Systematic Investing, Mission, and the Discipline of Expectations with Eduardo Repetto

"You cannot have liquidity from things that cannot provide liquidity. When there is a mismatch between expectations and what the products do, you have disappointment from the point of view of the investor. That's sad."

— Eduardo Repetto

The history of investing has been a slow march from artisanal to systematic. Markowitz gave us the framework. Fama and French gave us the factors. What Eduardo Repetto has spent his career building is what happens when those ideas get implemented at scale — broadly diversified, daily-managed, transparent, and priced to respect the investor. In the industry we sometimes call it "core and bore." The "bore" is the point, no flash for its own sake.

We talk about ownership, too. Avantis sits inside American Century, whose controlling shareholder is the Stowers Institute for Medical Research — an endowment built from the donated shares of a cancer-survivor founder, funding fundamental research that grant cycles rarely sustain. Eduardo describes it as taking one for society. And we get into discipline: liquid wrappers around illiquid assets, thematic ETFs that turn out to hold the Magnificent Seven in disguise, and the behavioral pull to bail out in a drawdown.

Eduardo is unhurried, undramatic, and uninterested in selling you on a person. He believes in the process, not in himself.

Key Takeaways

1. Systematization is not a compromise on craft. It is what lets craft scale.

Build a car like an artist and you get one car, expensively, with the quality of the day it was made. Systematize the process and you get reliability, throughput, and a cost structure that changes what's possible. Portfolio management works the same way. Without a framework, you need someone extraordinary analyzing securities one at a time — a proposition that is both expensive and inefficient. With a framework, you can evaluate far more securities, far more often, and manage the portfolio daily. The cost of security analysis collapses. What you get back is broader diversification and lower fees on the same underlying insight. That's not a lesser version of active management. That's the assembly line arriving in finance.

2. Anomalies are only anomalies if you treat version 1.0 as gospel.

Markowitz established that expected return trades off against risk. The CAPM linked expected returns to a single variable. Then researchers with newly available price and fundamental data started finding results the model didn't predict — low price-to-earnings did better than expected, low price-to-book did better than expected. The honest reading is not that markets misbehaved; it's that the model was incomplete. Fama and French built out the multi-factor framework that explains much of the cross-sectional variation, and theoretical work from Merton's ICAPM to the APT gave reasons why those variables should carry expected returns at all. The lesson is about epistemics as much as finance: a framework is a starting place that gets better over time, not a settled account.

3. A liquidity mismatch is mechanics, not misfortune.

Put ninety-nine percent illiquid assets in a vehicle promising daily liquidity, and when two percent of shareholders redeem, there is no clever answer. You gate. That outcome is not bad luck or a bad tape — it is arithmetic that was visible on day one. The same discipline applies to the thematic fund with "the future of" in its name whose holdings turn out to be the largest companies in the world at roughly a hundred basis points. The question that filters both is the same one: why should this persist? A simulation that looks good tells you what happened, not what will keep happening. Absent a reason grounded in something that isn't time-dependent, you're buying a back-test.

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About Eduardo Repetto

Eduardo Repetto is Chief Investment Officer of Avantis Investors, the systematic investment firm he launched in September 2019 and which now manages more than $125 billion across roughly forty ETFs, collective investment trusts, and separate accounts in the US, Europe, Australia, and Canada. Before Avantis, he spent seventeen years at Dimensional Fund Advisors, arriving as employee 107 and departing as Co-CEO and Co-CIO, where he worked alongside Eugene Fama and Kenneth French and built strategies across research, portfolio management, trading, and distribution in markets around the world. He holds a Ph.D. in Aeronautics from Caltech, a Master's from Brown, and a degree from the University of Buenos Aires. He grew up in Argentina.

Timestamps

• 00:00 — Introduction

• 01:00 — Growing up in Argentina, engineering, and an Apple IIc with 2K of memory

• 03:00 — Models versus reality: what STEM training actually gives you

• 06:00 — Joining DFA as employee 107 and learning the full stack of asset management

• 09:00 — Cross-border markets: why investors in the US, Germany, and France think differently

• 11:00 — Mission-aligned ownership: American Century and the Stowers Institute

• 13:00 — Purpose and engineering: why an AUM business is a good match for medical research

• 15:00 — Launching Avantis in September 2019, four months before the pandemic

• 17:00 — Passive, active, and the middle ground

• 18:00 — Markowitz, the CAPM, and how the factor model got built

• 22:00 — Building a car like an artist versus building one on an assembly line

• 25:00 — The ETF is a box: what belongs in it and what doesn't

• 27:00 — Illiquid assets, daily liquidity, and why gates are arithmetic

• 28:00 — Back-test engineering and the marketing temptation

• 30:00 — Markets in 2026 and the worst thing investors do in a drawdown

• 31:00 — Traffic on the way to the airport: building volatility into the journey

• 33:00 — The plane and the bicycle

• 34:00 — The Pivot Questions

Full Transcript

Jonathan Treussard: Hi, I'm Jonathan Treussard, and welcome to Treussard Talks, where we talk about the mechanics of investing, the psychology of investing, and what it means to manage your wealth with purpose — because understanding your wealth shouldn't be as complex as building it. Welcome to today's show.

Eduardo Repetto, I'm so excited to be talking to you today.

Eduardo Repetto: It is a pleasure. Thank you for having me.

Jonathan Treussard: Before we get into the substance of this conversation, let me set the stage with a brief bio. You are the Chief Investment Officer of Avantis, a firm that started in 2019 and has recently surpassed a hundred billion dollars. You direct the research, the design, and the implementation of the investment strategies. Before that, you were Co-CEO and Co-CIO at Dimensional Fund Advisors. Your education is truly spectacular: a Ph.D. in Aeronautics from Caltech, a Master of Science from Brown, and a diploma from the University of Buenos Aires.

You grew up in Argentina, and I'd love to hear about your origin story — how you grew up, and how your family and your environment informed the way you think about things.

Eduardo Repetto: Yes, I grew up in Argentina. I have a sister, two parents — everyone is still around, so that's great. Not young: my father is turning ninety-five at the end of the month.

Jonathan Treussard: Wow, that's amazing.

Eduardo Repetto: Yeah. I studied engineering, working on structures and numerical methods to solve structural problems. And I got into doing things with computers very early on. I remember we had an Apple IIc very early — it was amazing. The whole memory, I think, was 2K or something like that. Nothing compared to what we have today, but it was quite interesting to be able to use computers to solve things that early.

I tried to create something like Google Maps at the time. I went to the Minister of Transportation in Buenos Aires to propose it, but it didn't go anywhere. I should have pursued it better.

Then I worked in research at a company in Buenos Aires, alongside two great people. One of them is responsible for me going into finance — he was a mathematician, a Ph.D. in mathematics from Caltech, and then he went to Wall Street. After my engineering degree I worked a little in Buenos Aires and a little in the United States, and then I went to Brown for a Master's. The idea was to do a Ph.D., but I did the Master's, and it happened to be in mechanical engineering. The topics were basically the same: working on materials, building theoretical models for materials, trying to understand how they work, and then solving them computationally for particular classes of materials. I finished at Caltech, here in California — better weather. The problems were the same. Working on materials, trying to understand how certain materials behave, putting that in a computer model, and solving it.

Jonathan Treussard: This is interesting, right? Because in a lot of ways, the work you did from the very beginning had to do with building models versus confronting reality. This is not pure theoretical physics. This is applied physics, and therefore you have to deal with the world as it is.

Eduardo Repetto: I don't want to claim that I'm a physicist — I'm an engineer. But yes, it's a strange boundary, because you're trying to understand how materials behave under particular conditions and solve for that numerically.

And that's exactly why I'm telling you these details, because I get tons of questions from kids now saying, "I'm an engineer, I want to do that. Can I?" And the answer is you can, because a lot of what you learn in STEM — no matter which branch of STEM — can be applied. The logic, the processes, the thinking, and the tools you have can be applied to other things.

Today I work in finance. I got my Ph.D., I did a little research at Caltech, but I really didn't want to be a professor. And one of the mathematicians I mentioned — Luis, who has just retired — said, "Try finance." And I said, "Why not?" I asked my wife; she said yes. I got a job in finance, and it happened to be DFA, which was in California. I went to interview in New York, but my wife was from California. It would have been tough to move her to New York — easy to take a job here in LA.

So I started working in finance, and a lot of the learning you have from doing a Ph.D. or taking courses in STEM can be applied to other topics. Today I apply the same logic to investing, but I also apply it to marketing and to other things. You always develop a model in your brain for how things work, because reality is too complex. Even if you don't think you're doing it, you are creating a model in your brain of how things work, and then you try to work with that model.

For example, I play squash. Depending on who I play, I develop a model of how I play against that person in order to try to score more points. So whether you're working in marketing, in sales, in managing a company, or in investing, you're developing a model and then solving it in different ways — logical ways, process ways, computational ways. That's basically the training you get in any STEM field. It gives you a similar way of addressing problems, and it has been great.

Jonathan Treussard: Yeah, I think that makes a lot of sense. That's the way I think about it, too. I got into economics because I showed up at UCLA and took a class with a professor who basically looked at me and said, "You look confused. Do you want to be less confused?" And a huge amount of it is developing mental frameworks, mental models, and then saying, okay, I think this is how this works. I'm not convinced that I know, but let's give it a shot — and then you can process reality. You can adjust your model. That's the scientific pursuit, which has the advantage of being very clear about what you don't know, but chipping away at that confusion along the way, if you're lucky.

So you're at Caltech, which for those not totally familiar is in Pasadena. You get a job at DFA, which at the time is in Santa Monica. Is that correct? So it's across town. It's not an ideal town to cross, but you're doing okay — at least you're not moving to New York. What happens when you get to DFA?

Eduardo Repetto: I started in the research group. I was very lucky to be hired to work with Ken French and Gene Fama — amazing people, great knowledge. I learned a lot, and I was at DFA at the right time. It was a small company. I was employee 107.

So I was able to work on many different things with the same logic I'd applied before. I was working on new products, new investments. When you're developing a new investment solution — a new product, a new fund, a separate account at the time, a strategy — you have to work not only on the theoretical and empirical part of the strategy. You also have to work on the implementation. And implementation is the portfolio management aspects, the trading aspects, but also the accounting, the taxation, the marketing, the sales, the legal.

When you have a small company, you're able to work in many, many different fields, and learn from all of it, and learn from many different people. You learn how clients think from the people who interact with them. Working with someone like Dan Wheeler was amazing. Or David Schneider on the institutional side. Or portfolio management. You're able to learn from a lot of different people, and then that knowledge is great because you think about how everything works together — again, a model — in order to put together a full solution with all the different aspects. And I was able to do that globally: Canada, Europe, Australia, many other countries. Every country has a different legal framework, a different structural framework, different things. That was amazing knowledge to be able to get when I was younger.

Jonathan Treussard: It's a great education. And for those who don't know as much about DFA as you and I do, this is really the first attempt, the first revolution, at bringing some of that so-called modern finance knowledge — things like factor investing — into the investment diet of a vast swath of investors, whether institutional or retail.

I love what you just said about understanding across cultures and across jurisdictions. People think about markets very differently in a place like the US from, say, Germany or Australia — or, obviously, my native France. Some people are very engineering-centric. Some people are very hero-centric. We in the US love to think about Warren Buffett, that sort of thing. But you're learning everything: the investment side of things, which for me and I suspect for you can be completely disassociated from the scientific side of things, plus operations, client servicing, marketing, and so on.

And then at some point, in 2019, you decide to launch Avantis. Just to set the stage: DFA is an incredible success story — taking these basic pieces of knowledge we acquired in roughly the last fifty years of scientific finance and building them into a firm that manages hundreds of billions of dollars.

Eduardo Repetto: Look, I left DFA in 2017. My last day was September 2017, though I think I resigned before that. I think we had about $550 billion at the time. When I started, in 2000, it was $25 billion — and then $550 billion.

I met a lot of people there. I learned a lot, and they were great. But in 2017 I thought, okay, I've done enough here. It's time to stop. We had moved to Texas at the time, and my wife needed to come back to California — her parents aren't young and they live here. So I was going back and forth, and there were other issues, and I said it's time for me to go. Then I did nothing for a couple of years.

In September 2019, we brought the first Avantis products to market. Avantis is not a firm per se. Avantis is part of a bigger company that runs all of our operations — a great company, American Century. It's a private company, but the controlling shareholder is an institute for medical research. They do research on cancer, Alzheimer's, and so on. The founder donated all his shares to fund the Stowers Institute for Medical Research. So it's an endowment funded from the profits of American Century.

Jonathan Treussard: It felt mission-aligned, is what you're saying. Touch on that for a second, because I think this is an incredible story. The ownership decision that was made a long time ago has allowed something like $2 billion — is that right? It's just extraordinary.

Eduardo Repetto: Yeah. James Stowers — I didn't meet him, but I met his wife, Virginia, who has passed. Both of them were cancer survivors. They built a big company. They needed to decide what to do with that amount of money. And they took one for society, man. They donated their shares to endow the Stowers Institute for Medical Research in order to promote fundamental research on cancer.

When you do research at an institute, a lot of the time you have to spend writing proposals that then go out to see whether you get the grant or you don't. So it's difficult to have long-term planning. This allows the institute to have very good equipment, great researchers, and very good long-term planning, because they're endowed with a portion of the profits coming from American Century. It's amazing what this guy did.

American Century, our parent company, is a private company. It provides a good service to society, and the Institute has developed some drugs that are commercialized and in the market — some great discoveries to solve certain genetic diseases. It's quite impressive. I went there. I spoke with the researchers. They're doing amazing things, but it goes a little bit over my head.

Jonathan Treussard: That's okay. I think it's helpful to know our area of expertise. But the reason that story resonates with me as much as it does is, first, exactly the way you described it: taking one for society. I think it's leading with purpose. You get to a place of wealth where, realistically, you have access to more resources than most humans on the planet. And at that point it becomes about, well, what's my place in all of this? How do I derive purpose? And this happens to be incredibly purpose-driven.

As well as incredible engineering. And what I mean by that is not the engineering around the tax implications and all of that. What I mean is: we have a societal issue, which is that we need to fund medical research. Medical research benefits from stability of funding. And sure, markets have ups and downs, but an AUM business is a pretty stable source of revenue. So it's a perfect match in a lot of ways.

[Thanks for listening. I'm Jonathan Treussard, founder of Treussard Capital Management. I hope you're enjoying this episode. If you'd like to start receiving my free newsletter, Wealth, Empowered, or if you'd like to learn more about me and Treussard Capital Management, go to treussard.com. That's T-R-E-U-S-S-A-R-D dot com. Thanks, and enjoy the rest of the episode.]

Eduardo Repetto: I met the researchers. They're amazing people. I cannot judge the research — let me be clear, because I don't know much about it. But I can judge the tools they use, the algorithms. I've asked questions like, how do you do this now that we have new technologies? The answers are very interesting. Again, I'm not judging the research, but they have people in the National Academy of Sciences. Very high-level people. It's impressive. So I'm glad to be able to help. And with Carla, my wife, we donate money to them on our own side, because it's a good mission.

So, we were speaking about starting Avantis in September 2019. The mission was to bring more cutting-edge solutions at very good and attractive prices, like ETFs. We went to market at the end of September 2019 with five ETFs. We didn't know the pandemic was coming four or six months later.

And it has been good. Today we have more than $125 billion under management and around forty ETFs. We have a big lineup of equity and fixed income ETFs in the United States, even balanced strategies in ETFs, but we also have some funds. We have collective investment trusts for target-date. We manage separate accounts in the US. We have six ETFs in Europe, trading in London and in Frankfurt. We have three in Australia. And the latest thing, a month ago, is a strategic alliance in Canada with CIBC — one of the biggest banks in Canada, and in the world — where we've already brought eight ETFs to market for Canadian investors. It has been great. In less than a month, they've grown extremely nicely.

So things are good. And the part that makes me feel good about things being good is that people find what we do useful to them. They don't give us money because of our pretty face. They give us money because they think we provide a good service at a good fee. That's something we always look at: we need to provide a good service at a good fee. So it's a good deal for them.

Jonathan Treussard: That's really important. Anybody who's accumulated some version of $125 billion in some version of six years is clearly successful. But it goes back to your background and the way you think about the mission of the firm, which is what you just said: good value. And there's a scientific component to that, and an operational component, and the value.

The historic dichotomy, when you think about value versus fees, has often been passive versus active. Passive is cheap and simple; active is expensive and complex. Then you have to ask yourself the real question, which is: can I actually draw a straight line from expensive to valuable? Which is not always the case.

And somewhere on this journey, this concept of factor investing comes along, and it allows us to get past passive-good, active-bad. So how do you think about that evolution, and the introduction of that middle ground where you don't have to go pure market-cap passive to deliver value for fees?

Eduardo Repetto: So look, all this started a long time back. Early on, the concept of a portfolio didn't exist — before Markowitz. Markowitz has the famous insight that it's not just about expected return; there's a trade-off between expected return and risk.

Jonathan Treussard: This is 1952, right? Roughly when the original paper comes out.

Eduardo Repetto: Yeah. And people may have done research before that — remember, there was less data and so on. So let's just start there. I'm not trying to take credit away from anyone who may have done research earlier. But he put a framework around risk and return, and from there the CAPM came soon after.

And what is the CAPM? It's a model that links expected returns to a single variable — in this case, volatility. So then people started developing models to decide which companies have higher expected returns. And no model is perfect. So people discovered over time that the CAPM has limitations. How did they discover that? By going and analyzing empirical data that by then was becoming available. People were storing securities prices, dividends, and fundamental data, so you could analyze whether the model works like reality or whether there are gaps. And people said, well, there are gaps.

They found that securities with a low price-to-earnings ratio did better than the model expected. Or securities — I think in '81 — with a low price-to-book did better. They were finding things that were not consistent. The observations were not consistent with the CAPM.

So people started saying, maybe we need more than one factor, more than one variable that links reality to the theoretical framework of why securities have different expected returns. And you have Ken French and Gene Fama putting together the multi-factor model that explains quite a lot of the cross-sectional variability — which securities do better than others. From there you get the Morningstar boxes, which are related to that, because you have large, medium, and small; growth, blend, and value.

And then you have theoretical models like the Intertemporal Capital Asset Pricing Model from Bob Merton, or the APT, justifying why these should exist. So there has been a lot of theoretical and empirical framework. Some models, like the three-factor model, are more empirical; others are more theoretical. And you can link them in some way by saying there have to be variables that have a relationship with expected returns. The moment you have that, you have a framework. You have a framework to create portfolios, and that framework can become better and better over time. But you have a framework.

Jonathan Treussard: I think that's helpful to repeat for emphasis, because this is truly critical. We go from a pre-knowledge world to a framework-based world with Harry Markowitz, who says: here's one way to think about where so-called returns come from. This concept of a return driver is risk. And that gets you into the modern scientific era.

Now, along the way, that becomes some version of gospel, and it gets enshrined in certain ways of thinking about markets. So then, when people start discovering what become other return drivers in a statistical sense — and you're talking, to be very clear, about the cross-section of returns, which is very different from the time series of returns. This is: at any given point in time, let's pretend we have a thousand stocks kicking around. We have more than a thousand stocks, but let's just say. Some of them are more likely than others to do well over the next increment of time. Can we say anything about their statistical odds?

But because it's a new way of thinking, because it's a departure, people call whatever you come up with anomalies, because they don't fit the original framework. Well, they're not anomalies. They're only anomalies if you're wedded to version 1.0 being the gold standard, as opposed to a starting place. So I like to call them return drivers. I think that's descriptive. People like to describe them as factors. It's things like, as you said, value; it's things like quality and carry and momentum. Those are probably the four big ones, though there are many more.

And you're saying that, given that these are scientifically driven, they lend themselves to mass application. Is that the way to think about it?

Eduardo Repetto: Yeah. Basically the way I think about it is: imagine you're doing everything without the framework. You're doing everything by hand. Imagine making a car. You're making a car like an artist. You go and put this nail here and a screw there, and you put this part over there — just like an artist.

If you systematize the process, you have someone who is the perfect machine, or the perfect person, to put the screws there, and the perfect person to put the tire there. So you can create a systematized process that is way more efficient and more reliable in delivering the outcome.

If you think about portfolio management: if you don't have a framework, you have someone amazing doing analysis stock by stock to decide "I buy this, not that." But that's a very expensive proposition, a very inefficient proposition. If you can systematize that process, you can analyze more securities on a more frequent basis, daily, and you can deliver portfolios that have value added, because you are doing the security analysis in some way. But you're delivering that value added with lower costs and higher diversification, managed on a daily basis, because the cost of security analysis goes down dramatically.

That's what has been happening, and it's still happening, and it will continue to happen. That's progress at the end of the day. And we are on that bandwagon. I don't want to claim we're the only ones, but we're on that bandwagon. We're saying: how can we create portfolios that have value added, broadly diversified, managed on a daily basis, at a very low expense ratio? Because if we can do that, that's something important to the investor. So that's what we try to deliver.

Jonathan Treussard: That makes a lot of sense to me. As you know, I was a partner at Research Affiliates, and our mission statement ended with the words "for the benefit of investors." I think you share that DNA — this concept that we're not just doing this to entertain ourselves or enrich ourselves. We're doing this for the benefit of investors.

That's, in my estimation, what Avantis is trying to do: building high-capacity, transparent, liquid, reasonably priced strategies. The cute sentence I've heard around the industry for that is "core and bore." It's stuff you can hold in the center of your allocation, and it's boring, but it's good boring. I think there's value in that.

But high-capacity, transparent, liquid, and inexpensive isn't what everybody else wants all the time. Sometimes people aren't quite as mission-driven, and they use the same vehicles. An ETF is a box. You can put a lot of things in a box. It happens to be a box you trade, in exchange for a fee. But you can put things in it that are less boring — people pursue excitement — less liquid, pursuing things like private assets in public vehicles. How do you think about all that? How are those businesses different? How should investor expectations be adjusted? Is there a place where you say, I think you're abusing the box here?

Eduardo Repetto: I'm always thinking that investors should understand what they're buying. Our job is for them to understand what they're doing, what they're buying, so they can use the products. If you buy something and you don't know what's going on, you may misuse it. And if you misuse it, you may be lucky, or you may be disappointed. So I prefer people knowing what they're buying, and being as transparent as possible. For example, we disclose all the holdings of our ETFs on a daily basis. We want people to know what they have.

So when you buy something whose logic you can't understand — where it depends on whatever ideas some person has on any particular day, and they may have reasons, they may be bad reasons, who knows — or if you have something pursuing a premium and you ask, why will this provide a premium or excess returns? Why? What's the logic behind that? And then you can't find the logic — even if you have simulated data saying it's great, that doesn't tell you it will persist in the future. There has to be a reason why something should persist in the future.

And for example, you're speaking about less liquid assets. If you put less liquid assets in a portfolio that provides daily liquidity, there may be a mismatch. In the extreme, you put in ninety-nine percent illiquid assets and one percent liquid assets, and two percent of the shareholders redeem. How do you do that redemption? You can't. You have to put up gates. So now we have funds that put up gates.

As long as people know what they're facing, and they don't have the wrong expectations, it may be the right solution. But it's important that people have the right expectations. You cannot have liquidity from things that cannot provide liquidity. When there is a mismatch between expectations and what the products do, you have a little bit of disappointment from the point of view of the investor. That's sad, you know?

Jonathan Treussard: It is sad. As you said, people need to have the right expectations, but there is a degree of self-delusion, of trying to suspend disbelief. If you have a highly illiquid asset inside a liquid box, and it happens that two percent of the people show up and ask for their money back, the engineer in us says: well, what did you think was going to happen? It's just mechanics at this point. So I think forcing expectations to be well managed is really helpful.

The other thing, as you said, is the back-test quality — selling past performance, which truly is a sin, intellectual and otherwise. My favorites are the pure marketing strategies. Often they have "the future of" in the title. It's thematic investing: the future of robotics, the future of whatever. And then you look at the holdings and it's the Magnificent Seven. And of course the last handful of years looks really good. Now, it begs the question: if these are the top five or six or seven companies in the world, why are you paying close to one percent for the benefit of holding them? It's unfortunately an exercise in marketing, and an exercise in back-test engineering, in a lot of ways, in my view.

Eduardo Repetto: Yeah, look, you have to be careful. The main question is: why will this persist? Because when you invest today, you're thinking about why it will persist in the future.

Some people believe in the person. In other cases, people believe in the ideas and the process. In our case, the person is less relevant. The ideas and the process are more relevant. And I think that makes the stronger case, because if you believe too much in the person, you're exposed to whatever sentiment that person may have on a particular day, or whatever brightness they may have on a particular day.

So we rely more on the process, on the ideas, on the theoretical and empirical evidence. They should persist in the future because they're based on things that are not time-dependent, in some sense. It should work now, and in the future, and it already worked very well in the past. So that makes us feel good.

Jonathan Treussard: You just talked about this concept of time-independent knowledge — things that have worked, that probably have a reason to work now, and probably have a reason to work in the future. I'm going to threaten a very time-dependent question. Markets in 2026 have been interesting. And of course, they've been interesting after markets being interesting in '25. When you think about markets today as it relates to your framework, your mental model — how do you think about the environment, whether it's valuations, or regimes, or things like inflation and rates? And how do you think about the top mistakes investors make when they're facing the kind of exciting environment we're facing?

Eduardo Repetto: Look, we have a chart — whoever wants it can probably get it on our website — that we put together every December 31st, a couple of hours after the market closes. It shows the performance of the S&P 500 alongside a lot of the news that happened throughout the year.

Last year the market went up. But in between, during the year, you had some big drawdowns. Big ones. And that shows you the animal you're dealing with when you're investing in the market. You have all this news coming, and markets going down, and you feel, oh my God, what do I do? You should know beforehand that that's the animal we're dealing with.

If I have to go from my house to the airport, I know I may hit traffic, more or less depending on the time of day. I know there are going to be traffic lights. So I build that expectation into my travel. When you're investing in the market, it's good to build that expectation of volatility, of uncertainty, into your portfolio allocation. This part of the portfolio should grow a lot over time, but it's going to have movements.

You take planes despite the turbulence you face once in a while. Why? Because going by train is really not the best option if you want to go from here to New York. Same as the market: you want to grow your assets, so you deal with the volatility, because that's the only way. If each time the market goes down you bail and sell and say, I'm going to buy some money market funds — probably that portfolio isn't right for you, and you're probably making the wrong decisions. And all of us have seen people do that. There's a term for that, flight to quality, in terms of stress. That's one of the worst things people can do, in my opinion. Saying, oh no, I'm going to go out now and come back when the market is better off — but what does that mean?

Jonathan Treussard: I think that's right. It's helpful to know what you're trying to accomplish. And if what you're trying to accomplish is growth over long horizons, then certainly over the last hundred and fifty years or so — but I think this is the story of humanity — being part of the economic system, contributing to something that looks like capitalism, has been the right answer. But it's not for the faint of heart.

And I like your analogy. You and I probably get on an airplane without thinking too much about it. In fact, it makes our lives richer. I get to see my mother, who lives in Paris, by getting on a plane. It fundamentally makes my life better, despite the turbulence and the potential delays and the traffic on the way to the airport and all of that. So far, every time I've left my home to go see my mother, I've actually gotten to Paris.

Eduardo Repetto: That's a fact. I can see that you're here.

Jonathan Treussard: Correct. But I guess that's the point. For some other people, the thought is terrifying. And then it's: know yourself. Find joy in the local pursuits, the things you can do on a bicycle or in a car or whatever. And I think it's the same with investing. Can you get on a plane, or do you need to travel by bicycle? It's just going to have different implications.

So, look — we've talked about my three favorite topics: the mechanics of investing, the psychology of investing, and the purpose of investing. And certainly the purpose of life, including some of the philanthropy conversation about medical research and so forth. This has been a really great conversation.

I've mentioned repeatedly that I'm French. On the way out, I ask my guests a series of questions that I inherited from French TV — a cultural TV show I watched as a kid, hosted by Bernard Pivot. He would ask every one of his guests — authors and artists and playwrights, very French — a series of questions. And that series of questions was adapted for American television by James Lipton for Inside the Actors Studio. So these are not my questions. I think they're fabulous questions. I'd like to ask them of you, and because they're inherently a little philosophical, I want you to know that you can answer them as literally or as metaphysically as you see fit. Are you ready?

Eduardo Repetto: Okay, go for it.

Jonathan Treussard: What is your favorite word?

Eduardo Repetto: Might.

Jonathan Treussard: Might. What is your least favorite word?

Eduardo Repetto: "You can't." Ah, that's two words.

Jonathan Treussard: That's okay.

Eduardo Repetto: Can't.

Jonathan Treussard: I get the sentiment. What is your favorite drug?

Eduardo Repetto: I don't think I have one. Advil, when I have a headache or something like that. But no. Maybe a glass of wine, if you think that's a drug. I don't know.

Jonathan Treussard: I'll take it. Again, you're allowed literal answers or metaphysical ones. What sound or noise do you love?

Eduardo Repetto: I like music.

Jonathan Treussard: What sound or noise do you hate?

Eduardo Repetto: Noises inside my car. I have an electric car and I love it, because when cars make a lot of noise it just distracts me. I don't like it.

Jonathan Treussard: What is your favorite curse word?

Eduardo Repetto: I will not say.

Jonathan Treussard: Who would you like to see on a new banknote?

Eduardo Repetto: Some astronaut, or some Nobel Prize winner in physics. In physics.

Jonathan Treussard: What profession, other than your own, would you never, ever want to attempt?

Eduardo Repetto: Well, I cannot be a singer. I like music, but if I start singing, everyone runs away.

Jonathan Treussard: Maybe you want to attempt it. People around you may not want you to attempt it.

Eduardo Repetto: I care too much about everyone. I cannot do that.

Jonathan Treussard: If you were reincarnated as a plant or as an animal, what would it be?

Eduardo Repetto: A plant or an animal. I'd like to be a tree. I think a tree provides a lot of services, from shade to processing the air. I like a tree.

Jonathan Treussard: Okay, last question. Are you ready? If Heaven exists, what would you like to hear God say when you get to the pearly gates?

Eduardo Repetto: "You did a good job."

Jonathan Treussard: Well, Eduardo Repetto, you really did do a great job talking to us today. Thank you so much.

Dolores: This podcast is for entertainment and education only. Nothing here is financial advice. Treussard Capital Management is a registered investment advisor. Please visit our website, www.treussard.com, for additional information and disclaimers.

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Disclaimer

The content of "Treussard Talks" is for informational and educational purposes only and should not be considered financial advice. The views expressed are those of the host and guests and do not necessarily reflect the opinions of Treussard Capital Management or its affiliates. Consult your own financial advisor before making any investment decisions. For full disclosures, visit treussard.com.