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Summit's Harden on Low Volatility Investment Strategy (Audio) · Bloomberg Intelligence

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  Speaker 1: Global business news twenty four hours a day at Bloomberg
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  Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.
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  Speaker 1: I'm Charlie Pellett. To dal the SMP naztak all declined today.
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  Speaker 1: SMP five hundred index down twelve to seventy eight, a
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  Speaker 1: drop of six tenths of one percent. NAZ Stack down
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  Speaker 1: thirty five, a drop of seven tenths of one percent. Down.
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  Speaker 1: Industrials down eighty four points, a drop there of five
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  Speaker 1: tenths of one percent. The down now at eighteen thousand,
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  Speaker 1: five hundred fifty two. The ten year down five thirty seconds,
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  Speaker 1: yield one point five seven percent. Gold up four fifty
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  Speaker 1: the ounce to thirteen forty seven, a gain of three
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  Speaker 1: tenths of one percent. Crude oil West Texas Intermediate up
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  Speaker 1: two percent to day of ninety cents forty sixty four
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  Speaker 1: barrel for West Texas Intermediate Crude. I'm Charlie Palett, and
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  Speaker 1: that's a Bloomberg Business Flash. You're listening to Taking Stock
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  Speaker 1: with Kathleen Hayes and Pim Fox on Bloomberg Radio. He
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  Speaker 1: hails from Bountiful, Utah. David Harden is the president and
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  Speaker 1: the chief investment Officer of Summit of Global Investments, helping
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  Speaker 1: to manage more than five and twenty million dollars of
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  Speaker 1: customer assets, and he's here to tell us about investing
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  Speaker 1: without volatility. David Harden, thank you very much for being
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  Speaker 1: with us. Good afternoon, Jim, glad to be with you today.
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  Speaker 1: Tell us your strategy about investing with the context of volatility,
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  Speaker 1: low volatility and manage risk. Absolutely glad to. One of
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  Speaker 1: the things that we specialize here is downside protection. And
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  Speaker 1: so in the market that's volatile or that has future volatility,
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  Speaker 1: providing downside protection I think is very very important. And
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  Speaker 1: so what we look to do with our strategy is
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  Speaker 1: look how stocks fit together from a risk perspective, what
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  Speaker 1: stocks look to outperform from a return perspective, followed with
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  Speaker 1: constraints so other risks don't come into the portfolio. And lastly,
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  Speaker 1: probably one of the best things that we're going to
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  Speaker 1: do is we do a in a mental risk overlay
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  Speaker 1: on every stock that we buy. In other words, we
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  Speaker 1: want to make sure there's no downside catalysts when we
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  Speaker 1: purchased that stock for investors. Okay, So here we are
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  Speaker 1: a situation where we've seen these new highs and the
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  Speaker 1: major market indexes, and we are watching the FED over
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  Speaker 1: one shoulder and earnings over another. Or maybe we're there,
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  Speaker 1: not behind us, we're looking ahead of us. Why don't
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  Speaker 1: your view in a nutshell of the market so you
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  Speaker 1: can tell us how you're applying the strategy according to
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  Speaker 1: what you what you think is driving the market, and
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  Speaker 1: where you think it's heading. Absolutely, thanks Kathleen. So from
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  Speaker 1: a from a standpoint of overall market, I would say
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  Speaker 1: I'm pretty neutral to maybe a little bit negative. I
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  Speaker 1: was positive on the FED even though today is what
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  Speaker 1: kind of caused the Fed to cause the markets to
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  Speaker 1: go down. I think was comments from the President Dudley
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  Speaker 1: and also from San Francisco President John Williams last night
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  Speaker 1: and those comments today I think seemed to say that
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  Speaker 1: the Fed's trying to tell us something, and that's that
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  Speaker 1: I think the rake hike is coming. I don't think
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  Speaker 1: they like a lot of uncertainty coming out of the FED.
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  Speaker 1: They want more stability for the markets. But reality, I
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  Speaker 1: think I'm above that. We may see a rate hike
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  Speaker 1: here in two thousand sixteen, primarily because we're up over
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  Speaker 1: for the last six months, so with in place and
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  Speaker 1: still in check. Typically i'd say it fed's probably positive
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  Speaker 1: overall for the market, but right now a little bit uncertainty,
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  Speaker 1: and there's a lot of speaking opportunities for the FED
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  Speaker 1: coming up in the next week, so I think the
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  Speaker 1: Fed's going to take over here and drive some of
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  Speaker 1: the market. But once that settles down, I see overall
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  Speaker 1: the FED positive. I think the thing that's causing me
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  Speaker 1: to be more neutral to negative as you look at
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  Speaker 1: the earnings of the p s of the s and
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  Speaker 1: P five hundred, for example, we're at the high end
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  Speaker 1: of the range, and I think from a stock perspective,
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  Speaker 1: we're very vulnerable to economic disappointments, and so with the
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  Speaker 1: P at the high end of the range, you look
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  Speaker 1: at the risk. On the other hand, I think we're
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  Speaker 1: under priced with risk. So look at the VIX down
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  Speaker 1: in the twelve eleven range. I think we're under pricing
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  Speaker 1: the risk that's ahead. Be that, you know, for Congress
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  Speaker 1: and the and the rhetoric coming out of Washington, be
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  Speaker 1: it like I said, uh, disappointing economic outputs and what
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  Speaker 1: have you. I think for me, I see cloud these
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  Speaker 1: guys ahead. I see a little bit more uncertainty. I'm
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  Speaker 1: not sure we can continue on such a great path.
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  Speaker 1: Could we? Yes, But the fundamentals really don't support that
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  Speaker 1: for the US, and so we need to protect against that.
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  Speaker 1: That's really what we're trying to do with our strategy. David,
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  Speaker 1: How does that affect how you run the Summit Global
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  Speaker 1: Investments US Low Volatility Equity Fund. This is the mutual
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  Speaker 1: fund to symbol s I l v X. It has
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  Speaker 1: got a performance of nearly ten percent year today. Compare
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  Speaker 1: that with the SMP five of a six and a
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  Speaker 1: half percent gain. What we're trying to do here is
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  Speaker 1: we're very concerned about valuation. It's only one factor, and
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  Speaker 1: we don't want just one factor to drive how you invest.
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  Speaker 1: But we're very cautious and so in this market where
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  Speaker 1: evaluation is really what's going to be one of the
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  Speaker 1: things that's going to drive us going forward, we want
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  Speaker 1: to look very carefully. So when we do a fundamental
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  Speaker 1: risk overly on companies, we're not looking for just for example,
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  Speaker 1: their filings with the SEC, for their transparency with their management,
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  Speaker 1: for their you know, CEO turnover, and all the things
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  Speaker 1: that go into downside risk. But we're also looking at valuation,
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  Speaker 1: and it's one of our factors in our alpha as well,
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  Speaker 1: trying to look for out performance. So when you look
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  Speaker 1: at not just valuation, but coupled that with growth, coupled
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  Speaker 1: that with quality, and coupled that with a number of
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  Speaker 1: other factors, we feel like putting those together, it's what's
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  Speaker 1: really helping us move forward and outperform. So far, what
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  Speaker 1: happens if Altilo goes through the roof? What hapmens your
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  Speaker 1: fund well? To be honest with you, thinking looking back
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  Speaker 1: at past history, we've been able to do very well
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  Speaker 1: when volatility spikes. So if you look at the past
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  Speaker 1: times when vix really went through, for example the bricks
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  Speaker 1: at earlier uh this year in June, we did very
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  Speaker 1: very well. You look back at the first of the
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  Speaker 1: year when the market really took a tumble in January
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  Speaker 1: and was off i think from Pete Stroth over eleven
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  Speaker 1: and a half percent, we only went down about fifty
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  Speaker 1: per of that down market, and that's tipically our average.
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  Speaker 1: If you look at historically, we're down about of the
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  Speaker 1: market decline, but we're still capturing sometimes of an upside.
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  Speaker 1: In March, the market was up six point seven and
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  Speaker 1: we're up over six per So when you have those
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  Speaker 1: higher lows, it definitely helps when the market comes back,
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  Speaker 1: you have more money there to make money for your clients. David,
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  Speaker 1: you also have the Summit Global Investments Small Cap Low
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  Speaker 1: Volatility Fund. Tell us about that. So the small cat fund.
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  Speaker 1: What I usually tell people in clients is a lot
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  Speaker 1: of times they really like the characteristics of the large
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  Speaker 1: cat fund with the SMP high hundred. The small cat fund,
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  Speaker 1: you take everything you like about it and you just
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  Speaker 1: turn it into a love The small cat fund does everything,
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  Speaker 1: but it's more pronounced. There's a little bit more volatility there.
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  Speaker 1: Who were able to take advantage of that volatility a
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  Speaker 1: little bit more, the spreads began to be a little
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  Speaker 1: bit wider, and we've we've we've done very well there.
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  Speaker 1: We took about three years to research this before we
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  Speaker 1: started at about three years ago, and it's just been
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  Speaker 1: a tremendous asset for clients. Just really quickly. Before I
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  Speaker 1: let you go, David, please tell us again the ticker
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  Speaker 1: symbol UH and how the performance has done not just
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  Speaker 1: over the past year, but since he started it. You
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  Speaker 1: bet so. For the large cap it's s I l
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  Speaker 1: v X Summit like Investments low ball x ray and
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  Speaker 1: then for the small cap it's small cap sc l
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  Speaker 1: le x Okay, David Harden fascinating. Thank you so very
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  Speaker 1: much for joining us. He's the President chief investment officer
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  Speaker 1: at Summit Global Investments. Joining us in Salt Lake City.
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  Speaker 1: I'm Kathleen Hayes along with pim Fox. We thank you
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  Speaker 1: so much for joining us today. Keep it right here.
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