Unlimited’s Bob Elliott on Democratizing Hedge Fund Alpha
Hedge fund returns without the high fees? Unlimited Funds' co-founder and CEO Bob Elliott joins Behind the Ticker to reveal how the firm's Bayesian machine learning is replicating institutional strategies and generating equity-like returns for investors.
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).
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Key Takeaways
- Democratizing the Hedge Fund Model: Bob Elliott co-founded Unlimited Funds to solve for two hedge fund industry secrets: that institutional hedge funds often don't outperform their peers over time and that their high fees (the "2 and 20" model) consume the majority of the alpha generated. Unlimited aims to provide hedge fund returns without high fees by diversifying across managers and utilizing liquid ETFs.
- Evolution of Replication Technology: The firm uses a third generation of hedge fund replication. While earlier methods relied on factor analysis or rolling regressions (which were prone to lag), Unlimited uses proprietary Bayesian machine learning models to analyze hedge fund positioning in real-time. This allows them to capture tactical alpha more effectively, particularly in complex strategies like global macro.
- Robustness over Optimization: Elliott emphasizes that robustness matters far more than optimization in money management, arguing that many academic or technologist-built strategies fail because they are over-optimized to backtests. Unlimited instead selects assets that intuitively matter rather than relying on empirical optimization that might simply be noise in the end.
The 50/30/20 Portfolio: To combat the limitations of the traditional 60/40 portfolio—which is entirely long-only and dependent on rising asset prices—Elliott pitches a more diversified model. A 50/30/20 split includes 20% in alternative strategies like the Unlimited HFGM Global Macro ETF (HFGM), which provides the flexibility to make money in any market environment, including downside markets.
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Disclaimer: The market insights, projections, and investment strategies expressed in this article are solely those of the contributor and do not necessarily reflect the views or opinions of ETF.com This content is provided for informational purposes and does not constitute financial, investment, or legal advice.
