Last Updated on 14 October, 2021 by Samuelsson
Steve Lescarbeau is a mutual fund trader. Jack Schwager’s interview with Gill Blake inspired him to try out the mutual fund timing approach. — holding his equity positions while they are gaining and switching to money market funds to avoid downside risks when the equity market is about to crash.
Steve graduated with a degree in chemistry from Boston University. He got a job as a salesman using his chemistry background. “I think that a physical science degree is as good as, if not better than, a financial degree because it trains you to be analytical. If there is anything I am really good at, it’s being a researcher”, he said.
Steve was a salesman, selling filtration systems to pharmaceutical and electric companies. He won the salesman-of-the-year award for three consecutive years. He got involved in the financial market in 1983 when he worked for a mutual fund company. He switched to this field because he thought that was the place he could make the most money as a salesman. He had a degree in chemistry which helped, but he had no prior experience in financial trading.
He loved the job, but because of the restrictions placed on him by the company, he realized that if he wanted to take the next step, he would have to do something different from what he had been doing. So he became a stockbroker — he was hired by Shearson Lehman Brothers.
He met Tim Hoik in the managed futures department — an area he did not know about. One day, Steve and Tim went down to meet with some traders at Commodities Corporation. And after that meeting, he told him, “Screw the retail money; let’s go after institutional money.” He cold-called Eastman Kodak, which led to opening a $50 million account — the most significant investment ever in managed futures. They eventually increased their investment to $250 million.
They were making lots of money off the account, but they had a problem — the fund was managed futures with an up-and-down movement in profit, which he said was sickening to watch. So, he started looking for an alternative to the managed futures.
In 1993, Steve got interested in a newsletter written by a guy in Texas. He put out recommendations and tips on mutual funds and had a good track record. Steve called him up and suggested they do a fund. He agreed, and they launched the fund in September 1993. Steve raised the money while the guy traded.
By late 1994, Steve was discouraged by the returns they made. So he began researching mutual funds timing. He later split up with the trading manager and took over the management of the trading account.
During the five years he traded, Steve had realized an average 70% pa compounded return. What was genuinely outstanding about his results was that Steve had achieved it under extraordinary risk control. His worst month ended with a bit of 3%, but his consistency ensured he was profitable.
Lescarbeau works alone at his home in a small rural town outside of Albany, New York.
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