ETF Portfolio X-Ray: Newfound's Multi-Asset Income Portfolio

In this series, we look under the hood of some of the ETF portfolios on the market today.

Reviewed by: Cinthia Murphy
Edited by: Cinthia Murphy

There is no single recipe to building an ETF portfolio. But understanding how a portfolio is built is key to picking the right one. And choices certainly abound, with hundreds of ETF strategist portfolios commanding nearly $100 billion in combined assets today.

For that reason, we are setting out to better understand how ETF strategists go about creating these portfolios in a series of interviews that look under the hood on some of the ETF portfolios available to retail, institutional and advisor clients alike.

Today’s Portfolio:

Newfound’s Multi-Asset Income Portfolio


Newfound Research, a Boston-based institutional asset management firm behind a suite of ETF-based portfolios. The firm has nearly $500 million in total assets under management.

Who We Talked To:

Andrew Gogerty, Vice President of Investment Strategies and member of the investment team.

Portfolio AUM:

About $110 million

Primary Goal:

This portfolio is designed to provide “turnkey access” to a set of higher-income-generating asset classes, all with risk management in mind.

In today’s low-interest-rate environment, finding yield without taking on excessive risk can be difficult. With historically high equity valuations and low interest rates, forecasted returns for traditional U.S. core asset classes are anemic. Newfound believes that high-income asset classes are not only more fairly valued, but also offer a higher yield, meaning they can be used both for their income potential but also as an engine of growth within a portfolio.

The strategy picks from a universe of asset classes that include both traditional income generators such as dividend equities, investment-grade corporate bonds and high yield bonds, as well as nontraditional income generators such as bank loans, REITs, preferreds and emerging market debt.


The portfolio seeks to manage risk in three ways. First, through diversification—it incorporates 16 global high-income asset classes.

Secondly, a simple trend-following overlay is used on each asset class to remove those that are showing excessive downside risk characteristics. Finally, the remaining asset classes are weighted based on their risk-adjusted yield, favoring those positions that offer more yield per unit of volatility.

Positions are capped at 25% to reduce concentration risk. If three or fewer asset classes pass the “trend filter,” a position in short-term U.S. Treasurys will be built. The portfolio is evaluated on a weekly basis.

Target Client:

Given the portfolio’s scope to income generation and focus on risk management, it could be a good fit for just about any type of client. It can be a replacement for some equity or fixed-income exposure in someone’s portfolio, or it could be part of a broader retirement distributions strategy, making it appropriate for a retiree who wants to focus on stability and growth.

Asset Allocation Breakdown:

The portfolio has a dynamic profile that is a result of the asset classes exhibiting the most attractive yield/risk profile. Asset classes are capped at 25%. 

As of June 30, the forward annualized yield of the portfolio is estimated to be 5.4%.

For perspective on just how dynamic the allocation on this portfolio can be in an effort to de-risk during market turbulence or to add back in positive trending asset classes, back in January, 38% of the portfolio was tied to cash. Today that allocation is zero. Satellite fixed income, now the biggest asset class allocation at 39%, was a mere 6% in January.

All ETFs?


ETFs Included In This Portfolio:

The current investment universe for this portfolio includes:

PowerShares Senior Loan Portfolio (BKLN | C)

SPDR Barclays Convertible Securities ETF (CWB | C)

VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (EMLC | C-54)

PowerShares Emerging Markets Sovereign Debt Portfolio (PCY | B-60)

iShares iBoxx $ High Yield Corporate Bond ETF (HYG | B-68)

iShares International Select Dividend ETF (IDV | B-85)

Vanguard Global ex-US Real Estate Index Fund (VNQI | A-92)

SPDR Barclays International Treasury Bond ETF (BWX | B-89)

iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD | A-77)

iShares 20+ Year Treasury Bond ETF (TLT | A-83)

J.P. Morgan Alerian MLP Index ETN (AMJ)

iShares Mortgage Real Estate Capped ETF (REM | B-97)

iShares U.S. Preferred Stock ETF (PFF | B)

PowerShares S&P 500 BuyWrite Portfolio (PBP | B-68)

Vanguard High Dividend Yield Index Fund (VYM | A-96)

Vanguard REIT Index Fund (VNQ | A-92)



(The portfolio strategy is available as an SMA, UMA and mutual fund. The strategy can also be accessed via a model delivery agreement.)

Performance: (Gross, through July 15, 2016)

YTD return:         +6.3%

1-Year return:    +4.2%

Contact Cinthia Murphy at [email protected].



Cinthia Murphy is head of digital experience, advocating for the user in all that does. She previously served as managing editor and writer for, specializing in ETF content and multimedia. Cinthia’s experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. She has a bachelor’s degree in journalism from the University of Missouri-Columbia.