On Monday, Otter Creek Advisors made its ETF debut with the Otter Creek Focus Strategy ETF actively managed fund has a net expense ratio of 0.85%. It seeks to provide investors with access to long-term appreciation of capital.
Securities within the portfolio are largely equities of small and midcap companies listed within the United States. This makes OCFS a beneficial option for investors seeking to avoid large and mega-cap overexposure. Otter Creek determines small to midcap companies as those that possess market caps between $500 million and $60 billion at the time of purchase.
To choose assets to hold, Otter Creek employs a unique, vigorous screening process. First, companies across the small and midcap space get screened on competitive advantage, secular growth, a proven management team, and above-average financial profile.
From there, remaining securities get then thinned out to prioritize long-term earnings growth, cash flow, and return on capital, amid other factors. This process continues until there are about 30-50 candidates remaining.
In the final screening stage, the list of companies narrows based on growth outlook and internal rates of return. Otter Creek’s concentrated portfolio leaves room for about 20-35 small to midcap assets. Securities within the fund’s holdings will continue to be monitored to ensure optimal fund positioning.
Additionally, the fund may invest up to 20% of assets toward U.S.-dollar-denominated foreign equity securities. These options include U.S. depository-issued American depositary receipts and global depositary receipts that trade on U.S. exchanges.
Adaptable Benefits
The fund’s flexible strategy helps Otter Creek better position investments. OCFS aims to capture risk-adjusted opportunities by focusing on capital appreciation instead of growth or value
The fund’s active management strategy bolsters this flexibility. An active management team can proactively reposition assets and shift portfolio weightings to best benefit from the current economic environment.
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