Tailwinds Tactical Portfolio Suite

Transcription

1 Tailwinds Tactical Portfolio Suite Newfound Case ID: December 2015

2 The Newfound Mission Defensive Simple Consistent Thoughtful In August 2008, Newfound Research was founded based on a simple, but powerful, premise: investors care deeply about capital preservation. Newfound Research offers a full suite of tactically risk-managed ETF portfolios that seek to participate in market growth and avoid significant market declines. We believe in portfolio processes that are simple, consistent, and thoughtfully designed. Most of all, we believe that managing risk is paramount to achieving superior risk-adjusted returns. Volatility happens. Have a plan with Newfound Research. Defensive Simple Consistent Thoughtful Views risk management from the investor s point of view, seeking to participate in bull markets and avoid large losses during bear markets. Volatility will happen. It is the price of admission to the financial markets. Investors need a thoughtful plan to deal with this volatility before it happens. We believe that each strategy should seek to adhere to a simple investment objective, providing transparency both in expected outcome and process. Our research shows that simple processes are more robust to uncertainty than complicated processes an important factor in delivering consistent and repeatable results. To meet a simple objective, a strategy must be governed by a guiding policy. At Newfound, we believe that the best way to ensure consistency in our process is through a quantitatively-enabled, rulebased approach, which can help mitigate the behavioral biases that often compound into investment errors. At Newfound, we recognize the clear distinction between the algorithms that generate our investment signals and the rules we use to translate those signals into portfolios. We believe that it is with these rules the design of the portfolio that we seek to achieve our objective and manage model risk. 2

3 About Newfound Defensive Simple Consistent Thoughtful Founded to license output from our core momentum models Began to actively develop and manage customized tactical overlays and portfolios for institutions, asset managers, and large RIAs Made strategies directly available to advisors under the Newfound brand for the first time Full Suite of Tactically Risk-Managed ETF Portfolios Equity Risk Managed Global Sectors Risk Managed U.S. Sectors Risk Managed Small-Cap Sectors U.S. Factor Defensive Equity Alternative Income Multi-Asset Income Bond Alternative Total Return Newfound Strategy Suite Fixed Income 1% Target Excess Yield 2% Target Excess Yield 3% Target Excess Yield 4% Target Excess Yield Liquid Alternatives Dynamic Alternatives 3 Total Portfolio Tailwinds Conservative Tailwinds Moderate Tailwinds Growth Simple Objective Consistent Process Thoughtful Design

4 Tailwinds Tactical Portfolio Suite A Simple Objective A Consistent Process A Thoughtful Design A simple objective To provide either a conservative, moderate, or growth oriented total return portfolio with an emphasis on downside protection and upside participation. A consistent process Each sleeve of the portfolio is independently managed using one of Newfound s core strategies. A thoughtful design A sophisticated overlay is employed to thoughtfully reduce the number of ETF exposures, manage turnover, and leverage available capital in the most attractive markets and asset classes. There is no assurance that the strategy will achieve its investment objective. Newfound reserves the right to substitute the ETFs used in the investment universe. 4

5 Tailwinds Tactical Allocation Suite Thoughtful Access to Newfound s Core Strategies Each risk profile consists of up to six sleeves that are managed independently using a subset of Newfound s core strategies. RMGS Risk Managed Global Sectors RMSS Risk Managed Small-Cap MAI Multi-Asset Income TEY3 3% Target Excess Yield UST U.S. Treasuries DA Dynamic Alternatives RMGS Protect and participate in global large-cap equities Foreign Large-Cap U.S. Large-Cap U.S. Small-Cap RMSS Protect and participate in small-cap equities DA Multi-strategy alternatives portfolio with limited ability to add U.S. equity beta U.S. Equity Diversified Alternatives U.S. Treasuries Tailwinds International Credit MAI Strong risk-adjusted income by emphasizing yield and capital protection Other (MBS, Agency, ) UST 7-10 Yr. U.S. Treasuries 7-10 Yr. U.S. Treasuries U.S. Treasuries TEY3 Credit Achieve yield 3% in excess of short-term Foreign Fixed Income Treasuries with Other Fixed Income (MBS, Agency, etc.) minimum volatility There is no assurance that the strategy will achieve its investment objective. Newfound reserves the right to substitute the ETFs used in the investment universe. 5

6 Tailwinds Tactical Allocation Suite Sleeve Allocations Customized by Risk Profile Growth emphasizes domestic and international equities. Moderate holds a larger proportion of income generating and alternative assets. Conservative prioritizes income. RMGS Risk Managed Global Sectors RMSS Risk Managed Small-Cap MAI Multi-Asset Income TEY3 3% Target Excess Yield UST U.S. Treasuries DA Dynamic Alternatives Conservative Moderate Growth RMGS 13% 27% 47% RMSS 7% 13% 23% MAI 30% 30% 30% 3% TEY 15% 5% 0% Passive FI 15% 5% 0% Alternatives 20% 20% 0% Equity Maximum 50% 70% 90% Risky Asset 1 Maximum 60% 80% 100% Defensive Allocation Maximum 2 100% 100% 100% 1 Includes core equity, satellite equity and satellite fixed income 2 Defensive Allocation will vary by risk profile. It will consist of more cash for Conservative and more core fixed income for Growth. There is no assurance that the strategy will achieve its investment objective. Newfound reserves the right to substitute the ETFs used in the investment universe. 6

7 Tailwinds Tactical Allocation Suite Efficient Sleeve Integration To Pursue Market Opportunities While each of the underlying sleeves is managed independently, the allocation to each sleeve can be opportunistically adjusted to seek to maximize outperformance opportunities as markets change. RMGS and RMSS allocation processes are independent RMGS Example of Sleeve Integration RMGS fully invested, but RMSS has 50% cash position Invested Instead of creating a cash drag, reinvest capital into the stronger global equity markets Invested RMSS Cash Invested There is no assurance that the strategy will achieve its investment objective. Newfound reserves the right to substitute the ETFs used in the investment universe. 7

8 Tailwinds Tactical Allocation Suite Customizing the Defensive Position by Risk Profile All strategies in the suite have the ability to move to a 100% defensive allocation. However, the make-up of the defensive position varies by risk profile. The more aggressive the risk profile, the more freedom the defensive portfolio has to move out on the duration and credit spectrum. 100% 80% 60% 40% 20% 0% Conservative Moderate Growth 3% Target Excess Yield Passive U.S. Treasuries Cash There is no assurance that the strategy will achieve its investment objective. Newfound reserves the right to substitute the ETFs used in the investment universe. 8

9 IMPORTANT DISCLOSURES Newfound began to actively calculate the performance of the Newfound Tailwinds Conservative index, the Newfound Tailwinds Moderate index, and the Newfound Tailwinds Growth index on April 20, Performance results prior to April 20, 2014 are all backtested and hypothetical. Newfound began to manage and trade a brokerage account on June 1, 2014, which sole purpose was to track the performance of the Newfound Tailwinds Moderate index. Live dollars first began to track the Newfound Tailwinds Conservative index on June 16, 2014 and the Newfound Tailwinds Growth index on July 1, 2014 under model licensing agreements. Before you invest in the Newfound Tailwinds Conservative strategy, the Newfound Tailwinds Moderate strategy, or the Newfound Tailwinds Growth strategy, you are strongly encouraged to consult with your financial advisor. Newfound shall have the right at any time, in its sole discretion, to substitute any or all of the ETFs or other securities utilized within the investment strategy. This presentation (including the hypothetical/backtested performance results) is provided for informational purposes only and is subject to revision. This presentation relates to a rule-based index and related investment strategy which are managed by Newfound. This presentation is not an offer to sell or a solicitation of an offer to purchase an interest or shares ( Interests ) in any pooled vehicle. Newfound does not assume any obligation or duty to update or otherwise revise information set forth herein. This document is not to be reproduced or transmitted, in whole or in part, to other third parties, without the prior consent of Newfound. Certain information contained in this presentation constitutes forward-looking statements, which can be identified by the use of forward-looking terminology such as may, will, should, expect, anticipate, project, estimate, intend, continue, or believe, or the negatives thereof or other variations or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of an investment managed using the Newfound index or investment strategy may differ materially from those reflected in such forward-looking statements or in the hypothetical backtested composite results or the index s model performance results included in this presentation. The information in this presentation is made available on an as is, without representation or warranty basis. There can be no assurance that the Newfound index or related investment strategy will achieve any level of performance, and investment results may vary substantially from year to year or even from month to month. An investor could lose all or substantially all of his or her investment. Both the use of a single adviser and the focus on a single investment strategy could result in the lack of diversification and consequently, higher risk. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. You should consult your investment adviser, tax, legal, accounting or other advisors about the matters discussed herein. These materials represent an assessment of the market environment at specific points in time and are intended neither to be a guarantee of future events nor as a primary basis for investment decisions. The hypothetical/backtested performance results and model performance results should not be construed as advice meeting the particular needs of any investor. Past performance (whether actual, hypothetical/backtested or model performance) is not indicative of future performance and investments in equity securities do present risk of loss. The ability to replicate the hypothetical or model performance results in actual trading could be affected by market or economic conditions, among other things. 9

10 IMPORTANT DISCLOSURES Investors should understand that while the performance results may show a general rising trend at times, there is no assurance that any such trends will continue. If such trends are broken, then investors may experience real losses. None of Newfound nor any other person managed any product or account seeking to track the performance of the Tailwinds Conservative index prior to June 16, 2014, the Tailwinds Moderate index prior to June 1, 2014 and the Tailwinds Growth index prior to July 1, No representation is being made that any account will achieve performance results similar to those shown in this presentation. In fact, there may be substantial differences between backtested performance results and the actual results subsequently achieved by any particular investment program. As a result, the index theoretically may be changed from time to time to obtain more favorable performance results. There are other factors related to the markets in general or to the implementation of any specific investment program which have not been fully accounted for in the preparation of the hypothetical/backtested performance results, all of which may adversely affect actual portfolio management results. The information included in this presentation reflects the different assumptions, views and analytical methods of Newfound as of the date of this presentation. Each index s 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, other than the composite results, each of the index model performance subsequent to April 20, 2014 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 index inception date (April 20, 2014) is each index s 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 (except as otherwise described in this presentation). Accounts and funds managed by an adviser using the Newfound model portfolios are subject to additions and redemptions of assets under management, which may positively or negatively affect performance depending generally upon the timing of such events in relation to the market s direction. The Hypothetical Information and model performance assume full investment, whereas actual accounts and funds managed by an adviser would most likely have a positive cash position. Had the Hypothetical Information or model performance included the cash position, the information would have been different and generally may have been lower. While there have been periodic updates and improvements to the Newfound model, there have not been any material changes in the objectives or strategies of the model that have occurred that may affect results. While Newfound believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information. 10