WEBVTT - Summit's Harden on Low Volatility Investment Strategy (Audio)

0:00:01.400 --> 0:00:04.800
<v Speaker 1>Global business news twenty four hours a day at Bloomberg

0:00:04.840 --> 0:00:07.920
<v Speaker 1>dot Com, the Radio plus Mobile Act and on your radio.

0:00:08.200 --> 0:00:12.120
<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters.

0:00:12.200 --> 0:00:16.079
<v Speaker 1>I'm Charlie Pellett. To dal the SMP naztak all declined today.

0:00:16.320 --> 0:00:19.840
<v Speaker 1>SMP five hundred index down twelve to seventy eight, a

0:00:19.920 --> 0:00:22.919
<v Speaker 1>drop of six tenths of one percent. NAZ Stack down

0:00:22.960 --> 0:00:26.079
<v Speaker 1>thirty five, a drop of seven tenths of one percent. Down.

0:00:26.079 --> 0:00:29.080
<v Speaker 1>Industrials down eighty four points, a drop there of five

0:00:29.080 --> 0:00:32.080
<v Speaker 1>tenths of one percent. The down now at eighteen thousand,

0:00:32.280 --> 0:00:35.240
<v Speaker 1>five hundred fifty two. The ten year down five thirty seconds,

0:00:35.360 --> 0:00:38.800
<v Speaker 1>yield one point five seven percent. Gold up four fifty

0:00:38.840 --> 0:00:41.120
<v Speaker 1>the ounce to thirteen forty seven, a gain of three

0:00:41.159 --> 0:00:44.519
<v Speaker 1>tenths of one percent. Crude oil West Texas Intermediate up

0:00:44.560 --> 0:00:47.800
<v Speaker 1>two percent to day of ninety cents forty sixty four

0:00:47.920 --> 0:00:51.760
<v Speaker 1>barrel for West Texas Intermediate Crude. I'm Charlie Palett, and

0:00:51.840 --> 0:00:56.160
<v Speaker 1>that's a Bloomberg Business Flash. You're listening to Taking Stock

0:00:56.320 --> 0:01:00.320
<v Speaker 1>with Kathleen Hayes and Pim Fox on Bloomberg Radio. He

0:01:00.440 --> 0:01:04.720
<v Speaker 1>hails from Bountiful, Utah. David Harden is the president and

0:01:04.760 --> 0:01:08.640
<v Speaker 1>the chief investment Officer of Summit of Global Investments, helping

0:01:08.640 --> 0:01:11.760
<v Speaker 1>to manage more than five and twenty million dollars of

0:01:11.800 --> 0:01:14.920
<v Speaker 1>customer assets, and he's here to tell us about investing

0:01:15.360 --> 0:01:18.400
<v Speaker 1>without volatility. David Harden, thank you very much for being

0:01:18.400 --> 0:01:21.720
<v Speaker 1>with us. Good afternoon, Jim, glad to be with you today.

0:01:21.920 --> 0:01:27.680
<v Speaker 1>Tell us your strategy about investing with the context of volatility,

0:01:27.800 --> 0:01:33.480
<v Speaker 1>low volatility and manage risk. Absolutely glad to. One of

0:01:33.520 --> 0:01:36.640
<v Speaker 1>the things that we specialize here is downside protection. And

0:01:36.680 --> 0:01:39.920
<v Speaker 1>so in the market that's volatile or that has future volatility,

0:01:40.080 --> 0:01:43.560
<v Speaker 1>providing downside protection I think is very very important. And

0:01:43.600 --> 0:01:46.880
<v Speaker 1>so what we look to do with our strategy is

0:01:47.080 --> 0:01:50.240
<v Speaker 1>look how stocks fit together from a risk perspective, what

0:01:50.400 --> 0:01:53.720
<v Speaker 1>stocks look to outperform from a return perspective, followed with

0:01:53.800 --> 0:01:57.200
<v Speaker 1>constraints so other risks don't come into the portfolio. And lastly,

0:01:57.320 --> 0:01:58.840
<v Speaker 1>probably one of the best things that we're going to

0:01:58.960 --> 0:02:01.280
<v Speaker 1>do is we do a in a mental risk overlay

0:02:01.440 --> 0:02:03.880
<v Speaker 1>on every stock that we buy. In other words, we

0:02:03.920 --> 0:02:06.720
<v Speaker 1>want to make sure there's no downside catalysts when we

0:02:06.800 --> 0:02:09.600
<v Speaker 1>purchased that stock for investors. Okay, So here we are

0:02:09.639 --> 0:02:12.160
<v Speaker 1>a situation where we've seen these new highs and the

0:02:12.200 --> 0:02:14.880
<v Speaker 1>major market indexes, and we are watching the FED over

0:02:14.919 --> 0:02:18.079
<v Speaker 1>one shoulder and earnings over another. Or maybe we're there,

0:02:18.120 --> 0:02:20.959
<v Speaker 1>not behind us, we're looking ahead of us. Why don't

0:02:21.400 --> 0:02:23.400
<v Speaker 1>your view in a nutshell of the market so you

0:02:23.440 --> 0:02:27.160
<v Speaker 1>can tell us how you're applying the strategy according to

0:02:27.320 --> 0:02:29.640
<v Speaker 1>what you what you think is driving the market, and

0:02:29.639 --> 0:02:33.480
<v Speaker 1>where you think it's heading. Absolutely, thanks Kathleen. So from

0:02:33.480 --> 0:02:36.160
<v Speaker 1>a from a standpoint of overall market, I would say

0:02:36.200 --> 0:02:38.880
<v Speaker 1>I'm pretty neutral to maybe a little bit negative. I

0:02:38.960 --> 0:02:41.360
<v Speaker 1>was positive on the FED even though today is what

0:02:41.520 --> 0:02:43.720
<v Speaker 1>kind of caused the Fed to cause the markets to

0:02:43.760 --> 0:02:46.359
<v Speaker 1>go down. I think was comments from the President Dudley

0:02:46.360 --> 0:02:49.880
<v Speaker 1>and also from San Francisco President John Williams last night

0:02:50.320 --> 0:02:52.519
<v Speaker 1>and those comments today I think seemed to say that

0:02:52.560 --> 0:02:54.519
<v Speaker 1>the Fed's trying to tell us something, and that's that

0:02:54.639 --> 0:02:56.919
<v Speaker 1>I think the rake hike is coming. I don't think

0:02:56.960 --> 0:02:59.560
<v Speaker 1>they like a lot of uncertainty coming out of the FED.

0:02:59.720 --> 0:03:03.800
<v Speaker 1>They want more stability for the markets. But reality, I

0:03:03.800 --> 0:03:06.600
<v Speaker 1>think I'm above that. We may see a rate hike

0:03:06.639 --> 0:03:09.720
<v Speaker 1>here in two thousand sixteen, primarily because we're up over

0:03:10.639 --> 0:03:12.880
<v Speaker 1>for the last six months, so with in place and

0:03:12.960 --> 0:03:15.919
<v Speaker 1>still in check. Typically i'd say it fed's probably positive

0:03:16.200 --> 0:03:19.640
<v Speaker 1>overall for the market, but right now a little bit uncertainty,

0:03:19.680 --> 0:03:21.679
<v Speaker 1>and there's a lot of speaking opportunities for the FED

0:03:21.720 --> 0:03:23.840
<v Speaker 1>coming up in the next week, so I think the

0:03:23.880 --> 0:03:25.800
<v Speaker 1>Fed's going to take over here and drive some of

0:03:25.800 --> 0:03:28.440
<v Speaker 1>the market. But once that settles down, I see overall

0:03:28.440 --> 0:03:30.680
<v Speaker 1>the FED positive. I think the thing that's causing me

0:03:30.720 --> 0:03:32.720
<v Speaker 1>to be more neutral to negative as you look at

0:03:32.720 --> 0:03:34.880
<v Speaker 1>the earnings of the p s of the s and

0:03:34.920 --> 0:03:37.000
<v Speaker 1>P five hundred, for example, we're at the high end

0:03:37.000 --> 0:03:40.000
<v Speaker 1>of the range, and I think from a stock perspective,

0:03:40.120 --> 0:03:44.280
<v Speaker 1>we're very vulnerable to economic disappointments, and so with the

0:03:44.360 --> 0:03:46.440
<v Speaker 1>P at the high end of the range, you look

0:03:46.440 --> 0:03:48.720
<v Speaker 1>at the risk. On the other hand, I think we're

0:03:48.800 --> 0:03:51.280
<v Speaker 1>under priced with risk. So look at the VIX down

0:03:51.280 --> 0:03:54.720
<v Speaker 1>in the twelve eleven range. I think we're under pricing

0:03:54.720 --> 0:03:57.600
<v Speaker 1>the risk that's ahead. Be that, you know, for Congress

0:03:57.600 --> 0:03:59.640
<v Speaker 1>and the and the rhetoric coming out of Washington, be

0:03:59.760 --> 0:04:04.080
<v Speaker 1>it like I said, uh, disappointing economic outputs and what

0:04:04.200 --> 0:04:06.600
<v Speaker 1>have you. I think for me, I see cloud these

0:04:06.640 --> 0:04:09.440
<v Speaker 1>guys ahead. I see a little bit more uncertainty. I'm

0:04:09.480 --> 0:04:11.760
<v Speaker 1>not sure we can continue on such a great path.

0:04:12.320 --> 0:04:15.280
<v Speaker 1>Could we? Yes, But the fundamentals really don't support that

0:04:15.320 --> 0:04:17.800
<v Speaker 1>for the US, and so we need to protect against that.

0:04:17.800 --> 0:04:20.799
<v Speaker 1>That's really what we're trying to do with our strategy. David,

0:04:20.839 --> 0:04:24.200
<v Speaker 1>How does that affect how you run the Summit Global

0:04:24.279 --> 0:04:27.840
<v Speaker 1>Investments US Low Volatility Equity Fund. This is the mutual

0:04:27.880 --> 0:04:31.080
<v Speaker 1>fund to symbol s I l v X. It has

0:04:31.120 --> 0:04:34.360
<v Speaker 1>got a performance of nearly ten percent year today. Compare

0:04:34.400 --> 0:04:36.240
<v Speaker 1>that with the SMP five of a six and a

0:04:36.279 --> 0:04:40.520
<v Speaker 1>half percent gain. What we're trying to do here is

0:04:40.560 --> 0:04:45.360
<v Speaker 1>we're very concerned about valuation. It's only one factor, and

0:04:45.400 --> 0:04:48.240
<v Speaker 1>we don't want just one factor to drive how you invest.

0:04:48.640 --> 0:04:51.599
<v Speaker 1>But we're very cautious and so in this market where

0:04:51.600 --> 0:04:53.960
<v Speaker 1>evaluation is really what's going to be one of the

0:04:53.960 --> 0:04:56.600
<v Speaker 1>things that's going to drive us going forward, we want

0:04:56.640 --> 0:04:58.719
<v Speaker 1>to look very carefully. So when we do a fundamental

0:04:58.800 --> 0:05:02.520
<v Speaker 1>risk overly on companies, we're not looking for just for example,

0:05:02.560 --> 0:05:07.000
<v Speaker 1>their filings with the SEC, for their transparency with their management,

0:05:07.080 --> 0:05:09.320
<v Speaker 1>for their you know, CEO turnover, and all the things

0:05:09.320 --> 0:05:12.760
<v Speaker 1>that go into downside risk. But we're also looking at valuation,

0:05:13.320 --> 0:05:15.599
<v Speaker 1>and it's one of our factors in our alpha as well,

0:05:15.640 --> 0:05:18.360
<v Speaker 1>trying to look for out performance. So when you look

0:05:18.400 --> 0:05:21.640
<v Speaker 1>at not just valuation, but coupled that with growth, coupled

0:05:21.640 --> 0:05:23.560
<v Speaker 1>that with quality, and coupled that with a number of

0:05:23.560 --> 0:05:27.320
<v Speaker 1>other factors, we feel like putting those together, it's what's

0:05:27.360 --> 0:05:30.800
<v Speaker 1>really helping us move forward and outperform. So far, what

0:05:30.880 --> 0:05:33.120
<v Speaker 1>happens if Altilo goes through the roof? What hapmens your

0:05:33.160 --> 0:05:36.719
<v Speaker 1>fund well? To be honest with you, thinking looking back

0:05:36.720 --> 0:05:38.960
<v Speaker 1>at past history, we've been able to do very well

0:05:39.000 --> 0:05:41.839
<v Speaker 1>when volatility spikes. So if you look at the past

0:05:41.880 --> 0:05:44.640
<v Speaker 1>times when vix really went through, for example the bricks

0:05:44.680 --> 0:05:47.360
<v Speaker 1>at earlier uh this year in June, we did very

0:05:47.480 --> 0:05:49.440
<v Speaker 1>very well. You look back at the first of the

0:05:49.520 --> 0:05:51.919
<v Speaker 1>year when the market really took a tumble in January

0:05:51.920 --> 0:05:54.200
<v Speaker 1>and was off i think from Pete Stroth over eleven

0:05:54.240 --> 0:05:56.720
<v Speaker 1>and a half percent, we only went down about fifty

0:05:57.000 --> 0:06:00.839
<v Speaker 1>per of that down market, and that's tipically our average.

0:06:00.839 --> 0:06:03.839
<v Speaker 1>If you look at historically, we're down about of the

0:06:03.839 --> 0:06:08.400
<v Speaker 1>market decline, but we're still capturing sometimes of an upside.

0:06:08.640 --> 0:06:11.120
<v Speaker 1>In March, the market was up six point seven and

0:06:11.160 --> 0:06:13.880
<v Speaker 1>we're up over six per So when you have those

0:06:14.000 --> 0:06:16.960
<v Speaker 1>higher lows, it definitely helps when the market comes back,

0:06:17.000 --> 0:06:19.960
<v Speaker 1>you have more money there to make money for your clients. David,

0:06:20.040 --> 0:06:23.719
<v Speaker 1>you also have the Summit Global Investments Small Cap Low

0:06:23.800 --> 0:06:27.719
<v Speaker 1>Volatility Fund. Tell us about that. So the small cat fund.

0:06:28.320 --> 0:06:30.400
<v Speaker 1>What I usually tell people in clients is a lot

0:06:30.480 --> 0:06:33.000
<v Speaker 1>of times they really like the characteristics of the large

0:06:33.000 --> 0:06:36.000
<v Speaker 1>cat fund with the SMP high hundred. The small cat fund,

0:06:36.000 --> 0:06:38.560
<v Speaker 1>you take everything you like about it and you just

0:06:38.600 --> 0:06:41.479
<v Speaker 1>turn it into a love The small cat fund does everything,

0:06:41.560 --> 0:06:44.120
<v Speaker 1>but it's more pronounced. There's a little bit more volatility there.

0:06:44.200 --> 0:06:46.880
<v Speaker 1>Who were able to take advantage of that volatility a

0:06:46.920 --> 0:06:49.400
<v Speaker 1>little bit more, the spreads began to be a little

0:06:49.400 --> 0:06:53.000
<v Speaker 1>bit wider, and we've we've we've done very well there.

0:06:53.000 --> 0:06:55.200
<v Speaker 1>We took about three years to research this before we

0:06:55.240 --> 0:06:57.920
<v Speaker 1>started at about three years ago, and it's just been

0:06:57.960 --> 0:07:02.560
<v Speaker 1>a tremendous asset for clients. Just really quickly. Before I

0:07:02.640 --> 0:07:06.040
<v Speaker 1>let you go, David, please tell us again the ticker

0:07:06.160 --> 0:07:09.560
<v Speaker 1>symbol UH and how the performance has done not just

0:07:09.640 --> 0:07:12.680
<v Speaker 1>over the past year, but since he started it. You

0:07:12.840 --> 0:07:16.640
<v Speaker 1>bet so. For the large cap it's s I l

0:07:16.760 --> 0:07:20.840
<v Speaker 1>v X Summit like Investments low ball x ray and

0:07:20.840 --> 0:07:24.000
<v Speaker 1>then for the small cap it's small cap sc l

0:07:24.280 --> 0:07:28.200
<v Speaker 1>le x Okay, David Harden fascinating. Thank you so very

0:07:28.280 --> 0:07:30.920
<v Speaker 1>much for joining us. He's the President chief investment officer

0:07:30.960 --> 0:07:34.120
<v Speaker 1>at Summit Global Investments. Joining us in Salt Lake City.

0:07:34.600 --> 0:07:37.440
<v Speaker 1>I'm Kathleen Hayes along with pim Fox. We thank you

0:07:37.560 --> 0:07:40.560
<v Speaker 1>so much for joining us today. Keep it right here.

0:07:40.640 --> 0:07:48.000
<v Speaker 1>This is Bloomberg coming off Bloomberg Laws. Brought to you

0:07:48.040 --> 0:07:50.679
<v Speaker 1>by land Over Manhattan, where New York goes for luxury,

0:07:50.760 --> 0:07:53.640
<v Speaker 1>conveniently located at fifty four and Eleventh Avenue. Went online

0:07:53.680 --> 0:07:57.280
<v Speaker 1>at landover Manhattan dot com. Land Over Manhattan is at

0:07:57.320 --> 0:07:58.040
<v Speaker 1>your service