Boring Diversifier Framing
Position diversifiers as modest portfolio components, not star investments.
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 94%
Boring Diversifier Framing treats an alternative allocation as a routine piece of portfolio infrastructure rather than a star performer. The advisor begins by identifying the gap it fills, such as exposure that may behave differently when stocks and bonds decline together. The strategy is then described as a modest, low-cost allocation that will sometimes be wrong and may lag familiar assets for extended periods. Its success is evaluated through the resilience it adds to the whole portfolio, not whether it wins every year. This framing lowers attention, prevents recent performance from becoming the client’s benchmark, and makes normal drawdowns easier to tolerate. It also avoids using charisma, exclusivity, or expensive-manager mystique to justify the investment.
Origin
Andrew Beer developed this communication approach through six years of working with wealth managers and observing that star-performer pitches make clients monitor diversifiers too closely. Extracted from Masters in Business.
Core principles
- 01A diversifier should be judged by its portfolio role, not standalone excitement.
- 02Star-manager narratives create unrealistic performance expectations.
- 03Clients tolerate ordinary fluctuations when an asset has a clear allocation purpose.
- 04Low fees reduce the cost of waiting for diversification to matter.
- 05Diversification is an incremental improvement rather than an all-or-nothing bet.
How to run it
- 1
Name the Portfolio Gap
Explain the vulnerability the allocation is intended to address, such as excessive equity risk or rising stock-bond correlation.
Pro tip Connect the strategy to the client’s existing portfolio rather than discussing it in isolation.
Watch out Do not promise protection against every possible decline.
- 2
Remove the Star Narrative
Present the strategy as a functional allocation rather than an exceptional manager or unbeatable return engine.
Pro tip Use familiar comparisons such as adding another established asset class.
Watch out Highlighting recent spectacular performance encourages clients to expect it repeatedly.
- 3
Normalize Imperfection
State in advance that the strategy will experience losses, lag other assets, and sometimes appear unnecessary.
Pro tip Describe at least one environment in which the strategy is expected to disappoint.
Watch out Clients who hear only the upside may sell at the first ordinary setback.
- 4
Keep the Cost of Waiting Low
Prefer efficient implementation so that fees do not consume the allocation while its diversification benefit is dormant.
Pro tip Show the annual cost in both percentage and monetary terms.
Watch out High fees can turn patience into a persistent portfolio drag.
- 5
Size It Incrementally
Add enough exposure to improve portfolio robustness without making the diversifier a dominant standalone wager.
Pro tip Tie sizing to the desired reduction in portfolio risk rather than enthusiasm for the product.
Watch out Oversizing transforms insurance-like exposure into a new concentration.
- 6
Review the Whole Portfolio
Evaluate whether the allocation improved drawdowns, correlations, and risk balance across a full cycle.
Pro tip Include portfolio-level attribution in client reviews.
Watch out Judging only standalone returns recreates the behavior the framework is designed to prevent.
In the wild
An advisor explains that a small managed-futures allocation is intended to fill a gap when traditional assets move together. The advisor acknowledges that it may lag equities and suffer losses, emphasizes its low implementation cost, and reviews it as part of the complete allocation rather than as a star fund.
→ The client has realistic expectations and is less likely to sell solely because the strategy trails stocks for several years.
Instead of presenting a diversifier as a newly discovered genius manager, an advisor compares it with earlier incremental additions such as high-yield bonds or non-US equities. Its purpose is described as making the portfolio more robust over five to ten years.
→ The allocation becomes a durable policy decision rather than a performance-chasing trade.
Common mistakes
Selling Star Power
Comparing a fund with Lionel Messi or LeBron James causes clients to expect it to score in every market environment.
Hiding Expected Losses
If clients are not told that the diversifier will sometimes be wrong, normal underperformance feels like product failure.
Evaluating It Alone
Standalone return comparisons ignore the allocation’s intended contribution to total portfolio resilience.
Is it for you?
Best for
It is best for advisors introducing managed futures or other unfamiliar diversifiers to long-term clients.
Not ideal for
It is not ideal for speculative allocations whose purpose depends on rapid standalone gains.
From the transcript
“I think the way people often pitch these things to clients is wrong.”
“look, we know this strategy is useful, but we're a boring way of getting exposure to it.”
“This is just simply incrementally that fills a gap in terms of how we manage your money”
From the episode
At The Money: Diversifying with Managed Futures ETFs