We believe there is an imperfect understanding of where alpha comes from.
Rather than trying to pick winners, investors should avoid the losers.
A proven team with 20+ years of successful partnership building modern,
efficient, and dependable asset management firms.
Our portfolio solutions are designed to help you build your business and
grow your client relationships.
Our custom indexes seek to achieve a singular goal – enhance all existing
investment universes by removing the losers.
Use our H-Factor System to help avoid the losers inside your portfolio.
Partner with us to access our unique model solutions so you have more
time to focus on building your practice and create wealth for your
Our custom indexes seek to achieve a singular goal – enhance all existing investment
universes by removing the losers.
We believe there is an imperfect understanding of where alpha comes from. Rather than trying to pick winners, investors should avoid the losers.
A proven team with 20+ years of successful partnership building modern, efficient, and dependable asset management firms.
Our portfolio solutions are designed to help you build your business and grow your client relationships.
AVOIDERS – New Age Alpha’s ETF suite utilizing our proprietary H-Factor methodology.
Our custom indexes seek to achieve a singular goal – enhance all existing investment universes by removing the losers.
Use our H-Factor System to help avoid the losers inside your portfolio.
Partner with us to access our unique model solutions so you have more time to focus on building your practice and create wealth for your clients.
Ahmed Zayat was ready to sell. 152 one-year old horses were set to go to auction and included among them was one of Zayat’s Thoroughbreds that did nothing to separate itself from the herd. Professional horse scouts—"Bloodstock Agents” in the vernacular—had used their traditional pedigree analysis and stopwatch times to conclude this particular horse’s future didn’t appear remarkably bright. But there was one problem. Zayat’s own people were begging him not to sell. They’d utilized a different methodology, one born of data and statistics rather than “gut feeling” and Jeff Seder’s team said all of those so-called experts were wrong. Approximately three years later, this horse, then known as American Pharoah, delivered on the team’s expectations by becoming the first horse to win the Grand Slam of Thoroughbred racing—the “Triple Crown” as well as the prestigious Breeder’s Cup Classic. What did Jeff know that everyone else didn’t?
If one boils down the definition of risk to its most fundamental premise, it is this: not knowing. Risk can be that faulty brake line in a car, that brick dropped from a rooftop or that person with infidelity issues. If one had only known about those hazards, he or she would’ve simply fixed the line, crossed the street or avoided the cheater. But the lack of knowledge of such dangers is the primordial soup from which risk arises. In the investment world, scholars have been seeking to tame risk for centuries. They’ve attempted to know risk by ascribing labels to the various types and amounts in the market. In so doing, the variety and intricacy of these metrics multiplied. As examples, they can be as common as Beta or ROI, as precise as the FCFE Ratio or as ghoulish as the Unclaimed Corpse Indicator. It’s almost as if there’s too much information available. In turn, these measures were then taught with authoritarian gravitas at universities. An unfortunate result? At the most selective investment firms, a person can’t get hired without a degree from a small handful of prestigious universities that teach risk analysis like this as gospel. The problem with this? Everyone’s looking in the same direction. They’re all learning to apply the same metrics and approaching risk the same way. They’re focusing their attention on the brake pads and ignoring the brake line; they’re fixating on the open manhole ahead and missing the falling brick from above; they’re interrogating a date about his or her salary and ignoring the tan line on their ring finger. In effect, they’re looking at the wrong risks…because they don’t know the correct risk to look for.
Different results require different thinking. Jeff Seder knew this. His work’s initial focus involved the U.S. bobsledding team. By combining a mind for data and these unique lessons learned from his previous experiences, he approached horse racing from a new vantage point. Rather than lineage, he followed the data and isolated the size of a horse’s left heart ventricle as a fantastic predictor of success. It was groundbreaking in its audacity. But he wasn’t the first person to upend a world he wasn’t classically trained in. Far from it. In fact, “Outsiders,” or those with little formal training in their chosen field, have often proven to be some of the best innovators. Precisely due to their lack of indoctrination, these disruptors don’t fall into the common traps of conventional thinking and, in fact, their ideas are often initially met with scorn. Only a small selection of examples include:
Historically, one of the most important metrics in horse racing has been pedigree. When you think about it, a horse’s lineage is often one of the first things to be presented as proof of its abilities in common conversation. Yet, think of this same metric in any other sport. For every Manning quarterback that produced careers as good as their father’s, there are untold numbers of progeny that wash out in the pros or never even make it there. So why does the sport of horse racing stubbornly cling to this metric? The reason is Inflexibility. It’s a particularly insidious problem that infects “Insiders.” Put simply, it’s a rush to judgment based on previous experience that prohibits the exploration of new thinking. Studies have shown that Insiders are far more prone to this trap, the Einstellung Effect, than Outsiders. And this often explains many of the innovations made by people who weren’t formally indoctrinated in a chosen field. Julian Koski and Armen Arus like to say they have one university degree between the two of them. It’s a point of pride, in fact. They weren’t trained in the traditional mindsets like the vast majority of those working on Wall Street. They didn’t establish New Age Alpha, or their previous company, Transparent Value, to be another drab, uninspired asset management firm. They wanted to reframe the question of risk in its entirety and divorced themselves from traditional Wall Street risk metrics. Instead, they drew on the principals of insurance to completely reimagine the investment business. They saw the failure in asset management for what it truly was: a myopic tendency by Wall Street to focus on measures that identify uncertainty rather than focusing on the mother of all risk—Human Behavior, which they believed leads directly to loss. It’s the risk of human behavior. This decouples stock prices from their underlying fundamentals. It’s a risk that cannot diversified away, only avoided. Put simply, investors have always attempted to pick stock market winners, but such an approach is archaic, unsystematic, and unpredictable. Recognizing that investors impound vague and ambiguous information into their investment decisions at all levels of the market, they reimagined asset management to attempt to strip out this risk. Julian and Armen discovered an innovative path that can unearth a new form of alpha by simply avoiding the losers. In retrospect, it feels so obvious. Like measuring the size of a horse’s heart rather than its family tree.
New Age Alpha is ushering in a new age of asset management by applying an actuarial-based approach to investment portfolios. Utilizing these principles built by the insurance industry, we construct portfolio solutions, indexes, and tools that aim to identify and avoid a mispricing risk caused by investor behavior. Embedding well-established principles of probability theory in our investment methodology, we construct solutions that aim to avoid mispriced stocks in a portfolio—losers. We combine the alpha potential of active management with the advantages of rules-based investing to build differentiated equity, fixed income and ESG-themed portfolios that drive long-term outperformance.
New Age Alpha refers to the New Age Alpha separate but affiliated entities, generally, rather than to one particular entity. These entities are New Age Alpha LLC and New Age Alpha Advisors, LLC (“New Age Alpha Advisors”). Investment advice is offered through New Age Alpha Advisors, LLC a wholly-owned subsidiary of New Age Alpha LLC. New Age Alpha Advisors is an investment advisor registered with the U.S. Securities and Exchange Commission. New Age Alpha Advisors, located in the State of New York, only transacts business in those states in which it is properly registered or qualifies for an applicable exemption or exclusion from such state’s registration requirements. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security. It is not possible to invest directly in an index. We are not soliciting any action based on this material. It is for general information purposes only. To the extent that it includes references to securities, these references do not constitute a recommendation to buy, sell or hold such security, the information may not be current, and it should not be read to suggest that it is an endorsement of New Age Alpha or its products or strategies. There is no intention for New Age Alpha to include any securities referenced herein, if any, in its portfolios unless they become part of the established universe of eligible securities that are part of each specific investment strategy. Past performance is not indicative of future results. Current and future results may be lower or higher than those shown. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by New Age Alpha), or an Index, product, or a referenced strategy, either directly or indirectly, in this material, will be profitable or equal to corresponding indicated performance levels. Information contained herein and used in the analysis provided by New Age Alpha has been obtained from sources believed to be reliable, but not guaranteed. It has been prepared solely for informational purposes on an “as is” basis and New Age Alpha does not make any warranty or representation regarding the information. Investors should be aware of the risks associated with data sources and quantitative processes used in our investment management process. Errors may exist in data acquired from third-party vendors. This overview is limited to providing general information about New Age Alpha and its investment advisory services. New Age Alpha’s specific advice is given only within the context of its contractual agreements with each client. Investment advice may only be rendered after the delivery of Form ADV Part 2 (an investment advisor’s disclosure document) and the execution of an investment agreement by the client and New Age Alpha. New Age Alpha’s Form ADV Part 2 and accompanying descriptions are available upon request.
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