Hello and welcome to the second webinar in our webinar series featuring Brinker's flagship offering Destinations. We appreciate you taking the time to join us today. We hope you find the content of value and always. As always, we hope you're all doing well and navigating what remains a pretty difficult period as well as possible. As many of you know, Destinations is a suite of multi asset class portfolios that has a near 30 year track record of delivering compelling risk adjusted returns to our clients, clients, right. Everything we do at Orion, at Brinker is with room for the advisor and it's done that through a very deliberate, institutional thoughtful approach to investment strategy selection, portfolio construction and asset allocation. And as you all heard me say on the first webinar in this series on Destinations, my family's retirement money sits in the Destinations aggressive portfolio. So it's always a real treat for me to have the opportunity to grill the PMS that are responsible for this very important franchise. So welcome Brian Story, Deputy CIO of Destinations Portfolios and Andrew Goins, Senior Portfolio Manager for the Destinations portfolios. And today Brian and Andrew are going to wade into one of the hot button and ongoing debates on Wall Street and that is the value of in the case for active management. We certainly believe in active management at both the security selection and portfolio management level and at the asset allocation level as well. But we also believe that there are better ways and worse ways to think about an employee active strategies and to approach active management in general. And as an offshoot of that debate, Brian and Andrew will also weigh in on the merits of active relative to passive and how we think about and use those complementary approaches to portfolio construction in order to build efficient portfolios for our clients. With that all said, let's get going, Brian, Andrew, as always, great to see you, great to be with you. You all have built a fantastic presentation that we're going to lean heavily on today that makes the case for active Management lays out, I think a really interesting way to think about the active versus passive debate and maybe most importantly details how and why Destinations has been so successful in deploying active strategies for so long. Now I'm gonna do my best to drive the bus regarding the slides and do my best to keep quiet as folks on this webinar are obviously much more interested in hearing from you both than from me. And I'll also say before I turn it over to Brian and Andrew at the end of the the, the, the presentation Brian and Andrew will weigh in on portfolio positioning today, how they're thinking about risk assets, the markets as we move into year end with the awful events in Israel, the conflict in the Middle East. Obviously you know on everyone's on everyone's mind. So with that said, let me turn it over to Brian and Andrew and again, I will do my best to click through the slides. So take it away. Thanks a lot, Tim, appreciate the introduction and always a pleasure to be on these webinars with with you. So yeah, if we want to move ahead to the slide that talks about active and passive, not active versus passive. So I think this is a, this is, this is one of these things where it's kind of a paradox. And you know we hear a lot of debate about active versus passive or let's say active or passive. And a lot of people have taken very strong positions on either of those two sides as if you, you know, it's an either or decision. And you know, we think as with most things in the investment industry, being too dogmatic or being too passionate or emotional about any issue tends to steer you in the wrong direction in many cases. And so you know, we think a bit, we think of this a little bit differently. I think it's a little more nuanced and we think it's not really a debate that we should be focused on too heavily about should we use active or passive, but how can we best use both, both of these complementary approaches to deliver efficient and and successful portfolios and outcomes for clients. And so, yeah, we've kind of structured or or kind of built this presentation deck to to talk about both of the issues. But really to end on what we think is the more important question of sort of active versus active, which is kind of might sound on the surface little little odd, but it's really how do you implement active management and less so about should you implement active management because we think there's there's a case to be made for active management in, in many areas. There's also a case to be made in some asset classes to to utilize passive management and particularly Andrew we'll get into this a bit later. But in more efficient asset classes where you can actually access cheap beta, we think that you know for risk control purposes perhaps for expense management purposes, there is a benefit right role that passive has to play. But we think for investors that have the time and the expertise and the resources to employ and seeking out highly skilled active managers, we think there's a lot of benefit from a return and risk standpoint to do that. And we, we think within destinations, within the Brinker team, we have those capabilities and we're able to deliver on that with active management. Yeah, no, I think active versus active is a really interesting concept, which I know you're gonna get into. And then the other idea and sort of flipping through the presentation is even within passive, there's sort of an active bet, right, which I know again, you guys are gonna unpack, which I think a lot of folks forget about. So let me at the risk of stealing your Thunder and I said I wasn't going to talk important considerations when using passive. I'll, I'll just click through the next slide and again turn it back to to to you all oh thanks for stealing a little bit of the Thunder, Tim. Yeah. So as we as we think about this topic again it's it's not we're trying not trying to dispute the benefits of passive. It's really the ideas and some of the shortcomings that come along with maybe going all passive or considering active or passive. So we think one of those shortcomings could be that we think as you're making a if you're only allocated to passive strategies, you're not making any bets on the market. And we just don't think that that's necessarily true. If you look at the equity side and market cap weighted benchmarks, the largest names in those benchmarks, the largest positions in your portfolio are those names that have been the best performing names over time and law of large numbers and history never repeats itself. There's lots of reasons to believe that those may not be the best performing names over the next 10 years. And so even though you think you're just we're just going to take what the market's giving us, you are making, we are essentially making up that that the names that have been the top performers historically will continue that way going forward. The assumption that or bet that you may make in fixed income passive benchmarks is almost more worrisome. And the way that those benchmarks are constructed, the largest weights in those strategies are going to be the either companies or countries that actually have the largest amount of debt outstanding. And so with that you're, you're making an assumption that those companies that have the most debt are going to be the best performing going forward. And then in some cases that might be true. But if kind of from a fundamental perspective, it's hard to, it's hard to want to be overly allocated to those most indebted countries or companies. That's all the shortcomings that may come with that. Yeah. Now that's a really good point too because typically when folks talk about passive, they tend to focus on the equity side of the 6040 portfolio, whatever it may be. And to your point, you know, those bigger companies in those equity indices are there because they've been bit up and typically that's because of good fundamental performance over a long period of time. But that may not persist, but on the fixed income end of things, you know you're bigger in that index because you're just more leveraged and you need to take on more debt, which you know can be a pretty scary proposition when the world becomes a bit unsettled. So I I think that's a really important point for folks to keep in mind on, on the fixed income end of the spectrum. So, yeah, and some of the actually before we move to the next slide, some of the other kind of unintended bets or assumptions that are made and passing mandates is again that the the next 10 years is going to be very similar to the last 10 years. And there's a lot of changing dynamics. The landscape looks very different today than it did 10 years ago. I think if you just think about where interest rates are right now, we're kind of the highest yield on the 10 year that we've had in the last 15 years. That kind of low interest rate environment we've seen over the last 10 years has created an environment where there's kind of it's the all all runners get a prize type of scenario where all the names of the all all stocks have done well because there hasn't really been opportunities or kind of credit events that kind of separated the winners or the higher quality companies from the lose from the losers. And with higher rates expected going forward, we we think that there'll be just there'll be more dispersion across stocks that there really will create an environment where there'll be winners and losers. And in that environment, we do think again favors active managers that have kind of the be the ability and that's what they do is to look for those names that they think will be able to hold up and do well kind of in a higher rate environment going forward. Also if you think about from a geopolitical or even a demographics perspective with an aging population of crop globally, we we think there'll be just more dispersion and more opportunities kind of from country to country or regionally. The active managers again will have more flexibility to allocate their portfolios to where they think that more opportunities to do opportunities exist than you would in a purely passive mandate. Yeah, volatility can be unpleasant, but it can create great opportunities for well constructed active strategies for, for sure. Yeah, I think to sort of summarize a lot of what what Andrew was talking about which are critical, critical points that that we think folks need to consider just in thinking about the use of passive management as a sort of a you know more almost some people think of it as more defensive or or you're you're not making bets as Andrew said. Is that really we think of active managers as sort of driving while looking through the windshield where I know your sports analogy like you know that Dwayne Gretzky skating where the puck is going as opposed to passive investments that are really. I mean we think that's really just the, the driving while looking in the rearview mirror and not really, you know, remaining silent on a lot of these questions, a lot of these topics that are critically important as and as Andrew said and particularly now with some of the inflections we have going on, we think is even more important to think about what's that future going to look like and not just rely on what has the past looked like. Yep, no, all great points on this slide. One of the other main selling points are kind of proponents of why passive is that they're very inexpensive ways to get exposure to different market environments or market segments. And while that is definitely the case within large cap equities and more efficient market asset classes, it is definitely not the case within the satellite or more diversified kind of diversifying asset classes. But you can see in the chart here on the bottom left is the average expense ratio of the three largest ETFs across these very different asset classes. So again these are the largest ETFs. We would expect higher expense ratios from the smaller nichier ETFs within some of these asset classes. But these are the the big names that many of us are likely already using in our in our portfolios. You can see within the average high yield those three largest ETFs expense ratio of 35 basis points and as you get into alternatives and commodities, you're looking at 90 basis points, 80 basis points. These are, I mean very similar expense levels as you'd see amongst active strategies. So that that idea that passive is a cheap way to get exposure. Again, yes, in some asset classes it is. But there are many areas in the market where we think you're really you're you're not getting a cheap exposure, you're really paying similar levels of fees as you may and active strategies. Yeah. And and then these are asset classes that you could argue and I would argue lend themselves to active management as well. So if you go pass, if you're already paying a lot and you're guaranteed not to outperform, but you're also doing it within asset classes that are a bit more opaque that that are a bit inefficient from an information perspective and and set up for for well constructed portfolios to create real real value. So, yeah, it's kind of a double, double negative for sure. Yeah, we'll touch on that a little more in the next couple of slides. But so on this slide, another assumption that you make in passing management is that if you buy an ETF the for a specific asset class, you're going to get that type of return profile. And and if you're buying an S&P 500 ETF, yes, the tracking error to the S&P 500 is going to be be very tight. But again in these satellite and a niche year asset classes some of these biggest bench, some of the biggest ETFs kind of for each of these has really not provided you some like asset similar return profile of these asset classes. You can see the the iShares Ibox High Yield Corporate Bond ETF, actually the largest high yield ETF in the market has underperformed the ICB of AUS High Yield Index by nearly 125 basis points on an annualized basis for the last three years and almost a full percent over the five year period. And so again it's not necessarily tracking that specific benchmark, but that is one of the main benchmarks for high yield. So if you're wanting to go passive and high yield, you buy the largest ETF out there, you've meaningfully underperformed the the exposure you were intending to get in your portfolio. Similarly with an EM debt maybe to a little bit lesser extent about 20-30 basis points annualized for the three-year, a little over 25, a little under 25 basis points for the five year. But if you look at alternatives which is a very differentiated, lots of dispersion across strategies within that within that asset class. The main ETF kind of if you want alternatives exposure has underperformed the liver multi alternative index by almost 3% on a for the three-year period and a little under 70 basis points for the five years. So you you can make the right asset allocation decision by a lot exposure to these, but if you're by fully implementing through passive, you're actually not getting the return profile that you you think you were going to get. And then if you compound those negative excess returns that 96 basis points over five years becomes a pretty big number. So yeah, I know those are all great points. Sorry Brian, if I cut you off. No you did not. I'm just listen listening to Andrew and becoming educated. All right. Next slide and then on this, this slide is more to your point Tim, of these segments of the market were active really over time has really been able to add value. These numbers are you'll see on the chart in the bottom, bottom left shows the returns of these ET these kind of biggest, one of the biggest ETFs in each of these categories relative to the category average. And though active passive debate many, I mean there's lots of data out there that suggests that the average active manager does not outperform their benchmark over time. And there are segments of the market and we're not defeating that refuting that data that the data is out there. But there are segments in the market where the average active manager has been able to outperform and has meaningfully outperformed these some of these passive ETFs. Again not to pick on the alternative space, but if you see this index, the IQ Hedge Multi Strategy Tracker ETF has actually underperformed the Morningstar category average for multi strategy by over 4% annualized on a three-year period, 150 basis points for the five year period. And even in high yield which you can argue is maybe more is more efficient and than than the multi alternatives area, you still see get about 120 basis points of underperformance of this largest ETF in the category relative to the average active strategy. And again that's active strategy or the average active strategy within destinations. As Tim alluded to the long history of adding kind of significant value and being able to to be able to identify those managers that are much better than average, that can over time have been able to deliver a meaningful amount of outperformance. And if you look historically at destinations and Brad will touch on this even more later, but we have, we've added value even to those efficient asset classes. We've added a disproportionate amount of value through these satellite asset classes where we've been able to find managers that have added significant or been able to deliver significant performance relative to their benchmarks and also these passive ETF. So we think it's vital and very important kind of in these more nichy areas to be to be highly allocated to active managers. Yeah. And I would quickly add if I could that you know, I know it's been a very unsettling 3 plus years now because of the pandemic and everything that went along with that inflation. Now you have these awful events in Israel and the Middle East and Eastern Europe. But you know these numbers sort of catch the tail end of what was to Andrew and Brian's earlier comments or the tail end of a low rate, low cost of capital, really tough environment for active managers generally speaking because the market really wasn't discerning all that much between quality and maybe not so high quality companies, partly because rates were so low for so long through the teens and then obviously the early part of the pandemic and the cost of money was so cheap. So if you are in this construct that favors active management because of higher cost of capital, higher yields which we're clearly in right now, you know and and and these numbers were produced in a much more difficult environment for active. You know we could be early days in terms of you know a a a really good sort of construct or backdrop for for smart portfolio selection, portfolio management, security analysis and and selection. So I just wanted to mention that yeah, agreed and I I think we may have touched on this, definitely touched on it in, in our last webinar. But you know these asset classes we're talking about whether it's global credit alternatives, real assets, these are you know they you know they could come across as as Nichy. But to us and the way that we construct portfolios to deliver more consistent returns over time from the asset allocation standpoint to us these are very important asset classes where we can have you know 20 plus percent within let's say a moderate portfolio and so having you know the difference between. You know, underperforming with an ETF by a couple percent a year versus outperforming with a, you know, diversified set of active managers by a couple percent. You know, through through our approach and the, the experiences and the the track record, we've been able to deliver. That's very impactful over time. All right, So we're in football season. My New York Football Giants are not doing all that well. Passive management, punts on fundamental opportunities, what are what are we looking at here, gentlemen? Yeah, so maybe as a final shortcoming that we see a full passive implementations is that over periods of time dispersion across segments of the market does create opportunities for active managers to add value. We're not advocating for market timing or even for like highly tactical strategies, but these two charts will hopefully illustrate kind of what I what we're talking about. The chart on the bottom left shows the three kind of main segments of the Bloomberg US aggregate Bond index, the blue line representing MBS mortgage-backed securities, the green line treasuries and the yellow line corporates. And you can see that over time each segment has performed very differently from each other, some better than others. And if you're if you're implementing fully passive, you're just going to get the straight line, you're going to get to get the market overall market. But an active manager can look at, can look at the environment and see areas where there are better opportunities, more attractive valuations kind of across these segments and be able to add value over time. And we've seen that kind of the proof is in the pudding in the fixed income generally is an area where active management has been able to add value just because there are these big different kind of differences between the three main segments. On the equity side, the chart on the bottom right just shows the relative valuation between the Russell 1000 growth and the Russell 1000 value. And so with with the the lines moving up that means the growth is getting more expensive. And you can see growth really peaked kind of in that 2022 area time frame and really sold off and that's when we saw value Rep and kind of recover. And so again, we're not trying to talk, we don't try to time the market, our managers don't try to time the market. We're just trying to show that if you were, if you were just implementing through say the Russell 1000, you're just going to get what the market, what's the market kind of gives you. But if you're an active manager, can can you really navigate and find areas of opportunities that maybe those more aggressive growth stocks have gotten very expensive kind of in that the post COVID environment but or during the COVID environment that they can kind of rotate. A lot of our managers were rotating into pockets where they're finding more attractive opportunities and similar on the value side. And so here is that over time there are the market will deliver some attractive opportunities and dislocations that an active manager can take advantage of where a passive allocation or strategy is just going to kind of sit back and watch and just give you the broader market exposure. Yep, no all great points. So I think we're ready to dig into how Destinations does what it does and has done so successfully for so long around using active strategies. And I'm pretty sure in this section of the webinar, I'll get to use my favorite phrase from the last or the first webinar in the series, which is the whole is going to be worth more than the sum of the parts. So I was thinking of you, Brian, as I was going through the presentation 'cause I'm a, as you know, big fan of of that line. So I'll stop talking again and hand it back to to Brian and Andrew. Sure thing. You know it's it's we we treat it with a little humor because you are such a fan of it. But it's a it's a valid point in a lot of areas of what we try to do whether it's the asset allocation, the manager selection and portfolio construction and and really you know not to digress too far but that is the the benefit of diversification that we think is you know we we do believe it's as I say it's free lunch and we think it's one of the only free lunches out there. And so we capitalize on anytime we can no never turn down a free lunch, right. So yeah, we kind of are pivoting now I guess from that active versus passive or or sort of just you know talking about active and passive and and you know thinking of them side by side into this active versus active discussion and and how we within destinations approach active management that we think it is yields better outcomes. But also beyond that it it it, it just lends itself more to clients and investors having successful outcomes and having less frustration with active management. Because you know we we often times hear some folks express dissatisfaction with active management. And and I you know my belief is that it's it's less about active management and more about the approach or how they implement active management. And so you know not to not to be dismissive of the challenges that do come with implementing via active management because you know there there are some, there are some challenges, it's not all roses. And one of the things is that there are several layers of uncertainty involved and we know that from a lot of the behavioral finance research that the human brain doesn't really deal so well all the time with decision making under uncertainty. And so when I talk about some, some areas of uncertainty that that come along with active management, yes. OK. Well, first of all is this manager going to outperform essentially is it a skilled, is this a skilled manager that can add value over time. And just to just to you know sort of preview this, we'll run through these questions and we'll we'll get back to them in a few minutes on a later slide and discuss how we have designed an approach that we think mitigates a lot of these uncertainties that it's released to active management within destinations. But just sort of setting the table here, you know these are, these are not the only three, but three key questions. You know, you know one will the manager outperform and then and then two and three are much more I would say behavioral. So if the manager does outperform, when and how will they outperform? So will the excess return profile be lumpy with let's say several quarters of a tremendous upside over a five year period, but then modest underperformance or even some larger drawdowns during the rest of the time still ending positive live over that five year period relative to the benchmark, but doing it in a more volatile way? Or will it be more consistent, you know, sort of you know as they say sometimes picking up nickels in front of the steamroller, but that's a much different outcome and much different behavioral profile or behavioral impact on investors. The other is, you know, inevitably active managers will have periods of underperformance. No active manager has ever just always outperformed and we know that. And so during those periods of underperformance, how long and how deep will that will those drawdowns be? You know how painful will they be both in magnitude, how far will the, you know the that drawdown fall, but also how long will it extend. And so as I said, we'll talk about our approach and how we believe that we have mitigated a lot of these uncertainties within destinations in a few minutes. But but you know just suffice it to say that all these questions take on even more urgency and create greater stress when there's a limited number of active managers that are being utilized. So you know if an if an investor in their portfolio, it just has you know a couple or a few active managers and they're having an outsized impact on the overall performance of the portfolio. Investors are just more likely to make poor decisions that are based on emotion rather than fact or rational thought and tend to have more of a short term orientation. And we know all those things don't lend themselves to successful long term outcomes. And so we think that you know we're very firm believers that a multi manager approach to active management is, is able to reduce the emotional stress, reduce and definitely reduce the negative behavioral impulses that many investors have when using active management with only a handful of active managers that are not diversified. And I think that, oh, sorry, I was just going to say, I think those are points that are particularly salient today, right, a tough August and September for risk assets, broadly speaking. And again the the the conflict in the Middle East what's happened in Israel and and again not to be dismissive of any of those awful events but just the idea that broadly diversified portfolios can help us help get our clients through these very, very difficult periods. And and so that you're still in the market and you can participate as things normalize and and and things start to move up and to the right again And that multi manager approach that diversification can be so, so powerful even during good times. But during periods of particular stress like we're going through right now, I think that approach really shines, shines through. Yeah for sure. And so you know this is quite interesting that this this slide the the research and the the graphs we're showing here are actually based on a study conducted by Vanguard on active management and and so this is a study of an outperforming active managers. So this is this whole what we're going to talk about here. All of these managers are what what are categorized as outperforming managers. So those that over a 10 year period have outperformed either their respective benchmark or their their peer group. And so even within a subset of outperforming managers we can look at the the top charts showing draw downs and the magnitude of draw downs and what it you know it's probably hard to decipher from from the graph itself. But essentially over 50% of outperforming active managers had a relative draw down during the any prior decade in which to underperform benchmark and peers by more than 20%. And so this is just not in absolute terms a a 20% down. This is relative to benchmark or peers underperforming by at least 20% and nearly a third of them underperformed benchmarking peers by over 30%. And so, you know, thinking about that and putting that in context and then maybe looking at the next the the bottom chart talks about the chart just shows the the duration of drawdowns. And so similarly if we're looking at a subset of outperforming active managers, the average manner had at least one period of relative drawdown and lasted over 2 years. And again, you know thinking about it even more starkly that nearly a third of them had or nearly half of them had a period of drawdown of more than five years. So thinking about both the magnitude and the duration there, it's easy to see how an approach in which investor doesn't have high conviction in an active manager through a lot of due diligence, deep research and and confidence in a a process that has been you know sort of forged in in fire and they they they only have a couple active managers in their portfolio. If you have one or two active managers even per asset class and you know one of them is experiencing A tremendous drawdown like this, it's very, it's very unlikely that you're going to hold on to that manager. You're just going to want to make the pain go away. You're going to swap out of manager A that's underperforming and swap in the manager B that's done great over the last three years. And generally the exactly the wrong time assuming that it's the you know, the underperforming manager is you know has all the attributes and characteristics of a long term outperforming manager. And so we just think that it's it's a very challenging to for most people from a behavioral standpoint and an emotional standpoint to build a portfolio of active managers that are very, very tight. We like, we like concentrated managers, but we don't think that having a concentrated portfolio of active managers is the best way to achieve successful outcomes over the long term in active management. And so we think that that's really one of the reasons that you see this behavioral gap show up in a lot of the research where the average investor return in pretty much every asset class over all time periods trails meaningfully the average investment return. So if if Manager ABC returned 10%, the average investor on a dollar weighted basis tends to have you know let's say a return of only 8%, so missing out on you know 2030% of that potential return it's because of buying and selling at exactly the the wrong times. And so you know when we're moving on to the next slide, this is this is kind of where we come back approach those three questions that I talked about a few slides ago. As far as as far as the behavioral challenges with a a limited number of active managers and sort of the the some of the uncertainties that exist within active, the use of active management and how we address that through our process and our approach with destinations. And so as far as you know being able to identify skilled active managers we we have high conviction that we're not going to bat 1000. You know no one's going to always pick outperforming managers. And and fortunately we we've done this long enough and have the experience and expertise to know when it's time to to terminate a a relationship with an active manager and we've done that you know recently with a with a couple of our sub advisors. And so that's always an important decision as well, not just the the hiring but the termination decision. But over time we think the expertise that we have individually and collectively within the Brinker team that the quantitative tools and insights that we're able to to utilize. And then the collaboration we have you know with Andrew and I have with the the broader Brinker due diligence team as well as that that deep and broad industry network that that we've been able to develop. All those things contribute along with the you know very robust process two conviction that we have that we're able to identify skilled active managers and incorporate them into client portfolios. And then the the following two questions were a little bit more behavioral or emotional in nature and and sort of how how do you deal with draw downs more or less. And I think what we've talked about we've hinted at it, we had the you know in our last webinar we talked about our multi manager implementation and sort of from a risk management standpoint. And we think it's it's very critical to implement portfolios in a way that allows you to utilize highly active managers that you know are going to have some periods of volatility along the way to a long term successful outcome. But by combining those managers together in a multi manager approach, you're able to balance the risk so that not any single manager is delivering too much of the return or risk profile and that you're able to benefit from you know the low correlations or that free lunch of diversification and have a more consistent return profile over time without giving up any of the return potential. So we think that's the really the the key to all this is the multi manager implementation and doing it in a very thoughtful way not just sort of arbitrarily combining managers together but what understanding the managers, understanding their characteristics, their risk profiles and how they interact and putting them together in a way that that as Tim said that the sum is greater than the the, the parts which I will probably be using two or three more times during during the webinar. Sorry Andrew go ahead. I was just going to add I think the the correlation of excess returns and how you make termination decisions. That is a good example of a recent which Brian will talk, we'll talk about later. But a recent change we made in the portfolios is within large cap growth is we didn't necessarily make a termination decision solely based on performance as Brian alluded to that often leads to really terrible outcomes. It's really that kind of constructing. We want to find managers that have return profiles that have low correlations with each other. And what we found is our two, our two large cap growth managers, their return profile or their excess return profile became highly correlated with each other. And we, we want to make sure that in our portfolios we consistently have managers that perform differently and in different types of market environments. And so again, there's a good a point to how we make termination decisions. It's we really try not to base it solely on just absolute performance or even relative performance. It's we really try to look at the portfolio as a whole to make sure again that the, the sum of the parts is better than each each individual piece. Yeah, yeah, sure. And and the next slide I believe gets into and lays out what's a pretty impressive track record in terms of manager selection. And you know one of the tenants of destinations. One of the underlying principles which obviously we believe in based on the narrative we've shared with you today is that you know active managers that create value exist can be identified and should be invested in and and I think the the next slide speaks to a pretty impressive track record of Brian and Andrew and and destinations doing just that over a pretty long period of time. So back back to you both. Yeah sure. And I think this is this is I guess you call it maybe a proof statement on on the ability to to identify skilled active managers through a a robust process and and you know really leaning on the expertise that that we've developed over time. And So what this slide shows is all the active sub advisors within the destinations funds. You know as of I guess the third end of the third end of the third quarter and so looking at the one, three and five year trailing returns of of all the sub advisors. So the blue bar is all of the sub advisors across all asset classes. The the darker Gray bar there is you know only equity sub advisors. The lighter Gray is fixed income sub advisors in the on the far right would be the, the lightest Gray is alternatives and and so you can really see that you know across all the sub advisors the blue bar where they're looking at 1, three or five year trailing returns anywhere between you know 80 and 140 basis points of annualized excess return relative to their respective benchmarks. And similarly, whether you're looking at equity or alternatives, same thing overall all time periods. Fixed income over the near term, the last last year has been a little bit trickier, but we're really not investing for one year. And so we think as you move out over the the you know three and five year returns where some of the some of the volatility gets washed out a bit, that's where you see the true value of active managers shining a little bit more. And so when you're looking at three and five year periods, you know whether you're looking at all the sub advisors or any of the sub asset classes, we've delivered our performance relative to respective benchmarks for those managers. And and you know you look at the light Gray bar we were talking earlier about some of the the diversifying asset classes and so alternatives. Again we think it's a a critical part from an asset portfolio from an asset allocation standpoint and we also think it's pretty fertile ground for us to identify active managers that can outperform over time. And I guess the the you know the final piece of it is this is magnitude of outperformance, but you know frequency or consistency of outperformance really are sort of the how many of our active managers are outperforming is also important. And so regardless of whether they're looking at 1, three or five year periods, you know roughly 60% of our sub advisors are outperforming which you know they say if you're if you're hitting 51% over time you'll do well we're we're hitting about 60%. So you know compounding that over time leads to both magnitude but also consistent outperformance from our active managers. Yeah, no, it's football season and and baseball playoffs. So, yeah, I know there you go and and this is obviously a really impressive, the data set proof statement around the ability of the team to identify and invest with managers that create value over time. And then to Andrew's earlier point, you not only knock on wood get this benefit, but by identifying and blending together complementary managers, there's risk mitigation and volatility mitigation as well. And and so again, you know this is very impressive in a vacuum, but when you think about the destinations portfolio construction process combining complementary managers creates other benefits for sure. So I'll go to the next slide and I think the next couple slides, I'm going to say it one more time really speak to the idea that the whole is worth more than the sum of the parts, the way the team identifies and blends together complementary managers. I promise that's the last time I will say that. So back back to you both. Yeah, sure. So the these two next two slides are really you know very much a a couple that that speaks to the same point. And so the first one we've we've talked about this before but I think it's important to to really think about that when you're at, when you're combining managers only because there is some commentary out there that by having you know too many active managers within a portfolio, you're diversifying away alpha, you're just owning the index blah blah, blah, you know whatever whatever sort of patronizing comment might be made. And it's it's really not true. We're, you know the the math is on this this slide, this slide or the theories on this slide that what you do is you diversify away a lot of risk but you don't diversify away any returns by combining managers together. And so this, this stylized example, you know, let's say all three managers have an excess return of 2%. Combine them together, the overall portfolio still has an excess return of 2%. But instead of having you know these higher risk levels, the overall portfolio is is much less risky and less risk implies the greater consistency return over time, less volatility, less likelihood that that clients get or you know even us as professional investors get shaken out at the wrong time. And then the next slide is is really a a real world example of this. So we looked at the small cap universe and we said OK well let's find let's find 3 managers that over a five year period outperformed by 2% per year. So the same 2% excess return we showed on the the prior theory slide and combine them together, this is this is just sort of naive, we didn't do any sort of risk based you know weighting. We just said an equal weighting among these three. And you can see that a multi manager blend that if you look at the the bottom left a multi manager blend just equal weighting these three managers. You have you know a higher excess return on an annualized basis than any of the three on a stand alone basis. You get a tremendous reduction in the tracking error of that combined portfolio. So the risk relative to the Russell 2000 benchmark in this case since these are small cap managers but tracking error is a measure of risk relative to a benchmark and information ratio is risk adjusted return measure that looks at excess return and tracking error. And so you you know it's not surprising that if you have higher return, lower risk you're going to have a better risk adjusted return but you know showing it nonetheless. And so then on the right it's kind of you know thinking about risk via numbers is sometimes hard and so that the chart on the right just showing that the blue dotted line is that multi manager portfolio and the three three other colored lines are the the return profile over time. So this is excess return relative to the Russell 2000 benchmark plotted for each of these over that over the last five years. And you can see that you know as you would expect the the multi manager portfolio, it gives you a smoother ride, you have, the drawdowns are less but you end up at the same place and that I think that's the key takeaways. You don't somehow by putting these managers together, diversify away all your return potential so that the blue dotted line of the multi manager portfolio is way below where all these other portfolios are. You capture all the return potential from each of these three but you do it in a a less risky way. And so you know I think that's going to be something that we continue to hammer home because I think there is the a false narrative out there sometimes that that combining active managers together just gets you too much. You get redundancy and you get clutter and it's it has you know, little benefit and that's just totally false. And I think what we've tried to show and what we have shown and we'll continue to talk about is the ability to capture return would while diversifying away risk And that's that's really the best of both worlds. Yeah. And and to tie it back to the earlier slides, the behavioral benefits of that, right, sort of smoothing out the return stream. I can't tell you how many advisors I've talked to the last couple, four weeks after again a tough August, tough September, now October, OK, but just an awful backdrop because of the geopolitical dynamic and clients are anxious and scared and and so again that diversification multi manager approach, you know you got to be in the game to win it to to be flip about it. And if clients get shook out, you know they're they're going to end up in a tough spot because they're going to miss with the market as we all know can give you over time because of time and and compounding. So I just think it's such a an important part of the narrative, OK. So obviously again as we move into year end, US equities are still up for the year ex US equities a little bit as well bonds have struggled and and and again or at least parts of the fixed income construct and again we've got this terrible geopolitical backdrop. So we wanted to end on sort of a even though we're long term investors more of a short term note and I'll leave it to to Brian and Andrew to talk about how the team is positioned the portfolios again as we move in to year end and and get ready to say hello to to 2024. So, so back to you both, sure, I'll I'll touch on maybe a little bit of positioning and then you know we'll also dive into some of the the recent sub advisor changes we've made And so. So, yeah, I mean, for sure there's a lot of, a lot of things going on geopolitically overseas with, you know, continuing, you know, war in Ukraine, also the recent conflict in Israel. And you know, on top of that we have AUS house without a speaker and there's a lot of, a lot of things going on, right. And so we did not necessarily foresee any of these things, but we did in our reallocation in July trim risk. So we took down our risk profile exposure and you know so far that's that's played out pretty well and a lot of that also has related to seasonality which is also kind of played out according to script where you know you you get into the the late summer and early fall months markets tend to equity markets and risk assets tend to sell off some. And so we've we've benefited on a relative basis by the risk reduction that we've that we implemented in July. And you know I think the other the other piece of it is that we've we've we have you know sort of exposed the portfolio a bit more to core fixed income which hasn't done as well. But alongside of that you know global credit or satellite fixed income and and alternatives which both have held up very well and in the choppiness that we've seen over the last several months. And so I think you know we're fairly comfortable with our positioning now we don't have a a clear crystal ball, it's a murky like everyone else's but you know I think it's it's likely that over you know in coming months we could we could see a a a return to a little bit more of a pro, pro risk posture with an increase in risk assets. But all that is sort of as the Fed says data dependent and we we do rely heavily on data. It's not there's no crystal ball and it's not just a finger in the air. And so we're we're you know we're watching very closely a lot of things but I think you know some of the things that have occurred under the hood and I Andrew I don't know if you want to talk about this some or or I can as well. But you know we've we've sent out several news flashes recently to to share the the information but a lot of times some of the subadvisor changes we make underneath or within the destinations funds can get overlooked sometimes. I so definitely want to take this opportunity just to to share a little bit of what we what we have done recently. Yeah, great. I mentioned one of the changes in large cap within the large cap equity space as we did add William Blair large cap growth and replacement of T Rowe Price growth stock. But T Rowe had been in the port in the destinations portfolios for a very long time. As I alluded to earlier, more recently have just have seen a return profile, maybe the change in the return profile a little bit more aggressively positioned, a little bit more correlation to one of our other growth managers, Columbia. And with the addition of William Blair was able to get a little bit more consistency from a return profile there a little bit more of a core growth mandate and within a very within a challenging space for active management over the last 5-10 years have been able to provide much more consistency in our performance and just in a much more lower correlation of excess returns to Columbia, our other existing manager. So again not we're not removing T Rowe just because performance has been been more a little bit challenged. It's a combination of multiple things, which is how we want to be aware of the overall positioning within large cap fund. And then tying back to some of the comments we made earlier about the active and passive, instead of active versus passive, we have increased our passive exposure within both the US equity space and international. Within the large cap, we added a passive mandate from some State Street Global Advisors for the rest of 2000 and they replaced an S&P 500 mandate with BlackRock. So not only did we replace BlackRock, but we also increased the exposure to passive within large cap to about 10%. And then within small cap and international, we've been, we have utilized ETFs to some extent within those allocations for a little bit of passive exposure. But we have added again State Street to both of those spaces for passive mandates and about 10% in both. So about 10% in a small midcap mandate within the small midcap exposure at about 10% of kind of broad international exposure within our international equity allocation. And so again we we do believe that there are spaces where passive makes makes sense and some allocation to that helps both with a kind of a a risk tracking our perspective, but also as we alluded to from a fee perspective and these more more efficient areas of the market, clearly passive is actually inexpensive. And so we've been able to bring down some of the expenses of the overall funds through this kind of increase in passive allocations. OK, Brian, any other comments before I close things out? No, we're turning it over to our, to our man Tim to close it out. All right. I appreciate the, the confidence and this may seem kind of silly, but I just realized that I introduced Andrew and Brian at the start of the webinar. I didn't introduce myself. So I'm Tim Holland. I'm CIO of Orion's outsourced Chief Investment Officer offering, but I joined Brinker 7 years ago as the firm's investment strategist. So I'm not only a Long live investor in Destinations, but I've been attached to the portfolios for seven years, affiliated with the portfolios for seven years as as well. So long history with Destinations as an investor and personally and professionally and a big big believer and the franchise the the power of a multi manager approach and big, big believers, a big big believer and and a ton of confidence and and trust in what Brian and Andrew have done and continue to do so. So I apologize for introducing myself at at the end of this but I I do hope you all found the content of value. We appreciate your time, your interest and and for those of you who have invested your clients in destinations, your confidence in in the in the portfolio set and again what the team has done and continues to do. We've already touched on these six bullet points. I'll I'll run through them quickly before really closing things out. But Right Destinations has been around north of 25 years, not a lot of portfolio solutions, multi manager or single manager have those kinds of track records. And you think about some of the things Destinations has had to have navigate right the early 2000s, the tech, media, telecom bubble burst in the awful events of 911. The Great Recession, the pandemic, everything in between. You know it's a structure and it's approach that works and and and works for a reason. I think Brian and Andrew did a great job articulating all the benefits of it. It's a dynamic approach to asset allocation. So it's not set it and forget it, but it's not a a day trading mindset either. You know Brian and the team are looking for those opportunities to tilt one way or another and they they've done just that. Obviously big believers in in active management and big believers in passive and and I think have arrived at a very thoughtful way to to combine active and passive and and think about active and passive in the right way deep deep due diligence process in terms of manager research and selection and and vetting and and again the idea that I guess I do get to use the phrase one more one more time right sort of multi manager approach You know where where the hole really is worth more than the sum of the parts can deliver. You know compelling risk adjusted returns smooth out that volatility. You know keep people where they need to be as investors which is most likely in their seats letting time and and and the market it's work work for them. And and again destinations is only a couple years away from a 30 year track record which I think is just awesome. So with that all said, my thanks to Andrew, my thanks to Brian, our thanks to all of you for taking the time to join the webinar today. Again we hope you found it a value. If you have any questions, please reach out to your sales contact or Brian or Andrew, my or myself. We'd be happy, would love to connect, and please keep a lookout for the next webinar in our series on on Destinations. That'll be coming to you soon and we hope you have a wonderful day and and take care. _1731972602526