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.
The Foundational Elements of Our Investment Process
The Quantitative Element
We believe in quantitatively-driven investment approaches, powered by the evidence-based insights of consistent, thoughtful research. We focus on the application of value, momentum, carry, defensive, and trend in tactical asset allocation.
We believe process consistency is paramount for long-term investment success and is best achieved through systematic approaches which help mitigate the behavioral biases that often lead to poor investment decisions.
We adhere to a philosophy of quantitative integrity, whereby an idea must not only be supported by empirical data, but must also be grounded in sound theory.
Simple by Design
A Consistent Process
At Newfound, we believe that portfolio construction has two separate and distinct elements: the investment signals we generate and the rules that compose these signals into portfolio allocations.
We liken this to cooking, where the investment signals are ingredients and our portfolio rules are a recipe. And just like cooking, we believe excellence is required in both areas: a great meal can be ruined by subpar ingredients, just as great ingredients cannot save a horrible recipe.
While most quantitative research focuses only on the trading signals, by utilizing a bifurcated framework we ensure that our research is balanced, recognizing that the rules are often where a portfolio’s objective is defined and prudent risk management techniques are applied.
The Behavioral Element
Investing shouldn’t be complicated, but that doesn’t mean it is easy. Emotional decisions can derail even the best laid investment plan. Therefore, we believe the optimal investment plan is, first and foremost, the one we can stick with.
We know investors care deeply about protecting the capital they have worked hard to accumulate, so we seek to improve risk-adjusted returns by prioritizing downside risk (drawdown) management.
In the real world, short-term emotional decisions can threaten even the best-scripted financial plan. We believe that managing anxiety is paramount for long-term investment success.
Ready to rethink how you manage risk in your portfolio?