OCMR Investment Perspectives Volume 1.2

Seek First to Understand – The Pleasure of Finding Things out

While growing up in the investments industry at Russell Investments, I was privileged to participate in an excellence-driven and strong research culture. George Russell, the visionary who built a transformational company, often quoted various business thinkers to inspire the hundreds of Russell associates to innovate and help transform our industry. At our annual company meetings, he would deliver remarks designed to inspire and motivate. On one occasion, he shared an insight from business guru Stephen Covey which was “Seek First To Understand.”

This concept proved vitally important to me as I developed skills and insights as a young analyst. It turns out, the more one develops one’s “understanding skills,” the better one understands things. Funny how that works! But the first step in understanding well is wanting to understand. Once a person has committed to building understanding, then the development of all the skills necessary to produce insights arise from this impulse. It is this skill of seeking to understand that led to the creation of BufferLABS.

A number of years ago, I began overseeing the management of model portfolios composed of individual buffered ETFs. I had been thrust into this particular aspect of the role, as these buffered ETF models “came with the job.” But once a person starts looking at these instruments and evaluating their market pricing behavior, the hunt is on!

What makes one buffered ETF behave a certain way in response to market moves? Why do some behave differently from the herd? What causes some to go up when the market goes down? What causes the opposite behavior? Why is there such a big gap in returns amongst all the buffers with the same buffer and cap? These and many other questions were answered in our quest to understand these instruments.

Our research into these instruments resulted in the following: 1) A comprehensive research report dedicated to bringing insights to investors with the goal of improving investment outcomes, 2) A proprietary model for ranking these buffered ETFs on different metrics, 3) A scenario analysis tool so investors can get a sense of likely behavior in advance of a purchase decision, 4) A custom index to help assess the performance of different buffered ETFs, and 5) Our very own market path-responsive dynamic buffered ETF which we believe addresses the major challenges associated with static buffered ETF offerings, to name a few. And soon, we will be launching buffered ETF universe returns to compare the historical returns of ETFs that share similar features.

The basic impulse behind all of these innovations has been to understand the basic “essence” of these instruments. We are empiricists. All we develop is research and data driven. And when we learn new things we imbed those insights into our product offerings, whether it be our research product or our ETF. We cannot know where this journey will lead us, but we do know “the pleasure of finding things out” along the way makes the journey well worth the effort.

Disclaimer

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. The opinions expressed herein are subject to change at any time without notice. The information presented here is not specific to any individual’s personal circumstances and therefore, these strategies may not be suitable all individuals. An investor should consult with their financial professional before making any investment decisions.