fund replication ETFs and make the case for why advisors should be rethinking their portfolio construction. Bob spent the majority of his career at Bridgewater developing proprietary investment strategies before co-founding Unlimited, built on two insights the industry knew but wouldn't say out loud: that institutional-quality hedge funds are largely no better than their peers over time, and that managers were capturing the vast majority of the alpha they generated through fees, leaving investors not much better off than they'd be on their own. The solution, as Bob sees it, isn't trying to be smarter than everyone else — it's diversifying across managers, reducing idiosyncrasy, and slashing fees. Unlimited does this by building technology that analyzes how hedge fund managers are positioned in real time, translates that into long and short positions in liquid securities, and packages it into ETFs.

The conversation digs into the mechanics of how that replication actually works and why skeptics should take it seriously. Bob explains that managers can't flip positions instantaneously — they're path dependent — which means the set of plausible portfolios that explain their daily returns is relatively narrow. Unlimited exploits this by solving for today's portfolio in the context of prior portfolios rather than using long-term rolling regressions that average months or years of data, allowing them to pick up more tactical alpha. He walks through the three generations of hedge fund replication: Sharpe's original factor analysis of mutual funds in the 1990s, Andrew Lo's rolling regression approach in the early 2000s, and now Unlimited's proprietary Bayesian machine learning model that performs probabilistic inference on timely returns. Bob notes that the earlier regression-based approaches worked reasonably well for managed futures, where positioning is constrained and high-frequency data exists, but fell short for strategies like global macro where the opportunity set is far more open-ended.

Brad and Bob then get into a candid discussion about the difference between academic or technologist-built strategies and those designed by people who have actually managed money. Bob argues that robustness matters far more than optimization, using the example of opportunity set selection in managed futures. You could backtest hundreds of asset combinations and find some that look great, but that's just selection noise. The better approach is to be comprehensive but parsimonious — write down the 20 assets that intuitively matter, verify the backtest isn't insane, and move forward without relying on any particular empirical optimization. It's an approach no academic would use because it inevitably looks worse than the optimized alternatives, but it's a much better way to actually manage money.

The episode covers Unlimited's full product lineup. HFND is the flagship, essentially SPY for hedge funds, matching hedge fund industry volatility at bond-like risk levels with over three years of live track record. The newer 2X target return products — HFEQ, HFGM, and HFMF — are where Bob sees most advisor interest because they're more cash efficient and deliver returns closer to equity index volatility. HFEQ is an equity long-short replication that Bob positions as an active equity replacement, and he points to data showing hedge fund equity long-short managers outperform the vast majority of the top 100 actively managed equity ETFs on metrics like Sharpe ratio and information ratio. HFMF replicates managed futures and provides high convexity defensive properties. HFGM, the global macro strategy, is what Bob describes as "all weather alpha" — it can go anywhere globally, long or short, across different markets, generating strong alpha in a wide range of environments. HFGM has been the biggest asset gatherer, crossing $100 million in about nine months.

Bob makes his pitch for moving from 60-40 to 50-30-20, arguing that the biggest problem with traditional portfolios is that everything in them is long only and dependent on asset prices going up. Alternative strategies — not alternative assets — give you the flexibility to make money in any environment. He acknowledges the tracking error challenge for advisors and frames the 2X products as the solution: enough return to keep up in positive markets while still providing diversification in downside environments, without becoming a drag that advisors have to constantly defend to clients.

The episode wraps with a straightforward discussion about the realities of growing a boutique ETF business. Bob is blunt that the biggest risk for startup ETF issuers is blowing themselves up spending too much on sales and distribution before they have traction, calling out companies that have burned through tens of millions with nothing to show for it. Unlimited's approach has been guerrilla marketing — leveraging data on every RIA's holdings to target advisors most likely to be interested, running what Bob calls a "$0 marketing budget." People interested in learning more can visit unlimitedetfs.com, read Bob's Substack "Non-Consensus," or find him on social media at BobEUnlimited and on LinkedIn.

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