Corey Hoffstein from Newfound and ReturnStacked ETFs had a Twitter thread that recapped a webinar they put on about how to use their funds but it seemed to have an edge to it like it was defensively justifying the idea.
Take that Tweet combined with the two older funds ReturnStacked Stocks & Trend (RSST) and Return Stacked Bonds & Trend (RSBT) which appear to be lagging as per the following.
Six months in the case of RSST is a very short period but that is a big difference.
A year where RSBT is concerned is not a long time but it's not nothing and that is a big gap.
I agree with the idea of not tunnel visioning on performance alone but that depends on what we're talking about. I say all the time if gold is the best performer in your portfolio, then chances are things aren't going very well. That is even more the case with client/personal holding BTAL. We've modeled countless portfolios over the last year and half or so with BTAL and it has shown to consistently lower volatility and help with performance.
BTAL, as an example, allows for a much greater allocation to equities leading to a much higher return than plain vanilla 60/40 with about the same volatility. And you can see how BTAL by itself just sort of limps along.
RSBT and RSST are talked about in terms of capturing the beta of bonds and stocks respectively and then adding managed futures on top to add the opportunity for "excess return." The idea has merit and Corey's comment about making sure you're looking at the right things is valid but you need some basis to think that the strategy you're considering can work and I'm having trouble seeing that with the ReturnStacked ETFs at this point. There was a related fund that we've looked at a few times, the Newfound Risk Managed US Growth which is now closed, it had symbol NFDIX and as opposed to 100/100, it was 75/75. It too lagged badly.
The concept of leverage as they employ it can work but it appears to me that with their funds, something has been off regardless of whether I can figure out what about it has been off.
The WisdomTree US Efficient Core ETF (NTSX) is a capital efficient (synonymous with ReturnStacked) fund that leverages up in such a way that a 67% allocation to it just about equals 100% into a 60/40 strategy like the Vanguard Balanced Index Fund (VBAIX).
Portfolio 3 takes a similar approach to how ReturnStacked suggests their funds are used by allocating 10% to managed futures on top of a "normal" stock/bonds mix. The lower volatility and higher performance of Portfolio 3 is merely incremental but we can take NTSX, plug in different types of alts intended to smooth out the ride and get back tests that also have incremental benefit.
Speaking of alts, April was obviously a rough month for equities. It looks like the S&P 500 was down 4.07% for the month. I wanted to take a look at how various types of alts that are intended to help smooth out the ride one way or another did as a microcosm.
Just typical Yahoo Finance weirdness that not all them capture today's close. The names don't matter, they're all funds that we look at here regularly and/or are in my ownership universe. Client/personal holding BLNDX is not on the chart but it was down 2.3%. A month is obviously a very short period and while a couple of them were down (less than the market) I would say they collectively helped with avoiding the full brunt of the 4.07% decline. It wouldn't have been surprising if any of them disappointed for the month, it just turns out that wasn't the case on this go around. The potential for one or two to not work out is why you diversify your diversifiers.
Interestingly, managed futures looks like it did well even though the cocoa trade blew up on Monday. I don't follow every single managed futures fund but of the 6 or 7 I do watch, only the Invesco Managed Futures Fund (RYMFX), which I believe to be the oldest in the group, was down for the month.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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