On Could 17, 2024, Otter Creek Advisors launched the Otter Creek Focus Technique ETF (OCFS). In doing so, they’re offering an current individually managed account technique which launched on Could 29, 2020, as an ETF. Otter Creek was based in 1991 to handle a protracted/brief hedge fund and, in 2013, launched a protracted/brief mutual fund. That four-star fund stays their solely different public providing.
OCFS is an actively managed ETF led by Corey Reed and Tyler Walling. Messrs. Reed and Walling are principals of the agency and are additionally answerable for the four-star Otter Creek Lengthy/Quick Alternative Fund. The duo manages $2.6 billion throughout 13 accounts.
What the fund does: the technique targets 20-25 high-quality small- to midcap US shares. Particularly, they aim corporations with “larger profitability, extra engaging progress profiles, and excessive ranges of free money circulate” than the common agency within the Russell Midcap Index benchmark. They’re in search of mixture progress charges and profitability every 400-500 bps above the benchmark. The managers notice, “We deal with investing in sturdy companies with aggressive benefits run by competent administration groups. We’re opportunistic on occasion, investing in company transformation and particular conditions.” They describe a three-step portfolio course of:
First, firms throughout the small and midcap area get screened on aggressive benefit, secular progress, a confirmed administration staff, and an above-average monetary profile.
Second, remaining securities get thinned out to prioritize long-term earnings progress, money circulate, and return on capital, amongst different elements. That shortlist is often 30-50 names.
Lastly, the shortlist is narrowed primarily based on progress outlook and inside charges of return to 20-23 names.
The latest statistics for his or her Midcap Focus technique bear out their success at reaching that objective. Considerably smaller shares with considerably larger high quality and decrease valuations than the index.
| Otter Creek | Russell Midcap | |
| Common market cap | $19B | $25B |
| P/E ratio | 18X | 20X |
| Working earnings | 16% | 9% |
| Lengthy-term earnings progress | 16% | 9% |
| Return on fairness | 18% | 12% |
The technique has an Energetic Share of about 95, indicating a really excessive diploma of independence from its benchmark. They anticipate a turnover price of 25%.
Why it could be attention-grabbing: Not less than on a complete return foundation, the technique has been fairly persistently profitable.
Comparability of Lifetime Efficiency (06/2020-06/2024)
| Focus Technique | Russell Midcap Index | |
| 2024, by way of 6/30 | 13.92% | 4.96% |
| 1 12 months Annualized | 23.18% | 12.85% |
| 3 12 months Annualized | 5.93% | 2.35% |
| Since inception Annualized | 17.72% | 12.89% |
We’re pursuing the volatility metrics now.
Administrative particulars: the fund costs 0.85% on belongings of simply over $5 million. We should not have studies on private investments within the new ETF however each managers and 4 of the 5 members of the board of trustees have private investments within the Lengthy/Quick Alternatives fund.
The Otter Creek Advisors homepage and, individually, the Otter Creek Focus Technique ETF web page.
