Episode 3

E3. Stacking In Higher Rate Environment, Taxes, Trend Replication Update

In this episode, the Get Stacked team, consisting of Rodrigo Gordillo, Corey Hoffstein, Adam Butler and Mike Philbrick delve into the intricacies of Return Stacking, market trends, and the impact of taxes on investment strategies. They provide detailed insights into their research and findings, discussing the implications of their work for the investment landscape.

Key Points

  • Higher interest rates do not necessarily reduce the efficacy of return stacking, as the strategy focuses on excess returns over the risk-free rate.
  • Tax considerations are significant when dealing with managed futures and commodities within return stacking strategies, but proper asset location can help mitigate tax burdens.
  • Combining top-down and bottom-up replication methods in trend-following strategies significantly reduces tracking error, providing a more reliable replication of the SocGen CTA Trend Index.

(0:00) Introduction to the topic of risk-free rates and episode overview

(2:36) Return stacking in a higher interest rate environment and tax considerations

(4:15) Trend replication research and fundamentals of excess returns

(10:18) Leveraging futures contracts for portfolio construction

(17:31) Importance of non-correlated return streams in investing

(21:38) Deep dive into tax implications of return stacking

(25:18) Tax efficiency comparison: Stacked strategies vs. traditional funds

(32:23) Enhancing trend replication strategies and decision-making

(37:36) Top-down vs. bottom-up approaches in trend replication

(42:01) Correlation, tracking error, and trend definition analysis

(50:54) Realized tracking error and volatility weighting in models

(56:26) Optimizing gross returns and turnover in trend models

(1:02:12) Trend lookback periods and their impacts pre- and post-2008

(1:07:28) Market-specific contributions to trend-following performance

(1:13:34) WTI crude, commodities, and correlation dynamics in trend models

(1:18:00) Sponsor: XY Capital

(1:18:37) Using extensive data for model training and market replication

(1:22:05) Universe selection's impact on tracking error and ensemble methods

(1:30:31) Validating design principles and preview of the next episode

(1:32:27) Additional resources for listeners and closing remarks

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About your hosts

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Rodrigo Gordillo

Rodrigo Gordillo is the President and Portfolio Manager at ReSolve Asset Management Global, an alternative asset management firm specializing in globally diversified systematic investment strategies. He co-founded ReSolve Asset Management Inc. in 2015 and expanded to ReSolve Asset Management Global in 2021. Starting his career at John Hancock focusing on pensions, Gordillo transitioned to the ultra-high-net-worth sector with i3 Advisors Inc. He held significant roles at Macquarie Private Wealth, Dundee Goodman Private Wealth, and Richardson GMP, enhancing his expertise in investment decisions and client wealth management.
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Corey Hoffstein

Corey Hoffstein is the CEO and Chief Investment Officer of Newfound Research, a quantitative investment and research firm based in the Greater Tampa Bay Area, United States. Hoffstein co-founded Newfound Research with the aim of assisting investors in proactively managing investment risks through diversification, specifically by leveraging Return Stacking™ strategies. The firm specializes in managing alternative strategies and capital-efficient solutions, enabling the implementation of these innovative investment concepts. In addition to his role at Newfound Research, Hoffstein also serves as a Portfolio Manager at Return Stacked® Portfolio Solutions.