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Strategic Risk Control

DIVERSIFYING OUR DIVERSIFIERS

For the past thirty years, investors have been able to rely on fixed income for yield, capital preservation, diversification, and even a hedge during crisis periods.

As rates hover near the zero bound, we must make heroic correlation assumptions – or assume the ability for rates to plunge well below zero – for bonds to offer similar protection as past crises.  And with little income remaining from yield, we have to consider the opportunity cost of using them to hedge equities.

Our Risk Managed U.S. Growth mandate (available as an SMA and mutual fund) seeks to create a more resilient portfolio by structurally diversifying across risk management techniques, including: style tilts, trend following, convexity for left and right tails, and capital efficient bond exposure.

Participation for the Right Tail

MOMENTUM. TREND. CONVEXITY.
  • Momentum tilts seek to generate alpha.
  • Trend following seeks to increase portfolio beta in positively trending markets.
  • Call options seek to create convex participation during sustained market rallies.
  • Treasury futures seek to add a second, diversifying source of returns.

Protection for the Left Tail

DEFENSIVE. TREND. HEDGE.
  • High quality, low volatility tilts seek to preserve capital.
  • Trend following seeks to decrease portfolio beta during negatively trending markets.
  • Put options seek to create convex protection during market declines.
  • Treasury futures seek to benefit from “flight-to-safety” in fixed income.
Click Here to Learn More About the Risk Managed U.S. Growth

“Risk cannot be destroyed, only transformed”


Newfound Research LLC is a quantitative investment and research firm dedicated to helping investors pro-actively navigate the risks of investing through thought leadership and investment acumen.  To build more resilient portfolios, we seek to diversify across the investment axes of what, how, and when.
 

Copyright © 2020 Newfound Research LLC, All rights reserved.



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