Ocean Tomo's intra-sector market neutral strategy has been trading since October 2007. Since its inception, the fund has generated a positive gross return of 7% with less than 4% volatility. In 2008, while the strategy generated a positive gross return of 3.26%, the HFR Market Neutral Index was down 5.92%, the DJ Market Neutral Index was down 8.33%, the S&P 500 was down 38.5%, and hedge funds were generally down 18%. Each of these generated market measures with significantly higher volatility.
Ocean Tomo is the only investment firm that can offer this investment program because of the patented processes (the Ocean Tomo Ratings™ system) that underlie the analysis of its proprietary IP dataset. The dataset took eight years to construct and continues to evolve, with monthly re-grading based on value changes attributable to new patent issuance. Once the Ocean Tomo Ratings™ system grades the quality of corporate IP portfolios, Ocean Tomo’s Investments team constructs intra-sector relative value baskets by buying the stocks of companies with strong IP portfolios and short-selling the stocks of companies with weak or non-existent IP portfolios.
OTAM's Special Situations team invests in unique arbitrage opportunities as they relate to qualitative IP valuation. Types of Special Situations investments include PIPEs, IP collateralized debt, sale/license-back transactions, Unit License Right™ contracts, and royalty securitizations. The scope and nature of these investments are considerably idiosyncratic and require a high degree of specialized IP and investment knowledge. For these reasons, OTAM is a market leader in this field.
Each of the investment products described above can be bundled into structured products. Doing so provides investors with all of the benefits of structured products (e.g. principal protection) and IP investments (e.g. unique alpha and low correlation).