On behalf of the entire Newfound Research team, we would like to wish you and yours a happy holiday season.
We treat this weekly research commentary as a sacred part of our investment process. We continue to be honored and humbled by the vast and growing number of readers it reaches, a sign of the trust and confidence you place in our work.
To remain transparent can often be uncomfortable, as new research may contradict old. This was certainly the case this year when our views on mixed and integrated multi-factor products took an abrupt 180° turn mid-year after a research break-through.
Nevertheless, we believe that continuous, transparent research is paramount for creating an objective, evidence-based investment process.
At Newfound we remain dedicated to helping clients achieve their long-term investment goals while simultaneously acknowledging the importance of managing the quality of the journey along the way.
To this end, in 2017 – and in every year – thoughtful, dedicated, and transparent research at the intersection of quantitative and behavioral finance will remain our guiding process.
With warmest wishes,
Corey Hoffstein, Justin Sibears & Nathan Faber
Summary of Core Research Themes in 2016
- Alpha is not risk-less. In fact, for an active strategy to have the potential to outperform in the long run, we believe it must be difficult to hold in the short-run. As a zero-sum measure, alpha is passed from investors who fold during times of volatility to those who have the fortitude to hold.
- Risk cannot be destroyed, only transformed. Every investment decision we make should be viewed through the lens of a relative risk trade-off.
- Active management should be an allocation, not a trade. To harvest the long-term outperformance potential of active investment strategies, we need to look well beyond 3-year track records and create long term factor exposure allocation in our portfolios.
- Are stocks actually undervalued?
- JP Morgan Outlook Implies Satellite Bonds Are King
- The Ghost of GDP Past
- Outperforming by Underperforming
- Even bad strategies will perform well
- God, Buffett, and the Three Oenophiles
- Diversification will always disappoint
- Rising correlations and tactical asset allocation
- Alpha is not a risk management technique