Loading...

TREND EQUITY // SECTOR SERIES

Objective

Seeks to capture a significant portion of broadly diversified equity market growth over a full market cycle while reducing the impact of severe and prolonged market declines.

Why does managing risk matter?

Exposures

  • Equity

Styles

  • Trend

Trade Offs

  • May not be tax efficient
  • May not closely track the strategy’s benchmark
  • Does not seek outperformance versus equity market benchmarks
  • Unlikely to protect against short-term volatility

Available in U.S. large-cap, U.S. small-cap, and Global equity variations.

Strategy Process

  • Employ a systematic trend following approach that can move the portfolio entirely to high quality, short-term fixed income in effort to avoid significant losses.
  • When invested, allocate across primary equity sectors that are exhibiting positive trends.
  • Review tactical models on a weekly basis.

Detailed process information available in the Document Center.

Research on Trend Following

  • A Trend Equity Primer: An introduction to trend equity, a strategy that seeks to benefit from the long-term, expected equity risk premium and the convex payoff of trend following.

  • Two Centuries of Momentum: Exploring the rich history of both relative and time-series momentum.

  • Read more.

Questions & Answers

What does the portfolio invest in?

The portfolio invests in exchange traded funds (ETFs) representing equities of the primary economic sectors.  We utilize ETFs as the building blocks of its portfolios because they are a transparent, cost-effective, and highly liquid means of gaining and managing exposure to particular asset classes and market sectors.

What variations are available?

There are three variations of the portfolio available: Global large-cap, U.S. large-cap, and U.S. small-cap.

How does the portfolio manage risk?

The portfolio employs a trend-following process that seeks to identify negatively trending sectors and remove them from the portfolio.  To enforce diversification, the remaining sectors are given an equal allocation within the portfolio, with a cap of 25%.  In the case where there are 3 or fewer sectors exhibiting positive trends, a position in short-term U.S. Treasuries is built.  In extreme situations, this portfolio can be invested entirely in short-term U.S. Treasuries in effort to preserve capital.

How often does this portfolio rebalance?

The portfolio is evaluated on a weekly basis.  In stable market environments, we expect to make few, if any, portfolio changes; in higher risk environments we expect to trade the portfolio more frequently in effort to keep up with changing market dynamics.

Ready to rethink how you manage risk in your portfolio?

Let us help

Investment Ideas

Go Global

We believe that international and emerging market equities offer higher expected return over the next 7-10 years than core U.S. equities.  However, these higher expected returns come with increased volatility.  We believe Newfound’s Risk Managed Global Sectors portfolio can help provide investors with risk managed access to these markets.

Manage Risk

The strategy employs a trend-following based dynamic hedging strategy.  For investors concerned about equity market volatility, this portfolio can be employed to provide access to equity market growth without necessarily exposing them to the full potential of market drawdowns.

Request more Information