A Star Investor's Tale of Risk, Ruin & Reinvention w/ Victor Haghani (RWH071)

Summary

William Green interviews Victor Haghani, former LTCM partner and now founder of Elm Wealth, about his journey from spectacular success and failure to building a disciplined, low-cost wealth management firm. Haghani explains how the collapse of LTCM taught him to frame decisions through expected utility rather than expected wealth, and why he now favors a dynamic index-based asset allocation. He provides specific current positioning from his ELM ETF, underweight US equities and overweight non-US equities and TIPS, and argues against private equity, hedge funds, and factor strategies for individual investors.

• Haghani traces his formative experiences from Salomon Brothers' arbitrage desk to co-founding Long-Term Capital Management.
• He contends LTCM's leverage was not excessive for an institutional fund, but his personal 80% allocation was the real mistake.
• The concept of maximizing expected utility—not expected wealth—is the core framework for sizing risk in personal finance.
• After leaving LTCM, he abandoned private equity and hedge funds due to tax inefficiency and high fees, embracing broad indexing.
• He developed a dynamic asset allocation approach that adjusts equity exposure based on long-term valuations and momentum-based risk signals.
• The ELM ETF (ticker ELM) currently runs underweight US equities, overweight non-US equities, and overweight Treasury bills and TIPS.
• Haghani rejects factor tilting (value, size, momentum) as not worth the extra costs, risk, and behavioral pitfalls for most investors.
• He emphasizes resilience: time heals most wounds, and a long-term perspective helps investors survive market turmoil.