The Three Bull Oak Investment Strategies


Conservative

The Bull Oak Conservative risk-tolerance strategy attempts to earn stable returns with low levels of volatility over time while maintaining a focus on downside risk management. It is designed to benefit during periods where the economy is thriving. However, it also attempts to protect during periods of uncertainty and high levels of market volatility. The strategy provides diversification and balance and regularly offers exposure through the use of ETFs to U.S. and international stocks, bonds, and alternative asset classes, such as U.S. real estate, treasury inflation-protected securities, and commodities. However, equity exposure is modest, and emphasis is placed on fixed income securities. This strategy may be appropriate for investors with a low tolerance for risk.


Moderate

 
The Bull Oak Moderate risk-tolerance strategy seeks to achieve equity- like returns while exhibiting less volatility and maximum drawdown over full market cycles. The strategy provides diversification and balance and regularly offers exposure through the use of ETFs to U.S. and international stocks, bonds, and alternative asset classes, such as U.S. real estate, treasury inflation-protected securities, and commodities. This strategy may be appropriate for investors with a time horizon greater than five years and who have a moderate tolerance for risk.


Aggressive

The Bull Oak Aggressive risk-tolerance strategy strives to aggressively take advantage of global capital market investment opportunities while exhibiting less volatility and maximum drawdown than conventional equity portfolios over full market cycles. The strategy provides diversification and balance and regularly offers exposure through the use of ETFs to U.S. and international stocks, bonds, and alternative asset classes, such as U.S. real estate, treasury inflation-protected securities, and commodities. This strategy may be appropriate for investors who have a 10 to 15 year time horizon, a substantial tolerance for risk and an ability to withstand a permanent loss of capital.

Our Investment Philosophy

Bull Oak Capital offers a sophisticated investment strategy that focuses on low costs and smarter risk allocations. We offer 3 investment strategies for our clients: Aggressive, Moderate, and Conservative. We believe that most individual investors can be placed into one of these three portfolios, depending upon the client's goals, risk tolerance, and time horizon.

The firm's investment strategy was created by Ryan Hughes, UCLA Anderson professors, and top industry professionals. It was created while Ryan was studying quantitative finance and working towards his MBA at the UCLA Anderson School of Management. He set out to build an investment strategy that combined time-tested strategies used by some of the most successful managers throughout time. This is a common goal for many investment managers. Fortunately, Ryan had the benefit of working with some of the brightest minds in finance, both in academia and in industry. 

Ryan worked mostly with his research advisor, Dr. Hanno Lustig, the faculty director of the UCLA Master of Financial Engineering program (currently at Stanford University GSB) and Dr. Jason Hsu, the Chief Investment Officer of Research Affiliates, a firm that currently manages $198B. The result of the project led to the creation of Bull Oak Capital.

Passive Management

Passive investing is almost always superior to active investing. Research shows that active management (e.g. mutual fund managers, stock pickers, hedge fund managers, etc.) is likely to underperform passive management over time, especially when management fees are taken into consideration. Due to this trend of underperformance by these active managers, we primarily use low-cost passive ETFs for our clients. This isn't to say that all active managers do not earn their fee. We are saying that most do not. We have decided not to gamble on active managers. Instead, we save our clients money by investing in lower cost ETFs and place the odds in our client's favor.

Risk Contribution Method

Most portfolio managers will keep a static allocation within their portfolios (e.g. maintain a 60% allocation to equities and a 40% allocation to bonds) throughout the entire business market cycle. This is a rather inefficient way of investing as it often leaves too much exposure to equities when risk is high (e.g. when stock prices are overvalued) and too little exposure when risk is low (e.g. after stock prices have corrected). Bull Oak Capital will instead systematically rebalance our client's portfolios in a way that will reduce exposure to risky assets during the latter periods of the business market cycle, thus limiting our clients exposure when there is a correction. Likewise, we will also take advantage of attractive valuations during market downturns.

The Risk Contribution Method strategy is the result of a UCLA Anderson graduate research project. It helps better balance the trade-off between protecting against downside risk via limiting drawdowns and generating attractive returns during periods of expansion. To learn more about this, read the whitepaper that serves as the investment strategy's foundation. Keep in mind that while the whitepaper may have helped launch Bull Oak Capital, there have been several updates to the overall investment strategy and the current strategy may be considerably different than what is presented within the whitepaper. 

 

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