Embedded in Contango’s investment approach is the discipline to control risk and enhance return, always seeking to deliver consistent returns regardless of the financial market’s ups and downs.
Although our overall investment focus is long term, we always seek to identify promising opportunities and/or market inefficiencies that enable us to generate returns for our clients that are higher than they would otherwise obtain. At the same time, we attempt to identify strategies that will mitigate risk in particularly volatile or negative environments. At times, the strategy we select may satisfy both objectives.
Thus, in addition to adjusting portfolios in light of financial and economic developments, we undertake a number of other strategies as appropriate. As always, however, we implement them only after we are satisfied that these strategies are able to withstand our extensive analysis and due diligence. A few of these strategies are:
- Portfolio insurance, a means of controlling risk by buying puts – options to sell shares of the underlying stock – during particularly volatile periods in the stock market.
- Covered call writing, a strategy that can help to control risk as well as increase returns, by selling covered calls – options to buy underlying stock that you hold in your portfolio – against equity positions.
- Interest-rate hedging, a means of protecting largely predictable interest rate rises.
- Duration shifting, a strategy that alters the average maturity of bond portfolios against short-term curve views (the relationship between short-term and long-term interest rates).
In addition, we occasionally see investment opportunities that, for a variety of reasons, may be available only for a short time. Again, if we are persuaded that these investments – and their managers – meet our criteria and client needs, we may seek to integrate them into client portfolios as available. Such opportunities are often available only to clients who meet certain net worth and other requirements.
