In an effort to make many of the concepts that we utilize more accessible to financial advisors and their clients, we have endeavored to create series of “1-pagers”: single page educational materials highlighting and covering a single topic.

The first series we are releasing is on drawdowns is accessible via the links below.

There are five installments in the first series:

  1. What is Drawdown: Explains the concept of drawdown and max drawdown
  2. Drawdowns & Withdrawals: Explains the importance of drawdown control, especially for portfolios in the withdrawal phase.  Provides an example of how withdrawals during drawdown can cause irreparable harm to long-term portfolio growth because they lock in losses
  3. Is Static Enough?: Explores the implications of utilizing a static portfolio, even under the assumptions of long-term expected returns and volatility estimates. The probability of large drawdowns may be higher than you think!
  4. Methods of Drawdown Control: Covers several methods of controlling drawdowns, including volatility management, put options, the momentum methodologies, and demonstrates the effects of each methodology on the resulting return distribution
  5. The Cost of Drawdown Control: Re-frames the concept of drawdown management techniques into non-guaranteed downside insurance with (potentially) lumpy premiums (costs).  Helps provide clients with a realistic understanding of risk management offerings and their associated costs.

Comments are always appreciated.

Corey is co-founder and Chief Investment Officer of Newfound Research, a quantitative asset manager offering a suite of separately managed accounts and mutual funds. At Newfound, Corey is responsible for portfolio management, investment research, strategy development, and communication of the firm's views to clients. Prior to offering asset management services, Newfound licensed research from the quantitative investment models developed by Corey. At peak, this research helped steer the tactical allocation decisions for upwards of $10bn. Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University. You can connect with Corey on LinkedIn or Twitter.