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Newfound/ReSolve Robust Equity Momentum Index

THE INDEX SEEKS TO…

The Newfound/ReSolve Robust Equity Momentum Index seeks to provide momentum-based exposure to global equity regions while simultaneously avoiding significant and prolonged drawdowns.

Central Philosophy

The greatest opportunity for differentiated returns is in active asset allocation.

Supporting Beliefs
  • Investors care deeply about capital preservation.
  • It is better to be broadly correct than specifically wrong.

Index performance calculated by Solactive.  Strategy performance reported by Strategy Shares.


MOMENTUM + TREND

Tilt Towards Relative Strength

The Index seeks to tilt towards out-performing equity regions – and thereby avoid perennial losers – by allocating towards the equity region that is exhibiting the strongest relative performance.

Protect Against Extended Declines

The Index seeks to avoid the impact of prolonged equity market declines by allocating towards short- or intermediate-term U.S. Treasuries when global equity market returns turn negative.


THE WEEKLY REBALANCE PROCESS

Each week, the Index combines the votes of thousands of simple models, pursuing robustness through a combination of simplicity and diversification, not complexity.

Each momentum and trend model follows its own, slightly unique process.

Each model submits a single vote as to which asset the portfolio should allocate to.

Votes across thousands of different models are tallied together.

Allocations to each asset are made in proportion to the number of votes received.


  • 5:24 – Why Did We Collaborate
  • 7:18 – What Problems Are We looking to Solve
  • 13:35 – Re-thinking Risk Management
  • 33:19 – The Surprising Fragility of Simplicity
  • 39:11 – The Diversification of Ensembles
  • 45:10 – Our Solution
  • 54:51 – Summary
  • 57:49 – Q&A

THE POWER OF ENSEMBLES

A Dimmer, Not a Light Switch

Despite the overwhelming empirical evidence supporting momentum and trend signals, our research suggests that overly simplified implementations can be surprisingly fragile.

Fortunately, many models that seek to capture momentum and trend are actually close mathematical cousins.1, 2, 3, 4, 5

By combining thousands of simple – but slightly different – models together, we seek to benefit from process diversification and create a more robust investment result.


Example ``Light Switch`` Model

Hypothetical single system transition map.  For illustrative purposes only.

Example ``Dimmer Switch`` Model

Hypothetical ensemble system transition map.  For illustrative purposes only.


PATIENT TRADING

A Little, But Frequently

Our journal-published research suggests that the simple choice of when a strategy rebalances can have a significant impact on realized strategy results.

In an effort to avoid this risk, the Newfound/ReSolve Robust Equity Momentum Index adopts a “little but frequently” philosophy to rebalancing.

Tactical signals are updated weekly but only partially implemented, allowing the Index to adapt continuously over time without making large and sudden changes.

Start asking questions.
Whether you’re looking for strategy information, how to gain access, or want to have a conversation about how our mandates might integrate into your portfolio, don’t hesitate to reach out.

Disclosures

Newfound Research receives compensation in connection with licensing its indices to third parties. Any returns or performance provided within are for illustrative purposes only and do not demonstrate actual performance. Past performance is not a guarantee of future investment results.

The Newfound/ReSolve Robust Equity Momentum Index was first calculated on a live basis on 6/20/2019.  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 otherwise described.  The performance results include reinvestment of dividends, capital gains, and other earnings.

It is not possible to invest directly in an index. Exposure to an asset class is available through investable instruments based on an index. Newfound Research does not sponsor, endorse, sell, promote or manage any investment fund or other vehicle that is offered by third parties and that seeks to provide an investment return based on the returns of any index. There is no assurance that investment products based on an index will accurately track index performance or provide positive investment returns. Newfound Research makes no representation regarding the advisability of investing in any such investment fund or other vehicle. A decision to invest in any such investment fund or other vehicle should not be made in reliance on any of the statements set forth in this document. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by Newfound Research to buy, sell, or hold such security, nor is it considered to be investment advice.

The information contained herein is intended for personal use only and should not be relied upon as the basis for the execution of a security trade. Investors are advised to consult with their broker or other financial representative to verify pricing information for any securities referenced herein. Neither Newfound Research nor any of its direct or indirect third-party data suppliers or their affiliates shall have any liability for the accuracy or completeness of the information contained herein, nor for any lost profits, indirect, special or consequential damages. Either Newfound Research or its direct or indirect third-party data suppliers or their affiliates have exclusive proprietary rights in any information contained herein. The information contained herein may not be used for any unauthorized purpose or redistributed without prior written approval from Newfound Research.

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