How this family office ETF outperforms the market

Welcome to Trader Talk, where we serve up the latest buzz from Wall street, helping you to keep your portfolio sizzling without getting burned. I'm your host, Kenny Pulcari, broadcasting live from the iconic New York Stock Exchange, the heartbeat of capitalism. After decades here as an institutional Stockbroker, I spent 40 years here. It feels incredible for me to be back home. This place still gives me a thrill. While it's evolved and modernized over the years, it the New York Stock Exchange remains a cornerstone of capitalism and entrepreneurship. And above all, it represents freedom to me. And that's woven into the very fabric of our nation's history. Now, earnings overhyped. The market loves a good distraction. AI hype, trade wars, political drama, you name it. The headlines will try to make it the story of the day. But when you strip all the way noise, one thing drives the market more than anything else. Its earnings and its economic data. Investors may react to short term narratives, but the real moves happen when companies report results. Revenues, margin, guidance, that's all that matters. Remember, earnings are history. They reflect what was. What you really want to know is what's going to be. What's the forward guidance? What are these companies saying about the future? Where are the potholes? So if the earnings are good and the guidance is strong, that's a win. If the earnings were weak but the guidance is strong, well, that could be good. If the earnings are strong but the guidance is weak, not so good. And if the earnings are weak in the guidance is weak. Watch out below, right? Right now we're seeing a shift in market leadership. The MAG7 that have dominated the discussion for a couple of years now may not have the same power this year that they've had in the past. Right? They might not have that same push. Which doesn't mean that they're finished. It just means that investors are broadening out their focus and finding opportunity in alpha elsewhere. It could also mean that the sector and industries are falling out of favor for whatever reason. What is important is that you realize there are opportunities outside the usual suspects. And those paying attention know where to look. Then there's the Fed. Everyone wants to predict what they'll do next. As if that you can't tell just by listening what they say. God knows they manage the messages quite closely. The last thing they want to do is surprise the market. Yet everyone has an opinion. What you think they should do may be very different from what they think they should do. But in the end you must realize they are making the decision. They are making the decision. You need to react they drive the bus. So the reality is simple. Follow the data. If inflation stays in check and the economy cools, they ease. If growth heats up too fast, they easily they hold steady. That's the game. Betting on rate cuts without considering the full picture can be a mistake. Meanwhile, energy demand isn't going anywhere. AI data centers, infrastructure, global rebuilding, these all require energy. The idea that demand is going to suddenly fall off a cliff doesn't really match my reality. And gold. It's been quietly building momentum. It is up another 11% this year on top of the 25% percent last year, as global investors are still hedging against uncertainty. At the end of the day, markets reward patience, discipline, and a solid strategy. Don't get caught up in the noise. The smart money is always looking at fundamentals, not just the headlines. Stick to the plan, focus on the quality, and don't let the daily chatter shake you out of a good position. My next guest is Rob Haugitt. He's a financial powerhouse with over 25 years of experience. He launched his career as a CBO options market maker, mastered quantitative trading, and spent 14 years investing for top hedge and mutual funds at Baird. Today he drives investments for one of Wisconsin's largest family offices, River One Asset Management. And in April of 24, they launched their first ever ETF. RVer is the symbol and it trades right here at the New York Stock Exchange. With an MBA from Kellogg and a BBA from UMass Amherst, Rob is also a dedicated family man and a community leader. Let's give Rob a warm welcome, ladies and gentlemen. So, Rob, first of all, I didn't know that you went to UMass Amherst. Because I'm a boss, the kid myself. So tell me, how do you end up at UMass Amherst of all places?

Oh, fantastic story. I mean, I was a Midwestern kid who just wanted to go away to school and wanted to go see something fun and go have a good basketball program. Remember Coach Calipari was there. They were winning a 10s. There was a lot of great basketball stuff going on there. So that's what dragged me out there.

Right, and you enjoyed it? Yeah, goes to U. S. Amherst, really enjoys it. I went to Boston University, but I know a lot of people that went to UMass Amherst.

Absolutely.

Anyway, so talk a little bit about your. How you got started and your experience on the cbo. Because you started like me as a floor trader on the. I was here at the New York Stock Exchange. But you were at the cbo.

Yeah, I was a market maker. You know, we we yelled, we screamed, we had paper tickets, all that stuff that, that went on back in the day. It's electronic now, but it really taught us a lot about supply and demand. We thought the most important part is of a stock's value isn't necessarily its fundamentals, but it's who's buying and who's selling it. And so if you can dig into that piece of it as a part of all the analysis behind what you're doing, we really think you've got a good.

Right, but that's true on the daily basis. Right. Because certainly fundamentals matter. But, but, but what I always found fascinating was, was every day was different, right? Because the news was different, the participants were different. Sometimes there were clearly more buyers and sellers and the stock went up. Yeah, sometimes there were more sellers and buy stock went down. But that was, you know, that was day to day. It didn't necessarily say, it didn't necessarily predict the fundamentals of the company. It just predicted the action that day. No, but that's what made it exciting.

Fundamentals are very, very important in the medium and long term. For sure, you want to be in stocks that are making money, companies that are making money, that have great balance sheets. These are the companies that you want to buy and be holding because they're the ones that can go up 10, 20, 50x over the course of a decade and really help your portfolio.

Right. So, so I want to talk about your, your etf, but I want to first talk about then your say, floor trader to. Today you're at River One Asset Management, which is a, which is a family office, a large family office based out of Madison, Wisconsin. So tell us a little bit about that transition and how you ended there.

Milwaukee, Wisconsin. But yeah, all, all Wisconsin. Yeah, but so, you know, ultimately I was brought over there a few years ago because family office I think is emerging. I mean obviously family office is growing like crazy. I think there's something like 8,000 of them globally now. And this is just. Each family office is obviously different and wants their money run a different way. The family office, River One as we run it, the folks are really into public equities and which is my background. And so when they brought myself and my, my cohort Tony Taglipietro over, they brought us over to sort of try to add value in the public markets. Not all family offices are like that. Some just play in real estate, some play in other things, but.

Right, so define that. Just so the audience says that the public markets. You mean listed securities.

I do. I mean I mean.

I mean, those are the public markets, correct?

The ones with tickers that are listed on NYS or other exchanges, right?

Yeah, right. IBM, General Motors, those are the public markets, Correct. Because there are other family offices that do nothing but real estate or nothing but private credit.

Correct, Correct, correct. A lot of times that's where they made their money. They feel more most comfortable in or just. They're just the best at, essentially. So that's where they spend a lot of their time.

All right, so you've been there now for how long?

Four years.

Four years. And so you came over and you now help them manage that. You find opportunities in the public market, both listed in nasdaq. And I like to still say that because while you can trade everything everywhere, when I'm here at the New York Stock Exchange, I still think of the New York Stock Exchange as the listed market and NASDAQ as the NASDAQ market.

That. Well, yeah, absolutely. Yeah.

Yeah. Although you could trade everything from everywhere now. And that was certainly. We could talk about that too. A direct result of kind of modernization and 9, 11 and what happened around that. But one way or the other. So now you're at River One Asset Management and you're helping manage that money. And you guys have just launched an etf.

That's right. That's right. We launched it right here on the New York Stock Exchange, listed it here. And we've been really happy with how the New York Stock Exchange listing has gone for us. Not just because it's gold plated, because it is. That brand name is as good as it gets all over the world. So it let investors know that we are for real. That was one of the pieces we want. But we've been surprised. On the positive side is all of the marketing that they've allowed us to do. Not just pictures and videos and things here on the floor, but allowed us to push ourselves into the ETF channel and gain AUM through that channel, essentially. So they're here for you, not just for pictures and for your listing. They're here for you to build your a. To make sure that you're. You're as good as you can be.

Yeah, yeah. So let me ask question, because there are two options here, right. Just so people understand it, you can be at the New York Stock Exchange and be on the ARCA platform, which is the electronic platform, or you can be at the New York Stock Exchange and be down there with the. With a designated market maker where you're. You're actually on the trading floor. Yeah. So Yours is on the trading floor.

Yeah. We chose the designated market maker because as a, as a newer etf, you're not necessarily going to have a ton of liquidity like Amazon or Apple are going to be, meaning people aren't going to be buying and selling your stock naturally as frequently as often.

Right.

So you're going to want a designated market maker to sit behind your stock and buy and sell it for when new folks want to come in, someone calls us up, they say, hey, I want to join you. I want to. On your journey. I want to buy this. So the market maker is going to take the other side of that because there is a natural seller to them that essentially.

Right.

You know, helping them.

So then, so talk a little bit about your etf. Tell me what it is, how it's designed, what you got. You know, what the theory is behind this particular etf.

Yep. So we, we built this particular ETF to try to beat the S and P and beat the nasdaq. We're an active manager. That is our job. Our job is to win, to beat these two things. How do we do it? Well, we look at fundamentals just like a lot of folks do.

Right.

We look at valuations. We want to make sure that we're not overpaying for anything, despite the fundamental positivity. And there's a lot of that that's going on in the stock market right now. A lot of really high. A lot of really high valuations. Well past what's going to probably happen. Fundamentally stretched. Right. So we don't want to buy the companies that aren't growing.

Right.

We don't want to buy companies that have stretched valuations. That should be enough. But when we, we layer a third piece on, and what we're looking for in that third piece is what we call risk reward of holders. Risk or holders reward. Are new holders going to come into this stock specifically or are they going to exit this stock and why? Right. And that might be money is coming into the sector. It might be money is coming into the specific name because it's being fixed. But we're looking for supply and demand drivers towards the stock, not away from it.

Okay, so give me just a sense. How many names are in this ETF.

So 15 to 20.

15 to 20. And they are all large cap, small cap, mid cap. Is it a range of names?

Yes, we're all capitalizations and we're actually all countries. Because what we saw when we managed money for some of the biggest folks in the world is they get stuck in One box, it becomes very difficult to beat the S&P 500 because that box has a bad quarter or a bad 2/4. So we are box agnostic. We'll even move out to other countries, essentially, if that's where the opportunities are, because we feel that's the best way to beat the S and P. And.

You say it's an active etf. So, so just so the listener understands, when you say an activ etf, explain what that means to them.

It means that we are actively buying and selling stocks in an attempt to beat our index, which means we may buy something if it goes up 20 or 30%, you may sell it, Sell it, and then buy something else that we think will outperform the index.

Correct. So you're not necessarily. So just to make it clear, you're not necessarily buying and just holding it forever. If it. If it makes it. You identified a move. If it makes that move, you're going to sell it.

That's correct.

Okay. Even if it's still a name, you.

Still like if it's a name. No, we would hold something for 10 years if it's named.

If it's a name, you're right.

Each way along the way, we may buy a stock for 20 that we think is 40. And when it gets to 40, we may say, thank you, we're done. Or we may say, we evaluate and say, you know what? This stock's worth 60. This stock is worth 80. There are better things coming into this thing fundamentally than we gave it credit at 40. So we will change it.

And so tell me now, so how have you gained assets under management in this etf? The New York Stock Exchange has helped you?

They sure have. Yeah. So I would say guerrilla marketing is the way that we've done it. Right. So our track record is almost a old. And so at a year, there's some folks that'll start taking calls with you. Right. And then at two years there's more. And then at three years there's more. Right. So. But for that first year, it's very gorilla. Right. So we are out there, we're doing videos on stocks that. Of what we think is going on. We're doing macro videos. It's all on YouTube, it's all on our social channels. And all of that stuff is to be built to create sort of an aum path to say, oh, these folks know what they're doing. We like. We like what they're doing.

There's a history. Yeah. Because by rights, people have to understand the history. Yes, certainly. Certainly, you know, large asset managers, you have to have a track record.

Correct.

Right. Before someone's going to commit new money to it.

Correct. In the ETF world, that three year Morningstar rating is really important. But what are you going to do between year zero and year three? Just wait for your rating and then go to the institutional folks or are you going to go out there and meet with them and figure out what, what you need to do.

So last question was this. Did you take a process that you had when managing money and then turn it into this etf? Was this a process you've been using all along?

Yes, yes. We're much longer than the 11 months that we've been available for. We did this within the family office for many, many years essentially and did pretty well against the market. And so that was, that was sort of one of our impetuses being behind. Hey, we're buying this stock, we're selling this stock. You should come along with us in a very efficient, official way, right? Rather than us just talking stocks at.

A cocktail party because somebody goes out, they want to participate a little bit, they can just go out and buy the, they can go out and buy the etf.

That's right.

They can allocate X amount of dollars to it and get the whole, and get the whole portfolio.

That's right. And even within your investment portfolio, even within our family office, what we do is not everybody is 100% in this ETF only, right? Everybody has a suite of investments. And certain folks may just want beta or market investments. They want the spies or the S&P 500 or whatever, whatever it is. There's a certain part allocated in every family office to that. This portion is the portion that we think is good to try to beat the stock market, right? Not good for every dollar, but good for a lot of dollars of folks that are saying, I want to outperform, right?

And so remind me, because I'm not. I want to make sure I heard you right. You have, you're everywhere. You're an emerging market as well as bold, developed international markets.

It would be weird if we went into an emerging market, right? We're mostly in some of the bigger markets. We're in the capitalist markets so that we can trust them. We stay out of the non capitalist market, essentially, and we stay in generally the larger or bigger cap names developed in those, in those developed worlds, essentially. But there are a lot of opportunities in Europe right now. Europe's much cheaper than the United States, right?

But Europe's a developed market, right? So Like I say to you, would you take a percentage of this ETF you have in China or is China not a place you want to be?

China's really difficult because we have not bought a Chinese stock and have thought about it hard. But Those are Chinese ADRs, right. You do not own the company 100%. You may one day if China invades, whatever happens. Because it happened with the RSX and the Russian stocks. All of those stocks. You thought you bought RSX and you thought you bought Seb Oil and you bought Lukoil and all of these Russian companies. You didn't. You bought ADRs and the ADRs went to zero.

Right. And here's the other thing that because I don't play in China, first of all, because I think there's too many other opportunities around the world. But to your point, China can change your rules midstream and suddenly you wake up one day and you go, wait, what happened to my investment? Right. There's no, there's no, no one's holding their feet to the fire. Right, Right. So, and so that's why it's interesting, you know, when, when a lot of people, they want to, you know, should we be in emerging markets? And I say, listen, you can be if you're going to do it. Allocate. I would allocate a tiny push. I don't play in the emerging markets.

Yeah.

Just because I think there's way, way, way too much risk. I think there's so much opportunity in developed markets and large cap names and say it's boring, but it always works. It's consistent and it works.

We call that stroke of pen risk. Right. A stroke of a pen from a government and you are wiped out. And that actually happens in America too. They could stroke Penn, change a law and then you could be wiped out on your equity investment. It's way easier in China than.

Yeah, it's 100% easier in China. And the U.S. and China could happen overnight, correct? In the U.S. if they're going to start talking about changing policy, they'll just change it overnight. There's a lot of conversation about it. People have time to figure it out, what's it mean and to make then adjustments. But you could wake up one morning and you know, with the stroke of the pen in some foreign country, an emerging market. Right. I don't. Let's be clear. Europe is not an emerging market. Europe is very much a developed market the way the US is developed market. We're bigger, but they're a Developed market China is considered an emerging market.

Right. To put it another way, we like to buy stocks where management wants us, the shareholder, to make money. I'm not sure China wants me to make money owning their equities. I'm not positive that's true. So we would rather play somewhere where either the rules or the want and desire to make your shareholders money exists.

Right? Right. All right, so tell me, just tell the audience, tell the audience a little bit more about the family office dynamic and how you are. What, what, what's new? What are you looking at? Are you looking at derivatives? Are you doing other stuff in and around you that's, that's kind of supporting your thesis?

Well, I'll say. In general, you know, the family office investment slate is large. Right. We can buy any private investments. We can make direct deals. We can buy apartment complexes that are down the street. I mean, essentially the world is your oyster.

Right.

And so you really have to narrow your focus as to what you're good at.

Right.

And then maybe if you want to be in those other, find professionals that are really good at those other sectors. The one sector that is clearly really hot is private credit. We have watched, we have taken 100 meetings on folks that are, that are building massive books on the private credit side. Private equity has been around a long time. Everybody knows what's going on there. Private credit is just private companies and the debt side essentially. And they will tell you 10, 11, 12% returns, little risk, a lot of good things going on in that world. But trillions have headed there.

Right.

We've actually avoided it for the most part, maybe to our own fault, but we're a little worried about all that money going in at once.

Yeah, but you know, like you said, you stick to what you know best.

Exactly.

Right. And if, and if, and if, and if people want private credit, they should go to a place that specializes in private credit.

Precisely. There's folks that have been doing it for 25 years. Those, those are the ones that are doing a good job.

Hold on. And we'll be right back. Okay, so welcome back. Let's wrap things up with three essential market tips to keep in mind no matter which way the wind blows. Right. Number Define your trading objectives. First and foremost, you need to clearly define your trading objectives. Ask yourself, why am I trading? What are my financial goals? Am I looking to build long term wealth? Generate supplementary income? Or perhaps both? It's crucial that you take the time to answer these questions honestly. You want to write down your objectives in as much detail as possible. For instance, you might say, I aim to achieve a 15% annual return while risking no more than 2% of my capital on any single trade. By doing this, you're not only setting a measurable target, but you're also defining your risk tolerance and the time commitment that you're willing to invest. Remember, these objectives will serve as your roadmap. They will guide your decisions and help you remain focused during volatile market periods. A written, well thought out set of goals isn't just a checklist. It's your personal trading manifesto that anchors you when emotions run high. Take a moment now to jot down some objectives right. You might even consider creating a mission statement for your trading career, something that you can revisit regularly to ensure you're staying on track. 2. Set up your trading environment the second tip is to create a dedicated and distraction free trading environment. Think of your trading workspace as your command center, that is where you'll make all your decisions, analyze the market data and execute your orders. It's essential that this environment is optimized for focus and efficiency. Invest in reliable, high performance hardware. A fast computer is a must and if possible, a dual monitor setup can significantly improve your ability to multitask. Make sure your trading software is robust and that your data feeds are real time and accurate. Additionally, consider the ergonomics of space. A comfortable supportive chair, proper lighting and a quiet, organized desk can make a huge difference during long trading sessions. Eliminate your distractions, turn off the unnecessary notifications, close irrelevant tabs, and create a physical space that signals to your mind that it's time to focus on the market. By having a well equipped and serene environment, you're setting yourself up for success and ensuring that you can react swiftly when market opportunities arise. And then Start a trading journal One third major tip is to begin this trading journal today. A trading journal is one of the most most powerful tools in the arsenal. It's where you record your thoughts, your decisions, and the lessons learned. Start by documenting initial objectives, your risk tolerance, and any questions or insights you have about trading. Write down the reasons behind the goals and outline the strategies you intend to explore as you continue on the trading journey. Make it a habit to update the journal daily, recording every trade, including your entry and exit decisions, your emotional state at the time, and what you learned from each experience. Over time, your journal will evolve into a comprehensive resource that helps you identify patterns in your decision making, track your progress, and adjust your strategies accordingly. It's not just a log, it's a mirror that reflects your growth and guides you and helps you improve continuously. I mean, that's fairly right.

Yeah.

Anyone that's just starting out as a trader should really kind of commit to doing a lot of those things. Great discipline there, because it's all about the discipline. Each week I feature a recipe at the end of the podcast, and I like to reach out to the guest to see if there's anything that sounds good. Today I asked Rob, and he gave me the classic Bolognese, which is also a fan favorite. I mean, how could it not be, right? But let me just give you a little bit of history. The classic Bolognese sauce is one of Italy's most beloved and iconic meat sauces. Originating from the city of Bologna in Emilia Romana, Authentic Bolognese is a slow cooked, rich and creamy dish that relies on finely ground meat, sofrito, which is like celery, carrots and onions, wine, milk, and a small amount of tomatoes. Rob, that's a delicious dish. It's a classic. I don't usually order it out because I make it at home, but tell me why it's your favorite.

Well, I think January through March in Wisconsin, you need something hearty. You need something that takes a while to cook, but you can pick at the entire time. Right. Go back to the. Go back to the sauce, essentially.

You can dunk the bread in it.

Yeah, you can dunk the bread in it. You can go over, have. Throw a couple noodles under it, you know, whatever it is. And the kids love it. It's one of those just hits all over the family.

And it does. And to your point, especially in the wintertime in a place like Wisconsin, where it gets cold, you want something really hearty that makes you feel good, kind of all cozy and warm inside, which is what a classic Bolognese does. Anyway, thank you for joining me today. I really enjoyed the conversation. I hope we get a chance to do it again.

Thanks for having me. Absolutely. Love it.

My pleasure. And I want to keep up on RVer, which is your ETF. I kind of want to watch it and see how it grows. Yeah. Right. Thank you very much for joining us.

Thanks for having me.

My pleasure. This content was not intended to be financial advice and should not be used as a substitute for professional financial services.