Corey Hoffstein- Strategy Construction: Why Simple is Fragile (EP.11)

This episode of Gestalt University could not be timelier, having been recorded two weeks prior to the current market correction that began in late February 2020. The discussion of fragile versus robust approaches is especially important given how recent volatility has led simpler tactical strategies to signal a complete shift away from equities and towards cash. This in turn has left practitioners second-guessing the wisdom of their indicators and hesitant to pull the trigger. For this fascinating conversation we bring none other than Corey Hoffstein of Newfound Research. Corey has lived by the “risk cannot be destroyed, only transformed” dictum, which has guided the core of his investment philosophy across three axes of diversification – sources of risk, process and time.  Our similar thinking (including recent warnings of the dangers involving simple DIY tactical heuristics) led to an extensive research collaboration and ultimately to co-launch the Newfound / ReSolve Robust Equity Momentum Index (following requests from our FinTwit brethren). Our discussion with Corey goes deep into the benefits of building strategies based on Ensemble Methods while considering the impacts of cost, the role of timing and luck, and ways to increase one’s confidence in a back-test. We also examine the behavioral benefits of strategy execution using an array of signals as opposed to binary approaches. A plateful for investors of all stripes, especially practitioners.