Howard Capital Management (HCM) is reshaping the way advisors approach core equity exposure. Rather than relying solely on traditional indexing or discretionary stock picking, HCM combines broad index tracking with a proprietary trend-following model designed to reduce exposure during significant market downturns. The firm’s ETFs—QQH, LGH, and HCMT—seek to offer institutional-style risk management in a tax-efficient ETF wrapper, without giving up the core market beta that clients expect.
In an interview with The Wealth Advisor’s Scott Martin, Vance Howard, CEO of Howard Capital Management, discussed the firm’s risk-managed approach, its long-tested model, and how financial advisors can use the ETFs to reframe client expectations around market volatility and long-term participation.
Why Sidestepping Major Drawdowns Matters
HCM’s philosophy centers on reducing exposure during periods of extreme market stress to help avoid the kind of drawdowns that can significantly delay recovery. For example, Howard notes that the Nasdaq Composite lost more than 75% between its 2000 peak and its 2002 low, meaning a $1 million investment could have fallen to just over $250,000. Similarly, an investment in the S&P 500 at its 2007 high would not have returned to breakeven until early 2013—nearly six years later.
Losses of that magnitude can severely disrupt long-term compounding and erode investor confidence. To help manage this risk, HCM’s approach prioritizes downside mitigation. Rather than attempting to predict every market turning point, the firm’s methodology focuses on limiting portfolio damage during events with the potential to derail progress entirely—such as the dot-com crash, the Global Financial Crisis, or the Covid-19 pandemic drawdown. “There’s a point out there, you have to calculate whether risk management is worth it or not,” Howard says.
How the HCM-BuyLine® Responds to Market Stress
At the heart of HCM’s ETFs is the HCM-BuyLine®, a proprietary trend model that adjusts equity exposure based on market momentum. The model doesn’t rely on economic forecasts or discretionary judgment—it’s driven by quantitative inputs.
“It’s basically a good solid trend indicator,” Howard explains. “It’s got proprietary mechanisms or math to it that’s proprietary to us.” The model features a 68% win rate and a 32% loss rate. “In other words, 32% of the time, I’m going to get whips off,” he adds. “The market’s going to move ahead of me, and I’m going to be behind the S&P or the Qs for a short period of time. And that’s okay.”
The system operates on a tiered-exposure schedule. When markets drop 3.5% below the HCM-BuyLine®, the model reduces exposure by about 20–25%. A 6.5% drawdown cuts exposure to roughly 40%, and a 12% decline pulls allocations to about 60% cash. When the market recovers and closes above the HCM-BuyLine® for five consecutive trading days, the funds step back into equities.
The structured response is designed to remove emotional bias and allow advisors to explain to clients exactly how risk is being managed in real time.
Core Index Exposure with a Tactical Risk Overlay
Both QQH and LGH aim to provide exposure to key equity benchmarks while incorporating the HCM-BuyLine® as a defensive mechanism. The HCM Defender 100 (ticker: QQH) seeks to outperform the Solactive US Technology 100 Index, offering exposure comparable to the Nasdaq-100, while the HCM Defender 500 (ticker: LGH) follows the Solactive US Large Cap Index to mirror the S&P 500.
Each fund maintains 80% core exposure and allocates the remaining 20% tactically. “We leverage the other 20% up,” Howard says. The modest leverage is intended to help offset periods when the model gets whipsawed. “If I’m behind it on the 32% by 4% or 5%, if I leverage up just a little bit over a period of time, I catch it.”
Despite the occasional whipsaw, Howard notes that the strategies have performed well over time. “When you look at QQH, it is ahead of everybody on Morningstar, even though we are a little bit behind it this year,” he says. “LGH is right in the heat. It’s right in the pack doing about what it’s supposed to do.”
Helping Advisors Position the Strategy with Clients
The performance of HCM’s funds aligns closely with their respective benchmarks, but the value proposition lies in the way they respond to major market shocks. According to Howard, that’s the core message advisors should convey to clients who are skeptical of tactical management. “You look at QQH, you look at LGH, they’re right there with their benchmarks, if not better than their benchmarks,” he says. “The only difference is, we’re using risk management.”
Risk mitigation resonates deeply with clients during periods of volatility, especially when they feel their advisors are actively working to preserve capital rather than passively riding out losses. Howard shares, “I had one of my clients tell me one time, ‘The good part about you guys, when the house is on fire, at least you pull us out.’” Another client, a retired judge, put it more bluntly: “‘The other guys didn’t even try. They just let us go down to zero.’”
Advisors often find themselves defending a lack of action during downturns. With HCM’s model in place, advisors might have a clear framework for acting decisively and transparently, which may help preserve trust when markets become volatile.
A More Aggressive Option: HCMT
For clients seeking enhanced exposure and willing to tolerate more volatility, the Direxion HCM Tactical Enhanced US ETF (ticker: HCMT) builds on the same HCM-BuyLine® model but executes it through a more dynamic framework. The fund can take up to 200% exposure through derivatives, split across the S&P 500, Nasdaq-100, and targeted sectors.
HCMT is sub-advised by HCM, while Rafferty Asset Management handles implementation. The portfolio can rebalance daily, ensuring that allocations remain tightly aligned with the model’s output. During periods of market strength, HCMT uses swaps to increase market exposure. When signals turn negative, the strategy swiftly moves into cash or equivalents.
The actively managed structure enables more aggressive participation during rallies while still seeking to protect capital during sharp drawdowns. It’s a tool for advisors working with clients who want to pursue growth without abandoning disciplined risk management.
A Model That Can Expand Across Markets
Howard sees growing demand for tactical strategies as the investable universe narrows and risk factors become more complex. “Things have become more and more concentrated. You’ve got 3,500 stocks in the Russell 5,000, so there’s less and less stocks to play,” he says.
Because the HCM-BuyLine® is model-driven rather than subjective, it can be applied to a wide range of asset classes and geographies. According to Howard, the same quantitative signals driving the firm’s U.S. equity strategies are adaptable to other exposures where trend-following can help manage downside risk. “When you start looking at tactical, you’re going to look at international, look at emerging markets, look at small cap, mid cap, large cap. I mean, it’s going to start to move around,” he says.
As clients demand more transparency around risk—and more consistent handling of downturns—advisors might use tools such as LGH, QQH, and HCMT to deliver a structured response rooted in quantitative discipline. The ability to move to cash, reduce exposure, and reenter based on signals may give advisors an actionable framework for both defensive and offensive positioning.
A Bullish View with a Tactical Foundation
While HCM’s ETFs are built with a risk-first mindset, Howard is confident about long-term equity growth. “I’m excited about the markets. I’m incredibly bullish now,” he says. “I think we could be at 12,000 on the S&P within the next five to six years. I think we could double the S&P in that short period of time.”
His optimism stems from structural factors like rising investor participation and a shrinking pool of public equities. “There’s $7 trillion worth of cash on the sidelines. You’ve got more and more investors coming into the market. You have less and less stocks to play. I think this market’s going a lot higher.”
Even in that bullish scenario, he sees a clear role for tactical ETFs. Leveraged upside positioning helps capture long-term gains, while the HCM-BuyLine® seeks to soften the path through inevitable downturns.
For financial advisors, the HCM ETF lineup offers a differentiated way to stay invested in U.S. equities while aiming to mitigate downside risk with a clear, repeatable process. As Howard puts it: “That’s it. Now you got it.”
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