In the years leading up to the financial crisis in 2008, the managers for the Redwood strategy were hearing a common source of frustration amongst investors: they commonly desired an equity-like return in the range of 6-9% annually, but many of their investments rarely produced a return within that range, and instead swung wildly through the mean, either positively or negatively. Consequently, the managers endeavored to develop an investment strategy that would increase the probability of generating a 6-9% return but with lower volatility than equity markets, and the Redwood strategy was born.
|Mutual Fund||Separate Account||Offshore (UCITS)|
|Redwood Volatility Harvesting||$100||$100||–||–|
* AUM ($ Millions) as of 6/30/2017
Redwood pursues its goals through a fundamentally-managed, volatility-harvesting strategy:
- Redwood uses deep in-the-money equity buy-writes on individual stocks to create synthetic yield
- Risk is controlled through fundamental bottom-up company analysis
- We determine the valuation support level for a stock
- We then look to structure a deep in-the-money buy-write where a consistent return stream is generated at any stock price greater than or equal to that valuation support level
Through this process, Redwood leverages our dual core competencies: robust fundamental research for which Boston Partners is known, coupled with the equity derivatives expertise developed by Redwood’s managers over the course of their careers.