This week on Weighing the Risks we are joined by Fritz Folts from 3EDGE Asset Management. Fritz has over 20 years of experience at the investment committee level in the investment management industry. He was one of the co-founders of 3EDGE Asset Management, where he serves as the Chief Investment Strategist and Member of the Investment Committee. Prior to 3EDGE, Fritz was one of the first team members at Windward Investment Management, a pioneer in constructing globally diversified portfolios utilizing index Exchange Traded Funds (ETFs). After the acquisition of Windward by Charles Schwab in 2010, the name of the firm was changed to Windhaven Investment Management. Fritz became responsible for distribution of Windhaven's investment solutions throughout the entire Charles Schwab nationwide retail branch network. He and his team raised over $15 billion in new assets under management. Later, Fritz was named Chief Investment Strategist at Windhaven. He began his career at The Boston Company, where he ultimately served as Vice President, and Director of Global Funding for the then-newly-formed Boston Safe Deposit & Trust Co. (U.K.) Ltd., in London, England. Fritz received his B.A. with a major in Political Science from Connecticut College and his MBA from IESE (Instituto Estudios Superiores de la Empresa), a bilingual Spanish - English MBA program in Barcelona, Spain. He is the former Chair of the Board of Trustees at Connecticut College and now serves as an Emeritus Trustee. In addition, Fritz currently serves on the Investment Committee for the Connecticut College endowment fund and the Investment Committee for the Umbrella Center for the Arts in Concord, MA. Fritz and his wife Cathy live in Concord, Massachusetts. Key Takeaways [02:44] - Learn more about Fritz’s background and his work at 3EDGE.[05:48] - How does Fritz define risk and how does he think advisors and investors should think about it?[09:47] - Does Fritz think we should anticipate any more election cycle surprises or does he think we’ve likely already seen all the surprises?[11:35] - Are “internal” or “external” October surprises more destabilizing for the market in Fritz’s opinion?[13:03] - Might October surprises be more damaging to newer candidates, as opposed to more established candidates?[15:50] - What kind of cognitive biases do October surprises build upon?[17:27] - How might the parties prepare for an October surprise? Also, have October surprises lost some of their power because they are expected?[21:28] - Base case market and election scenario and how probable Fritz thinks this is.[23:52] - Good case market and election scenario and how probable Fritz thinks this is.[27:05] - Bad case market and election scenario and how probable Fritz thinks this is. Quotes [06:06] ~ “We [at 3EDGE] look at risk a bit differently, because we believe that incidence of extreme market events occur more often than you might anticipate if you use standard risk management models. [This is] because those models tend to employ normal distribution, or bell curves, to manage risk…We consider the global markets to be a complex system of interrelated variables and if you have that philosophy, or premise, then you would not use a normal distribution.” ~ Fritz Folts [18:58] ~ “So, in terms of [October surprises] losing their potency, yeah I do think that to the extent the public has become almost numb to extraordinary events in the world…it just seems that the nation and the electorate is so divided, with each side so firmly entrenched in their camps, that [an] October surprise would almost serve to just strengthen each sides commitment to their own candidate…particularly in the presidential election.” ~ Fritz Folts Links Fritz Folts on LinkedIn“Suffragette City” by David Bowie3EDGE Asset ManagementCow in a Boat by Michael John Mariano3EDGE Fact Sheets3EDGE Market CommentaryConnect with Us Meet Rusty Vanneman, Orion’s Chief Investment OfficerCheck Out All of Orion’s PodcastsPower Your Growth with OrionDisclosure(s) - Orion Portfolio Solutions, LLC, an Orion Company, is a registered investment advisor. The CFA® is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org. Access to the services presented is provided solely as a service to financial advisors. Orion Risk Intelligence does not make recommendations or determine the suitability of any security or strategy. Past performance of a security or strategy does not guarantee future results. Orion Risk Intelligence research and tools are provided for informational purposes only. While the information is deemed reliable, Orion Risk Intelligence does not guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with respect to the results to be obtained from its use. Compliance Code: 2529-OPS-10/1/2024
