2/25/2014

There is a money manager out of Chicago, that has secretly become one of the biggest traders of ETFs on the planet. The firm Good Harbor Financial LLC, which had less than $10 million in assets in 2008 has grown to almost $12 Billion today by frenetically trading in and out of ETFs.

The firms strategy is to make aggressive bets on a small number of bond and stock ETFs, while using as much as 1.6 times leverage. Good Harbor trades so aggressively and so rapidly that it can move from 100% stocks to 100% bonds in a single day.

This aggressive trading strategy has worked exceptionally well, Good Harbor has returned 20% annualized over the last 5 years with less risk than the overall stock market. Good Harbor lost less than 1% in 2008 versus a 37% loss in the S&P 500 and it made 47% in 2009. Furthermore when almost every single equity based hedge fund and mutual fund lost money in 2011, Good Harbor returned 12.73%.

Good Harbor uses quantitative models that signal whether to buy stocks or bonds based on changes in investor risk premiums (the VIX), momentum, economics data and yield curve dynamics. The founder and Chief Investment Officer of Good Harbor has a strong quantitative background with a degree in electrical engineering from Michigan Technological University located in Houghton, Michigan a masters in electrical engineering from the University of Michigan and an MBA from the University of Chicago.

Good Harbor is one of the funds that I constantly watch at the billionairesportfolio.com as they have shown a consistent ability to time the market. Also due to the size of their ETF trades, their trades and signals are very easy to follow.

This month Good Harbor has been pouring more than $7 Billion dollars into bond ETFs betting on a recovery in both corporate bonds and treasuries, a move that is being closely watched even as equity markets are making all time highs.

Good Harbor is a great example of how one can tactically use ETFS to beat the market and for individual investors they are a firm to watch as they have shown a strong ability to time the stock and bond markets.

Will Meade
President of The Billionaires Portfolio