Octavia understands that our clients have varying needs, so Octavia offers both Market and Active investment portfolio strategies.
Octavia's market portfolios endeavor to track market indices at a low cost. Octavia benefits our clients via (i) researching the optimal securities that track market indices, (ii) constructing the portfolio of securities and (iii) managing the periodic rebalancing of securities to match the targeted portfolio construction. For these services, Octavia charges a modest fee.
Octavia's active portfolios endeavor to either outperform the overall market or offer our clients exposure to specific asset classes. Active portfolios' security selection is based on significant research and analysis.
Octavia currently offers one market portfolio and four active portfolios to our clients.
Market Index Portfolio
The Market Index Portfolio strategy (“Market Index”) endeavors to generate investment returns via principal appreciation and income. Market Index invests in a diversified portfolio of equities and fixed income primarily via index exchange-traded funds (“ETFs”).
Market Index's investment objective is to track the broad market in equities and fixed income via low-cost ETFs. Market Index invests in ETFs that track US, international developed market and emerging market equity indices, as well as ETFs that track US, international developed market and emerging market fixed income indices. All clients investing in Market Index will hold the same securities but client weightings between equities and fixed income will vary based on their specific financial objectives. Periodically, the portfolio manager will rebalance the ETF holdings to match client profiles or due to relative changes in the values of the ETFs.
Market Index does not seek to generate excess returns but instead seeks to track the broad global equity and fixed income markets. Index ETFs are subject to overall market risks. As with any security, risk is present in that past performance by no means guarantees future results.
Active Index Portfolio
The Active Index Portfolio strategy (“Active Index”) endeavors to generate investment returns via principal appreciation and income. Active Index invests in a diversified portfolio of equities and fixed income via ETFs (or via mutual funds when an ETF does not exist to invest in a certain equity or fixed income asset class).
Active Index's investment ideas derive from macro economic research, as well as industry fundamental research, all of which inform investment theses on various global asset classes. Active Index may invest in ETFs that track broad US equity indices (such as but not limited to the S&P 500, NASDAQ and Russell 2000), as well as sub-sectors of such equity indices. Active Index may also invest in ETFs that track various US fixed income indices (such as but not limited to US corporate investment grade, US corporate high yield, US municipal bonds, US preferred stocks and US government debt). Active Index may invest in international developed market and emerging market equity and fixed income ETFs that track comparable indices.
Active Index seeks to generate excess returns by varying the weightings of its holdings relative to index benchmarks. The primary risk assumed with this strategy is that Active Index over-weights under-performing indices and under-weights out-performing indices. Also, index ETFs are highly susceptible to overall market risks. As with any security, risk is present in that past performance by no means guarantees future results.
The Income Portfolio strategy (“Income”) invests in high-yielding securities, principally utilizing closed-end funds (“CEFs”) and ETFs, and to a lesser extent mutual funds and business development companies (“BDCs”). Income endeavors to generate investment returns via interest and dividends. Typically, the CEFs, ETFs and BDCs will invest in non-investment grade securities and will utilize leverage to further increase distribution yields.
Income's investment process relies heavily on macro economic research and the resulting direction of interest rates and credit conditions, research on investor sentiment and the direction of funds flows, and the specific investment composition within the various CEFs, ETFs, mutual funds and BDCs.
Due to the non-investment-grade nature of the underlying securities, the use of leverage and the high exposure to short-term and long-term interest rates, Income’s security holdings are typically more volatile and riskier than typical bond funds and should not be considered a “safe” investment. As with any security, risk is present in that past performance by no means guarantees future results.
The Energy Portfolio strategy ("Energy") invests in the energy sector and endeavors to generate investment returns via principal appreciation.
Energy invests primarily in individual company equities, but will also consider individual company fixed income securities. Energy considers investments in oil and gas exploration, services, mid-stream and downstream, as well as alternative and cleantech energy. Investments in Energy are grounded in deep research of the macro energy industry landscape that then shape inputs for detailed financial modeling to derive individual company valuations. Energy primarily invests in long positions, but would consider short positions or the use of put options as a portfolio hedge or to capitalize on specific situations. Energy would also consider selling calls against long positions to derive income.
The energy sector is highly volatile and subject to substantial risks. In addition, the Energy portfolio typically has a limited number of security positions, which can lead to added volatility and substantial risk of investment loss. As with any security, risk is present in that past performance by no means guarantees future results.
The Unconstrained Portfolio strategy (“Unconstrained”) includes securities held in the Active Index, Income and Energy portfolios, as well as select securities not held within these portfolios. Weightings between Active Index, Income, Energy and select other securities are based on the portfolio manager’s opinion regarding which portfolios and securities hold the best risk-adjusted return potential. Securities held that are not included in Active Index, Income or Energy typically follow a value-oriented investment strategy and endeavor to generate investment returns via principal appreciation through allocations across various asset classes, geographies and industry sectors.
Unconstrained invests in equities, fixed income and currencies. Unconstrained also considers principal preservation. If the portfolio manager believes there is risk of material market or sector declines, the portfolio manager may tactically move a portion of the Unconstrained portfolio into cash. This action may result in portfolio under-performance in a rising market environment, but reduces the risk of principal loss.
Unconstrained's investment ideas derive from macro economic research, as well as industry and security-specific fundamental research, all of which inform investment theses on various global asset classes, industry sectors, and individual companies. From time to time, Unconstrained will invest in options to derive income from long positions and as a risk-management tool.
Unconstrained’s holdings outside of Active Index, Income and Energy overweight a value investing strategy. Value investing involves buying securities that have been determined by the portfolio manager to be significantly under-priced relative to their intrinsic value. Using fundamental analysis, the portfolio manager attempts to identify these undervalued securities to generate returns. The primary risk assumed with this strategy is that the market will fail to reach expectations of perceived value. Unconstrained’s holdings from the Active Index, Income and Energy portfolios share the same risks – please see such risks already listed above. As with any security, risk is present in that past performance by no means guarantees future results.