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Frequently Asked Questions


The Basics

Yes, we do. US investors can invest either in a private fund or in their own individual Separately Managed Account at Fidelity or Schwab. We can handle both taxable investments and tax-advantaged accounts, such as IRAs. If you are not sure whether the fund or an SMA would be more appropriate for you, please click here for the relative benefits of each.

Non-US investors from certain jurisdictions can invest in our private off-shore fund. For all our products, we charge a 0.12% per annum management fee, which is inclusive of all operating expenses, and we charge no incentive or other fees.

For our US private fund, investors must be Qualified Purchasers, which generally means they need to have at least $5mm of investment assets (we can send you a copy of the full SEC definition). Our Separately Managed Accounts are open to all US investors. For our private offshore fund, non-US investors from only certain jurisdictions are eligible to invest. Please contact us to discuss further.

The majority of our investors are active or retired financial industry professionals, from 45 to 60 years of age, and who have accumulated substantial savings. Many of our investors have graduate degrees, and at least 7 of our investors have taught finance at the graduate level in such universities as UPenn, Stanford, NYU and Harvard.

Here are three links containing descriptions of our investment approach, in increasing order of detail:

More than 300 investors have trusted us with over $1 billion of their savings. Please see our most recent Form ADV for current AUM as of the latest filing.

Elm Wealth manages a substantial fraction (>80%) of the liquid, non-real estate assets of the Management Team, i.e. Victor Haghani, James White, and their immediate families.

Account Details

There is a $1,000,000 minimum investment required for Individual and IRA accounts, as well as Trust, Corporation and Partnership accounts. The minimum investment required for the Cayman private fund is also $1mm, while the minimum for our US private fund is $2mm.

The primary reason for our $1,000,000 SMA minimum is for us to be able to keep your costs low, in terms of us being able to deliver our services for our annual fee of 0.12% per year.

We are happy to consider accepting ETFs and Index funds you already own into Elm’s investment program for your Separately Managed Account. If the instruments are part of Elm’s current program or can reasonably be mapped into Elm’s program, we will typically accept them. For taxable accounts, on a case-by-case basis, we will also normally help you evaluate the costs and benefits of holding the legacy instrument versus switching to a lower-cost or better-structured similar instrument (if available). Once these assets are accepted into your account, we will routinely evaluate whether to continue to hold them based on all our usual criteria, including but not limited to Elm’s target asset allocation, transactions costs, expenses and tax considerations (for taxable accounts).

We hold assets with the following institutions for each of our products:

For US investors:
• Our private fund – Vanguard, Morgan Stanley and Northern Trust
• Separately Managed Accounts at Fidelity or Schwab

For non-US investors:
• Our private fund – Morgan Stanley, Interactive Brokers and Northern Trust

Many advisors charge higher, “fat” fees for smaller accounts, and the “right” fee for their largest accounts. At Elm though, we simply don’t do that. We view 12bp as the absolute minimum marginal rate we need to charge, and we give that to all clients regardless of their size. We don’t know of any other advisors whose “top-tier” rate is below 12bp, and we have never charged a client less (not including Elm staff and family).

How Elm Works

We’ve put a great deal of effort into making each taxable SMA as tax-efficient for a US investor as possible.

In our core SMA product for taxable investors, we re-balance each investor’s portfolio approximately every week, and our systematic rebalance algorithm attempts to optimize between minimizing realized short-term taxable gains, maximizing realized short-term taxable losses, keeping the portfolio within certain bounds of our target risk allocations, and minimizing transaction costs. We also try to minimize realized long-term capital gains, but we place significantly less emphasis on this relative to the focus we put on short-term gains. Because many of the dozen-or-so core risk markets we invest in are related, and several instruments are generally available per market, we can often achieve a much better tax result for our investors than if we just naively re-balanced each market without thinking about taxes.

Despite the higher expected turnover of our dynamic approach compared to a static approach that re-balances back to fixed weights, there are several subtle but significant effects that, together, yield high expected tax efficiency. First, the momentum overlay is what generates most of the additional turnover compared to a static approach, and its nature is to generate frequent but small short-term capital losses punctuated by less frequent but large long-term capital gains. Second, our portfolio turnover generally takes the form of buying and selling a small ‘top’ slice of the portfolio, which typically has relatively low built-up gains or losses. Beneath this ‘top’ slice, there will tend to be a more static base layer of the portfolio that can hold a buildup of unrealized long-term capital gains.

By default, all taxable SMA investors benefit from automated tax-loss harvesting, and our system automatically works to prevent tax-adverse wash sales between groups of linked accounts. We also try to earn as much income as possible in the tax-preferred form of Qualified Dividends.

Please be aware that tax performance in a particular instance will strongly depend on the specific path of the market and the investor’s entry point (or points, in the case of multiple investments), and also that tax law will change over time in ways that are impossible to predict. We discuss how tax considerations impact portfolio re-balancing in more detail in this note here, and we discuss in detail the tax efficiency of a historical Elm investment in this note here.

First of all, we don’t think we charge a low fee, but rather a fair fee. Others charge substantially higher fees, at least partially because they have to pay for expensive experts to manage their clients investments in a discretionary manner. The structure of our product, being primarily systematic and rules-based, allows us to charge the fee we do.

No. We only charge the 12bp management fee. We do not charge an incentive fee, and our management fee is inclusive of operating costs, such as administration, audit and legal. There are no hidden fees.

When trading ETFs we pay commission, of $0/trade. When trading mutual funds, we pay $45/trade in and $25/trade out. For a $1,000,000 account equal to our minimum account size, we expect trading commissions to be $0, though larger accounts may see a small amount of trading commissions from mutual funds. Our portfolio management system is designed to minimize total trading costs (trading commissions + market spread) by trading instruments appropriate to the account size – e.g. for $1mm accounts, we will only use ETFs, while for much larger accounts we will use a mix of ETFs and mutual funds while also minimizing the number of trades done on each rebalance date, subject also to optimizing for tax and risk considerations.

The weighted average expense ratios change depending on the asset allocation. For our various products it has ranged from 0.12% to 0.19% so far. We carefully select the vehicles we use to build our portfolios, and cost is one of the factors that we think is important.

Each of our strategies follows our rules-based asset allocation methodology, an approach we call Dynamic Index Investing®. Please click here for a note that describes in detail the three main components of this approach: the construction of the Baseline portfolio and the value and momentum overlays to that Baseline portfolio which make the portfolio responsive to changing market conditions.

For an asset class to be included in our Baseline portfolio it needs to be:

  • Big and producing undiversifiable risk
  • Investible via low cost and liquid vehicles
  • Likely to carry a risk premium which ideally should be observable prospectively
  • Accessible without requiring specialized selection skill

Asset classes that meet these criteria for our SMA portfolios are public market equities, public market real estate vehicles and government and corporate bonds. Among the many investments that don’t meet these criteria are hedge funds, private equity, venture capital investments, bank loans, volatility indexes, convertible bonds, soft commodities, fine art and other collectibles, and cryptocurrencies. We also do not invest in individual industry sectors or individual equities.

Our policy is that we do not hedge the FX exposure. For example, when we buy Japanese equities through index funds or ETFs, we hold them without any associated short positions in the Yen/$ exchange rate. So, if the price of Japanese equities in Yen stays constant, but the Yen weakens against the dollar, then Japanese equities will reduce the return of our fund, which we report in dollars. We made this decision for the following reasons:

  1. Simplicity: we invest in the equity markets of over 60 countries with most of them having their own local currencies. Not all of them have liquid and open FX markets. Furthermore, certain FX markets won’t be well described by Elm’s value and momentum framework, making us cautious in introducing this extra complexity into our approach.
  2. FX hedging is not clearly risk reducing for countries whose stock markets tend to go down when their currencies strengthen (e.g. those with significant international trade).
  3. If investors consider themselves global citizens, as many of our investors do, and choose to measure the value of their investments in a global currency unit (albeit with a home bias), FX hedging can also increase risk.
  4. Negative correlation reduces returns: An FX hedge needs to be adjusted so that it stays in line with the value of the equity market it is hedging. If an equity market tends to go up when its currency weakens (and vice versa), then each rebalancing adjustment will be done at an expected loss to the hedger, as it will be necessary to go short more of the currency when it has weakened and to buy it back when it has appreciated, resulting in a significant drag on returns. Of course, the associated transaction costs are a further drag on returns as well.
  5. It is very disturbing that a FX-hedged equity investment can lose more than 100% of its value – sounds too much like leverage for us.


TIPS are bonds issued by the US Government, with a fixed maturity (e.g. 10 years) and fixed percentage real coupon (e.g. 2%). Every day, the bond’s redemption value and coupon payments are adjusted based on the headline Consumer Price Inflation (CPI) Index. If you buy the bond at par and hold it to maturity, you’ll earn a real (i.e. adjusted for inflation) return equal to the percentage coupon, and a nominal return equal to the real return plus CPI. In the meantime, as with any bond, its market value will fluctuate based on the going market real yield for a given maturity.

See TreasuryDirect for more information about the mechanics of TIPS.

TIPS are designed to protect the real spending power of your wealth over a given horizon. If the frustrated investor above had bought TIPS maturing in four years, her wealth would have much more closely tracked inflation over that period. But while that’s tempting, as we’ll see below, it’s not necessarily her best course.

It’s natural that some investors think of inflation protection strictly as ensuring their portfolio value will rise during periods of unexpectedly high inflation. If that’s truly your only goal, you should buy short-dated TIPS. However, your long-term spending power is impacted not just by inflation, but also by long-term real interest rates. $1 million of wealth goes a lot further when real interest rates are at 4% than when they’re at 0%.

If your goal is to protect long-term spending power rather than the narrower goal of protecting inflation-adjusted wealth, then longer-dated TIPS (owned directly or through ETFs) make sense and are effective. However, just as “no man can serve two masters,” TIPS cannot protect inflation-adjusted wealth in the near-term while simultaneously protecting long-term spending power.

In “Back to the Future: Reviving a 19th Century Perspective on Financial Well-Being”, we discuss why we think protecting long-term spending power is the more desirable objective – and, for readers looking for a deeper dive, we discuss a number of related issues in these two notes as well:
How I Learned to Stop Worrying and Love the Bomb
A Sheep in Wolf’s Clothing

The question, “Should you buy bonds or bond funds?” gets a lot of discussion in the financial press. We often read that it’s better to buy individual bonds rather than bond funds, as you will never suffer a loss on individual bonds as long as you hold them to maturity. We think this argument is, at best, confused.

If you want to protect against inflation or lock in a real rate of return to a specific date, then you should buy and hold individual bonds, whose maturity will naturally run down as you approach your target date. However, we think this is a relatively rare use-case. Few people, even those getting on in years, have a specific date with their name on it. Instead, many investors either have a medium-to-long and rolling horizon, or are allocating between asset classes.

In either of the latter cases where you’re trying to maintain the duration of a bond portfolio, the mechanics of holding individual bonds versus a bond ETF will be very similar. In both forms, bonds will naturally be running off, and you’ll be replacing them by buying new issues. If the ETF is trading close to its Net Asset Value, as TIPS ETFs normally do, the returns will also be very similar between holding the ETF and a similar portfolio of individual bonds. The main difference will be that the ETF charges a management fee (0.03% in the case of SCHP), but is more convenient and likely has lower transaction costs than managing your own portfolio of individual bonds.