Quant Investor With 40% Cash Can't Wait to Plunge Back Into the Market
(Bloomberg) -- As the equity selloff hit Wall Street late last month, Vance Howard’s quant program flashed sell signals across his portfolio teeming with high-priced tech companies, fueling a $1.8 billion liquidation and a now-40% cash position.
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The algo, which signaled bearish alarms during the onset of the Covid outbreak, did its job – helping the 61-year-old investor stem further losses as growth equities sink anew this week in the grip of the brewing trade war.
Now, Howard is waiting for the all-clear from his systematic model – mindful that entering back into the market early is as vital for long-term investment performance as bypassing declines. The good news? The trading program suggests the equity market is getting into oversold territory. The bad: the negative momentum of late, notwithstanding Friday’s bounce, suggests the S&P 500 could hit 5,400, or 3.5% lower from Thursday’s closing level.
Yet for all that, the founder of Howard Capital Management expects a fresh rebound soon enough on the belief that the White House will step back from its disruptive tariff plans. Howard reckons the recent selloff is showering bargains, with the market likely to hit records again before the year is out.
His Georgia-based firm has around $6.5 billion in assets under management, with amped-up stock funds that have largely kept up with the S&P 500 over the past five years by maximizing the Big Tech trade.
“When you’re sitting with almost 40% of your funding cash, you want it to go really, really low so you can buy back in cheap,” Howard said in an interview. “If we can catch the turn correctly, then we can apply a little bit of leverage. We’re putting together our buy list and we’re pretty excited about it.”
Howard is the rarity in the typically conservative mutual-fund industry, because he dabbles in leveraged-up exchange-traded funds – speculative products beloved day traders that may have saddled ill-timed investors with losses north of 30% just this week. His firm uses its own math-driven process to time the market based on price trends and other inputs.
Out of 3,074 actively-run US equity mutual funds tracked by Bloomberg Intelligence’s David Cohne, only 10 fund families held leveraged ETFs as of the latest reporting period. And only Howard’s firm held ProShares UltraPro QQQ (ticker TQQQ) and ProShares Ultra S&P 500 (SSO), a triple-leveraged Nasdaq 100 ETF and a double-leveraged S&P 500 one, respectively.