OFA believes asset allocation (as opposed to market timing and individual security selection) is the primary determinant of portfolio performance over the long term. Other underlying tenets of our investment philosophy are:
low portfolio turnover
high sensitivity to “frictional” costs and tax efficiency
To implement our investment strategy, we employ various broad-based, well-diversified cost- and tax-efficient investment vehicles as core building blocks, particularly with regard to equities. We sometimes augment these diversified vehicles, primarily funds and Exchange Traded Funds (ETFs), with a diversified set of individual securities, particularly when a client holds positions in taxable accounts that are transferred to OFA at the start of a management relationship. In these cases, we may be reluctant to eliminate the positions entirely in order to mitigate taxable gains.
We may also construct our own diversified basket of individual securities, to be held for the long term. We generally select out-of-favor and more value-oriented stocks of established companies, with long-term track records, solid balance sheets, strong free cash flow generation, and high returns on invested capital.
The primary focus for our fixed-income strategy is capital preservation, in light of specific client income and spending requirements. Fixed-income exposure is maintained through either a staggered maturity ladder of individual bonds or by fixed-income focused index and passive asset class funds and/or ETFs.