Matthew Tuttle has strong opinions about investing, and that’s reflected in the suite of four exchange-traded funds his company, Tuttle Tactical Management LLC, launched last month.
All four actively managed products are based on his trend aggregation model that he says puts a different twist on traditional tactical asset allocation, which Tuttle posits does well in straight-up or straight-down markets but tends to flail during choppy markets. He believes his trend aggregation approach differs by having well-defined strategies for all market conditions.
As described on the company’s website, Tuttle Tactical Management's investment style analyzes trends, countertrends and fundamental statistics, enabling it to choose holdings based on confirmed market information.
The firm's four new products share the same birth date (May 8) and the same U.S.-centric focus. The group comprises the following:
• Trend Aggregation Aggressive Growth ETF (TAAG)
• Trend Aggregation Dividend Stock ETF (TADS)
• Trend Aggregation U.S. ETF (TAEQ)
• Trend Aggregation ESG ETF (TEGS)
“What we’re looking to do on an overall basis in, for example, our growth funds—the Trend Aggregation Aggressive Growth and the Trend Aggregation U.S. funds—is two things which historically have been impossible but I don’t think are impossible,” Tuttle explained. “That is to beat the market both on an absolute and risk-adjusted basis, and to kick its ass on a risk-adjusted basis. We’re looking to have a lot lower volatility on a daily basis; but more importantly, a lot lower drawdowns [in down markets] while still beating it on the upside.”
All four funds invest across U.S. equities and other asset classes. They use individual stocks for the equity portion, and ETFs for the non-equities.
Regarding equities, everything is U.S.-based, though Tuttle said “there might be the occasional Alibaba or something like that.”
He cited a couple reasons for his focus on U.S stocks.
“One, if you don’t have to leave the U.S., then why?” he asked. “Our clients are U.S.-based and they see what’s going on in this market. And we like stuff that’s very easy to trade. To me, investing isn’t about spreading around my assets. It’s about wanting to make money and not lose it.”
And when it comes to U.S. stocks, Tuttle is focusing on what he believes are the “haves” in the post-Covid world. His take is that traditional equity indexes were designed for the pre-Covid economy, and they now include too many companies and sectors that aren’t built to capitalize on the new realities such as the work-from-home movement and the increased proclivity for people to get more stuff online, among other trends.
He believes the perceived delineation between the haves and have-nots will work to his advantage.
“I believe we’re going into a golden era of stock picking,” Tuttle says. “I believe that by being tactical with active management and having an overweight to the haves, you can really crush the market on an absolute basis, and then throw in risk management with Treasurys, gold, volatility and some inverse things."
Take, for example, the equity positions in the $56 million Trend Aggregation U.S. ETF, the largest of Tuttle’s suite of four trend aggregation funds. Three of the top four stock positions are Centene Corp., Danaher Corp. and Adaptive Biotechnologies Corp. All of them are involved in the life sciences and/or health-care fields.
Other so-called haves in the portfolio include Amazon.com and Twilio Inc., a cloud communications platform.
But the fund’s second-biggest stock position is Allegiant Travel Co., an integrated travel company. The portfolio also includes United Airlines. Tuttle considers these two companies to be operating in a have-not sector, but he said he likes having a little exposure to such companies as contrarian plays in order to capture their reversion to the mean after their share prices have fallen.
On the non-equity side, this fund’s holdings include the VanEck Vectors Gold Miners ETF (GDX), as well as other ETFs that either invest in Treasurys or take inverse and/or levered positions in various asset classes or in the VIX volatility index.
“Gold, like Treasurys, is a place money goes into when the market is going down,” Tuttle explained. “We use VXX [iPath Series B S&P 500 VIX Short-Term Futures ETN] for volatility. I love volatility because it has an asymmetrical return stream.”
In general, Tuttle is a fan of inverse and levered ETFs. He likes to employ funds that provide 3x, or three times exposure—either bullish or bearish—to the S&P 500 or other indexes on a short-term basis with the aim to create certain portfolio results with less money upfront, freeing up more cash to buy equities.
“We’re not going to be tax-efficient; we’re going to be very nimble,” he said. “We tell people you don’t want the tax tail to wag the dog.”
Other ETF Efforts
Tuttle, who is based in Riverside, Conn., said he has been doing tactical asset management since 2008, and that his current trend aggregation model took shape in August 2011 when, he said, “the wheels almost fell off the world.”
“On August 2 we got out of stocks entirely and got into Treasurys and TIPS,” he recalled. “I hate to say this, but there’s nothing better than making money when the market is going down.”
His various trend aggregation strategies have been run as separately managed accounts and mutual funds, but now have migrated to ETF Land.
Tuttle’s active management style is assertive and, well, pretty active, and that’s reflected in the expense ratio of the four ETFs—they all carry a hefty fee of 1.87%.
During their brief run as ETFs, each of these products has outperformed their respective benchmarks over the past one month by roughly five hundred to six hundred basis points, according to Morningstar.
Another Tuttle fund, the Trend Aggregation Managed Futures Strategy ETF (TAMF), remains in registration with the Securities and Exchange Commission.
Elsewhere, Tuttle Tactical Management has had past experience with ETFs. Two of its prior efforts—the Tuttle Tactical Management U.S. Core ETF (TUTT) and Tuttle Tactical Management Multi-Strategy Income ETF (TUTI)—closed in 2017.
The firm currently sub-advises on the Tactical Income ETF (TBND), which is sponsored by Belpointe Asset Management LLC. That roughly $31 million fund debuted in June 2019 and invests in fixed income, real estate investment trusts, master limited partnerships and dividend-paying equities. The bulk of its portfolio consists of ETFs and ETNs, some of which are inverse and/or levered. Its expense ratio is 1.59%.
“TBND is designed to take the place of where you would normally put bonds into a portfolio,” Tuttle said.
Regarding his four trend aggregation ETFs, Tuttle has his own take regarding their portfolio fit, though he recognizes that not all investors share his gung-ho enthusiasm for tactical investing.
“Everyone is different,” he said. “Me being tactical, I’m a big believer that people should be 100% tactical. Most people aren’t. [These ETFs] are designed to replace traditional equity exposure to give you the upside of the market without the downside.”