Oceanic Capital Management portfolios are designed to perform well on a risk-adjusted basis over longer time horizons and in difficult economic environments. Our investment strategy embraces the concepts of modern portfolio theory and proper allocation of assets, what we call diversification optimization. We utilize nontraditional and uncorrelated asset classes to offset risk. Additionally we adopt a contrarian bias to keep us from chasing yesterday’s winners, and regularly rebalance our portfolios. Avoiding short-term trades and the use of excessive leverage helps us lower volatility and produce steadier long-term returns. At OCM, we strive to build optimally diversified portfolios targeting long term returns of 10 - 15%, all within acceptable levels of risk as defined by our clients. We cannot, however guarantee specific returns.
As a tactical allocator, Oceanic Capital Management invests across multiple asset classes. The exact percentage invested in each asset class is based on our proprietary allocation model as well as customer needs and careful analyses of probable future market movements. Typical asset classes include equity, fixed income, real estate, precious metals, energy and commodities such as agricultural products, industrial metals, and timber. Hedge funds or absolute return strategies may also used, but are limited in scope to keep leverage extremely low. We seek to minimize market-timing and stock picking as sources of alpha. Our diversified investment strategy creates portfolios that operate best over longer time horizons with lower volatility and equity-like returns. These portfolios tend to have mitigated risk profiles and therefore lower correlations to the major market equity indexes, stabilizing return profiles in a broad range of economic environments.
OCM employs proprietary portfolio modeling tools based on mean-optimization in which a broad analysis of current and projected market conditions determines the exact allocations to a preselected group of asset classes. Working with clients to determine their specific needs and goals helps to define these asset classes. After this collaborative process is complete, we strive to allocate capital in the most efficient manner possible, taking care not to over-allocate to more traditional investment vehicles. In fiscal year 2007, the average endowment fund, for example, held more than 80% of its assets in traditional investment vehicles namely, equities, bonds, and cash. However, the most successful funds held only 35% to 45% in these traditional assets and greatly outperformed the average with returns in the 22% to 28% range. **
Our methodology is in keeping with modern portfolio theory as developed by Nobel Laureate in Economics Harry Markowitz, and used successfully over the last 25 years by some of the world’s largest endowment funds. Our style is further distinguished by our use of robust correlation software to optimally diversify, our use of multiple nontraditional asset classes, our low leverage approach, and our contrarian long term bias.
Our goal is to create portfolios that perform well by delivering equity like returns while also retaining lower risk and volatility profiles.
** According to the 2007 Endowment study by The National Association of College and University Business Officers (NACUBO).