Dave Moenning, Founder and CIO of Heritage Capital Research, Captures Top Ranking in the NAAIM Shark Tank Competition

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Winning investment strategy of the 2018 NAAIM Shark Tank strives to keep portfolios invested during rising markets and reduce exposure to market declines, while limiting turnover.

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Long-time financial professional Dave Moenning, founder and chief investment officer of Heritage Capital Research in Denver, Colorado, took home first place in the 2018 National Association of Active Investment Managers (NAAIM) Shark Tank. The competition was held in conjunction with the NAAIM Uncommon Knowledge conference in Orlando, Florida at the end of April.

NAAIM’s Shark Tank was launched in 2013 to provide NAAIM members with an opportunity to showcase their active investment strategies, models and signals and provide the membership with new ideas in asset management and opportunities to develop beneficial relationships with other active managers. Managers have up to seven minutes to make a presentation of their investment approach and results. A panel of judges and audience ratings determine the best strategy.

While prior winners have tended to feature programs with frequent trading designed to profit from market fluctuations, Moenning presented his flagship risk management strategy – HCR’s Tactical Asset Allocation Program (TAAP), which strives to stay in tune with the major cycles in the stock market while limiting turnover. “The program was developed as a risk management overlay for financial advisors who are not active managers. It is a means of allowing them to be fully invested in bull markets, pare back their risk exposure in uncertain markets, and attempt to preserve capital in bear markets,” Moenning explained.

TAAP is designed as a real-world approach for what financial advisors want from a risk managed strategy. The program also reflects the fact that the stock market tends to rise the vast majority of the time. “In my experience, financial advisors definitely want their clients to ‘make hay while the sun shines’ on the market. But they also don’t want client portfolios 100% at risk when the market action is uncertain or severely negative,” Moenning said.

When asked to succinctly sum up the strategy’s objective, Moenning explained, “The goal is to stay in tune with the risk/reward environment of the market and to get the big moves mostly right, most of the time.”

“We’re not trying to hit home runs here,” he added. “The idea is that by consistently keeping exposure to risk in line with the state of the overall market environment, we can lose less when the bears come to call and come out ahead in the long run.”
By combining two market models that drive the decision – a technical model with six independent signals and a fundamental model that looks at indicators related to the economy and equity environment – TAAP strives to reduce volatility and provide results superior to the S&P 500 over the long run.

Performance data provided in the Shark Tank presentation was based on the results of accounts managed with the strategy from the start of 2016 through March 2018, net of a 1.6% management fee, typical of what many financial advisors charge. Accounts were allocated up to 50% in an S&P 500 index fund, and up to 50% in what Moenning deems the leading equity index (from a universe of the Dow Jones Industrials, S&P 500, Nasdaq Composite, Russell 1000 or Russell 2000 index). The period included what Moenning termed a “mini bear” from the fall of 2015 through early 2016, and increased market volatility in 2018. The system outperformed the S&P 500 benchmark for the period. Although it signaled the need for a lower risk exposure earlier in 2018, as of the start of May, the TAAP model is currently fully invested, Moenning said.

Moenning traces his investment approach to an early fascination with the work of legendary investors Marty Zweig and Ned Davis. “The big money is made in the stock market by being on the right side of the major moves,” Zweig wrote. “The idea is to get in harmony with the market. It’s suicidal to fight trends. They have a higher probability of continuing than not…Strong momentum tends to persist…Fighting the tape is an open invitation to disaster.”

“I started managing money for clients on a discretionary basis in mid-1987, which was just in time for the 1987 crash. This was quickly followed by the first Gulf War, and it really hit home with me that losing less during a bear market made the bull markets more enjoyable,” said Moenning. “You weren’t spending time getting back to break even, which creates the opportunity for outperformance.”

Prior Shark Tank winners have included Richard Paul, Potomac Advisors; David Bush ALPHATATIVE LLC; Len Fox, Scarecrow Trading; and John McClure, ProfitScore Capital Management.

About Dave Moenning and Heritage Capital Research:

Heritage Capital Research (HCR) is an independent, privately owned investment research firm located in the Denver area. HCR services the needs of both financial advisors and individual investors including customized portfolio design; multi-methodology, multi-strategy, multi-manager portfolio solutions and risk managed portfolio solutions. David Moenning has been an independent money manager since 1987, including as a partner in a private money management firm and founding his own advisory firm, Heritage Capital Management, which emphasized a risk managed approach to the markets. Most recently, he was Chief Investment Officer for a RIA firm responsible for $1.2 billion. For more information visit [http://www.heritagecapitalresearch.com

About NAAIM:

NAAIM is the premier organization whose purpose is to establish active investment management as the preeminent principle used in helping investors achieve their financial goals.

We are active investment managers who use systematic models and strategies to take emotion out of the investment process, helping investors improve their returns and reduce risk. Through a mastermind alliance of members and firms we continuously improve our state of the art investment models and client acquisition strategies through education, mentoring and collaboration among investment advisors and firms of all sizes. For more information visit: http://www.naaim.org

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