Ned Davis Research 360 Dynamic Allocation ETF (NDAA)

NDAA is a multi-asset exchange-traded fund issued by Invesco that implements a dynamic allocation strategy developed by Ned Davis Research, a quantitative research firm known for developing long-dated, rules-based investment signals. Rather than holding a fixed mix of stocks and bonds, the fund shifts its allocation across equities, fixed income, commodities, and cash based on systematic signals intended to identify favorable risk-reward environments and avoid unfavorable ones. It is designed for investors seeking both diversification and the flexibility to reduce exposure during risky periods.

The Ned Davis Research signals

Ned Davis Research (NDR) is an independent research firm that has built models to assess the health of markets and economies using publicly available data — yield curves, market breadth, valuations, momentum indicators, and earnings trends. Its approach is quantitative and rules-based: rather than asking a human analyst’s opinion, NDR applies mathematical filters to data and produces buy, neutral, and sell signals for different asset classes. The “360” in NDAA refers to the breadth of its data inputs and the 360-degree view it aims to provide across different market dimensions.

The fund uses these signals to drive allocation decisions. For instance, when NDR’s equity indicators are bullish (valuations attractive, earnings momentum strong, market breadth healthy), NDAA might increase its stock allocation to 70% or higher. When the signals turn bearish, the fund might reduce equities to 40% or less and shift the proceeds to bonds and cash. This is not performance-chasing; the signals incorporate longer-term patterns and aim to be forward-looking. The rebalancing occurs on a set schedule, typically monthly or quarterly.

Asset classes and implementation

The fund holds three core asset classes: equities, fixed income, and alternatives (typically commodities or real-return assets like Treasury Inflation-Protected Securities). The equity sleeve is typically implemented via broad U.S. and international stock indices. The fixed-income sleeve includes investment-grade bonds, Treasuries, and shorter-duration instruments. The alternatives sleeve may include commodities futures or inflation-hedging bonds.

Unlike a static balanced fund (e.g., “60% stocks, 40% bonds”), NDAA is dynamic — the allocation shifts as the signals change. In a year where equities are strong and risky assets are favored, the fund might end the year overweight stocks. In the following year, if economic indicators weaken, it might shift heavily toward bonds and cash. This dynamic nature is intended to smooth returns and reduce peak-to-trough drawdowns during market downturns.

The rationale and trade-offs

The premise of dynamic allocation is appealing: reduce risk during dangerous periods by holding more bonds and cash, and lean into equities when the risk-reward is favorable. If the signals work, the fund should deliver better risk-adjusted returns than a buy-and-hold approach. The empirical evidence on rule-based tactical allocation is mixed — some periods it outperforms, others it lags due to the transaction costs and tax drag of frequent rebalancing, or because the signals miss turning points.

The expense ratio is typically around 0.50% to 0.75% annually, somewhat higher than a passive balanced fund due to the cost of implementing the NDR signals and the turnover required for regular rebalancing. This cost is a headwind that must be overcome by the alpha generated from better-timed allocations.

Liquidity, volatility, and who holds it

NDAA trades with typical ETF liquidity and spreads. Its volatility is typically lower than an all-stock index fund but higher than an all-bond fund, since it always holds meaningful equity exposure and sometimes swings allocations significantly. In down markets, the fund may lag pure stock indices (having shifted to bonds) but often outperforms by less than expected if the shift happened after the worst of the downturn had already occurred.

The fund is used by investors seeking a diversified, actively managed (in an allocation sense) approach without the fee burden of hiring a human asset-allocation manager. It is suitable for those comfortable with quarterly or monthly allocation shifts and who value the discipline of rule-based rebalancing. It is less suitable for traders seeking short-term performance or for investors who want to do their own tactical allocation.

To research NDAA, consult the prospectus and fact sheet on Invesco’s website, which detail the NDR signal framework. Track the fund’s allocation history on the Invesco website and compare NDAA’s returns and volatility over different market cycles to a balanced index fund (e.g., 60% stocks / 40% bonds) to assess whether the dynamic approach has added value after fees.