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Frequently Asked Questions 

On our FAQ page, you can find responses to questions that are commonly ask segmented by topic. If you do not see an answer to your particular question, please reach out to us directly.

 Exacta Focused ETI

  • Who is responsible for making the investment decisions at Exacta Focused ETI?
    Investment decisions at Exacta Focused ETI are made by a small, specialized team, embracing Steve Jobs' principle that small, focused teams drive organizational excellence. This structure ensures that the same experts analyzing potential investments also make the final decisions, fostering a streamlined and effective decision-making process.
  • What do you prioritize when selecting a new company to add to your investment portfolio?
    In our portfolio selection process, we prioritize companies that exhibit lasting competitive advantages, which often manifest as strong gross and net margins and significant returns on invested capital. We look for businesses with a track record of steady and increasing turnover and earnings, without specifying a strict time frame. Financial stability is also critical; hence, we favor companies with low debt and robust balance sheets. Additionally, we identify and target undervalued companies that present potential for growth and value recovery in the market.
  • How do you describe a quality company?
    A quality company is typically characterized by its strong ability to generate consistent profits, its superior position in the industry, growth potential within an expanding market, and significant barriers to entry that protect its market share. It should also boast a solid balance sheet and maintain low levels of debt. If a company meets these criteria, it usually qualifies for a more detailed analysis to ascertain its investment potential.
  • How would you describe a sustainable competitive advantage?
    A sustainable competitive advantage is defined by the enduring significance and necessity of a company's offerings to its customer base. Businesses with such an advantage are characterized by their ability to remain profitable across varying market conditions, including economic downturns. This resilience typically stems from a combination of product or service excellence, customer indispensability, and reduced susceptibility to competitive pricing pressures, which together enable the company to preserve attractive profit margins over time.
  • How many companies are included in your portfolio?
    Our portfolio usually comprises between 3 to 6 companies. While our guidelines permit owning more companies, we prefer to not exceed 10 companies to ensure that we can conduct thorough analyses on each one.
  • Do you allocate the same weight to each company in your portfolio?
    No, the weight of each company in our portfolio varies. According to our fund's rules, we can be very concentrated. Typically, our larger positions may reach 40%.
  • Do you focus on particular sectors or geographic regions in your investments?
    While we do not actively speculate on sectors or geographic regions, nor do we set predefined targets for such allocations, our selection process may naturally tilt towards companies operating in more favorable macroeconomic conditions. Ultimately, our portfolio reflects our commitment to investing in the best-quality companies across the globe that also present reasonable valuations.
  • Why do you not invest in energy companies?
    We do not invest in energy companies due to their earning' volatility, which is driven by fluctuating commodity prices and political factors, making long-term performance difficult to predict. Our investment strategy focuses on stable and predictable business models, rather than sectors prone to such uncertainties.
  • Why do you not invest in banks?
    Banks are generally excluded from our investment portfolio because their balance sheets can be opaque and difficult to interpret. The complexity and lack of transparency regarding the sources of their receivables and the destinations of their loans present risks we prefer to avoid. Additionally, competitive advantages among banks are often marginal, and the banking sector has a track record of relatively poor profitability. These factors lead us to exclude banks and other financial companies from our list of investable businesses.
  • How do you take into account the ESG factors in investing?
    Our investment selection prioritizes positive impact and ethical commitment, guided by our moral obligation and values. We intentionally exclude sectors that conflict with our ethical compass. Beyond exclusion, we proactively assess the Net Impact Score of our investments, targeting they yield at least a neutral effect on society and the environment. Investing in an ESG-themed fund does not guarantee a more positive net impact compared to an ordinary fund. Impact investing is the most rigorous investment approach in the responsible investing matrix and has the greatest potential for positive change
  • Are you considered a Shariah-compliant fund?
    No, our fund is not officially recognized as Shariah-compliant because we do not have a Shariah board to provide certification. However, we embrace the ethical guidelines of Shariah in our investment process. We avoid sectors such as tobacco, gambling, alcohol, weapons, and adult entertainment, consistent with Shariah principles. To assist our investors who wish to adhere to these principles, we publish the zakat and purification percentages each year, enabling them to fulfill these obligations independently.
  • Can you describe the ethical transparency of your investment portfolio?
    Our annual letter articulates our commitment to our moral standards by stating the sectors we're involved in and providing our portfolio's ethical scores and outcomes. We report the Net Impact Ratio for our aggregate investments by weighting each investment's impact as provided by Upright/ Nasdaq, as well as the ESG Rating of our portfolio holdings evaluated by major research and rating agencies. Furthermore, in our 'Ethical Results' section, we disclose the specific annual percentages designated for zakat and purification.
  • How do you compare the companies inside the portfolio?
    We utilize a rigorous approach that combines both qualitative and quantitative assessments to actively compare and monitor the companies in our portfolio. Decisions to buy or sell are informed by a quarterly ranking system, which is based on a blend of expected earnings yield and risk adjustments. This ranking not only reflects numerical data but also incorporates qualitative judgments about each company's performance and potential, ensuring a comprehensive analysis that guides our investment choices.
  • Is Exacta Focused ETI considered a value-investing fund?
    Yes, Exacta Focused ETI subscribes to the tenets of value investing, particularly through the Growth at a Reasonable Price (GARP) approach. We concentrate on securing stakes in high-quality companies at prices that reflect their growth prospects judiciously. This is in keeping with Charlie Munger's assertion that ''all intelligent investing is value investing.'' Our investment philosophy is rooted in acquiring and holding shares of fundamentally strong companies for the long term, embodying the essence of quality investing purchased at a reasonable price.
  • How many investments do you typically make in a year?
    Our approach leads us to invest in approximately 1 to 3 new companies annually. Please note that we do not follow a strict rule regarding the number of investments, as our focus is on the quality and strategic alignment of the investment opportunities that arise.
  • Are you always fully invested in stocks?
    Yes, we adhere to the philosophy that timing the market is impractical. Consequently, we maintain a position that is essentially always fully invested in high-quality companies. We keep a very small cash reserve, but the precise amount may vary. The allocation of how much of their total assets our clients choose to invest in stocks is left to their discretion.
  • What is your approach when there is a downturn in the stock market?
    During market downturns, we maintain our holdings in the portfolio. We conduct thorough analyses of each company to determine if there have been any fundamental changes affecting our investment thesis. A bear market itself is not a trigger for us to sell off quality companies. In fact, during significant market declines, we may take advantage of the situation to increase our positions in high-quality companies if we believe their stock prices have become overly depressed.
  • Do you consider macroeconomic situations in the ETI's investments?
    Yes, the investment selection process within the Exacta Focused ETI may inherently favor companies that are operating under more favorable macroeconomic conditions. While the primary focus is on the intrinsic qualities and valuations of individual companies, the broader macroeconomic environment can influence these factors. As a result, the due diligence and analysis of potential investments naturally consider the economic context in which these companies operate, which may lead to a portfolio that is tilted towards firms benefiting from or resilient to current macroeconomic trends.
  • Is today a good time to invest?
    Determining whether today is a good time to invest often depends on individual financial goals, risk tolerance, and investment horizon. Historically, investing in quality stocks over a long-term period has been a worthwhile strategy, as it allows for the potential of compound growth and can cushion the impact of market volatility. For investors, particularly those with less experience, adopting a methodical approach such as dollar-cost averaging – where investments are made in fixed amounts at regular intervals – can help mitigate the risks associated with market downturns. This strategy can help in smoothing out the purchase price over time and potentially reduce the impact of buying at a market peak. Regardless of market conditions, it's important for investors to conduct their own due diligence, consult with financial advisors if needed, and consider their own financial situation and investment objectives before making investment decisions.
  • Why might an actively concentrated managed ETI be a better investment than a passive index or an ETF fund?
    An actively managed ETI can be a better investment than a passive index or an ETF due to its concentrated approach aimed at generating alpha. Unlike ETFs that track an index, a concentrated fund actively selects a smaller portfolio of stocks with the intention of outperforming the market. This targeted approach allows the fund to invest in opportunities it assesses as having the most potential for higher returns. By meticulously managing these select investments, the fund endeavors to achieve superior value compared to the broad market performance of passive funds, thereby offering a distinct investment strategy and the possibility for enhanced investor returns.
  • Why would I invest in an active ETI with higher expenses than a passive ETF?
    Investing in an active ETIs like Exacta, despite higher costs compared to passive ETFs, is justified by the potential for excess returns due to its strategy of carefully selecting and analyzing quality companies globally. The concentrated portfolio approach aims to offer better risk-adjusted returns, while the active management ensures continuous monitoring and timely adjustments to the holdings. Additionally, Exacta's transparent communication provides investors with psychological comfort, especially during market downturns. This active management and concentrated investment strategy are core to Exacta's value proposition, offering the potential to outperform passive investment strategies.
  • Why do you believe you can outperform an index fund?
    The confidence in outperforming an index fund is rooted in a strategic approach that involves a concentrated portfolio of quality companies and a focus on undervalued firms. The portfolio manager brings a long history of delivering outstanding risk-adjusted returns, suggesting a proven track record of superior performance. By meticulously selecting and continuously reassessing a select group of high-quality companies that are believed to be undervalued, there' a strong belief that such an approach can yield better than average market returns. The investment philosophy is that a deliberate and focused investment in companies with solid fundamentals, competitive edges, and valuations that do not fully reflect their intrinsic value can surpass the performance of index funds, which include a broad mix of both overvalued and undervalued companies. It is important to note, however, that past performance is no guarantee of future results, and this remains a key consideration for investors when evaluating the potential for continued outperformance.
  • Is there a Credit Risk to the Issuer of Exacta Focused ETI?
    Other than first-generation Actively Managed Certificates (AMCs) issued by banks our ETI issuer assets are secured. The issuer pledges the underlying assets to a security trustee who holds the underlying assets for the benefit of the ETI holders. This reduces the issuer risk to nearly zero.
  • What are the most significant risks of investing in Exacta Focused ETI?
    One of the inherent risks associated with investing in the Exacta Focused ETI arises from its strategy of maintaining a concentrated portfolio, which can lead to heightened unsystematic risk. In other words, since the investments are focused on a select number of companies, the portfolio may experience greater volatility due to this concentration. The ETI's approach is to meticulously assess risk at the individual holding level, leveraging qualitative insights during the investment selection process. This method does not emphasize quantifying broader market risks at the portfolio level. While there is an effort to diversify across different geographies and sectors, the fund's commitment to concentration means it may not benefit from the risk mitigation typically associated with wide diversification. This focused strategy can offer significant rewards but also requires investors to be comfortable with the level of due diligence and risk assessment that the management applies to its select investments.
  • What if something happens to Exacta's key people?
    The Exacta Focused ETI is built upon a robust and proven investment process that transcends the presence of any single individual, emphasizing the continuity and long- term nature of our investment approach. While the unique contributions of key personnel are invaluable, the departure or unavailability of such individuals is unlikely to have an immediate impact due to our focus on long-term investment strategies. Our operations and strategies are designed for seamless transition, equipped with a framework that ensures the ETI can be proficiently managed by another qualified portfolio manager if necessary. Moreover, our operational infrastructure is meticulously crafted to minimize individual dependency, ensuring that the investment process upholds its integrity and dedication to our investors' interests, even amid personnel changes. To accommodate our investors' preferences for accessibility and control over their investments, we offer the option to instantly liquidate units at any point, a feature that remains consistent under the stewardship of both current and future management teams. This reaffirms our commitment to maintaining a resilient investment platform that aligns with the long-term financial goals of our investors.
  • How does Exacta report on portfolio risk to ensure transparency for investors and compliance with regulatory requirements?
    We employ a systematic approach to risk reporting by utilizing the Open Protocol (OP) framework through our specialized data management provider iQuant Solutions. OP standardizes how risk information is disclosed. This allows us to provide our investors with detailed and comparable risk data, including counterparty risks. Through the Open Protocol's consistent data inputs and established calculation methodologies, we ensure that our reporting meets the needs of our investors for effective portfolio risk management and transparency. We publish the OP reports on our site monthly.
  • What are the costs of the ETI?
    The ETI carries a maximum management fee of 1.2%, which encompasses running costs. As the fund's assets under management grow, we anticipate a reduction in these fees for all unit holders. Furthermore, when the ETI is making good returns, it has the right to collect performance fees.
  • What is the high-water mark related to the performance fee?
    The high-water mark in relation to the performance fee is a mechanism that ensures investors are only charged performance fees on new profits. For our ETI, it works as follows: if the NAV (Net Asset Value) of the underlying portfolio, which is quoted on a daily basis, climbs to a level that is 8% higher than its previous highest recorded value, the ETI is entitled to charge a 20% performance fee on the new profit made. There is no annual reset for the high-water mark, meaning the fund cannot charge performance fees again until the NAV reaches a new, higher peak. This ensures that performance fees are only paid on the incremental growth of the investment, protecting investors from paying fees on the same performance multiple times.
  • Is there an entry or exit fee for the Exacta Focused ETI?
    No, there is no specific entry or exit fee charged by the Exacta Focused ETI itself. However, since the ETI is listed on EUWAX/Stuttgart Stock Exchange, the usual trading costs apply. This includes a BID/ASK spread, which is 1%. Therefore, when you buy or sell units of the Exacta Focused ETI, you will encounter a cost of around 0.5% for each transaction due to this spread. This cost is a result of the difference between the buying price (ASK) and the selling price (BID) of the ETI.
  • Are the return figures on the stock exchange clean for the investor, i.e., after all fees?
    Yes, all the return figures presented on the stock exchange are net for the investor, meaning that all fees have already been deducted. This ensures that the performance data you see reflects the actual returns that investors would receive, with no additional fees to be subtracted.
  • How can I invest in the Exacta Focused ETI?
    Investing in the Exacta Focused ETI is straightforward and similar to purchasing stocks or ETFs. You can buy and sell units through brokers that offer trading in structured products, such as Swissquote or Interactive Brokers. Another option is to speak with your wealth manager or custodian bank about making a direct investment in the Exacta Focused ETI, which has the ISIN DE000A3G5M19. It's important to note that the Exacta Focused ETI is designed for long-term investors, and it may not be the best fit for those who plan to liquidate their investment within a 3–5 year timeframe.
  • Can I invest small amounts in the Exacta Focused ETI?
    Yes, you can invest small amounts in the Exacta Focused ETI. The initial issue price was set at 100 EUR per unit, which theoretically represents the minimum investment amount. You are free to invest in additional units at the current exchange-quoted price, but it's important to keep in mind the transaction costs that your broker may charge for each order. The Exacta Focused ETI is available for Retail Public Offering in Liechtenstein, France, and Ireland. It is also available for Public Offering to Qualified & Professional Investors throughout the EU, as well as in the UK, Norway, and Switzerland.
  • Am I able to sell Exacta Focused ETI units even if there is no seller?
    Yes, you can sell your Exacta Focused ETI units at any time even if there is no direct buyer. The market maker is obligated to provide liquidity on a daily basis, ensuring that they will buy your units or sell units to you when you wish to transact. They do this with a spread of around 0.5% to the actual underlying Net Asset Value (NAV) of the ETI. This service by the market maker effectively eliminates liquidity issues and prevents significant price distortions from the NAV.
  • What kind of investors does the Exacta Focused ETI have?
    Exacta Focused ETI caters to a diversified client base that includes individual professionals from various fields seeking to manage their wealth effectively. In addition, we serve high-net-worth individuals and family offices looking for disciplined investment strategies. Currently, a substantial number of our investors are residents of the Gulf Cooperation Council (GCC), illustrating our strong presence and the confidence placed in us by investors in this region. Our investment solutions address the financial goals and investment horizons of various groups.
  • Why is the ETI based in Germany?
    Germany is renowned for its credibility, safety and stability, both economically and politically. Our pursuit for an exchange listing was guided by the necessity for daily liquidity and global accessibility for our investors. EUWAX in Stuttgart stands out as the largest exchange-based segment for securitized derivatives in Europe, offering a robust platform with collateral security.
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