Key Takeaways
- • Newfound Research's Return Stacked ETF suite has raised $1 billion since launching its first product in February 2023, comprising seven funds that employ a leverage-based diversification strategy.
- • Return stacking solves a critical problem in alternative asset allocation: investors can now maintain full core stock and bond exposure while simultaneously layering alternative strategies (managed futures, merger arbitrage, carry strategies) on top, rather than selling traditional assets to make room.
- • The strategy uses capital-efficient derivatives to deliver more than $1.00 of exposure per $1.00 invested, enabling institutional investors to access non-correlated return streams without the behavioral friction of abandoning low-cost, transparent equity and bond portfolios.
- • Corey Hoffstein, CEO and CIO of Newfound Research, identified the structural problem that plagued alternative strategies in the 2010s: diversification required "addition through subtraction," forcing investors to choose between transparent, low-cost 60/40 allocations and opaque alternative strategies with extended sideways periods.
- • The Return Stacked brand addresses both numerical and behavioral challenges by pre-packaging alternatives with traditional core holdings, eliminating the psychological burden of selling trusted assets to fund strategies that may underperform for extended periods.
Summary
Newfound Research has successfully scaled its Return Stacked ETF suite to $1 billion in assets since launching its first product in February 2023, signaling growing institutional acceptance of return-stacking strategies as a solution to longstanding portfolio construction challenges. The suite currently comprises seven funds designed to overcome a critical friction point that has plagued alternative asset managers for over a decade.
The core innovation addresses a paradox that emerged during the 2010s bull market in equities and bonds: traditional diversification theory suggested that adding non-correlated alternative strategies would enhance portfolio efficiency, yet the exceptionally low costs and transparent nature of passive 60/40 allocations proved difficult to displace. According to Corey Hoffstein, CEO and CIO at Newfound Research, the problem was structural. "When you ask someone to add managed futures, you are implicitly asking them to sell stocks and bonds to make room, making traditional diversification a process of addition through subtraction," Hoffstein explains. This approach created both mathematical inefficiency and behavioral resistance—investors faced the psychological burden of abandoning familiar, low-cost equity and bond holdings to purchase opaque trading strategies that could "bumble along for years" without generating measurable outperformance.
Return stacking solves this problem through capital-efficient leverage via derivatives. The proposition is straightforward: for every dollar invested, the firm delivers one dollar of traditional stock or bond exposure plus one dollar of an alternative strategy—all pre-packaged together. This structure allows investors to maintain full participation in core equity and bond returns while simultaneously gaining exposure to diversifying return streams such as managed futures, merger arbitrage, and diversified carry strategies. The approach eliminates the false choice between traditional diversification and core portfolio integrity.
Newfound Research, founded in 2008 as a quantitative research firm providing signals to other asset managers, launched its own mutual fund suite in 2014 before pivoting to the ETF model. The firm's co-founder, alongside colleague Rodrigo Gordillo who coined the term "return stacking," recognized that institutional portfolio construction required solutions that preserved behavioral discipline while solving the capital efficiency problem. The Return Stacked brand now serves institutional, family office, and alternative investment professionals seeking to enhance diversification without sacrificing portfolio transparency or incurring the explicit costs of liquidating core holdings.
The core innovation addresses a paradox that emerged during the 2010s bull market in equities and bonds: traditional diversification theory suggested that adding non-correlated alternative strategies would enhance portfolio efficiency, yet the exceptionally low costs and transparent nature of passive 60/40 allocations proved difficult to displace. According to Corey Hoffstein, CEO and CIO at Newfound Research, the problem was structural. "When you ask someone to add managed futures, you are implicitly asking them to sell stocks and bonds to make room, making traditional diversification a process of addition through subtraction," Hoffstein explains. This approach created both mathematical inefficiency and behavioral resistance—investors faced the psychological burden of abandoning familiar, low-cost equity and bond holdings to purchase opaque trading strategies that could "bumble along for years" without generating measurable outperformance.
Return stacking solves this problem through capital-efficient leverage via derivatives. The proposition is straightforward: for every dollar invested, the firm delivers one dollar of traditional stock or bond exposure plus one dollar of an alternative strategy—all pre-packaged together. This structure allows investors to maintain full participation in core equity and bond returns while simultaneously gaining exposure to diversifying return streams such as managed futures, merger arbitrage, and diversified carry strategies. The approach eliminates the false choice between traditional diversification and core portfolio integrity.
Newfound Research, founded in 2008 as a quantitative research firm providing signals to other asset managers, launched its own mutual fund suite in 2014 before pivoting to the ETF model. The firm's co-founder, alongside colleague Rodrigo Gordillo who coined the term "return stacking," recognized that institutional portfolio construction required solutions that preserved behavioral discipline while solving the capital efficiency problem. The Return Stacked brand now serves institutional, family office, and alternative investment professionals seeking to enhance diversification without sacrificing portfolio transparency or incurring the explicit costs of liquidating core holdings.
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