In August 2008, Newfound Research was founded based on a simple, but powerful, premise: investors care deeply about capital preservation.
Newfound Research offers a full suite of tactically risk-managed investment strategies. We balance a disciplined, research-driven approach with prudent strategy design to deliver intuitive, repeatable results. Newfound’s strategies are distinguished by three qualities: a simple objective, a consistent process, and a thoughtful design.
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We believe a flexible and active approach to asset management is needed to manage portfolio risk while simultaneously allowing investors to meaningfully participate in market growth.
Tactical risk management can play a key role within a comprehensive risk management framework because, unlike diversification, its success does not rely solely on strong returns within a specific asset class (e.g. fixed income).
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In 2007, Corey Hoffstein – Newfound’s co-founder and Chief Investment Officer – was consulting for a financial advisor. His role was to sit in on portfolio manager interviews that would take place in the office.
Often the interviews covered the usual topics: philosophy, process, people, and current views of the market environment.
The responses were well rehearsed and the views were rarely confrontational.
Except for one particular portfolio manager who ran a small-cap value mutual fund. When asked about his view on the market environment, he was resolute in his view that the economy was headed for a significant recession.
In the summer of 2007, this was still a fairly unique view – especially to be expressed so strongly. So Corey asked what the manager planned on doing about it. “Nothing,” the manager replied. “My job is to provide the best small-cap value exposure I can – and that’s what I will do. Ultimately, I don’t know the individuals investing in my fund. If the risk level isn’t appropriate for them, their advisor should sell the position.”
“Besides,” he noted, “I have to remain 95% invested by my prospectus.”
This response seemed reasonable to Corey – until he asked the financial advisor, after the meeting, what his thoughts were.
“That’s ridiculous!” the advisor exclaimed. “How am I supposed to know when to sell out of small-cap value stocks for my clients? That’s why I hire an expert in the first place: to manage that risk.”
This also seemed like a reasonable response to Corey.
Two reasonable responses on why someone else should be managing risk. The result, to Corey, was that nobody was – especially by his definition of risk: a material loss of capital.
And so he began a journey of researching, developing – and eventually making available to investors – tactical investment models with a key focus: capital preservation is always a primary objective.
Newfound Research founded in August 2008 by Tom Rosedale, CEO, and Corey Hoffstein, CIO, to license data from its tactical investment algorithms. The firm’s models were researched and developed by Corey Hoffstein from 2007-2008. Originally developed to manage his own portfolio, Corey’s initial work focused on the application of momentum across domestic equity sectors as a risk management technique and cash as the default position of safety. The use of momentum enables the model to be applicable across a broad range of asset classes and portfolio objectives.
For several years, Newfound licensed data from its proprietary momentum model to other asset management firms, providing the signals that helped drive their tactical asset allocation decisions. In 2011, Newfound began to take a more active hand in strategy construction. Instead of delivering the raw momentum signals to clients, we would work with select asset managers to integrate our signals with their existing investment process, creating custom-tailored, collaborative tactical solutions. These relationships have a unique objective and tailored methodology, creating a wide universe of complementary tactical strategies all powered by Newfound.
In late 2013, Newfound began researching and building proprietary investment strategies to directly serve the financial advisor and intermediary marketplace. We leveraged the experience from the prior five years of live data from our proprietary models and designing collaborative tactical models. The strategies were seeded in late 2013 and we began broad distribution of the strategies across multiple platforms (SMA, UMA, mutual fund, etc.) in 2014.