Will This Quant-Based ETF Be Able to Time the Market?
The Hull Tactical US ETF (HTUS) - Get Report is flat since its late June launch compared to the S&P 500 which is up more than 2%, but the S&P has taken investors on a nerve-racking ride in the process. Blair Hull, the fund's manager, said despite the slow start, his analytics-based, market-timing fund will beat the index over the long term, and with far less volatility.
"There are certain times when you ought to be more exposed to equities and certain times when you are less exposed," said Hull, who sold his trading company to Goldman Sachs in 1999. "This is a long-term strategy that we believe will perform over a market cycle, so you can't really judge the performance over a short period of time."
The Hull Tactical US ETF is an actively managed ETF, created to achieve long-term growth from investments in the U.S. equity and Treasury markets, independent of market direction. It is driven by a proprietary, quantitative trading model. The fund takes long and short positions in ETFs that seek to track the performance of the S&P 500, as well as leveraged ETFs and inverse ETFs that seek to deliver multiples, or the inverse, of the performance of the S&P 500.
HTUS relies on quantitative algorithms and a patent-pending quantitative model that combines technology, predicative analytics and machine learning with the liquidity and transparency of an ETF. Using its models, Hull attempts to forecast the next six months' return of the S&P 500 while maintaining a long-term goal of capital appreciation in relation to equity risk premiums and mitigating long-term investment portfolio volatility.
"Predictive analytics are everywhere, but because of the stigma of market timing people don't use it relative to the market," said Hull. "And I believe that just as in the last 30 years, where it was considered irresponsible to participate in market timing, I believe in the next 30 years it will be irresponsible not to participate in market timing."