Portfolio Investing Presentation I Montecito Capital Management https://www.mcapitalmgt.com Kip Lytel, CFA

1. CAPITAL
MARKETS
PRESENTATION
YPO FEB 9, 2023
Kip Lytel, CFA
Montecito Capital
Management

2. YPO AGENDA
TOPICS
BY INVITATION AT
MIRAMAR PRIV
ATE CLUB
1. Introduction
2. El-Erian: Three Trends Changing
Global Economy
3. What’s Driving the Markets
4. Looking Ahead (Don’t Fight the Fed
& Goldilocks Recession)
5. Multi-Asset Investment Approach
6. Benefits of Liquid Alternative
(“Liquid Alts”) Assets
7. Examples of Select Liquid Alts
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3. INTRODUCTION
o Speaker-Lecturer, Author & RIA Firm Founder
o Career: Hedge Funds, $2.3 Billion Institutional Asset Team & founder MCM
2004
o We are not middle of the road investors. We invest in almost every liquid
(tradeable) asset class available
o Wealth Manager advice also includes: 1) private investments, 2) collectables,
3) vetting & due diligence, and 4) gatekeeper
o “All Weather” Investment Approach with diversity to 11 asset classes to help
mitigates loss exposure and steady portfolio return profile, including: stocks,
preferred equities, bonds, convertibles, alternatives, currency, commodities,
precious metals (rare earth), REITs, farmland and hedge ETFs (loss buffer).
o Combination of these asset enable us to invest in higher risk
environments with superior risk controls.
o STAY INVESTED: We don’t advise “timing the market” but add risk and
growth exposure in accommodating and healthy economic environments
while reducing risk and growth during periods of expected headwinds
o If you missed the market’s 10 best days over the past 30 years, your
returns would have been cut in half.
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4. THREE TRENDS CHANGING
THE GLOBAL ECONOMY
Topic Two

5. THREE MAJOR TRENDS ARE
CHANGING THE GLOBAL ECONOMY
FIRST
• Shift from insufficient
demand to insufficient supply
• This first shift was driven by
the impact of the pandemic,
beginning with the entire
system shutting down
• Then, Russia’s invasion of
Ukraine, sanctions, labor and
geopolitical tensions
• Now, Near-shoring, or moving
production back home
SECOND
• End of limitless central
bank liquidity
• Central banks are
fundamentally changing
their approach
• Easy money, quantitative
easing and stimulus will be
less robust and less
effective
THIRD
• Growing fragility of financial
markets
• Expect more volatility in the
markets since the end of the
easy money era is here
• Markets have been trained
to expect easy money from
central bank – so expect a
perverse effect, “fragility”
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6. WHAT’S DRIVING THE MARKETS
Topic Three

7. What’s Driving the Markets
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Sample Footer Text
• Inflation slowed more than forecasted at both
the headline and core level
• Shelter, wage & import prices remained
sticky
Inflation
• Incremental inflation declines key indicator
• Fed is clear they don’t expect to cut rates ‘23
• Market has priced in Fed cut end ‘23
Fed Pivot
Talk
• China Reopening (black swan Taiwan?)
• Russia Sanctions & $60/Barrel Oil EU
China,
Russia

8. LOOKING AHEAD
DON’T FIGHT THE FED &
GOLDILOCKS' RECESSION
Topic Four

9. 2023-2024 TRENDS
• The good news: Global inflation has peaked in the fourth quarter of 2022
• The bad news: There will be a new normal inflation as wages, shelter and
import prices sticky, so expect higher inflation than the Fed’s 2% target
• The good & bad news: The stock market isn't worried about a recession
because we are already in a mild one without any material job losses
(“Goldilocks Recession”)
• Good News to Know?
• Don’t fight the Fed. When the Fed pauses, or is about to pause rate hikes,
invest more risk
• US Small-cap stocks (Symbol: IJR) have 1) beaten inflation in every decade
since 1930 and 2) outperformed exiting recessions
• Best US equity sectors for recession: consumer staples (XLP) & healthcare
(VHT)
• Best US equity sectors exiting a recession: consumer discretionary (XLY) &
information technology (VGT)
• Best Int’l equity: emerging markets (EEM) (-40% ‘22, China, higher growth,
USD) & Thailand (THD)
• Yield Bonanza: 1-yr CD is 4.6%, 1-yr Treasury 4.8%, Schwab $1M Money
Market 4.5%. Also, mid-term bond funds -13% ‘22, are set to appreciate ‘23
• REITs offer great yield and capital appreciation after -24% loss in 2022.
Attractive: Cohen Steers Pref Income (RNP, 7.2%) & Apartments (BRT, 4.6%)
• Liquid, tradeable alternative assets
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10. PORTFOLIO INVESTING:
WHY A MULTI-ASSET APPROACH?
Topic Five

11. MULTI-ASSET INVESTMENT APPROACH
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1. Portfolios that include non-traditional investing brings a
broader range of assets, sectors and strategies.
2. A multi-asset portfolio is designed to navigate potential
market shifts through tactical trades, tilts and factor
exposures.
1. Therefore, flexibility to respond to changing market conditions and seek
out areas of greater potential return while ability to avoid asset classes
at risk.
3. Access to some of the world’s leading investment
opportunities and money managers through a tradeable, open
architecture approach.
4. Superior risk-adjusted returns compared to the limited asset
options of traditional portfolios.
1. Hence, multi-asset investors can achieve more return with less risk in
the mid-term or long-term hold range.
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12. MULTI-ASSET
RISK RETURN
E F F I C I E N T F R O N T I E R
O F D I V E R S E A S S E T S
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13. WHY NON-TRADITIONAL ASSETS?
BENEFITS OF LIQUID ALTERNATIVE ASSETS
Topic Six

14. ALTERNATIVE ASSETS
FIRST - DEFINITION
• Alternative investments include a
variety of assets that don’t fall into
either the bond or long stock
categories.
• Put simply, a liquid alternative
(“Liquid Alts”) investment is a blend
of lucrative hedge type investments
in a broad range of strategies with
the daily liquidity of a mutual fund
or ETFs.
SECOND - BENEFITS
• Alternative investments typically
have a low correlation to more
traditional asset classes
• Therefore, Liquid Alts provide an
opportunity for portfolio
diversification, reducing overall risk
exposure across investments
• This low correlation to traditional
investments potentially reduce
overall portfolio risk.
• With ability to be more flexible and
invest in a wider opportunity set,
Liquid Alts can enhance return.
THIRD - TYPES OF “LIQUID ALTS”
• Macro Funds
• Managed Futures (Commodities)
• Long-short
• Option hedge
• Event-driven
• Equity market neutral funds
• Multi-strategy
• Systematic trend
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15. ALTERNATIVES
CAN INCREASE
RISK-ADJUSTED
RETURNS
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16. ADD +20% ALTERNATIVES TO TRADITIONAL PORTFOLIO
Risk Reduced for 5, 10, & 20-year timeframes
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Liquid Alts Diversification.
Alternative investments typically
have low correlations to
traditional asset classes. As such,
their inclusion in an investment
portfolio tends to result in lower
overall volatility risk (Graph 2).

17. ADD +20%
ALTERNATIVES TO
TRADITIONAL
PORTFOLIO
I N C R E A S E D R E T U R N S
F O R B O T H 1 0 - & 2 O - Y R
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18. EXAMPLES OF OUR “LIQUID ALTS”
Final: Topic Seven

19. CATALYST (MBXIX)
MILLBURN FUND
SYSTEMATIC MULTI-STRATEGY
THE GLOBAL MACRO FUND
TRADES A DIVERSE PORTFOLIO
OF GLOBAL EQUITY, CURRENCY,
AND INTEREST RATE
INSTRUMENTS, AS WELL AS
FUTURES CONTRACTS ON
COMMODITIES IN THE ENERGY,
METAL AND AGRICULTURAL
SECTORS.
OBJECTIVE: LIMIT DRAWDOWNS
AND EXCEED LONG-ONLY
EQUITY INVESTMENTS.
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20. STANDPOINT
FUND (BLNDX)
MULTI-ASSET STRATEGY
STANDPOINT SEEKS
POSITIVE ABSOLUTE
RETURNS EVEN IN HOSTILE
MARKET CONDITIONS.
POSITIVE RETURN IN 2021
AND 2022, PERIODS IN
TIME WHEN EQUITIES
WERE NEGATIVE.
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21. LOSS BUFFER ETF - 10% LOSS BUFFER HEDGE
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22. THANK YOU / Q&A
Sample Footer Text
Montecito Capital Management
Kip Lytel, CFA
kjl@mcapitalmgt.com
www.mcapitalmgt.com
Direct mobile: (805) 208-5800
Please feel free to contact me with questions.
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