Is Now the Right Time to Add My Stack?

2026-05-11

Overview

For advisors who like the concept of return stacking but worry that now is the wrong moment to add it. The article concedes that adding a stack is, in fact, a timing decision.  And then equips advisors to manage it.

It distinguishes two implementation paths (stacking vs. funding) and shows why stacking carries materially less timing luck because its short leg (T-Bills) is far less volatile than a stock/bond short leg. It then walks through what timing luck actually looks like across 25+ years of history, examines the worst-timed historical episodes, and lays out three practical levers to manage the risk: tranche the entry, wait for volatility to normalize, and consider the correlation regime.

The recommended default is tranching — dollar-cost averaging for your stack — because it requires no market view. The closing turn: not adding the stack is itself a timing decision, and the status quo is an active bet that today is a bad day to diversify.

Key Topics

Market Timing, Timing Luck, Tranching

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It’s the question we hear most from advisors considering return stacking (also known as portable alpha) for the first time: “I love the concept, but is now the right time to add it?”

Embedded in this question is a very reasonable anxiety.

If you’re adding, say, a 20% managed futures stack to an existing 60/40 portfolio, you’re making a discrete change at a specific point in time. The portfolio you hold tomorrow will behave differently than the one you held yesterday. That feels an awful lot like a market timing decision.

And here’s the thing: it is. We should be honest about that.

But before we’re pulled into stacking-specific anxiety, it’s worth stepping back: there is nothing unique about this problem. The same timing question applies to any meaningful portfolio change: introducing alternatives, shifting your equity/bond mix, adding a new asset class. Every discrete allocation decision carries a date, and that date comes with some element of luck attached.

Let’s start by understanding what timing luck actually is and how much of it you’re taking on.

Funding vs. Stacking: Not All Timing Luck Is Equal

Any time you make a portfolio change, your subsequent experience depends on what happens next. Two advisors who add the same managed futures position a year, a quarter or even a month apart will live through different sequences of returns and end up in different places. That gap between their outcomes is timing luck.

How much timing luck you take on depends on how you implement. There are two ways to add a diversifying position, and they carry different amounts of timing luck.

Funding means selling part of your benchmark to buy the new position. Say you sell 10% of your stocks and 10% of your bonds to buy managed futures.

Stacking means keeping your full benchmark allocation and adding the new position on top, typically through capital-efficient instruments.

These two approaches are more similar than they appear. Both can be reframed as: your original benchmark, plus a long/short position.

For example:

a) When you fund the managed futures position from your equity sleeve, you become long managed futures and short equities.

b) When you stack that position on top of your benchmark portfolio, you are long managed futures and short U.S. Treasuries (representing the financing cost of adding the managed futures exposure).

The basic dynamics are the same. You’ve just changed what the position is short.

That difference matters. T-Bills have near-zero volatility. Stocks and bonds do not. The more volatile the short leg, and the less correlated it is with the long leg, the wider the range of monthly outcomes and the more timing luck is embedded in the decision.

Monthly Return Distribution: Stacking vs. Funding

Each curve shows the density of 312 historical monthly returns (January 2000 – December 2025), scaled by the stack size you select. The stacking approach (green) is long managed futures, financed at (ie short) the T-bill rate. The funding approach (navy) is long managed futures, short a 50/50 blend of stocks and bonds. The wider the distribution, the more timing luck is embedded in your implementation decision.

Hypothetical and for illustrative purposes only. Past performance is not indicative of future results. See full disclosures below.

20%
5%50%

Taller and narrower = less timing luck

Monthly Volatility (1 Std Dev)
Stacking (MF − T-Bills)
–
Funding (MF − 50/50 Stocks/Bonds)
–
Source: Bloomberg; PivotalPath. Period: 12/31/1999 – 12/31/2025 (312 monthly observations). Definitions. Managed Futures (“MF”) is the PivotalPath Managed Futures Index. Stocks is the S&P 500 Total Return Index. Bonds is the Bloomberg US Aggregate Bond Index. T-Bills is the Bloomberg Short Treasury US Total Return Index. Portfolios. The 50/50 Stock/Bond Blend is 50% Stocks / 50% Bonds, rebalanced monthly. Stacking is long MF financed at the T-Bill rate; monthly return = stack size × (MF return − T-Bill return), with the stack rebalanced monthly to its target size. Funding sells the 50/50 Stock/Bond Blend pro-rata to fund MF; monthly return = stack size × (MF return − 50/50 Stock/Bond Blend return), rebalanced monthly. Returns are gross of all fees and transaction costs. You cannot invest in an index. Hypothetical and for illustrative purposes only. Past performance is not indicative of future results.
By choosing to stack rather than fund, advisors can reduce the range of short-term outcomes they’re exposed to before the long-term thesis has time to play out. The chart above shows that, historically, this difference can be meaningful. But what does that range feel like in practice?

What Timing Luck Actually Looks Like

Everything above describes a distribution of possible outcomes. You don’t live in the distribution. You live on a single path.

History is one realization of many. The advisor who added a 20% managed futures stack didn’t experience “54 basis points of monthly tracking error.” They experienced a specific sequence of months that compounded into a specific result.

The timing luck embedded in any implementation is real. It is made more challenging by two forces:

Bad narratives. One rough month can derail an allocation. A bad first impression can be hard to recover from, regardless of long-term results.

Sequence risk. For retirees drawing down, early drag permanently impairs the compounding base. The luck of timing may be symmetric, but the impact on long-term wealth is not.

The chart below shows what this historically looks like. For every month from 2000 through 2025, we compute the subsequent 6-month drag (or boost) from adding a managed futures stack to a 60/40 portfolio. Most start dates produce modest results in either direction. A few produce sharp pain.

The Timing Luck Landscape

Each bar shows the cumulative 6-month difference between a 60/40 portfolio with a managed futures stack and the plain 60/40 benchmark, for every possible start date in the sample. Green bars mean the stack helped over the next 6 months. Red bars mean it dragged. Adjust the stack size to see how the magnitude scales, keeping an eye on the Y-axis.

Hypothetical and for illustrative purposes only. Past performance is not indicative of future results. See full disclosures below.

20%
5%50%
6-Month Drag/Boost vs. 60/40 Benchmark
Worst 6-Month Drag
–
Median 6-Month Impact
–
Best 6-Month Boost
–
Source: Bloomberg; PivotalPath. Period: 12/31/1999 – 12/31/2025. Definitions. Managed Futures (“MF”) is the PivotalPath Managed Futures Index. Stocks is the S&P 500 Total Return Index. Bonds is the Bloomberg US Aggregate Bond Index. T-Bills is the Bloomberg Short Treasury US Total Return Index. Portfolios. The 60/40 Benchmark is 60% Stocks / 40% Bonds, rebalanced monthly. The Stacked Portfolio is the 60/40 Benchmark plus a managed futures stack of the selected size, financed at the T-Bill rate; monthly return = 60/40 return + stack size × (MF return − T-Bill return), with the stack rebalanced monthly to its target size. Calculation. For each month-end start date, the 6-month drag is the cumulative growth of the Stacked Portfolio minus the cumulative growth of the 60/40 Benchmark over the subsequent 6 months. Returns are gross of all fees and transaction costs. You cannot invest in an index. Hypothetical and for illustrative purposes only. Past performance is not indicative of future results.
The bars above show that most start dates are uneventful, and many are positive. But the few that aren’t can be painful. Notice that this chart cuts both ways: delaying implementation to avoid a bad start date also means risking missing a good one. With that in mind, let’s zoom into some of the historically worst-timed episodes to understand what that pain actually looks like.

The "Wrong Time" in Practice

Select a historical episode where managed futures were performing well. This is exactly the moment an advisor might be most tempted to add the position. The chart compares two implementation approaches: stacking (steel blue) keeps the full 60/40 and adds MF on top; funding (slate) sells equally from stocks and bonds to make room. Both lines track the benchmark before the add date. Managed futures total return is shown in green for reference.

Hypothetical and for illustrative purposes only. Past performance is not indicative of future results. See full disclosures below.

20%
5%50%
Total Return Over Window
60/40 Benchmark
–
Managed Futures
–
Stacking Drag (Post-Add)
–
Funding Drag (Post-Add)
–
Source: Bloomberg; PivotalPath. Period: Episode-specific windows drawn from 12/31/1999 – 12/31/2025. Definitions. Managed Futures (“MF”) is the PivotalPath Managed Futures Index. Stocks is the S&P 500 Total Return Index. Bonds is the Bloomberg US Aggregate Bond Index. T-Bills is the Bloomberg Short Treasury US Total Return Index. Portfolios. The 60/40 Benchmark is 60% Stocks / 40% Bonds, rebalanced monthly. The Stacked Portfolio is the 60/40 Benchmark plus a managed futures stack of the selected size, financed at the T-Bill rate; monthly return = 60/40 return + stack size × (MF return − T-Bill return), rebalanced monthly. The Funded Portfolio sells the 60/40 Benchmark equally from Stocks and Bonds (i.e., from a 50/50 Stock/Bond Blend) to fund the managed futures position; monthly return = 60/40 return + stack size × (MF return − 50/50 Stock/Bond Blend return), rebalanced monthly. Managed Futures is shown standalone for reference. Calculation. All values are shown as growth of $100 over the episode window. Drag is the cumulative difference between each portfolio and the 60/40 Benchmark from the add date through the end of the window. Returns are gross of all fees and transaction costs. You cannot invest in an index. Hypothetical and for illustrative purposes only. Past performance is not indicative of future results.

Three Ways to Manage It

So how do you manage this? Knowing what drives timing luck gives us a practical toolkit. There are three levers advisors can pull.

1. Tranche the introduction. Rather than adding the full stack in a single rebalance, phase it in over two periods. A 20% target implemented as two 10% increments six months apart diversifies across two different timing environments. This is the closest thing to a universal solution: it doesn’t require a view on markets, volatility, or correlation, only a willingness to be patient.

Tranching in Action

Select a historical episode and compare what happens when you add the full stack at once (lump-sum) versus splitting it into two equal tranches six months apart (dashed). The 60/40 benchmark is in navy and standalone managed futures in green.

Hypothetical and for illustrative purposes only. Past performance is not indicative of future results. See full disclosures below.

20%
5%100%
Total Return Over Window
60/40
–
Managed Futures
–
Lump-Sum
–
2-Tranche
–
Source: Bloomberg; PivotalPath. Period: Episode-specific windows drawn from 12/31/1999 – 12/31/2025. Definitions. Managed Futures (“MF”) is the PivotalPath Managed Futures Index. Stocks is the S&P 500 Total Return Index. Bonds is the Bloomberg US Aggregate Bond Index. T-Bills is the Bloomberg Short Treasury US Total Return Index. Portfolios. The 60/40 Benchmark is 60% Stocks / 40% Bonds, rebalanced monthly. The Stacked Portfolio is the 60/40 Benchmark plus a managed futures stack financed at the T-Bill rate; monthly return = 60/40 return + active stack size × (MF return − T-Bill return), rebalanced monthly. Lump-Sum applies the full selected stack size at the episode's add date and holds it (rebalanced monthly to target) through the end of the window. 2-Tranche applies half the selected stack size at the add date and the remaining half six months later, holding each tranche (rebalanced monthly) through the end of the window. Calculation. All values are shown as growth of $100 over the episode window. Returns are gross of all fees and transaction costs. You cannot invest in an index. Hypothetical and for illustrative purposes only. Past performance is not indicative of future results.
2. Wait for volatility to subside. If the stack strategy is currently in a high-volatility regime, the range of outcomes is mechanically wider. One practical approach: measure recent volatility of the strategy’s returns. When it’s elevated relative to history, you’re taking on more timing luck per dollar of exposure. Waiting for it to normalize narrows the distribution. The tradeoff is that you’re now timing your anti-timing decision. But the logic is sound if you’re genuinely volatility-triggered rather than return-chasing.

Trailing Volatility vs. Subsequent 3-Month Drag

Each dot represents a possible start date. The x-axis shows recent volatility (annualized) of managed futures excess returns at the time of implementation. The y-axis shows the subsequent 3-month stacking drag (or boost). When trailing volatility is elevated, the dots fan out: outcomes are more dispersed in both directions.

Hypothetical and for illustrative purposes only. Past performance is not indicative of future results. See full disclosures below.

20%
5%50%
Source: Bloomberg; PivotalPath. Period: 12/31/1999 – 12/31/2025. Definitions. Managed Futures (“MF”) is the PivotalPath Managed Futures Index. Stocks is the S&P 500 Total Return Index. Bonds is the Bloomberg US Aggregate Bond Index. T-Bills is the Bloomberg Short Treasury US Total Return Index. Portfolios. The 60/40 Benchmark is 60% Stocks / 40% Bonds, rebalanced monthly. The Stacked Portfolio is the 60/40 Benchmark plus a managed futures stack of the selected size, financed at the T-Bill rate; monthly return = 60/40 return + stack size × (MF return − T-Bill return), rebalanced monthly. Calculation. Trailing Volatility is the annualized exponentially-weighted standard deviation of daily MF excess returns (MF return − T-Bill return) using a 63-day half-life, measured at each month-end. The 3-Month Drag is the cumulative growth of the Stacked Portfolio minus the cumulative growth of the 60/40 Benchmark over the subsequent 3 months, computed from monthly returns. Returns are gross of all fees and transaction costs. You cannot invest in an index. Hypothetical and for illustrative purposes only. Past performance is not indicative of future results.
3. Consider the correlation regime. One approach is to measure the trailing correlation between the strategy’s recent returns and the benchmark. The correlation tells you how closely the stack’s returns have recently been tied to the benchmark’s, and its sign tells you the direction of that relationship.

When correlation is positive, the stack is expected to move with the benchmark. For managed futures specifically, this often means the strategy is positioned to benefit from prevailing trends. Waiting to implement means sitting out on those expected returns. But the risk is that you implement right before a reversal: the benchmark sells off and the positively correlated stack falls with it, offering no diversification when you need it most.

When correlation is negative, the stack is expected to move opposite the benchmark. The diversification potential is highest here. But the risk is the mirror image: the benchmark rallies and the negatively correlated stack drags, creating the “double whammy” of having ridden the benchmark down without the stack’s help, then adding it just in time for it to hurt.

In both cases, higher absolute correlations accentuate both the potential reward and the potential risk. The question is not whether correlation is “good” or “bad,” but how much implementation risk you’re willing to accept for the expected benefit.

Correlation Regime and Benchmark Direction: What Happened Next?

For each trailing correlation regime (negative, near zero, or positive), we split subsequent 3-month outcomes by whether the benchmark rose or fell. The bars show the median stacking drag (or boost) in each scenario. You can observe the correlation regime before you implement, but you cannot predict what the benchmark will do next. When correlation is negative and the benchmark rallies, the stack tends to drag. When it falls, the stack tends to help. This asymmetry is the core timing risk.

Hypothetical and for illustrative purposes only. Past performance is not indicative of future results. See full disclosures below.

20%
5%50%
Source: Bloomberg; PivotalPath. Period: 12/31/1999 – 12/31/2025. Definitions. Managed Futures (“MF”) is the PivotalPath Managed Futures Index. Stocks is the S&P 500 Total Return Index. Bonds is the Bloomberg US Aggregate Bond Index. T-Bills is the Bloomberg Short Treasury US Total Return Index. Portfolios. The 60/40 Benchmark is 60% Stocks / 40% Bonds, rebalanced monthly. The Stacked Portfolio is the 60/40 Benchmark plus a managed futures stack of the selected size, financed at the T-Bill rate; monthly return = 60/40 return + stack size × (MF return − T-Bill return), rebalanced monthly. Calculation. Trailing Correlation is the exponentially-weighted correlation between daily MF excess returns (MF return − T-Bill return) and daily 60/40 Benchmark returns, computed using a 63-day half-life and measured at each month-end. Correlation bins: Negative (< −0.33), Near Zero (−0.33 to 0.33), Positive (> 0.33). Benchmark direction is the subsequent 3-month 60/40 Benchmark return (Up vs. Down). For each bin, the bar shows the median 3-month cumulative growth of the Stacked Portfolio minus the cumulative growth of the 60/40 Benchmark, computed from monthly returns. Returns are gross of all fees and transaction costs. You cannot invest in an index. Hypothetical and for illustrative purposes only. Past performance is not indicative of future results.

It’s worth remembering that this entire discussion is about managing the downside of timing luck. If you believe the stack has positive expected returns and diversification benefits, delay has its own cost: every month you wait is a month of expected return and diversification you’re forgoing. Tranching balances these two forces. You get into the position without betting everything on a single start date, but you don’t sit on the sidelines waiting for the “perfect” moment that may never come.

The approach we most often discuss with advisors: If you are concerned with timing risk, default to tranching. It requires no market view, no forecast of volatility or correlation, and it diversifies the timing decision. Think of it as dollar-cost averaging for your stack.

The Irony of the Question

Here’s the thing that gets lost in the “is now the right time?” anxiety: not adding the stack is itself a timing decision.

Every day you delay is a day you’ve chosen to hold a portfolio without the diversification the stack is designed to provide. The status quo is not neutral. It’s an active bet that today is a bad day to diversify.

The entire point of return stacking is to access diversifying return streams without sacrificing your core allocation. If the concept is sound, and you believe it is, then the question is not whether or not to time the entry. It’s how to get into the position without waiting for a certainty that will never arrive.

Tranche it in. Be methodical about it. And focus on the long term.

Disclosures

Important Disclosures on Hypothetical Performance

The portfolio returns set forth herein represent a series of differently weighted portfolios comprised of historical index returns; any such portfolio returns should be considered hypothetical and are for illustrative purposes. You are cautioned that hypothetical performance results have many inherent limitations, some of which are described herein.

Indexes are unmanaged and you cannot invest in an index. No representation is being made that any account will or is likely to achieve profits similar to those shown or will not be able to avoid substantial losses. In fact, frequently there are sharp differences between hypothetical performance results and actual performance an investor’s portfolio achieves.

The hypothetical portfolio in this presentation assumes full investment, whereas an actual investor’s portfolio would most likely have a positive cash position. Had the hypothetical portfolio included a cash position, the information would have been different and generally may have been lower.

An additional limitation of hypothetical performance results is that they are generally prepared with the benefit of hindsight.

Furthermore, the construction of a hypothetical portfolio of investments does not involve financial risk, and no hypothetical portfolio of investments can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or the implementation of a portfolio of investments which cannot be fully accounted for in the preparation of hypothetical performance results, all of which can adversely affect actual trading results.

Methodology

All portfolios assume monthly rebalancing back to target weights with no transaction costs. Returns are gross of all fees, including management costs, transaction costs, and taxes, except where explicitly stated otherwise. Returns assume the reinvestment of all distributions.

Index Definitions

Bloomberg Short Treasury US Total Return Index (“LD12TRUUU”) tracks the market for treasury bills issued by the US government with time to maturity between 1 and 3 months.

Bloomberg US Aggregate Bond Index (“LBUSTRUU”) is an index that covers the broad U.S. investment grade, US dollar-denominated, fixed-rate taxable bond market.

PivotalPath Managed Futures Index (“MFT”) is an equal weighted index of funds that typically forecast market trends and determine whether to invest long or short in futures contracts across metals, grains, equity indices and soft commodities, as well as foreign currency and U.S. government bond futures. The Index tracks the monthly performance, net of fees in USD, of its constituents and is representative of funds with a minimum fund track record of 18 months and a minimum fund AUM of $50mm. The constituents are fixed at the end of each calendar year for the following calendar year.

S&P 500 Total Return Index (“SPX”) is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.

Term Definitions

Basis Point (bps) is a unit of measure equal to one one-hundredth of one percent (0.01%).

Hypothetical/Backtested Performance refers to performance results generated by retroactively applying an investment strategy to historical data. Backtested results are not actual trading results and have inherent limitations, including the benefit of hindsight.

Tracking Error is the standard deviation of the difference in returns between a portfolio and its benchmark. It measures how consistently a portfolio tracks its benchmark.

Volatility is a statistical measure of the dispersion of returns, commonly calculated as the standard deviation. Higher volatility indicates greater price fluctuation and, therefore, greater risk.

PivotalPath Disclosure

The PivotalPath index/indices used in this information is/are produced by PivotalPath Inc. PivotalPath Indices are the proprietary product of PivotalPath Inc. They represent Hedge Fund Indices based on collected data from individual hedge funds and while PivotalPath considers the sources of such information and data to be reliable, such information and data has been verified but has not been audited by PivotalPath. No representation is made as to, and no responsibility or liability is accepted for, the accuracy or completeness of such information and data. PivotalPath Index constituents may be removed at any time and any PivotalPath index may be restated, adjusted, or corrected at any time without notice.

PivotalPath data is being used under license from PivotalPath, Inc, which does not approve of or endorse any of the products or the contents discussed in these materials.

Important Information

The information set forth in this document has been obtained or derived from sources believed by Newfound Research LLC and ReSolve Asset Management SEZC (jointly “Return Stacked® Portfolio Solutions”) to be reliable. However, Return Stacked® Portfolio Solutions does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does Return Stacked® Portfolio Solutions recommend that the information serve as the basis of any investment decision.

Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of an investment managed using any of the investment strategies or styles described in this document may differ materially from those reflected in such forward-looking statements.

There can be no assurance that any investment strategy or style will achieve any level of performance, and investment results may vary substantially from year to year or even from month to month. An investor could lose all or substantially all of his or her investment. Both the use of a single adviser and the focus on a single investment strategy could result in the lack of diversification and consequently, higher risk. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. You should consult your investment adviser, tax, legal, accounting or other advisors about the matters discussed herein.

Past performance is not indicative of future performance and investments in equity securities do present risk of loss. This presentation has been provided solely for informational purposes and does not constitute a current or past recommendation or an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.

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