Ocean Tomo 300® Patent Index

The Ocean Tomo 300® Patent Index (NYSE Euronext: OTPAT) is the first intellectual property index. It represents a diversified portfolio of the 300 publicly traded companies in the U.S. with the highest Innovation Ratios (patent value over book value, where patent value is assessed by the PatentRatings® system).

OTP, the ETF that tracks the OT300 stock index, generated an annualized excess return of 4.38% versus the S&P 500 (SPY) for the 10 quarters ended July 2009. Morningstar ranks OTP as the #1 performer of all Large Blend ETFs (US & Foreign) since its inception. The OT300 has now outperformed SPY in 20 out of 20 rolling one-year periods.

The OT300 is constructed as follows: Potential constituents are narrowed to a universe of companies that own patents. The patent-owning companies are then divided into 50 style and size groups and ranked according to their Innovation Ratios, with each group containing an approximately equal number of patent-owning companies. The securities in each group are ranked using a 100% rules-based methodology that identifies those securities with the highest Innovation Ratios, while maintaining broad-based diversification. The six highest ranking securities in each of the 50 groups are selected (a total of 300 securities) and then weighted by market capitalization.

Learn more about the Ocean Tomo 300® Patent Index

IP-Enhanced Index Products

OTAM's quantitative IP investment program has the capability to create an IP-based absolute return or benchmarked fund for any size, style, and sector criteria specified. In partnership with IPXI, Ocean Tomo has created IP-enhanced indexes for S&P 500 and 1500, NASDAQ, and the Wilderhill Clean Energy Index. In each case, OTAM's enhanced index products outperform their benchmark indexes with greater information ratio.

The enhanced indexes are constructed using a 130/30 ratio. Each starts with the underlying index weights, and then the weights are reduced by 30% in names with relatively weaker IP signals and increased by 30% in names with stronger IP signals. How much is added or reduced for an individual name is proportional to the IP signal. Since the IP signal is “sector neutral,” this procedure does not change sector weightings. As a result, you get an index tracking product with return and information ratio out-performance.

Structured Products

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).