Tactical money manager strategies have caught the attention of many investors recently, given their ability to participate in rising markets while also seeking to limit capital losses when the market declines. Newfound Research LLC's Risk Managed Global Sectors is one such strategy, providing investors access to global equities through an embedded risk-management process.
The Newfound Global Sectors Strategy offers the following:
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A tactical risk management approach - the strategy can move into 100% cash in an attempt to limit large losses1
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Additional equity exposure for your portfolio, specifically geared towards global stocks
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Elimination of cognitive biases due to its rules-based nature1
Newfound’s Risk Management Philosophy – “Protect and Participate”
Newfound acknowledges that many investors may sacrifice participation in rising markets in order to provide themselves adequate downside protection. However, this risk management approach might cause the investor to forego the total return that even a passive investment strategy would offer.
Newfound’s investment philosophy helps solve this investor problem. They aim to “protect and participate” – meaning you get exposure to global equities in order to participate in their potential upside, while also maintaining the ability to move 100% to cash when the strategy determines global conditions turn less favorable. It’s a risk managed framework that seeks to limit significant capital loss.
Newfound attempts to execute this strategy with their rules-based approach and discipline, and they do not use derivatives, leveraging, or shorting as some other tactical managers might.1
The Benefits of a Global, Tactical Equity Strategy
Close to 50% of production, sales, and profits from S&P 500 companies are generated abroad, and many growth opportunities exist outside the US. In a 2012 report by The Clearing House, they revealed that Fortune 50 Companies’ foreign revenues (as a percent of total revenue) have increased 14% over the last decade. It stands to reason that investors can potentially capitalize on global growth should it continue over time.
To gain access to these global trends, The Newfound Risk Managed Global Sectors strategy invests in 11 global sector ETFs, ranging from Large Capitalization US, Foreign Developed, to Emerging Markets Equities.
The strategy weights each sector equally, and applies a quantitative, proprietary rule-based approach to determine which sectors should remain in the portfolio and which should be eliminated or trimmed due to higher risk properties. It can begin to go to cash depending on how many sectors are deemed to be at an increased risk of loss. If all 11 sectors are exhibiting negative momentum qualities that signal further downside, the strategy can move to 100% cash/cash equivalents.1
The quantitative, rules-based approach eliminates cognitive biases, which is another way of saying it takes investor emotion out of the equation. Having a set of rules makes the decision process consistent and repeatable.
Learn More About Newfound’s Strategies and How You Can Invest
If you’d like to learn more details about the Newfound money manager strategies and whether it makes sense as an investment for you, please give one of our Wealth Managers a call today at 1-800-541-7774. You can also take just a few moments to request the information here.
Learning more about a money manager and a new investment strategy is the first step to knowing if it makes sense for you. WrapManager can help.
Sources:
1 Newfound Research
Strategy descriptions listed represent a brief outline of the portfolio’s objective. There is no guarantee that any manager or product will be successful in achieving the objective described. The strategy used by the money manager listed is not suitable for all investors. This material does not represent a personalized recommendation and does not reflect individual investor’s risk and return goals nor does it serve as the receipt of, or a substitute for, personalized advice from WrapManager, Inc. or any other investment professional.
