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Operating with a Flexible Investment Mandate to Navigate through all Market Environments: Broadmark Asset Management LLC


“The Tactical Growth strategy has no restrictions to holding 100 percent cash when necessary and can prudently use short sales in an effort to combat market downturns.”

Bear market declines have had an outsized negative impact on both long-term performance returns and investor behavior. These markets are often devastating to an investor’s long-term rate of return, often wiping out years of previous gains. Further, behavioral finance teaches us that clients fear the possibility of losses to a greater extent than they enjoy gains. Therefore, many may choose to liquidate their stock holdings at the wrong time due to the stress and turmoil in the face of market declines.

In light of the foregoing, we’re thrilled to present Broadmark Asset Management LLC — an investment management firm. It has $1.4 billion of assets under management.

At the core of Broadmark’s investment philosophy is equity market risk management. Intending to manage risk, the Broadmark investment team employs a directional equity long-and-short strategy that can be fully invested, fully in cash, or short. This contrasts with traditional long/short hedged strategies that are generally always hedged. The Broadmark strategy is designed to provide positive, risk-adjusted returns in any market environment.

The company was established in 1999 and is based in San Francisco, CA.

A Deeper Look into Tactical Growth Strategy

The Tactical Growth strategy is Broadmark’s flagship strategy that dates back to November 1, 2001. It offers investors a way to plan for and manage stock market declines and has the ability to be net short seeking to generate alpha in a bear market. The Tactical Growth strategy has no restrictions to holding 100 percent cash when necessary and can prudently use short sales in an effort to combat market downturns. The maximum draw-down has never been more than nine percent since its inception 20 years ago. In addition, when the market was down 37 percent in 2008 and 22 percent in 2002, the Tactical Growth strategy recorded gains of 16 percent and four percent, respectively. The strategy can be nimble due to the ability to re-position the portfolio on a real-time basis through the use of highly liquid exchange-traded funds (ETFs).

The strategy is designed to help investors side-step market downturns while participating in its growth via the continuous and active management of portfolio market exposure. The portfolio seeks to manage risk and enhance alpha with the flexibility to take a long, short, or neutral view of the market.

The portfolio is made up of a diversified universe of highly liquid ETFs that provide exposure to U.S. and non-U.S. equity securities. The Broadmark investment team uses a Four Pillar investment process created by its founder, CIO, and Co-CEO Chris Guptill. The first three pillars are qualitative: equity valuation, monetary policy/credit, and investor sentiment. The fourth pillar is quantitative. This pillar is comprised of a proprietary volume/breadth-based momentum model and is designed to determine optimal stock market exposure including entry points, the amount of exposure, the type of exposure, and exit.

Moreover, buy-and-hold and passive investment strategies have the advantage of taking full advantage of upward moves when the stock market is rising. But these strategies will suffer the full brunt of losses during a prolonged correction or bear market. The Tactical Growth strategy, when combined with a long-only strategy, is designed to protect an investment portfolio by raising cash and using short sales that can act as shock absorbers with the goal of mitigating risk.

Let’s not forget that the average bear market decline since 1960 has experienced a loss of approximately 30 percent. There have been 15 bear markets in the last 60 years — with a bear market defined as a market decline of 20 percent or more — or one every four years on average. The last two major bear markets resulted in losses of 50 percent for the major market averages. The question is not if a new bear market will happen, but when.

Facilitating a Tactical Approach

The Tactical Growth strategy is available as a separately managed account through several select wealth management, brokerage house and bank platforms.

Final Thoughts

With the record levels of global and U.S. debt, elevated equity valuations that by some measures rival the bubble and even 1929, and the disruptions due to the COVID-19 pandemic and Delta variant, there is substantial risk in equity prices. With that said, an allocation to Broadmark’s risk-averse strategy is a prudent way for an investor to plan for potential future stock market shocks. The company welcomes new investors into our strategies.

Importantly, the Broadmark team believes that its tactical strategies are ideally suited to the market environment that is potentially coming in the next few years.

Leadership | Broadmark Asset Management LLC

Chris Guptill, founder and CIO, serves as the co-CEO of Broadmark Asset Management LLC. He created the investment strategy that the company has used for the last 20 years.

Ricardo L. Cortez serves as the co-CEO of Broadmark Asset Management LLC. His role is to build the business and serve clients efficiently. This results-oriented focus on teamwork has been successful at allowing each member of the Broadmark team to do what each does best. This teamwork is the defining culture of Broadmark and is the reason for its success.

Laura Hespe serves as the Chief Operating Officer of Broadmark Asset Management LLC. She manages day-to-day business activities for the company.

“The Tactical Growth strategy offers investors a way to plan for and manage stock market declines, and has the ability to be net short seeking to generate alpha in a bear market.”