Andy Kern, Senior Portfolio Manager, New Age Alpha Jan 28, 2021 9:27:05 AM 7 min read Stock Insights

Complementing a Portfolio Using New Age Alpha U.S. Large-Cap Leading 50 Index

At New Age Alpha, we are reimagining the asset management industry by providing ETFs, indexes, SMAs, data and tools that seek to outperform by avoiding the losers – stocks we believe to be overpriced. We believe advisors can potentially achieve large cap alpha by replacing a portion of their existing S&P 500 allocation with exposure to the New Age Alpha’s U.S. Large-Cap Leading 50 Index.

A unique approach: The New Age Alpha U.S. Large-Cap Leading 50 Index follows New Age Alpha’s proprietary methodology, which seeks to deliver alpha by using the Human Factor to avoid the losers. We believe the Human Factor identifies a type of idiosyncratic risk, unlike traditional firm specific risk, that may impact stock prices and cannot be diversified away. To mitigate this risk, New Age Alpha identifies and removes the 450 stocks within the S&P 500® that have the highest Human Factor.

Take what’s good and aim to make it better: A hypothetical portfolio comprised of a 70% allocation to the S&P 500® Index and a 30% allocation to the New Age Alpha U.S. Large-Cap Leading 50 Index since January 1, 2002 resulted in outperformance with comparable beta and volatility. We call this the 70/30 approach and we encourage you to consider it.

Diversify your methodology. We all know diversification of securities is important, but diversification of the methodologies used to select those securities is too. Instead of more exposure to stocks with a large market cap like the S&P 500, the New Age Alpha U.S. Large-Cap Leading 50 Index seeks exposure to the companies within the S&P 500 that are least likely to fail to deliver the growth implied by the stock price. Take a piece of your S&P 500 allocation and replace it with exposure to the New Age Alpha U.S. Large-Cap Leading 50 Index.

Potential alpha source: By avoiding companies with high Human Factor, the New Age Alpha U.S. Large-Cap Leading 50 Index provides a potential alpha source that does not rely on traditional investment factors such as value, momentum, etc., and may complement passive market-cap weighted index strategies by combining the alpha potential of active management with the advantages of rules-based investing.

New Age Alpha U.S. Large-Cap Leading 50 Index Performance:Growth-of-$1000_LC_50


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S&P 500 Exposure with Alpha Opportunity:

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Disclosures :

This document is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. We discuss general market activity, industry or sector trends, or other broad-based economic or market conditions and this should not be construed as research, securities recommendations or investment advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Any forecasts or predictions are subject to high levels of uncertainty that may affect actual performance. Accordingly, all such predictions should be viewed as merely representative of a broad range of possible outcomes.

Past performance is not indicative of future results. Current and future results may be lower or higher than those shown. The performance results are gross of fees and expenses and reflect the reinvestment of dividends and interest. The information presented above does not reflect the effective applicable fees and the performance has not been adjusted to give effect to such fees. An investor in the strategy may experience a loss. It is not possible to invest directly in an index. No client or prospective client should assume that any information presented in this presentation serves as the receipt of, or a substitute for, personalized individual advice from New Age Alpha or any other investment professional. Any charts, graphs or tables used in this presentation are for illustrative purposes only and should not be construed as providing investment advice and should not be construed by a client or a prospective client as a solicitation to effect, or an attempt to effect transactions in securities, or the rendering of personalized investment advice. Information contained herein does not reflect the actual performance of the strategy. All research and data is simulated and should not be considered indicative of the skill of New Age Alpha.

Unless otherwise noted, data for the Calendar Year Return period is hypothetical, not annualized and back-tested. Back-tested performance is provided for informational purposes to indicate historical performance had the strategy been available over the relevant period. New Age Alpha’s back-tested results do not represent the results of actual trading using client assets but were achieved by means of the retroactive application of the strategy's investment methodology that was designed with the benefit of hindsight. The results do not necessarily reflect the impact that any material market or economic factors may have had on the strategy.


All New Age Alpha trademarks are owned by New Age Alpha LLC. S&P® is a registered trademark of Standard & Poor's Financial Services LLC (SPFS). All other company or product names mentioned herein are the property of their respective owners and should not be deemed to be an endorsement of any New Age Alpha product or strategy.

The S&P 500® is widely regarded as the best single gauge of large-cap US equities. There is over USD 11.2 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 4.6 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization.


At the time of this report, the COVID-19 outbreak is resulting in widespread disruption to financial markets and normal patterns of business activity across the world and has led to significant market volatility and accommodative monetary policies by global central banks and companies around the world activating business continuity planning (BCP) strategies to safeguard the well-being of employees, the continued operation of critical functions and the support of clients. The extent of the impact of these measures on the COVID-19 outbreak and on companies’ operational and financial performance, and on the markets and national economies more generally, will depend on future developments including the efficacy of these measures and the duration and continued spread of the outbreak.


Information contained herein 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.


The H-Factor - The H-Factor is a risk that comes from humans interpreting vague or ambiguous information in a systematically incorrect way. We believe that the H-Factor causes stocks to be mispriced. We measure how the H-Factor affects stock prices to identify which stocks are over or under priced. By measuring the H-Factor and deliberately avoiding high H-Factor stocks (stocks that are overpriced) , we can outperform.

Alpha - The extra return due to nonmarket factors. This risk-adjusted factor takes into account both performance of the market as a whole and the volatility of the manager’s performance. A positive Alpha indicates that a manager has produced returns above the expected amount at that risk level, and vice versa for a negative.

Standard Deviation - A measure of how widely an investment or investment strategy’s returns move relative to its average returns for an observed period. A higher value implies more “risk”, in that there is more of a chance the actual return observed is farther away from the average return.

Beta - A measure of the volatility of an index or investment relative to a benchmark. A reading of 1.00 indicates that the investment has moved in lockstep with the benchmark; a reading of -1.00 indicates that the investment has moved in the exact opposite direction of the benchmark.

Sharpe Ratio - A measure of risk-adjusted return. Higher values indicate greater return per unit of risk, specifically standard deviation, which is viewed as being desirable.

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