John McArthur, Chief Investment Officer at Krilogy, sat down with Jeff Malec, host of RCM’s The Derivative Podcast. In this wide-ranging conversation, John covers the investment philosophy behind Krilogy’s portfolio construction, how the firm thinks about private markets and alternatives in a concentrated public market, the role of AI in both the economy and the advisory relationship, and practical advice for investors navigating all-time highs.
“The future Mag Sevens are being born right now. And I think that’s really exciting for investors if you know where to look.”
Image source: RCM Alternatives “The Derivative” Podcast
Key Themes and Takeaways From The Conversation
Portfolio Construction: Beyond the 60/40 and the S&P
Krilogy’s model portfolios are built across five risk buckets, blending active and passive strategies, daily-liquid alternatives, fixed income, and private markets. John explains why the firm doesn’t subscribe to a rigid 60/40 framework and why a portfolio that looks more like 60/20/20 may serve clients better in today’s market. With the top 10 to 15 names in the S&P 500 accounting for an outsized share of the index’s earnings growth, John makes the case that true diversification now requires looking beyond public markets — at private equity, private credit, secondaries, and other structures that give investors access to more of the U.S. economy.
“There’s so much of the economy that people just aren’t participating in when they’re only in public markets. The future winners are being born right now.”
Private Markets: Education is Everything
Access to private markets has expanded dramatically for individual investors. But John is clear that access and acumen are not the same thing. For Krilogy, incorporating private equity, private credit, secondaries, and interval funds is a deliberate, methodical process and client education is at the center of it. John explains Krilogy’s approach to liquidity trade-offs, why the firm has been more cautious on private credit in recent years, and why the secondary market has become increasingly compelling as a way to shorten the J-curve and access mature businesses at a reasonable entry point.
Client Communication: Planning First and Pre-empting the Fear
Krilogy’s investment philosophy is financial planning-based from the start. That planning-first foundation shapes how the firm handles the behavioral side of advising especially in volatile, headline-driven markets. John’s approach is to preempt client fear with proactive communication: weekly technical analysis videos, monthly investment meetings, and impromptu team calls when something moves that clients need to understand. The goal, as John puts it, is to get clients the answers before they ask the question and to ensure that no one is making decisions based on a news cycle.
“To be trading based on headlines, you have to be continually be right, which is darn near impossible. Our focus is just frequent, proactive communication.”
Artificial Intelligence: Productivity Engine and Labor Disruption
John and Jeff dig into the dual nature of AI: a genuine productivity engine that is fueling the next wave of company formation, and a potential source of significant labor market disruption. John’s view is that the disruption is real but not imminent, and that because it’s such a widely discussed concern, the market is probably earlier in the cycle than the headlines suggest.
He also addresses what AI means for the advisory relationship itself, and why human skills, communication, and accountability are becoming more valuable, not less, as automation increases.
