Hybrid Strategies Allocation Tool

Allocating to Hybrid Strategies

What Golf and Investing Can Tell Us About the Benefits of a Hybrid Approach

Why Choose a Hybrid Investing Approach?

If you are a golfer, there is a good chance you have a hybrid club in your bag. Despite being practically nonexistent 20 years ago, hybrid golf clubs are now used by most professional golfers, regularly part of a golfer’s set, and in two-thirds of golf iron sets sold today.

A hybrid golf club borrows designs from both irons and woods. It was created out of a need to get more versatility and consistency. This offers an interesting parallel to investing. Hybrid investment strategies, especially those that combine equities and managed futures, offer many potential advantages, including:

You don’t need to give up your equity exposure. Many financial advisors find it difficult to simply get out of equities despite being concerned about the market.
You get a potential tail risk hedge for structural market changes. Historically, managed futures have performed well in periods of market turmoil. A managed futures strategy overlay on an equity portfolio provides the potential for meaningful positive returns in the overall portfolio even during severe equity market declines.
In theory, an investor has the potential to realize more exposure for each dollar invested. Because many managed futures strategies attempt to provide notional leverage in a minimally correlated manner, it is possible to get over $1.00 of exposure for each $1.00 you invest. However, if participating in this strategy, there is no guarantee this will be the case.

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50/70 Equity/Managed Futures Hybrid Strategy Allocator Tool

50/40/10 Allocation

Notional Exposure per $1.00 Invested

Historical Investment Outcome for 50/40/10 Portfolio compared to 60/40 Portfolio:

S&P 500 Total Return Index (Equities), Bloomberg Barclays US Aggregate Bond Total Return Index (Fixed Income), Barclay CTA Index (Managed Futures) monthly return data from December 1989 to December 2019. Blended portfolios rebalanced monthly. Source: Bloomberg LP.

	50/40/10	60/40	Diff
Cumulative Return	1260%	1087%	173.12%
Annualized Return	9.17%	8.67%	0.50%
Standard Deviation	8.17%	8.77%	-0.60%
Return/Risk	1.12	0.99	0.13
Maximum Drawdown	-28.87%	-32.54%	3.67%

Growth of $10K

Drawdowns

Rolling 3-Year Correlation to S&P 500

Annual Returns

Annual	50/40/10	60/40
12/31/1990	4.49%	1.81%
12/31/1991	25.36%	24.77%
12/31/1992	7.93%	7.59%
12/31/1993	11.29%	9.99%
12/31/1994	-0.69%	-0.33%
12/31/1995	31.00%	29.66%
12/31/1996	14.94%	14.97%
12/31/1997	23.89%	23.62%
12/31/1998	21.14%	20.99%
12/31/1999	10.78%	12.00%
12/31/2000	1.15%	-1.00%
12/31/2001	-2.18%	-3.71%
12/31/2002	-6.94%	-9.82%
12/31/2003	18.19%	18.48%
12/31/2004	8.46%	8.30%
12/31/2005	4.13%	4.00%
12/31/2006	11.05%	11.12%
12/31/2007	7.21%	6.22%
12/31/2008	-19.01%	-22.06%
12/31/2009	17.72%	18.40%
12/31/2010	12.58%	12.13%
12/31/2011	5.16%	4.69%
12/31/2012	10.84%	11.31%
12/31/2013	15.57%	17.56%
12/31/2014	11.12%	10.62%
12/31/2015	1.18%	1.28%
12/31/2016	7.90%	8.31%
12/31/2017	13.54%	14.21%
12/31/2018	-2.35%	-2.35%
12/31/2019	22.20%	22.18%

Rolling 3-Year Returns

	50/40/10	60/40
Number of 3-Year Periods	325	325
Average 3-Year Annualized Return	9.06%	8.63%
Best 3-Year Annualized Return	23.10%	23.01%
Worst 3-Year Annualized Return	-5.46%	-7.24%
Standard Deviation of 3-Year Periods	5.94%	6.39%
Profitable Periods (%)	91.38%	86.77%
Average Profitable Period Return (Annualized)	10.07%	10.33%
Unprofitable Periods (%)	8.62%	13.23%
Average Unprofitable Period Return (Annualized)	-1.60%	-2.50%

Rolling 5-Year Returns

	50/40/10	60/40
Number of 5-Year Periods	301	301
Average 5-Year Annualized Return	8.91%	8.44%
Best 5-Year Annualized Return	20.14%	20.09%
Worst 5-Year Annualized Return	-1.18%	-2.26%
Standard Deviation of 5-Year Periods	4.73%	5.05%
Profitable Periods (%)	99.34%	99.00%
Average Profitable Period Return (Annualized)	8.97%	8.54%
Unprofitable Periods (%)	0.66%	1.00%
Average Unprofitable Period Return (Annualized)	-0.62%	-1.33%

40/40/20 Allocation

Notional Exposure per $1.00 Invested

Historical Investment Outcome for 40/40/20 Portfolio compared to 60/40 Portfolio:

	40/40/20	60/40	Diff
Cumulative Return	1454%	1087%	366.68%
Annualized Return	9.66%	8.67%	0.99%
Standard Deviation	7.66%	8.77%	-1.11%
Return/Risk	1.26	0.99	0.27
Maximum Drawdown	-25.02%	-32.54%	7.52%

Growth of $10K

Drawdowns

Rolling 3-Year Correlation to S&P 500

Annual Returns

Annual	40/40/20	60/40
12/31/1990	7.21%	1.81%
12/31/1991	25.95%	24.77%
12/31/1992	8.26%	7.59%
12/31/1993	12.60%	9.99%
12/31/1994	-1.06%	-0.33%
12/31/1995	32.34%	29.66%
12/31/1996	14.89%	14.97%
12/31/1997	24.16%	23.62%
12/31/1998	21.26%	20.99%
12/31/1999	9.57%	12.00%
12/31/2000	3.33%	-1.00%
12/31/2001	-0.65%	-3.71%
12/31/2002	-4.00%	-9.82%
12/31/2003	17.89%	18.48%
12/31/2004	8.62%	8.30%
12/31/2005	4.25%	4.00%
12/31/2006	10.98%	11.12%
12/31/2007	8.21%	6.22%
12/31/2008	-15.87%	-22.06%
12/31/2009	17.03%	18.40%
12/31/2010	13.03%	12.13%
12/31/2011	5.63%	4.69%
12/31/2012	10.36%	11.31%
12/31/2013	13.62%	17.56%
12/31/2014	11.63%	10.62%
12/31/2015	1.07%	1.28%
12/31/2016	7.50%	8.31%
12/31/2017	12.88%	14.21%
12/31/2018	-2.35%	-2.35%
12/31/2019	22.21%	22.18%

Rolling 3-Year Returns

	40/40/20	60/40
Number of 3-Year Periods	325	325
Average 3-Year Annualized Return	9.49%	8.63%
Best 3-Year Annualized Return	23.59%	23.01%
Worst 3-Year Annualized Return	-3.66%	-7.24%
Standard Deviation of 3-Year Periods	5.55%	6.39%
Profitable Periods (%)	97.85%	86.77%
Average Profitable Period Return (Annualized)	9.73%	10.33%
Unprofitable Periods (%)	2.15%	13.23%
Average Unprofitable Period Return (Annualized)	-1.57%	-2.50%

Rolling 5-Year Returns

	40/40/20	60/40
Number of 5-Year Periods	301	301
Average 5-Year Annualized Return	9.37%	8.44%
Best 5-Year Annualized Return	20.19%	20.09%
Worst 5-Year Annualized Return	-0.10%	-2.26%
Standard Deviation of 5-Year Periods	4.45%	5.05%
Profitable Periods (%)	99.67%	99.00%
Average Profitable Period Return (Annualized)	9.40%	8.54%
Unprofitable Periods (%)	0.33%	1.00%
Average Unprofitable Period Return (Annualized)	-0.10%	-1.33%

30/40/30 Allocation

Notional Exposure per $1.00 Invested

Historical Investment Outcome for 30/40/30 Portfolio compared to 60/40 Portfolio:

	30/40/30	60/40	Diff
Cumulative Return	1670%	1087%	582.33%
Annualized Return	10.14%	8.67%	1.47%
Standard Deviation	7.25%	8.77%	-1.52%
Return/Risk	1.4	0.99	0.41
Maximum Drawdown	-21.47%	-32.54%	11.07%

Growth of $10K

Drawdowns

Rolling 3-Year Correlation to S&P 500

Annual Returns

Annual	30/40/30	60/40
12/31/1990	9.99%	1.81%
12/31/1991	26.52%	24.77%
12/31/1992	8.59%	7.59%
12/31/1993	13.92%	9.99%
12/31/1994	-1.44%	-0.33%
12/31/1995	33.69%	29.66%
12/31/1996	14.83%	14.97%
12/31/1997	24.43%	23.62%
12/31/1998	21.34%	20.99%
12/31/1999	8.36%	12.00%
12/31/2000	5.55%	-1.00%
12/31/2001	0.87%	-3.71%
12/31/2002	-1.01%	-9.82%
12/31/2003	17.57%	18.48%
12/31/2004	8.77%	8.30%
12/31/2005	4.38%	4.00%
12/31/2006	10.92%	11.12%
12/31/2007	9.21%	6.22%
12/31/2008	-12.63%	-22.06%
12/31/2009	16.34%	18.40%
12/31/2010	13.46%	12.13%
12/31/2011	6.09%	4.69%
12/31/2012	9.87%	11.31%
12/31/2013	11.70%	17.56%
12/31/2014	12.14%	10.62%
12/31/2015	0.95%	1.28%
12/31/2016	7.08%	8.31%
12/31/2017	12.22%	14.21%
12/31/2018	-2.37%	-2.35%
12/31/2019	22.20%	22.18%

Rolling 3-Year Returns

	30/40/30	60/40
Number of 3-Year Periods	325	325
Average 3-Year Annualized Return	9.91%	8.63%
Best 3-Year Annualized Return	24.08%	23.01%
Worst 3-Year Annualized Return	-1.84%	-7.24%
Standard Deviation of 3-Year Periods	5.23%	6.39%
Profitable Periods (%)	99.08%	86.77%
Average Profitable Period Return (Annualized)	10.01%	10.33%
Unprofitable Periods (%)	0.92%	13.23%
Average Unprofitable Period Return (Annualized)	-0.79%	-2.50%

Rolling 5-Year Returns

	30/40/30	60/40
Number of 5-Year Periods	301	301
Average 5-Year Annualized Return	9.82%	8.44%
Best 5-Year Annualized Return	20.23%	20.09%
Worst 5-Year Annualized Return	0.98%	-2.26%
Standard Deviation of 5-Year Periods	4.23%	5.05%
Profitable Periods (%)	100.00%	99.00%
Average Profitable Period Return (Annualized)	9.82%	8.54%
Unprofitable Periods (%)	0.00%	1.01%
Average Unprofitable Period Return (Annualized)	N/A	-1.33%

20/40/40 Allocation

Notional Exposure per $1.00 Invested

Historical Investment Outcome for 20/40/40 Portfolio compared to 60/40 Portfolio:

	20/40/40	60/40	Diff
Cumulative Return	1909%	1087%	821.77%
Annualized Return	10.61%	8.67%	1.94%
Standard Deviation	6.96%	8.77%	-1.81%
Return/Risk	1.52	0.99	0.53
Maximum Drawdown	-18.48%	-32.54%	14.06%

Growth of $10K

Drawdowns

Rolling 3-Year Correlation to S&P 500

Annual Returns

Annual	20/40/40	60/40
12/31/1990	12.81%	1.81%
12/31/1991	27.08%	24.77%
12/31/1992	8.91%	7.59%
12/31/1993	15.24%	9.99%
12/31/1994	-1.81%	-0.33%
12/31/1995	35.05%	29.66%
12/31/1996	14.77%	14.97%
12/31/1997	24.69%	23.62%
12/31/1998	21.40%	20.99%
12/31/1999	7.16%	12.00%
12/31/2000	7.80%	-1.00%
12/31/2001	2.39%	-3.71%
12/31/2002	2.03%	-9.82%
12/31/2003	17.24%	18.48%
12/31/2004	8.92%	8.30%
12/31/2005	4.49%	4.00%
12/31/2006	10.85%	11.12%
12/31/2007	10.21%	6.22%
12/31/2008	-9.29%	-22.06%
12/31/2009	15.64%	18.40%
12/31/2010	13.89%	12.13%
12/31/2011	6.53%	4.69%
12/31/2012	9.38%	11.31%
12/31/2013	9.80%	17.56%
12/31/2014	12.64%	10.62%
12/31/2015	0.82%	1.28%
12/31/2016	6.66%	8.31%
12/31/2017	11.55%	14.21%
12/31/2018	-2.39%	-2.35%
12/31/2019	22.19%	22.18%

Rolling 3-Year Returns

	20/40/40	60/40
Number of 3-Year Periods	325	325
Average 3-Year Annualized Return	10.33%	8.63%
Best 3-Year Annualized Return	24.56%	23.01%
Worst 3-Year Annualized Return	0.00%	-7.24%
Standard Deviation of 3-Year Periods	5.01%	6.39%
Profitable Periods (%)	100.00%	86.77%
Average Profitable Period Return (Annualized)	10.33%	10.33%
Unprofitable Periods (%)	0.00%	13.23%
Average Unprofitable Period Return (Annualized)	N/A	-2.50%

Rolling 5-Year Returns

	20/40/40	60/40
Number of 5-Year Periods	301	301
Average 5-Year Annualized Return	10.26%	8.44%
Best 5-Year Annualized Return	20.33%	20.09%
Worst 5-Year Annualized Return	2.07%	-2.26%
Standard Deviation of 5-Year Periods	4.07%	5.05%
Profitable Periods (%)	100.00%	99.00%
Average Profitable Period Return (Annualized)	10.26%	8.54%
Unprofitable Periods (%)	0.00%	1.00%
Average Unprofitable Period Return (Annualized)	N/A	-1.33%

10/40/50 Allocation

Notional Exposure per $1.00 Invested

Historical Investment Outcome for 10/40/50 Portfolio compared to 60/40 Portfolio:

	10/40/50	60/40	Diff
Cumulative Return	2174%	1087%	1086.70%
Annualized Return	11.07%	8.67%	2.40%
Standard Deviation	6.81%	8.77%	-1.96%
Return/Risk	1.63	0.99	0.64
Maximum Drawdown	-15.39%	-32.54%	17.15%

Growth of $10K

Drawdowns

Rolling 3-Year Correlation to S&P 500

Annual Returns

Date	10/40/50	60/40
12/31/1990	15.68%	1.81%
12/31/1991	27.62%	24.77%
12/31/1992	9.22%	7.59%
12/31/1993	16.57%	9.99%
12/31/1994	-2.19%	-0.33%
12/31/1995	36.41%	29.66%
12/31/1996	14.70%	14.97%
12/31/1997	24.95%	23.62%
12/31/1998	21.43%	20.99%
12/31/1999	5.97%	12.00%
12/31/2000	10.08%	-1.00%
12/31/2001	3.91%	-3.71%
12/31/2002	5.12%	-9.82%
12/31/2003	16.91%	18.48%
12/31/2004	9.06%	8.30%
12/31/2005	4.61%	4.00%
12/31/2006	10.78%	11.12%
12/31/2007	11.22%	6.22%
12/31/2008	-5.85%	-22.06%
12/31/2009	14.94%	18.40%
12/31/2010	14.31%	12.13%
12/31/2011	6.97%	4.69%
12/31/2012	8.88%	11.31%
12/31/2013	7.93%	17.56%
12/31/2014	13.15%	10.62%
12/31/2015	0.69%	1.28%
12/31/2016	6.23%	8.31%
12/31/2017	10.90%	14.21%
12/31/2018	-2.41%	-2.35%
12/31/2019	22.17%	22.18%

Rolling 3-Year Returns

	10/40/50	60/40
Number of 3-Year Periods	325	325
Average 3-Year Annualized Return	10.74%	8.63%
Best 3-Year Annualized Return	25.04%	23.01%
Worst 3-Year Annualized Return	1.87%	-7.24%
Standard Deviation of 3-Year Periods	4.89%	6.39%
Profitable Periods (%)	100.00%	86.77%
Average Profitable Period Return (Annualized)	10.74%	10.33%
Unprofitable Periods (%)	0.00%	13.23%
Average Unprofitable Period Return (Annualized)	N/A	-2.50%

Rolling 5-Year Returns

	10/40/50	60/40
Number of 5-Year Periods	301	301
Average 5-Year Annualized Return	10.70%	8.44%
Best 5-Year Annualized Return	20.57%	20.09%
Worst 5-Year Annualized Return	3.16%	-2.26%
Standard Deviation of 5-Year Periods	3.99%	5.05%
Profitable Periods (%)	100.00%	99.00%
Average Profitable Period Return (Annualized)	10.70%	8.54%
Unprofitable Periods (%)	0.00%	1.00%
Average Unprofitable Period Return (Annualized)	N/A	-1.33%

As with any investment strategy, there is no guarantee that an asset class will continue to perform similarly in the future. Investment markets are unpredictable and there will be certain market conditions where a strategy will not meet its investment objective and will lose money. Returns will vary and you could lose money investing in managed futures and those losses could be significant. Please note that investing in derivatives (which include options, futures and other transactions) may give rise to leverage risk (which can increase volatility) and can have a significant impact on performance. Investing in the commodities markets may subject managed futures to greater volatility than investments in traditional securities. Using derivatives like futures and options to increase long and short exposure creates leverage, which can magnify potential for gain or loss and, therefore, amplify the effects of market volatility.

The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features. Past performance is no guarantee of future results.

Glossary of Terms

Barclay CTA Index: A leading industry benchmark of representative performance of commodity trading advisors. The Index is equally weighted and rebalanced at the beginning of each year. The index only publishes monthly returns.

Bloomberg Barclays US Aggregate Bond Index: A broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.

Drawdown: A measure of the peak to valley loss of an investment for a stated time period. An investment does not recover from a drawdown until it surpasses the previous peak.

S&P 500 Index: A market capitalization-weighted index that is used to represent the U.S. large-cap stock market. The Total Return (TR) Index reflects the effects of dividend reinvestment.

Standard Deviation: A statistical measure of how consistent returns are over time; a higher standard deviation indicates historically more volatility.

4263-NLD-3/3/2020