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Thomas Wehlen Matthias Knab, Opalesque for New Managers: The Paradox of Obscurity and Excellence
In an industry obsessed with star managers and billion-dollar launches, Thomas Wehlen's Coburn Barrett represents one of hedge fund history's most compelling paradoxes: a fund that has quietly outperformed 99.5% of all tracked funds over nearly three decades while remaining virtually unknown to most allocators.
The numbers tell a remarkable story, as uncovered by Opalesque's Matthias Knab in a rare interview with Wehlen. Since 1998, Wehlen's Global Leveraged Indexing (GLI) strategy has delivered cumulative returns of approximately 2,200%, transforming $1,000 into over $23,000. This places his tactical asset allocation strategy in the top 0.5% of 170,000 Bloomberg-tracked funds. Perhaps more impressively, Wehlen has achieved this while maintaining a correlation of just 0.55 to the S&P 500 - delivering equity-beating returns without equity-level market exposure.
From Computer Science to Capital Markets
Wehlen's journey to investment excellence began not on a trading floor, but in the computer labs of the Swiss Federal Institute of Technology in Zurich. After years in database management and coding, a chance encounter with treasury professionals at Dow Chemical sparked his fascination with finance. This unconventional background would prove crucial to his systematic approach to markets.
The genesis of his investment philosophy came during a summer internship at Goldman Sachs London in 1994, where he worked on the proprietary trading desk. Tasked with interviewing the firm's revered prop traders about how they made money when interest rates rose, Wehlen discovered a surprising truth: they usually didn't. This insight, combined with his systematic mindset from computer science, led him to question the entire premise of alpha-chasing that dominated active management.
"After working at these banks where they're struggling to find alpha in many ways, I felt that maybe we should approach the investment process slightly differently," Wehlen explains. "My question is really, how would one invest if you assumed you did not chase alpha? How would you gain an advantage over other investment strategies if you did NOT chase alpha?"
The Anti-Alpha Philosophy
Wehlen's investment philosophy rests on five core tenets that challenge conventional hedge fund wisdom:- Portfolio theory is most effective when applied across all asset classes - not just within equities or bonds, but globally across all liquid markets
- Asset allocation, not security selection, drives long-term returns - the decision of how much to allocate to different asset classes matters more than picking individual winners
- Arbitrage opportunities are too rare to be the focus of long-term investing - sustainable edge comes from systematic exposure, not fleeting inefficiencies
- High fees don't equal high returns - the investment management industry's fee structure often misaligns manager and investor interests
- Global economic growth is the only reliable prediction - expecting 3-4% annual global growth while remaining agnostic about which specific markets will deliver it
This philosophy manifests in a remarkably straightforward two-step process. First, Wehlen creates a globally diversified portfolio typically consisting of 45% equities, 35% government bonds, and 20% commodities - all through liquid, publicly traded indices. Second, he applies modest leverage to this low-risk portfolio, adjusting based on correlations and implied volatility rather than market predictions.
The Leverage Paradox
Perhaps the most counterintuitive aspect of Wehlen's approach is his use of leverage on a diversified portfolio rather than concentration. While most hedge funds seek to generate returns through concentrated bets on their highest-conviction ideas, Wehlen does the opposite: heavy diversification combined with slight leverage.
"We're long all of them all the time," he emphasizes. "We will ensure that we will gain from that global economic growth because we don't know, maybe it's India next or Chinese government bonds, or who knows. If we're exposed to all the markets at all times, we won't miss the most important market of the year."
The strategy is 90% systematic, with human intervention reserved for extreme situations like 2008, when correlations across all asset classes approached one - a phenomenon Wehlen correctly identified as fear-driven rather than fundamental.
The Fee Structure Revolution
In an industry where "2 and 20" became synonymous with hedge fund compensation, Wehlen charges a flat 2% management fee with no performance fee. His reasoning is both mathematical and philosophical.
"If you charge a performance fee, that's effectively the investor giving the fund manager a free option, and the fund manager has control over the volatility," Wehlen explains. "An option price goes up as the volatility goes up, so what you're doing effectively is giving the fund manager control over the value of his option."
This alignment extends to his view on turnover. Lower turnover means lower costs and, Wehlen believes, higher returns - a philosophy that has proven correct over his 27-year track record.
Survival of the Fittest
In an industry where less than 2% of hedge funds survive beyond 25 years, Wehlen's longevity itself represents a form of alpha. The fund has navigated the dot-com bubble, the global financial crisis, the European debt crisis, the COVID-19 pandemic, and numerous geopolitical shocks while consistently delivering returns.
This durability stems partly from Wehlen's systematic approach and partly from his philosophical consistency. While other funds pivot strategies chasing the latest trend, Coburn Barrett has maintained the same core approach since 1997. The only changes have been additive - incorporating new markets like carbon credits as they develop sufficient liquidity and exploring access to Chinese local markets as regulatory frameworks evolve.
The Hidden Gems Phenomenon
Wehlen's relative obscurity - which he acknowledges stems from his "reticent nature and preference for solitary pursuits" - highlights a crucial truth about alternative investments: the best opportunities often lie outside the spotlight. While investors chase the latest launches from brand-name managers, funds like Coburn Barrett quietly compound wealth with proven, repeatable strategies.
This phenomenon suggests that family offices and institutional investors may benefit from looking beyond the usual suspects. The combination of a 27-year track record, top-percentile performance, and a genuinely differentiated approach to generating returns makes Wehlen's fund exactly the type of hidden gem that sophisticated allocators seek.
Lessons for Modern Allocators
Wehlen's success offers several crucial insights for today's investors:
Time Horizon Arbitrage: "Most investors underestimate their actual time horizon," Wehlen observes. "They switch from one fund to the other in a relatively short period of time, effectively buying high and selling low fairly often." His 27-year track record demonstrates the power of patient capital.
Complexity vs. Elegance: While many hedge funds tout complex strategies with dozens of sub-strategies and hundreds of positions, Wehlen's approach is elegantly simple - diversify broadly, leverage modestly, and let global growth do the work.
Correlation Management: With a 0.55 correlation to the S&P 500 despite beating equity returns, Wehlen proves that true diversification can deliver both lower risk and higher returns when properly implemented.
Fee Alignment: The flat fee structure removes the perverse incentives that often lead managers to take excessive risks with investor capital.
The Future of Diversification
Looking forward, Wehlen continues to seek new diversification opportunities while maintaining his core philosophy. The addition of carbon credits in the last decade and potential expansion into Chinese local markets demonstrates the strategy's evolution without revolution.
"The basic idea will continue to function," Wehlen states with characteristic understatement. "We're positioned pretty well to ride out bad times and pick up the returns that come from global economic growth."
Why This Matters Now
In today's environment of concentrated market leadership, rising correlations, and questions about traditional diversification, Wehlen's approach offers a proven alternative. His success demonstrates that investors don't need to predict the future or chase the latest trend to generate exceptional returns. Sometimes, the best strategy is to acknowledge what you don't know, diversify accordingly, and let time and global growth work in your favor.
For family offices and institutional investors seeking genuinely differentiated strategies with proven longevity, Wehlen's story serves as both inspiration and practical blueprint. It suggests that the next great investment opportunity might not come from a high-profile launch or a famous manager, but from a quiet professional in San Francisco who has been consistently delivering for nearly three decades.
Watch the Full Interview
Thomas Wehlen rarely gives interviews, making this exclusive Opalesque.TV conversation a unique opportunity to hear directly from one of the industry's most successful yet understated managers. In the full video interview, Wehlen provides deeper insights into:
- His specific process for managing correlations and implied volatility
- How he navigated the 2008 financial crisis when correlations went to one
- Why behavioral finance principles guide his volatility adjustments
- The mathematical reasoning behind his contrarian fee structure
- His views on which new markets offer the best diversification potential.
Watch the exclusive Opalesque.TV interview with Thomas Wehlen here to discover how this former computer scientist built one of the hedge fund industry's most remarkable track records by doing almost everything differently than his peers.
Don't miss this rare opportunity to learn from a fund manager who has not only survived but thrived through multiple market cycles - proving that in the world of hedge funds, the best performers aren't always the ones making headlines.
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