Newfound Risk Managed U.S. Trend Equity Index

Index Overview

The Newfound Research U.S. Trend Equity Index (“NFUSTE Index” or “Index”) applies diversified trend-following techniques to broad U.S. equity exposure in an effort to provide a transparent, liquid index that provides insight into the long-term performance of the trend equity style of investing.

The Newfound Research U.S. Trend Equity Index can allocate anywhere between 0% and 100% to broad U.S. equity exposure, with the remainder of the portfolio being allocated to U.S. Treasury Bills.

In an effort to provide insight into the broad style of trend equity, rather than a specific implementation, the NFUSTE Index seeks to diversify across an ensemble of different trend-following models, formation horizons, and rebalance periods.

Ensemble of Models

At each rebalance, the Index averages the allocation results of three different trend-following models.  The three different trend models are:

  1. Time-Series Momentum: A positive (negative) trend is identified when total return over the formation period is positive (negative).
  2. Price minus Moving Average: A positive (negative) trend is identified when price is above (below) an exponentially-weighted moving average of price.
  3. Moving Average Double Cross-Over: A positive (negative) trend is identified when a short-term exponentially-weighted moving average is above (below) a long-term exponentially-weighted moving average.

These three models were selected to reflect both common and transparent trend-following approaches.  They were also selected to reflect trading rules that weight prior returns in different manners.  For more details, please see section 11 of Two Centuries of Momentum.

Each model is applied across 120 different formation periods, spanning 120-to-240 trading days (approximately 6-to-12 months).

The ensemble of 360 (three models each with 120 different parameterizations) different allocation recommendations are averaged to generate the target allocation for the Index.

Tranched Rebalancing

The Index assumes a holding period of 20 trading days.  To avoid the potential impact of timing luck that can occur with specific rebalance dates, the Index is rebalanced on a daily staggered basis.  The portfolio is split into 20 equal parts (tranches) and each tranche has equal weight.  Each tranche is a full-fledged portfolio and is rebalanced once every 20 trading days to target weights determined for that period.

For example, the Index will consist of 5% of each of the 20 tranches.  On the first day, the first tranche is replaced, but the remaining tranches are not rebalanced.  On the second day, the second tranche is replaced, again with the other 19 tranches left untouched.  This process continues until the 21st day, at which point the first tranche is again replaced.  For more details, see Rebalance Timing Luck: The Difference Between Hired and Fired.


The Newfound Research U.S. Trend Equity Index (“Index”) was first calculated on a live basis on 03/31/2019.   All backtested index values for periods prior to the launch date of the Index are merely indicative, and they are provided “AS IS” for informational and educational purposes only.  Newfound Research makes no guarantee as to the accuracy, timeliness, completeness, or fitness for any particular purpose of or for any index values, either historical or back-tested.  Nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy.  The model performance during the backtested period is not based on live results produced by an investor’s actual investing and trading, but was achieved by the retroactive application of a model designed with the benefit of hindsight, and the model performance is not based on live results produced by an investor’s investment and trading, and fees, expenses, transaction costs, commissions, penalties or taxes have not been netted from the gross performance results except as is otherwise described in this presentation. The performance results include reinvestment of dividends, capital gains and other earnings. As the hypothetical information was backtested, it does not reflect contemporaneous advice or record keeping by an investment adviser. Actual, live client results may have materially differed from the presented performance results.  All information presented after the strategy inception date is model performance, which means it was calculated by Newfound in real-time (not on a backtested basis), but does not reflect the payment of any fees, commissions or expenses. The Index and associated data is for research purposes only and does not reflect the results of any investment strategy or product managed or offered by Newfound Research.  Like many passive benchmarks, the Index does not take into account significant factors such as management costs, transaction costs, or taxes.  Management costs, transaction costs, and taxes for strategies such as the Index could be significantly higher than for a passive strategy.  This document contains performance data based on back-testing, i.e., calculations of how the Index might have performed prior to launch. Backtested performance information is purely hypothetical and is provided in this document solely for informational purposes.  Backtested performance does not represent actual performance and should not be interpreted as an indication of actual performance.  Index performance assumes the reinvestment of all distributions.  The Index uses exposure in two ETFs: VTI and SHV. Prior to the launch of these ETFs, index data from the Kenneth French data library is utilized.  Past performance does not guarantee future results.  It is not possible to invest directly in an index.  Supporting documentation for any claims, comparisons, statistics or other technical data is available from Newfound upon request by emailing