In a recent episode of “Behind the Ticker,” Joe Benoit, portfolio manager at Grimes & Company, discussed the firm’s collaboration with Little Harbor Advisors on their ETF, the LHA Risk Managed Income ETF (ticker: RMIF). Benoit, who began his career with Grimes, now oversees portfolio management and research for the firm. Grimes & Company, a Massachusetts-based RIA managing over $5 billion in assets, follows a holistic approach to client portfolios, integrating stock, fixed income, and alternative strategies. Grimes’s partnership with Little Harbor Advisors, known for adaptive equity ETFs, stemmed from a mutual interest in providing a adaptive fixed income solution, ultimately leading to RMIF.
About Joe Benoit and Grimes & Co.
RMIF, as Benoit explains, aims to generate consistent income while preserving capital and managing downside risk. This strategy originated in response to the post-2008 low-interest environment, as Grimes sought alternatives to traditional high-quality bonds. The ETF applies a fully adaptive, unconstrained approach to fixed income, allocating based on positive price trends and yield. RMIF can shift entirely into areas like high yield, bank loans, or even cash, depending on market conditions. This flexible allocation model allows the ETF to adjust risk exposure as trends change, making it a versatile solution for income-focused investors.
Investment Strategy and Approach
Benoit details RMIF’s approach to asset allocation, explaining that it prioritizes ETFs offering the highest yield within the current positive trends. Currently, the portfolio includes five ETFs, with equal weighting, primarily focusing on bank loans and short-duration high yield bonds. The strategy is momentum-based, utilizing price trends, volatility assessments, and yield comparisons to determine allocations. In periods of heightened volatility, RMIF can de-risk quickly, shifting allocations to safer assets like short-duration Treasuries or cash.
Designed as an alternative to core fixed income, RMIF fits into portfolios as either a substitute for or complement to traditional bond investments. For advisors seeking “conditional credit,” RMIF’s ability to tactically adjust to market shifts provides a reliable source of income with an added layer of risk management.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Joe Benoit covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
Yes, so, you know, it is a adaptive strategy, but internally we say that the goal is not to trade. It's, it's not a very high turnover strategy. You know, if trends are positive in some of our higher yielding areas of the market, like domestic high yields, then we'll continue to own that until either the volatility in high yield picks up such that we have to start de-risking the portfolio or if the yield profile and the market changes that something else might overtake it from a yield stem fund.
So, so the yield profile largely depends on the, the underlying fixed income environment and, and the other, the other thing that's complicated with a adaptive strategy, if we were to have a yield threshold that we were trying to meet is, when the portfolio derisks, if the portfolio were to derisk in be a hundred percent in cash, for example, like it has been at points in time, you know, money markets have yield today, which is great. But, you know, if you think back to much of the last 10 or 15 years, money market rates were zero.
Market Context and Positioning
For example, we could de-risk completely to a safer area, it could be cash, it could be high-quality fixed income, things like short duration treasuries, things like that. It really depends every market's going to behave slightly differently. There's been markets in the past where we've started to de-risk only for the volatility to fade and we start putting physicians back on. There's, there's been periods like 2022 is very bad for fixed income where trends were just negative everywhere, so we owned cash for an extended period of time.
So, when we would have to derisk in the past, you know, it was one of those things where we were accepting the trade off of zero yield versus losing principle in some of the fixed income areas that were that were going down in value. So, with yields, with yields low, you know, if you get a credit event or you get one of these dig duration moves that can happen quickly in these markets, the price move can easily overwhelm the yield that you were receiving in that particular investment.
So, if you've got a portfolio of traditional core fixed income, you know, you could use this strategy as your conditional credit. So, when, when, you know, things are good in the credit markets and volatility is low, it's going to be invested in some of those higher yielding segments for you. And, but you also know that if volatility were to start picking up in the markets that the portfolio is going to shift. So, so those, I think, are some those are the two big use cases that that I think we see for the strategy these days.
Notable Insights
"It's, you know, at the end of the day, this is a fixed income strategy, what we're trying to do, all things can all things equal or trying to do is just generate yield, right?"
"For, for that reason, we allow the strategy to be more heavily concentrated in any one area versus if it was more fundamentally rooted."
Key Takeaways
- RMIF, as Benoit explains, aims to generate consistent income while preserving capital and managing downside risk.
- This flexible allocation model allows the ETF to adjust risk exposure as trends change, making it a versatile solution for income-focused investors.
- Designed as an alternative to core fixed income, RMIF fits into portfolios as either a substitute for or complement to traditional bond investments.
- For advisors seeking “conditional credit,” RMIF’s ability to tactically adjust to market shifts provides a reliable source of income with an added layer of risk management.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Joe Benoit highlights important considerations around fixed income. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of fixed income and income investing discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Joe Benoit, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.