What do we do?
Our first focus is risk.
Newfound Research is a quantitative asset management firm with a focus on risk-managed, tactical asset allocation strategies. We were founded in August 2008 and are based out of Boston, MA.
We work exclusively with institutions and financial advisors.
Tactical Asset Allocation: Opportunistically adapt and rotate portfolio exposures away from areas of perceived weakness.
Who are we?
- Newfound Research is an SEC-registered investment advisor.
- Privately held and owned by principals.
- Named ETF.com's 2016 ETF Strategist of the Year and 2017 Finalist.
- Learn more about our history and team here.
Why do we do it?
We know investors care deeply about protecting the capital they have worked hard to accumulate. And as investors approach and enter retirement, managing "sequence risk" becomes even more important.
So while most firms focus on alpha (i.e. generating excess returns), our first focus is on risk: we seek to improve risk-adjusted returns by prioritizing downside risk ("drawdown") management.
We aim to introduce new ways of managing risk by expanding investor exposure across the diversification axes of what (asset classes), how (process), and when (frequency) within their portfolios.
How do we do it?
We believe in systematic, disciplined and, repeatable decision-making powered by the evidence-based insights of consistent, thoughtful research.
Specifically, we focus on the high conviction application of the major quantitative investment "styles" – i.e. value, momentum, carry, defensive, and trend – within tactical asset allocation.
Why Risk Management Matters
Why we focus on risk first when many others focus on alpha.
- Failing Slow, Failing Fast, and Failing Really Fast: Why taking on too little risk can be just as dangerous as taking on too much risk for investors.
- You Are Not a Monte-Carlo Simulation: Why your experience may not be "average" and why "average" may not apply at all.
- Alpha is not a risk management technique: Demonstrating that excess return may not be sufficient for reducing risk.
- The Asymmetry Zone: Understanding how losing less – even if it means making less – can lead to asymmetric benefits in the context of compounding returns.
- The Butterfly Effect in Retirement Planning: How small changes in assumptions can lead to drastically different retirement outcomes and ideas for what we can do about it.
- Addressing Low Return Forecasts in Retirement with Tactical Asset Allocation: Why employing tactical strategies to systematically allocate to equities can more effectively reduce the risk that the sequence of market returns is unfavorable to a portfolio. (Listen to portfolio manager Justin Sibears discuss this piece)
- Achieving Risk Ignition: A white paper showing how tactical strategies can be employed by investors to both systematically increase and decrease their risk exposure.
Systematic Investing: Style Premia + Factors
Research on the systematic investment approaches we utilize to drive our tactical views.
- A Gentle Guide to Global Tactical Asset Allocation: An introduction to the systematic investment styles of value, momentum, defensive, carry, and trend when applied to tactical asset allocation.
- Two Centuries of Momentum: Exploring the rich history of both relative and time-series momentum.
- Protect & Participate: Managing Drawdowns with Trend Following: Using trend following as a transparent risk management diversifier.
- Does Sector Rotation Work?: A white paper exploring the application of value, momentum, and trend on U.S. equity sectors.
- Timing Bonds with Value, Momentum and Carry: Using value, momentum, and carry techniques in order to vary bond exposure.
- Why Tactical Fixed Income is Different: Why thoughtful portfolio construction is important when total return is driven by income, not growth.
- 199 Drawdowns, 1 Model: A white paper exploring the out-of-sample application of Newfound's trend-following on 149 ETFs and 199 large (>25%) drawdowns.
We like to say, "no pain, no premium." These articles are written to help investors gain insight into how tactical strategies perform in different environments and why underperformance, at times, is a necessary component of success.
- Outperforming by Underperforming: Why “[t]he most important investment ability is an emotional discipline.”
- Expectations with Tactical Equity: Gaining a better sense of when tactical strategies do well and when they do not.
- Rising Correlations and Tactical Asset Allocation: Understanding how available diversification affects the success of tactical strategies.
- Is Tactical Broken?: Reflecting on the role, and performance expectations, of tactical strategies after 2015.
- Dissecting a Trend-Following Strategy in 2015: Looking under the hood of a trend-following equity strategy in 2015 to understand how and where returns come from.
In portfolio construction, little details can have a big impact. That's why we spend a lot of time thinking about them.
- Quantifying Timing Luck: Why when is an important axis of diversification.
- Diversifying the What, How, and When of Trend Following: How a diversification across assets, process, and execution time can help increase the robustness of a trend-following strategy.
- Factor Investing & The Bets You Didn't Mean to Make: Why portfolios constraints can actually lead to more risk-efficient investments.
- The Case Against Overweighting International Equities: We discuss why valuation-driven arguments can be dangerous for making large, tactical tilts.
- When Ingredients Spoil: A look at how we think about managing the risk of knowing that tactical signals will be wrong from time-to-time.
Why leverage can potential help investors achieve more risk-efficient use of their capital.
- Portable Beta: Making the Most of Returns You're Already Getting: Demonstrating how leverage can allow investors to potentially create more risk-efficient portfolios.
- Levered ETFs for the Long Run?: Exploring how levered ETFs can be used to introduce diversifying, alternative exposures.
- Thinking in Long/Short Portfolios: Demonstrating why the ability to overcome the fee hurdle rate is determined both by the quantity and quality of active bets embedded in a portfolio.
General views & philosophies of our firm.