Leverage Without Speculation: David Dziekanski on Return Stacking, Income ETFs, and Portfolio Risk

This video is sponsored by Quantify Funds and contains discussion of exchange-traded funds sponsored by Quantify Funds. Quantify Funds paid the creator a flat fee for this endorsement and unscripted interview. This compensation gives the creator an incentive to recommend Quantify Funds, resulting in a material conflict of interest.   Quantify Funds did not produce, review, approve, or redistribute this content and is not responsible for the opinions or statements expressed by the content creator. The creator is not a client or investor of Quantify Funds.  Any views expressed are those of the creator and do not necessarily reflect the views of Quantify Funds.
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In this episode of Lead-Lag Live, I sit down with David Dziekanski, Founder and Portfolio Manager at Quantify Funds, to explain how return stacking reframes leverage from a short-term trading tool into something investors can actually buy and hold.
From combining Bitcoin and gold to stacking income strategies on top of equities, Dziekanski breaks down how diversification, embedded rebalancing, and structural design can deliver income and exposure without relying on extreme yield or constant investor intervention.

In this episode:

– Why leverage is dangerous without diversification
– How return stacking embeds rebalancing inside the ETF
– Why ultra-high yield ETFs often destroy total returns
– How income strategies can replace parts of fixed income
– Where these products fit in modern portfolio construction

Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.

#ETFInvesting #PortfolioConstruction #RiskManagement #Leverage #Bitcoin #Gold #StockMarket

Chapters

• 0:36 Bitcoin And Gold Stacked Explained
• 1:32 Intro And Guest Background
• 2:32 From Daily Leverage To Buy-And-Hold
• 3:07 PIMCO Roots Of Stacking
• 3:32 Income Stacked Lineup And Design
• 4:18 Risk Management vs Strike Selling
• 5:33 Option Legs And Tenor Flexibility
• 7:24 ETF Wrapper: Cost And Tax Edge
• 9:30 Retail Candy ETFs And Education
• 12:03 Full-Solution Portfolios In One ETF
• 13:03 Where It Fits In Portfolios
• 14:22 Addition Without Subtraction
• 15:56 Weekly Distributions And Access
• 16:48 Correlation, Rebalancing, And Alpha
• 18:23 Resources And How To Connect
• 18:59 Closing And Subscribe Prompt

Transcript

Bitcoin And Gold Stacked Explained

SPEAKER_01 0:00

Let's look at our first non-income related fund, BTGD, which is 100% Bitcoin, 100% gold. You know, a lot of young investors, for example, might say, Oh, I know gold is good. I know I should own it for the next 10 years, but it's run up so much I'm worried. And what are they worried about? They're worried about not that it won't be a positive returning asset. They're worried that it'll underperform the SP 500, right? They're worried that it'll underperform their benchmark. Return stacking allows you to add these asset classes such that, you know, for BTGD, you have Bitcoin and gold. Gold doesn't have to outperform the SP 500 that you might be taking this position from. It just has to outperform the cost of financing. And that's a much more realistic hurl rate, I think, in a lot of people's minds to get these asset classes added in this stacked concept.

SPEAKER_00 0:53

I'm your host, Melanie Schaefer. Welcome to Lead Leg Live. Now, as investors search for income and diversification in a market where traditional stocks and bonds are doing less of the heavy lifting, strategies that combine leverage, structure, and durability are getting a lot more attention. My guest today is David Jikansky, founder and portfolio manager at Quantify Funds. David, thanks for joining me.

SPEAKER_01 1:17

Thanks so much for having me. I'm excited to be here.

Intro And Guest Background

SPEAKER_00 1:19

So just to get started, a lot of investors hear the word leverage and immediately think speculation or short-term trading. At a high level, how does return stacking change that perception and turn a leverage into something that can actually be bought and held?

From Daily Leverage To Buy-And-Hold

PIMCO Roots Of Stacking

Income Stacked Lineup And Design

Risk Management vs Strike Selling

SPEAKER_01 1:36

Yeah, return stacking makes uh leverage your friend. I like to say it's a process of getting a leverage exposure that can be bought and held. There's nothing wrong with traditional leverage ETFs, although the onus is on you, the allocator, to do the day the difficult rebalancing. That means buying when it's up and selling when it's down. You might need to rebalance three or four days a week. And traditional leverage ETFs come with this ugly disclosure of just intended for daily use. Return stacking flips it on its head. There's no disclosure just intended for daily use. So these are leverage ETFs intended to be bought and held. And it's not magic. The concept is you stack two unique assets on top of each other, hopefully with some diversification benefits. And then we take the onus of rebalancing between those two assets off of you, the allocator's hand, and embed it into the ETF. This is a new concept to the application asset classes we're using it for, but it's not a new concept. Pimco actually started this in the 90s. If you recall with the Pimco stock plus bond funds, PIMCO considers themselves to be bond managers to not have to compete with equity allocations. They stacked their bond portfolio on top of an SP 500 portfolio, and that's the stock plus PIMCO funds, offering you both 100% of one and 100% of the other. So we're taking that concept, our flagship first fund launched in October 2024. It was the stacked Bitcoin and Gold ETF ticker BTGD. With this new lineup, income stacked, we're doing that same concept of 200% total exposure in broad asset classes, but with derivative income on each leg. So our first two ETFs are ISSB, income stacked stocks and Bitcoin, and ISBG Income Stacks, Bitcoin, and Gold gives you 100% exposure to both with a reasonable amount of income. These aren't the income ETFs that have 80, 90, 100% distributions. But by not having distributions, you know, north of 40%, it allows you to actually participate on the upside as well. So we call ourselves risk managers and not strike sellers. And that's one of the biggest differentiators, what you'll see in our lineup versus some of our competitors. Some of our competitors will just kind of set sell a call and hope that strike never gets reached. But then it's kind of a random walk of what your exposure is on a day-to-day basis. The SP goes up 2%, your exposure goes down, and vice versa. You could range in a normal cover call strategy from a beta of 0.8 to 0.2 and just kind of fluctuate between the two. And it's not on any prowess of a manager, it's just on a random walk of how the market performs. So we are true risk managers in this concept of income stacked. You will have almost always approximately 100% exposure to both asset classes. ISSB is the SP 500 Bitcoin, and ISPG is Bitcoin and gold. So leverage can be dangerous unless it's used with diversification. The biggest institutions in the world use a little bit of leverage. They don't necessarily leverage the same thing on top of itself. They leverage unique assets that have correlation benefits so that you can maximize the most efficient portfolio you have and add a little bit of leverage. And it's just so you can get the most amount of returns and still minimize the risk on that investment.

SPEAKER_00 4:48

Yeah. So just to ask you to be very specific just for a minute, how does this new lineup differ from the option income strategies investors already know?

Option Legs And Tenor Flexibility

SPEAKER_01 4:57

Yeah, um, one, I would say if you look at each leg individually, um sometimes you'll see very quality institutional managers that have very good track records approach this space in a little bit more of an indexed format. So our, if you look at each leg, our option strategy is really three different legs. We have our beta position, which is an in-the-money call option, that will not be systematic in that it can range from anywhere from three to 18 months in tenor. We sell a call option that can be at or above the money for a portion of the notional, majority of the motion of the notional that will uh uh change with time, as you've seen other issuers do. But what's unique here is we could go as short as a one-day call option to as long as a 180 or six, a hundred and eighty-day or six-month call option. And so, you know, I think a lot of people saw a lot of fanfare in the zero DTE space last year. And the way we look at it is these are just tools to be used in construction. There's no one process in options that is better than everyone, everything else. They all have times when they may be better or worse. And these are just tools to be used. So we can use very shorter dated options, we can use longer dated options, we can use a combination of both. You won't really see us move it like a light switch. Well, we'll just go from six months to one day, but you'll see us gradually shift over time. Um, so the the uniqueness of our strategies and the potential for alpha is in how much we're writing calls on, where the calls are being written, how we're rebalancing, and the tenor of when these options expire. That's where we're trying to create alpha in this strategy versus just a plug-and-play S P 500 cover call strategy. That in and in addition to the fact that we have two of these things stacked on top of each other.

SPEAKER_00 6:42

Okay, so you talked uh about your mission to bring sort of a hedge fund like exposures into an ETF wrapper. Why does the ETF structure matter here in terms of cost, tax efficiency, uh, and accessibility?

ETF Wrapper: Cost And Tax Edge

SPEAKER_01 6:55

Yeah, whether you're looking at hedge funds or structured products, a lot of these option-derived income strategies resemble what you see in the structured product space. Uh, the fees are not really known in structured products. In hedge funds, they're known and they're just egregiously high. So in the ETF wrapper, you have much more cost-effective fees. You have institutional cost of financing, you have the tax efficiency benefit that the ETF offer wrapper offers. Even in the option space, our beta is using flex options. So we can heartbeat out our beta position and roll it over without it being a taxable event, which can't be done in a hedge fund, we can't, which can't be done in a structured product. And most importantly, I think, you know, this world moves so fast and drawdowns exist for such a short period of times that if you have a strategy that differs from broad equity beta, when it when it outperforms or when it hedges, you want to be able to rebalance instantaneously and rebalance the other portions of your portfolio. And that's just not doable in the hedge fund or structured product space where you might need to put in a redemption notice and they'll say, okay, over the next four quarters, we'll give you your money back a little bit over time. Opportunities disappear in days, hours, or weeks in this world and not in years. Uh, you can't make a decision now and get the cash for a year later and think that opportunity is still going to be available. So the institutional cost of leverage, the lack of individuals having to use margin on their own, the tax efficiency, the cost effectiveness, and the accessibility of these strategies in the ETF wrapper, we think make it prime competitors for pretty much any hedge funds out there. Hedge funds actually do perform well. They just charge so much that their after-fee performance is then just mediocre at best because when you, at the end of the day, they might end up charging three or four percent with their performance fees on top. That's why if you really hone down on keeping it in a more cost-effective, tax-efficient ramper, there really is a lot of alpha to be garnered in that structure.

SPEAKER_00 8:49

And there are so many ETFs uh available to advisors and investors now. It's a it's an ETF buffet, essentially. And you have something that you've called like the retail candy ETFs that look attractive, but I mean they don't necessarily hold up over time. What do you see happening across the ETF landscape uh right now and in the sort of immediate to uh long-term, sorry, immediate to medium-term future? And how are you intentionally differentiating that from uh from from the category?

Retail Candy ETFs And Education

Full-Solution Portfolios In One ETF

SPEAKER_01 9:17

Yeah, we call, as you alluded to, some of these retail candy because they're really shiny, they look great, you eat them, and then you wake up the next day and you just don't feel so good, right? Um, I think a lot of people, especially in the derivative income space, saw distributions of 80 to 100% and then did the math in their head, wait a minute, 100% distributions. If I hold this for a year, I'll get all my money back. I will double my money in a year. And that's just not the case. Like you can only distribute what you make within the ETF. So just because it has a hundred percent ticker of distributions on top, doesn't mean holding for 12 months, you will make 100% total returns. Um, and I think what I'm so excited about is that retail's knowledge base is evolving at such a quick space uh pace. A lot of times because of the financial creator uh space that's doing really deep dives. Um, I think the hive effect and the collaborative nature of research that's being done amongst individuals and financial creators is allowing the education and adoption curve to evolve at such a fast pace. If you just look 18 months ago, you know, people were trying to understand what a very basic cover called ETF is, and now they're talking about the volatility curve and the option skew and this and that. Uh, the knowledge base is evolving so fast that allows us to feel comfortable coming out with what is a slightly more complex structure that, you know, might have a couple years ago hit that cardinal sin in the JIFR opera of, well, you can't describe it in 15 seconds, you've lost their attention. Uh, you need to have like everything succinct in an elevator pitch. But let's face it, like, as we talked about with zero DTE versus longer dated option strategies, there is no one be all strategy that's a panacea. They work differently in different markets. You need some layer and an ability to have some level of complexity to be able to really have an ability to outperform. Um, so we're just so excited that retail is really doing their due diligence, discerning one ETF good or bad from the other, um, and not just looking at like a top-line 15-second video on it and saying, oh, I like this or that. Um, these are no longer just asset classes, these are full solution products in an ETF, especially in the cover call strategy space. I think a lot of strategies first came out and were almost assumed to be what I like to call portfolios or full or full solution products when they in reality they're really trading tools and you can use them well as trading tools, and that's fine. But it's our opinion that what I think a lot of people were looking for is full solution products that are like, oh, you think longer dated options are better? You should do that within your in the ETF that you manage for us. You think shorter dated options are better, you should do that within the ETF you manage for us. Uh and having the movements and allocations being done within an ETF as opposed to putting the onus on the allocator to always have to rotate from one ETF to another, which ultimately usually means selling the ETF that's done well and buying an ETF that's done poor poorly. And that's quite frankly really hard for both allocators and individual investors to do, especially in the face of volatility. So embedding what we like to call full solution portfolios into an ETF, we think gives a better experience as a shareholder in our products.

unknown 12:27

Right.

SPEAKER_00 12:27

And so, like just to uh carry on from that thought, advisors for advisors thinking about portfolio construction, where do strategies like this fit into alongside traditional equity and fixed income allocations?

Where It Fits In Portfolios

Addition Without Subtraction

Weekly Distributions And Access

SPEAKER_01 12:39

Yeah, I think people are looking for derivative income strategies to really replace a lot of what the fixed income category used to offer. In a world where we have heightened inflation, the correlation between stocks and bonds goes up. And that means there's much less diversification benefits in your very basic 60-40 framework. And so people are looking for ways to either invest less in income-producing assets and still generate a lot of income so they can have alternatives and cash on the sidelines, um, or a way to use leverage to supplement what they already have and not bring down their equity exposure. What's beautiful about return stacking is I like to call it addition without subtraction. Let's look at our first non-income related fund, DTGD, which is 100% Bitcoin, 100% gold. You know, a lot of young investors, for example, might say, oh, I know gold is good. I know I should own it for the next 10 years, but it's run up so much I'm worried. And what are they worried about? They're worried about not that it won't be a positive returning asset. They're worried that it'll underperform the SP 500, right? They're worried that it'll underperform their benchmark. Return stacking allows you to add these asset classes such that, you know, for BTGD, you have Bitcoin and gold. Gold doesn't have to outperform the SP 500 that you might be taking this position from. It just has to outperform the cost of financing. And that's a much more realistic hurl rate, I think, in a lot of people's minds to get these asset classes added in this stacked concept. Um, so everything from people nearing retirement who you know want to be able to draw off of their assets and just don't feel that like the fixed income asset class is really offering attractive rates or diversification benefits, um, or younger individuals who, you know, are typically traditionally expected to be all growth investors, but they just might not be able to actually afford their cost of living. So actually having these income ETFs gives them a distribution stream to allow them to have regular payments, to keep up with car payments and mortgage payments, et cetera. And I don't think it's in lieu of equity investments. I actually think it's uh people who are feeling more comfortable pulling cash that's on the sidelines and then investing in the market because they know there's at the very least going to be a regular distribution of returns coming back to them through these dividends. Um, so we do pay weekly. We'll be paying weekly on Tuesdays, starting February 3rd, will be our first payments. Um, and it's just a way to have people feel more comfortable bringing cash off the sidelines for advisors to add a little bit of leverage on a model level basis without actually having to use margin, without running into any SEC issues of, well, you're using products that are intended just for daily use. There's no warning of just intended for daily use in our prospectuses. These are buy and hold leverage products. Uh, and let's face it, there's really two ways to try to strive for alpha. It's either trying to rotate amongst asset classes, be a stock picker, or structurally add leverage and diversification. Uh, and we see a lot of issuers who are just leveraging up on the same asset class or the same strategy, but leveraging two unique strategies and forcing that diversification. Let's face it, besides for the returns of, you know, in ISSB stocks in Bitcoin, what value does this strategy have? Well, the correlation benefits and the rebalancing will bring down the volatility of two uncorrelated assets. Uh, they can even increase the return by one to four percent. And then harvesting the volatility premium on the option side could add another two to four percent on top. Uh, so this is a way to slightly outperform just having your stocks and Bitcoin in your portfolio. You can replace that with this, and that frees up a portion of your portfolio to sit in cash and wait for an opportunity, go to other yield-bearing instruments to invest in hedge fund-like assets. So it frees up more allocation in your portfolio to add further diversification.

Correlation, Rebalancing, And Alpha

SPEAKER_00 16:27

Well, alongside hearing uh about the products and these ETFs, I think it's also exciting to hear that you're seeing uh younger investors who are interested in in gold and maybe other metals. And I think that goes along to show that financial industry or financial literacy is increasing among the Gen Z and maybe some of the younger millennials. But uh David, just to wrap up, for anyone watching who wants to learn more about what you're building and dig deeper into the research, where's the best place for them to go to read about it and where can they contact you?

SPEAKER_01 16:56

Yeah, you can uh find us on quantifyfunds.com, quantify funds on Twitter, on Instagram. Um, you can reach out to me directly on at David Jikansky on Twitter uh or email us at info at quantifyfunds.com. We're always eager to have conversations with whether it be financial advisors, individuals. We uh love having these conversations all day long, so we're here to spread the good word. We have a number of good research papers on the concept of return stacking and why that works with Bitcoin and gold under the BTGE tab. And we're building out our research tabs for ISSB and ISBG as well. Um, and just one last note I'll say if you want to think about what is a benchmark you could use, think about some of the traditional cover call strategies out there that we all know and love. Uh, and think about an SP 500 one and a Bitcoin one. Simply add the two together, minus about a four, four percent uh cost of financing. And that's what you should expect our hurdle rate to be on a day-to-day basis with these new income stack funds.

SPEAKER_00 17:50

Perfect, David. Well, thanks for joining me. And thanks to everyone for watching. Be sure to like, share, and subscribe for more episodes of Lead Like Live.

SPEAKER_01 17:58

Thank you so much for having me.