# All-Weather Portfolio 3.0 ## Three Fundamental Problems *I. Restricted access* The world's best hedge funds (Bridgewater, Citadel, Two Sigma) are accessible only to ultra-high-net-worth investors. The minimum entry starts at $250,000 and in some cases reaches $1,000,000. Lock-up periods range from one to three years, and qualification requirements automatically exclude 99% of mass affluent investors. *II. The illusion of choice* Dozens of asset managers offer "different" products that in practice are nearly identical. Equity funds from BlackRock, Vanguard, Fidelity, and State Street are essentially versions of the same portfolio. More than 60% of their underlying holdings overlap, generating no meaningful alpha over the index. The correlation between them approaches one. Diversifying across providers is not the same as diversifying risk. *III. Old models are broken* The classic 60/40 portfolio emerged in a very specific environment: four decades of falling interest rates, globalization, and a persistent disinflationary trend. In that world, bonds delivered high real returns and almost automatically rose when equities fell, acting as a shock absorber for the portfolio. Over recent years, the foundations of that construction have shifted on several fronts: central banks have moved away from zero rates, and during inflationary shocks the correlation between equities and bonds turns positive, meaning both pillars of 60/40 collapse simultaneously. As a result, 60/40 is no longer a universal "sleep-well" formula. It has become a bet that the old regime of falling rates, subdued inflation, and a stable negative equity-bond correlation will somehow return and persist for another decade. Recent research points in the opposite direction: toward structurally higher long-term inflation, more expensive capital, debt-laden economies, and geopolitically fragmented growth, an environment where correlations drift and static portfolios systematically underperform. ## Rethinking the All-Weather Portfolio Everything that represents the best in capital management, from Dalio's risk-parity to Simons' systematic strategies, from the value-investing principles of Graham and Buffett to Taleb's antifragility, was built on clear logic and rigorous discipline. That logic is our foundation. But the environment has changed, and the All-Weather concept, much like the 60/40 model, shows similar shortcomings in the new regime. Our approach is to preserve the strengths of proven frameworks, expand the asset universe, and improve programmable adaptation to shifting market regimes. This logic gave rise to our core objective: to find a new equilibrium between capital growth and risk at a given level in a structurally transformed economy. We tested dozens of hypotheses, analyzed hundreds of instruments, and ran thousands of simulations. The result is a model portfolio that performs across different market phases, built on eight instruments covering six asset classes. | **Instrument** | **Description** | | ----------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | | iShares MSCI EAFE Value ETF (EFV) | A fund investing in value stocks of large and mid-cap companies in developed markets outside the US and Canada (Europe, Japan, Australia). | | iShares JP Morgan EM Bonds (EMB) | A fund replicating the index of hard-currency bonds issued by emerging market sovereigns and corporations. | | iShares 0–3M Treasury Bond (SGOV) | A fund investing exclusively in US Treasury bills with maturities up to three months. | | NYLI Hedge Multi-Strategy (QAI) | A fund of funds constructing a portfolio that statistically approximates the aggregate return of a broad range of hedge fund strategies. | | iMGP DBi Managed Futures (DBMF) | An actively managed fund implementing systematic trend-following strategies through futures on equities, bonds, currencies, and commodities. | | SPDR Gold Shares (GLD) | World's largest gold fund, fully backed by physical metal held in certified vaults. | | iShares S\&P GSCI Commodities (GSG) | A fund replicating the S\&P GSCI index with exposure to a broad range of commodity futures: energy, industrial and precious metals, and other commodities. | | Bitcoin (BTC) | The first and largest cryptocurrency with a fixed supply cap of 21 million coins; functions as a decentralized payment network and a digital analog of gold. | To understand how these instruments behave not in isolation but as a system, we analyzed their joint dynamics over the maximum available period from January 1, 2021 to March 31, 2026. This formed the basis of a correlation matrix showing how the assets diversify the portfolio.
Through rebalancing, we searched for the optimal weights across three portfolios with different risk profiles: Conservative, Balanced, and Aggressive. To assess whether the new construction delivers genuine added value, each profile was benchmarked against the S\&P 500. The starting capital is $10,000. | **Metric** | **Conservative** | **Balanced** | **Aggressive** | **S\&P 500** | | ------------- | ---------------- | ------------ | -------------- | ------------ | | Final Balance | $15,884 | $18,969 | $22,214 | $18,690 | | CAGR | 9.21% | 12.97% | 16.42% | 12.65% | | Volatility | 5.84% | 8.73% | 13.23% | 15.03% | | Best Year | 17.46% | 22.77% | 27.64% | 28.75% | | Worst Year | -1.48% | -3.45% | -7.97% | -18.17% | | Max Drawdown | -8.43% | -12.29% | -18.97% | -23.93% | | Sharpe Ratio | 1.00 | 1.09 | 0.98 | 0.66 | | Sortino Ratio | 1.62 | 1.86 | 1.76 | 1.02 | All three portfolios outperform the S\&P 500 on risk-adjusted metrics. The Balanced profile is the only one that, at a return comparable to the index, delivers a notably higher Sharpe ratio and almost half the volatility. The Aggressive profile generates approximately 3.8 percentage points more return with lower volatility and more controlled drawdowns. ![](/files/d4759dc1f13bfe36290608b9821d74da8c071d20)

Structure of the Balanced portfolio as the base scenario

## Next Steps The current version of the portfolio is built on publicly traded ETFs, a deliberately chosen lower bound. Each ETF is a simplified replication of an active strategy that sacrifices some alpha. The real fund will improve on these results across three dimensions. ### I. Replacing ETF proxies with real strategies #### Algo and HFT block in place of QAI and DBMF Instead of an index fund that replicates the average return of hedge funds, we allocate capital across independent teams developing and running algorithmic, high-frequency, and quantitative models in equity, crypto, and currency markets. Each team builds its own research infrastructure, operates on its own data sets, and uses autonomous signal models, reducing the correlation between strategies and making results more robust. The block will include: * market-neutral strategies; * event-driven, momentum, and trend-following approaches; * arbitrage models. Teams and strategies are filtered through a selection funnel: each idea goes through a testing and stress-simulation phase, then enters live mode with a small capital allocation, and only a small fraction of strategies make it into the core pool. Admission to the core requires meeting a set of quantitative criteria (Sharpe ratio, maximum drawdown, return stability, strategy capacity) and passing review by internal committees. #### On-chain cash & cash-plus in place of SGOV Instead of a US Treasury bill ETF, the fund uses: * tokenized T-bills (e.g., ONDO, Centrifuge, and comparable products) as direct on-chain access to the risk-free dollar rate; * conservative lending protocols (AAVE, Morpho, Kamino, etc.) with broad diversification across networks, fiat-backed stablecoins, and strict risk limits. This preserves the "risk-free dollar income" profile while adding 2-4 percentage points annually above the classic money market through the on-chain premium and more efficient collateral management. #### Gold 2.0 In addition to classic gold ETFs, we add tokenized gold: XAUT and PAXG. Each token is backed by one ounce of physical metal and provides: * the same price dynamics as spot gold; * the ability to use the asset as collateral in DeFi; * round-the-clock on-chain liquidity. Gold transitions from a "dead" hedge into a working collateral instrument within the fund's ecosystem. #### From EFV to targeted developed market strategies Instead of a single broad ETF covering value stocks in developed markets, we move to a set of specialized developed-market strategies: * value approaches in sectors and countries trading at the steepest discount to fundamentals; * growth portfolios where the macro environment and rate cycle support expansion; * small-cap allocation adjusted to the economic cycle. This allows for far more flexible management of developed-market exposure than any index can deliver. #### Combined effect In the ETF version of the portfolio, the Sharpe ratio of the Balanced profile already stands at 1.09 with a maximum drawdown of -12.29%. The transition from index proxies to real strategies and on-chain instruments targets: * raising the Sharpe ratio by 0.5-1.0 points across each profile through higher expected return at comparable risk; * reducing maximum drawdowns by 2-4 percentage points. In concrete terms, our target range for the base Balanced portfolio is a Sharpe ratio of 1.6-2.0 with a maximum drawdown of approximately 8-10%. ### II. Expanding the asset class universe The second growth dimension is expanding the asset class spectrum beyond the current eight instruments. The first step will be a dedicated EM Equities block: value stocks across Asia and Latin America selected through disciplined screening on valuation multiples. Historically, emerging markets deliver a premium over developed markets. We aim to capture that premium without taking on excessive country-specific risk. The next element is full-scale Tail Risk Hedging. Rather than simply holding additional cash, we build a dynamic portfolio of deep OTM S\&P 500 puts and VIX calls. When the VIX is in a calm zone, the protection block is gradually built up because the hedge is cheap. As volatility rises, a portion of the defensive positions is locked in. This makes the portfolio convex: the cost of the hedge is bounded, while the payoff in extreme scenarios is potentially a multiple. Finally, we preserve optionality for selective participation in other alternatives, primarily private equity and late-stage VC. This is not the core of the strategy, nor the primary source of returns. If we identify a genuinely exceptional opportunity with an asymmetric profile, we may allocate a limited share of capital as an additional source of alpha.

Updated portfolio architecture

### III. Programmable dynamic rebalancing A static portfolio in a world of shifting economic regimes is a source of hidden risk. In our architecture, asset class weights are tied to observable market phases, so the portfolio responds to regime changes through adaptive logic. The key element of this architecture is tokenized strategies as a fund building block. Each strategy or logical group of strategies is structured as a separate token that an investor can acquire directly. This opens several scenarios: * an investor can assemble a personalized portfolio from selected strategies (e.g., a conservative portfolio + an arbitrage strategy + gold); * they can buy an aggregating token for the entire fund, gaining exposure to the full range of return sources; * they can use fund tokens as collateral in third-party DeFi protocols. Looking ahead, anyone building on-chain products will be able to use our fund as a trusted risk module, not reinventing a portfolio from scratch, but plugging into a proven, battle-tested set of strategies through a standardized interface. Each strategy within the fund operates by its own rules and is not immune to decay. Every strategy has an individual kill-switch trigger, for example exceeding the permissible drawdown over a quarter or a sustained deterioration in the return-to-risk ratio. When the trigger fires, the strategy is automatically disabled and its capital moves to the conservative block until an independent team presents an updated model and receives renewed approval. Fund management is organized through a smart contract system with role-based access control and multi-layered protection against unilateral decisions, implemented via multisig wallets. The system defines five roles: administrator, developer, strategy manager, legal officer, and security officer. Any critical change, whether a code upgrade, a revision of asset valuations, or a transfer of funds, requires multiple confirmations and passes through a 24-hour timelock. This window gives the team time to verify the change and gives investors the ability to withdraw before it takes effect if needed. Investor assets are held in two types of vaults. The first type (ERC-4626) supports instant deposits and withdrawals. The second (ERC-7540) is designed for strategies with off-chain assets: equities, managed futures, and other instruments. Withdrawals require two steps, and the price is fixed at the time the redemption request is submitted, protecting investors from price spikes during periods of low liquidity. If any balance anomaly is detected, the contracts are automatically frozen pending investigation. Every strategy we plan to include in the fund has already been or is currently being run on real capital. Some models operated on $100,000 to $300,000; individual teams manage portfolios of several million dollars. These track records belong to different managers and started at different times, but they give us live statistics on PnL, drawdowns, and strategy behavior. The fund aggregates this experience into a unified architecture rather than starting from a blank page. ## Terms We are currently in the phase of building the fund's core and attracting early investors. To allow the strategy to perform as designed, a critical mass of capital of $2,000,000 is required. At launch, the minimum investment is $10,000. As total AUM grows, we plan to progressively lower the entry threshold down to $100, opening access to a significantly broader investor base. The legal architecture is structured around a licensed VASP (Virtual Asset Service Provider) model with full KYC/AML procedures for all investors. For individual strategies and capital pools, we are prepared to establish SPV structures. Trading operations in traditional instruments and a portion of digital assets are executed through licensed counterparties, and asset custody is implemented via regulated custodians. The first 100 investors receive limited commission terms: a 1% management fee and a 10% performance fee locked in for the first three years of participation. The fee model is designed to align the fund's interests with those of its investors: * the performance fee is charged only if portfolio returns exceed the hurdle rate, defined as the prevailing US Federal Reserve risk-free rate for the relevant period; * and only if the NAV per share has reached a new high-water mark, meaning it has surpassed the previous capital peak net of all fees. We do not charge a performance fee for simply tracking the market or for recovering from a drawdown. The management team invests its own liquid capital on the same terms as external investors, ensuring risk and incentives are fully aligned. All on-chain smart contracts undergo technical audit; on-chain assets are verified in real time through public blockchain explorers; off-chain components (ETFs, bonds, custodian bank accounts) are confirmed by an independent auditor. We aim to maintain high portfolio liquidity: no less than 80% of assets available for withdrawal within 48 hours under standard market conditions. Investors receive a detailed quarterly report with a performance breakdown by each block and strategy, along with an update on risks and correlations. ## Contact We are ready to demonstrate a working MVP interface and the on-chain infrastructure for tokenizing investment strategies. A detailed architecture description and product roadmap are available upon request. In addition to investment in individual strategies and the fund as a whole, we welcome discussions about venture participation in the development of the project's technology infrastructure. To discuss the details and receive additional information:

Dima Blanc, Founder & CEO, Value Vaults

d.blanc@valuevaults.io; Telegram@blancnote

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