FAQs
When an object is aimed at your head, instinctively you duck.
This reflex is the guiding principle behind our investment process – get out of the way of downside risk.
That’s why our investment process focuses on disciplined risk management. We believe all advisors should have disciplined risk management in their client portfolios to help their clients stay invested and stay on plan.
Our investment process seeks two primary outcomes:
- To keep portfolios out of trouble by helping to mitigate downside risk
- To participate opportunistically in global investment uptrends
Ocean Park’s investment process is quantitative, rules-based, so there’s no guesswork or emotion in pursuing our outcomes. We have used quantitative, rules-based process for almost 40 years. Our approach buys and sells tactically in asset classes in and outside its index benchmark. We believe this gives our rules-based process freedom to pursue its intended outcomes for advisors and their clients.
Our Trailing Stop Discipline1 seeks to limit the further decline in a security’s value. It’s applied across our managed portfolios and monitored daily by our investment management team.
Ocean Park’s Trailing Stop Discipline identifies a sell signal when our quantitatively-based rules determine a downtrend in a security’s price. A downtrend is identified by a security’s price falling below the recent high of its lower band – an event which triggers a sell signal. A security’s bands are related to its historical volatility.
Amid downtrends, Ocean Park’s portfolios can increase their cash holdings as risk off assets to prevent further downside.
Tactical and index investing are fundamentally different philosophies about how to manage investments and generate returns.
Passive Investing buys and holds a set basket of securities that typically aims to track the performance of a market or investing style (e.g., “growth” or “value”). Passive investment vehicles may only trade those securities periodically and over time – hence the term “passive.” Passive investing contrasts with actively buying and selling individual securities to beat market performance or an investing style.
A common type of passive investing is market-cap indexing. Market-cap indexing is built on the belief that markets are largely efficient — that prices reflect all available information. Under this line of thinking, the market capitalizations of stocks reflect the information available to investors at the time. A market cap index can broadly represent a “market” (like the S&P 500 Index) and captures the returns of that market. Keep in mind that while an index-tracking investment may reflect the index’s gains, it will also reflect the index’s losses, with no management to buffer them.
Tactical Investing is active by nature. It frequently buys and sells individual securities to help manage downside risk and to beat the returns of a market index or benchmark. Our tactical approach is rules-based but those rules are not beholden to an index. It can take advantage of short- or longer-term opportunities that emerge in and outside of an index and doesn’t need to hold on to declining securities that are in an index. Our rules identify buy and sell opportunities based on price trends. This tactical approach, therefore, can shift holdings to help minimize sustained drawdowns2 while seeking to take advantage of price uptrends.
Ocean Park primarily uses a Trailing Stop Discipline, which seeks to limit the impact of a further decline in a security’s value on the overall portfolio. It’s applied across our managed portfolios and monitored daily.
Sell signals are generated when our quantitatively-based rules identify a downtrend in the security’s price. A downtrend is determined by a security’s price falling below the recent high of its lower band – an event which triggers a sell signal. A security’s bands are related to its historical volatility.
When a position is sold, we may keep the proceeds in cash or buy another security.
Ocean Park offers a wide array of investment solutions and vehicles in order to serve the broad investment needs of advisors and their clients.
Our solutions include active exchange-traded funds, strategies, models and programs for TAMPs and mutual funds.
We have fixed income, equities and multi-asset solutions, which all use our rules-based and tactical approach. Ocean Park also provides target-allocation model portfolios with varying combinations of equity and fixed income allocations depending on investor risk needs.
1Trailing Stop Discipline (“Discipline”): This proprietary Discipline has the objective of limiting the magnitude for portfolio drawdowns. The Discipline is based on a manual process that defines sell levels/signals for security holdings in decline, as measured by its price falling below the recent high of its lower band. These are not market orders. Ocean Park utilizes this Discipline directly in the management of non-affiliated holdings. Where Ocean Park invests in its affiliated Ocean Park Mutual Funds or Ocean Park ETFs (“Affiliated Funds”), the same Discipline is applied at the underlying funds level, not on the Affiliated Funds themselves.
2Whipsaw risk is the possibility of experiencing losses or missed gains when the market quickly reverses direction after a trend signal triggers an entry or or exit. For example, a Model or Affiliated Fund might sell a security because a downtrend is detected, only to have the market rebound, forcing it to buy back at a higher price (loss or missed gain). Conversely, the fund could buy due to an uptrend, and the market reverses downward, resulting in a loss. As such, trend-following strategies may be subject to frequent losses from whipsaw movements and Ocean Park Models, and Affiliated Funds, may experience short-term losses due to sudden reversals in prevailing trends. Therefore, trend-following strategy results, such as those utilized by Ocean Park, may differ from traditional buy-and-hold strategies and clients and investors must be prepared for periods of underperformance due to rapid market fluctuations.