Newfound Research and Island Light Capital Introduce SignalRock™
March 8, 2012 | In The News
BOSTON, MA –Newfound Research LLC and Island Capital Corporation have partnered to create the suite of Signal Rock™ proprietary investment products. The Dynamic Balanced Portfolio is the first SignalRock™ investment solution that combines Newfound Research’s exposure recommendation signals with Island Light Capital Corporation’s model portfolios, providing investors with dynamically risk-managed and optimally diversified portfolios.
The Dynamic Balanced Portfolio is a globally diversified, multi-asset class portfolio, designed to tactically pivot around a traditional 60/40 “balanced” stock/bond portfolio mix. Based on Newfound Research’s exposure recommendation signals, this strategy moves up and down the risk spectrum into one of five strategic allocations provided by Island Light Capital.
“Newfound Research and Island Light came together to create an innovative solution that helps financial advisors dynamically manage clients’ assets,” said Tom Rosedale, Chief Executive Officer of Newfound Research.
“It has become the industry standard for an asset allocation to serve as an investor risk profile, but this relationship only holds for expected returns; investors, unfortunately, live in the world of realized returns,” said Corey M. Hoffstein, Chief Strategy and Technology Officer of Newfound Research. “The SignalRockTM Dynamic Balanced portfolio addresses these concerns by tactically reacting to changing market environments, with specific focus on downside risk management.”
All of the strategic allocations are optimized for risk controls and implemented with liquid ETFs across a broad range of global asset classes. In concert, the product actively encourages attainment of these four essential goals:
- Maintain a consistent risk profile by dynamically managing for market risk
- Allow participation in market upside by investing in diversified global equities
- Minimize exposure to significant dislocations by using downside risk techniques
- Optimize for risk control using state-of-the-art optimization methods
The Global Equity Risk Indicator (GERITM), Newfound Research’s proprietary barometer for equity risk, is utilized in the SignalRockTM Dynamic Balanced Portfolio to determine the appropriate strategic allocation for each rebalancing period. The GERITM is constructed by aggregating exposure signals on multiple global equity markets. When risk is high, the tactical allocation becomes defensive, and when risk is low, the tactical allocation increases equity exposure. The GERI™ values then translate to one of five optimized allocations.
Matthew Pierce, President of Island Light Capital, said, “Instability and changes in the realized efficient frontier can cause unexpected portfolio behavior, especially in extreme market dislocations, when assets move together unexpectedly and standard diversification opportunities fail. By moving between strategic allocations based on the degree of market risk, we can more actively manage the investment risk profile to keep portfolio volatility stable.”
The SignalRockTM Dynamic Balanced Portfolio is available as a model portfolio to asset managers and financial advisors on a non-exclusive licensing basis, and can be used as a tool to manage some or all of a client’s assets using ETFs, mutual funds or other securities chosen by the advisor. The SignalRockTM solutions can be implemented by the asset manager or financial advisor under the SignalRockTM name or on a white-labeled basis.
About Newfound Research LLC
Newfound Research LLC is a Boston-based financial technology and investment product innovation firm. It provides data from its proprietary research and algorithms to investment professionals for driving dynamic and innovative investing and asset allocation strategies, including through mutual funds, SMAs, UMAs, hedge funds and other investment vehicles. Newfound Research’s quantitative processes help create a simple, repeatable investment process for managing downside while allowing significant upside participation. Utilized by the most discriminating investment managers, these processes raise assets through performance and positioning enhancement. Newfound Research’s utilities range from proprietary tactical timing models and proprietary risk measures to customized allocation techniques. For more information about Newfound Research, please visit www.newfoundresearch.com.
About Island Light Capital Corporation
Island Light is an innovative investment advisory and consulting firm that specializes in the development of optimally diversified investment portfolios. Our Enlightened Investing approach synthesizes state-of-the-art quantitative investment technology, institutional expertise, disciplined investment processes and intelligent security selection. Island Light’s investment products deliver globally diversified portfolios that span the risk spectrum. Our customers are institutional investors and financial advisors seeking to take advantage of our customized services ranging from a collaborative investment committee structure to model portfolios. Via proven methodologies, Enlightened Investing assures our clients will stay on the cutting-edge of innovation while taking comfort in a disciplined process that seeks to maximize returns for any given level of risk.
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