08/16/2026
Stacking Trend: One Strategy, Three Ways to Build a More Diversified Portfolio
Trend following has historically provided a buffer when stocks and bonds both fall. Return Stacking makes it possible to hold all three without sacrifice.
Managed futures trend following has historically offered positive returns and low correlation to a typical stock and bond portfolio (see Figure 2). The challenge is holding it. Adding it means selling core exposure that is easy to understand and defend. Return stacking changes the equation, making it possible to add diversifying return streams without giving up the equity or bond exposure advisors already hold. This post introduces the Return Stacked® U.S. Stocks & Managed Futures ETF (RSST), the Return Stacked® Bonds & Managed Futures ETF (RSBT), and the Return Stacked® International Stocks & Managed Futures ETF (RSIT), three funds built around that idea.
The Fund seeks long-term capital appreciation by investing in two complementary strategies: a U.S. Equity strategy and a managed futures trend strategy.
For every $1 invested, the ETF seeks to provide $1 of exposure to its U.S. Equity strategy and $1 of exposure to its managed futures trend strategy.
For illustrative purposes only. The dotted grey line delineates the 100% exposure of a portfolio.
Seeks to capture the total return of large-cap U.S. equities by investing in large-cap U.S. stocks, large-cap U.S. equity ETFs, and U.S. equity index futures.
The managed futures strategy will invest using a trend-following strategy in futures contracts among four major asset classes: commodities, currencies, equities, and fixed income.
Diversification does not assure a profit.
The Fund seeks long-term capital appreciation by investing in two complementary strategies: a bond strategy and a managed futures trend strategy.
For every $1 invested, the ETF seeks to provide $1 of exposure to its bond strategy and $1 of exposure to its managed futures trend strategy.
For illustrative purposes only. The dotted grey line delineates the 100% exposure of a portfolio.
Seeks to capture the total return of the broad U.S. fixed income market by investing in U.S. Treasury securities, broad-based bond ETFs, or U.S. Treasury futures contracts.
The managed futures strategy will invest using a trend-following strategy in futures contracts among four major asset classes: commodities, currencies, equities, and fixed income.
Diversification does not assure a profit.
The Fund seeks long-term capital appreciation by investing in two complementary strategies: an International Equity strategy and a managed futures trend strategy.
For every $1 invested, the ETF seeks to provide $1 of exposure to its International Equity strategy and $1 of exposure to its managed futures trend strategy.
For illustrative purposes only. The dotted grey line delineates the 100% exposure of a portfolio.
Seeks to capture the total return of large-cap international equities by investing in large-cap international stocks, large-cap international equity ETFs, and international equity index futures.
The managed futures strategy will invest using a trend-following strategy in futures contracts among four major asset classes: commodities, currencies, equities, and fixed income.
Diversification does not assure a profit.
The 60/40 Has a Blind Spot
For most of the past three decades, a portfolio of 60% stocks and 40% bonds delivered on its promise. Equities provided growth. Bonds cushioned the blow when equities fell. The combination was not perfect, but it was reliably good enough.
Then came 2022. Inflation surged, the Federal Reserve responded with the most aggressive rate hiking cycle in a generation, and stocks and bonds fell together. The S&P 500 declined roughly 18%. The Bloomberg U.S. Aggregate Bond Index declined roughly 13%. Investors who expected their bond allocation to buffer the equity pain found that it amplified it instead.
When the shared enemy is inflation, the two primary assets in a traditional portfolio move in the same direction.
This was not an anomaly. It was a reminder of a structural limitation in the 60/40 portfolio: stocks and bonds tend to diversify each other in low-inflation recessions, but not when inflation is the driver. Figure 1 traces how that relationship has shifted over the past four decades.
Figure 1: The Correlation Between U.S. Stocks and Bonds Has Reversed
Rolling 36-month correlation between U.S. stocks and U.S. bonds. A positive value indicates stocks and bonds moving in the same direction; a negative value indicates bonds providing diversification from equity risk.
Source: Bloomberg. U.S. Stocks is the MSCI USA Net Total Return USD Index. U.S. Bonds is the Bloomberg US Aggregate Bond Index (LBUSTRUU). Correlation calculated using a rolling 36-month window of monthly total returns. You cannot invest in an index. Past performance is not indicative of future results. For illustrative purposes only.
The question is not whether the 60/40 is broken. The question is what belongs alongside it.
What Is Trend Following?
When macro regimes shift, they tend to shift slowly. The Federal Reserve does not raise rates once and stop. Inflation does not appear and resolve in a week. Commodity shocks develop over quarters, not days. Prices adjust gradually as new information works its way through global markets, and those gradual adjustments create extended trends.
Trend following is the systematic attempt to position in the direction of those regimes as they develop, going long markets that are rising and short markets that are falling, across a globally diversified set of equities, bonds, commodities, and currencies. There is no discretion and no macro forecasting, only a disciplined set of rules applied to prevailing prices.
The crises most damaging to traditional portfolios have historically been among the environments where trend following has tended to perform best. Sustained drawdowns driven by inflation, rising rates, or macro dislocation generate the extended, directional price moves a rules-based system can capture. In 2008, equities fell for eighteen months and commodities reversed sharply; trend strategies that were short those markets as the declines extended captured the full breadth of the move. In 2022, when stocks and bonds fell together and inflation rose, trend following delivered some of its best returns in decades.
The crises most damaging to traditional portfolios have historically been among the environments where trend following has tended to perform best.
Figure 2 puts that history in concrete terms. Across the most severe equity drawdowns, managed futures trend strategies have historically posted positive returns. Practitioners call this crisis alpha, the tendency to generate returns precisely when traditional portfolios are under the most stress.
Figure 2: Trend Following Returns During Major Equity Drawdowns
Total returns of each asset class across the largest drawdown periods of global equities since index joint inception.
Source: Bloomberg. Global Equities is the MSCI ACWI Net Total Return Index (“MXWD”). U.S. Bonds is the Bloomberg US Aggregate Bond Index (“LBUSTRUU”). Managed Futures is the Société Générale Trend Index (“NEIXCTAT”). You cannot invest in an index. Returns assume the reinvestment of all distributions. Past performance is not indicative of future results. Periods selected reflect the largest drawdown periods of Global Equities since index joint inception.
Trend following does not perform well in all environments, though. In a fast-moving equity bull market with few sustained reversals, the strategy can lag for extended periods. It has historically earned a positive return premium, but that premium tends to arrive in concentrated bursts rather than smoothly across all market environments. Those bursts are separated by long stretches when the strategy lags a traditional equity benchmark, the kind of gap every advisor holding it will eventually need to explain to clients.
Why Most Advisors Don't Already Hold It
The funding problem. A standalone managed futures allocation requires capital. That capital has to come from somewhere. Adding a 10% position means selling 10% of something the client already owns, typically stocks or bonds.
The holding problem. Stocks and bonds both have narratives investors understand. Managed futures does not. Its episodic returns create what we call line-item bias, the tendency to evaluate holdings in isolation rather than by what they contribute to the overall portfolio. An investor who cannot explain why a holding did what it did will eventually question whether it belongs, and that problem is hardest to manage when managed futures shows up as a persistent drag while the other line items are surging.
An investor who cannot explain why a holding did what it did will eventually question whether it belongs.
Both are reasons to rethink how trend following enters a portfolio, not whether it belongs.
Return stacking addresses both problems by changing how the trend exposure enters the portfolio.
The mechanics rely on capital-efficient instruments, primarily futures contracts, which require only a fraction of their notional value as collateral. This means a single dollar of capital can support more than one dollar of market exposure. A Return Stacked® fund is built to do exactly that: for every $1.00 invested, it holds $1.00 of a core asset class (U.S. large-cap equities, U.S. bonds, or international equities) and $1.00 of managed futures trend exposure.
Figure 3: How Return Stacked® Funds Build Dual Exposure from a Single Dollar
Core exposure is accessed through underlying holdings and futures contracts. Managed futures trend exposure is then layered on top via futures, which require only a fraction of their notional value as collateral, allowing a single dollar to deliver both return streams simultaneously.
For illustrative purposes only. Proportions are conceptual and do not reflect actual fund allocations, margin requirements, or costs. Core Exposure corresponds to U.S. large-cap equities (RSST), U.S. Treasury bonds (RSBT), or international equities (RSIT). Notional exposure refers to the face value of derivatives positions held, which may exceed the capital deployed. There are risks associated with investing, including possible loss of principal. The use of derivatives involves additional risks, including leverage risk.
The practical result is that an advisor does not need to sell stocks or bonds to add trend following. By swapping a portion of an existing equity or bond allocation for the equivalent Return Stacked® product, the advisor keeps 100% of the core exposure and adds the trend overlay on top of it. Both problems ease for the same reason: the trend overlay is embedded within a core holding the advisor already owns and can already explain.
Three Products, Three Portfolio Jobs
RSST, RSBT, and RSIT each deliver the same $1.00 + $1.00 structure, but apply it to a different core asset class. The choice turns on where in the portfolio the advisor wants to introduce the trend overlay. Each product has a different job, depending on its core asset class and the particular problem advisors tend to face with that allocation.
RSST (Return Stacked® U.S. Stocks & Managed Futures ETF)
- Don't trade equity growth for diversification. Add to it.
- Keeps full exposure to a core U.S. equity growth engine and stacks a second return stream on top.
- The trend overlay has historically been largely uncorrelated to equities, so the added return stream may also help diversify the overall portfolio.
RSBT (Return Stacked® Bonds & Managed Futures ETF)
- Bonds for growth scares; trend for inflation scares.
- Pairs two return streams that have historically responded defensively in different market regimes.
- Historically, trend has helped address the inflation-risk exposure that bonds leave uncovered.
RSIT (Return Stacked® International Stocks & Managed Futures ETF)
- Same allocation, double the diversification job.
- Maintains the international equity exposure many allocators already hold for geographic diversification.
- Stacks a trend overlay on top, so the same dollar may serve a dual diversification purpose.
Figure 4: Three Products, Three Portfolio Entry Points
Each Return Stacked® fund pairs $1.00 of a core asset class with $1.00 of managed futures trend for every $1.00 invested. The choice of fund determines where the trend overlay enters the portfolio.
For illustrative purposes only. Dollar amounts represent notional market exposure per $1.00 invested. RSST = Return Stacked® U.S. Stocks & Managed Futures ETF. RSBT = Return Stacked® Bonds & Managed Futures ETF. RSIT = Return Stacked® International Stocks & Managed Futures ETF. There are risks associated with investing, including possible loss of principal. The use of derivatives involves additional risks, including leverage risk.
What This Looks Like in Practice
Consider a concrete example. An advisor manages a client portfolio allocated 60% to U.S. equities, 40% to bonds. They want to add a 10% allocation to managed futures trend following but are not willing to reduce the clients equity or bond exposure.
Using a traditional approach, they have a problem: every dollar allocated to managed futures must come from somewhere. Selling 10% of equities reduces equity exposure to 50%. Selling 10% of bonds reduces bond exposure to 30%. Neither option is appealing.
Using RSST, the advisor replaces 10% of the clients U.S. equity allocation with RSST. The portfolio now holds 50% in a traditional U.S. equity fund and 10% in RSST, alongside 40% bonds. The effective exposures are 60% U.S. equities (50% direct + 10% via RSST), 10% managed futures trend (via RSST), and 40% bonds. The equity and bond exposures are unchanged. The managed futures exposure has been added on top.
Figure 5: A Portfolio X-Ray of the Return Stacked® Approach
Swapping 10% of a 60/40 portfolio’s equity into RSST keeps the full 60% equity and 40% bond exposure, then stacks a 10% managed futures trend overlay on top, for 110% total exposure per 100% invested. For illustrative purposes only.
For illustrative purposes only. Figures reflect notional exposures and do not represent actual fund allocations or account for fees, costs, or tracking error. RSST = Return Stacked® U.S. Stocks & Managed Futures ETF. There are risks associated with investing, including possible loss of principal. The use of derivatives involves additional risks, including leverage risk.
The interactive tool below lets you explore this same logic with interactive asset allocations. Enter your current allocations, then use the sliders to swap a portion of each position into its Return Stacked® equivalent.
Build Your Return Stacked® Portfolio
Enter your current portfolio allocations, then use the sliders below to replace a portion of each asset class with its Return Stacked® equivalent. The chart shows how effective exposures change: core positions are preserved, and managed futures trend is added on top.
For illustrative purposes only. Not investment advice. Past performance is not indicative of future results.
General Disclosures. This tool is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. RSST = Return Stacked® U.S. Stocks & Managed Futures ETF. RSBT = Return Stacked® Bonds & Managed Futures ETF. RSIT = Return Stacked® International Stocks & Managed Futures ETF. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. A prospectus or summary prospectus with this and other important information about each fund is available on the fund pages for RSST, RSBT, and RSIT. Read the prospectus or summary prospectus carefully before investing.
The same logic applies to the other products. An advisor who wants to introduce trend through the bond allocation swaps a portion of bonds into RSBT, preserving bond exposure while adding the trend overlay. An advisor who already holds international equities swaps a portion into RSIT, turning one portfolio job into two.
The advisor has not made a trade-off. They have preserved their core and stacked managed futures on top.
Key Takeaways
- 1 Trend following offers both offense and defense. It has historically earned a positive return premium across full market cycles and helped deliver crisis mitigation when traditional portfolios needed it most. That combination makes it a natural complement to a stock and bond portfolio.
- 2 The barriers to holding it are practical, not intellectual. Adding managed futures means selling core exposure that is easy to understand and defend. Return stacking eliminates that trade-off. A Return Stacked® fund holds $1.00 of a core asset class and $1.00 of trend for each $1.00 invested, with no selling required.
- 3 Three products, three entry points. RSST stacks a second return stream on top of a U.S. equity allocation, adding exposure that has historically been largely uncorrelated to stocks. RSBT seeks to strengthen the bond allocation's diversification potential by layering in a strategy that has historically performed well during inflationary periods, the same environment where bonds have historically faced the most pressure. RSIT asks international equity dollars to pull double duty, delivering geographic diversification from U.S. markets and adding a managed futures trend overlay, all from a single allocation.
Important Disclosures
Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. A prospectus or summary prospectus with this and other important information about each fund is available on the fund pages for RSST, RSBT, and RSIT. Read the prospectus or summary prospectus carefully before investing.
Investments involve risk. Principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. Brokerage commissions may apply and would reduce returns.
Definitions: Bloomberg Short Treasury US Total Return Index is an index that covers US Treasury Bills between 1–3 months in maturity. 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. MSCI ACWI Net Total Return USD Index is a benchmark representing global equity performance, tracking large and mid-cap stocks across 23 developed and 24 emerging markets. It covers approximately 85% of the global investable equity set, with performance calculated in USD, net of dividend withholding taxes. MSCI EAFE Net Total Return USD Index measures the equity performance of developed markets outside of North America, specifically covering Europe, Australasia, and the Far East. It tracks large and mid-cap stocks, covering roughly 85% of each country’s free-float adjusted market capitalization, with returns calculated in USD, net of dividend withholding taxes. Société Générale Trend Index is designed to track the largest trend following commodity trading advisors (“CTAs”) in the managed futures space net of underlying fees. The index does not represent the entire universe of all CTAs. Actual rates of return may be significantly different and more volatile than those of the index. The MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. The index covers approximately 85% of the free-float-adjusted market capitalization in the US.
Derivatives Risk. Derivatives are instruments, such as futures contracts, whose value is derived from that of other assets, rates, or indices. The use of derivatives for non-hedging purposes may be considered to carry more risk than other types of investments. Cayman Subsidiary Risk. By investing in the Fund’s Cayman Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. The futures contracts and other investments held by the Subsidiary are subject to the same economic risks that apply to similar investments if held directly by the Fund. The Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in the Fund’s Prospectus, is not subject to all the investor protections of the 1940 Act. Bond Risks. The Fund will be subject to bond and fixed income risks through its investments in U.S. Treasury securities, broad-based bond ETFs, and investments in U.S. Treasury and fixed income futures contracts. Changes in interest rates generally will cause the value of fixed-income and bond instruments held by Fund (or underlying ETFs) to vary inversely to such changes. Commodity Risk. Investing in physical commodities is speculative and can be extremely volatile. Commodity-Linked Derivatives Tax Risk. The tax treatment of commodity-linked derivative instruments may be adversely affected by changes in legislation, regulations, or other legally binding authority. As a registered investment company (RIC), the Fund must derive at least 90% of its gross income each taxable year from certain qualifying sources of income under the Internal Revenue Code. If, as a result of any adverse future legislation, U.S. Treasury regulations, and/or guidance issued by the Internal Revenue Service, the income of the Fund from certain commodity-linked derivatives, including income from the Fund’s investments in the Subsidiary, were treated as non-qualifying income, the Fund may fail to qualify as RIC and/or be subject to federal income tax at the Fund level. The uncertainty surrounding the treatment of certain derivative instruments under the qualification tests for a RIC may limit the Fund’s use of such derivative instruments. Commodity Pool Regulatory Risk. The Fund’s investment exposure to futures instruments will cause it to be deemed to be a commodity pool, thereby subjecting the Fund to regulation under the Commodity Exchange Act and the Commodity Futures Trading Commission rules. Because the Fund is subject to additional laws, regulations, and enforcement policies, it may have increased compliance costs which may affect the operations and performance of the Fund. Credit Risk. Credit risk refers to the possibility that the issuer of a security will not be able to make principal and interest payments when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. Currency Risk. Currency risk is the risk that changes in currency exchange rates will negatively affect securities denominated in, and/or receiving revenues in, foreign currencies. The liquidity and trading value of foreign currencies could be affected by global economic factors, such as inflation, interest rate levels, and trade balances among countries, as well as the actions of sovereign governments and central banks. Foreign and Emerging Markets Risk. Foreign and emerging market investing involves currency, political and economic risk. Leverage Risk. As part of the Fund’s principal investment strategy, the Fund will make investments in futures contracts to gain long and short exposure across four major asset classes (commodities, currencies, fixed income, and equities). These derivative instruments provide the economic effect of financial leverage by creating additional investment exposure to the underlying instrument, as well as the potential for greater loss. Non-Diversification Risk. The Fund is non-diversified, meaning that it is permitted to invest a larger percentage of its assets in fewer issuers than diversified funds. Underlying ETFs Risk. The Fund will incur higher and duplicative expenses because it invests in bond ETFs. The Fund may also suffer losses due to the investment practices of the underlying bond ETFs. New Fund Risk. The Fund is recently organized with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions.
Management. Investment Adviser: Tidal Investments LLC serves as investment adviser to the Fund and the Subsidiary. Investment Sub-Advisers: Newfound Research LLC serves as investment sub-adviser to the Fund. ReSolve Asset Management Inc. serves as a non-discretionary investment sub-adviser to the Fund and the Subsidiary. Futures Advisor: ReSolve Asset Management SEZC (Cayman) serves as futures advisor to the Fund and the Subsidiary. Distributor: Foreside Fund Services, LLC is the distributor for the Fund. Foreside is not related to Tidal, Newfound, or RAM.