An Alternatives Specialist Pushes Back the Mutual Fund Frontier
Reported by Neil Anderson, Managing Editor
Alternatives manager continue to break into the mutual fund space, offering retail investors access to more non-traditional investing strategies. Today Denver-based Equinox Fund Management launched the MutualHedge Frontier Legends Fund, which utilizes a portfolio of managed futures investments. The seven-year-old firm will be expanding accordingly to manage the new effort.
Watch for Equinox to make further forays in the mutual fund business.
"We do have a series of other products that we plan to launch under the MutualHedge umbrella," confided Bob Encks, president and CEO of Equinox, in an interview with The MFWire. Those new funds should come out later this year.
Encks added that he's adding staff in accounting, IT infrastructure and wholesaling. (He already has more than 40 employees.)
Equinox isn't new to this asset class. Encks confirmed that Equinox has offered a non-mutual portfolio of managed futures, now boasting more than $800 million, for five years.
Richard Bornhoft, chief investment officer, servies as the portfolio manager for the fund, which is already available on several platforms, including Fidelity, LPL, Schwab, Stifel Nicholas and TD Ameritrade. The class A shares have a maximum load of 575 basis points and net annual operating expenses of 220 bps, while the C shares have net annual operating expenses of 295 bps.
Gemini Fund Services serves as the new fund's transfer agent, Northern Lights Distributors handles distribution and Union Bank is the fund's custodian. Thompson Hine and McGladrey & Pullen provide legal counsel and independent accounting services.
Company Press Release
April 27, 2010 – (Denver, CO) – Equinox Fund Management, LLC (“Equinox”) today announced the launch of MutualHedge Frontier Legends Fund (“MutualHedge,”) the first-ever mutual fund that provides investors with exposure to an actively managed portfolio of multiple managed futures investments.
Innovative in its structure, MutualHedge provides exposure to the trading results of actual commodity trading advisor (CTA) programs within a mutual fund format. The CTA programs employ a range of trading strategies (systematic and discretionary) and timeframes (from shorter-term to longer-term). The CTA programs, which vary in number from 5 to 7, trade more than 100 global futures markets without a net long bias in any market. By blending the trading styles, timeframes and markets of actual CTA programs, MutualHedge seeks to provide more consistent performance potential with less volatility than that of any individual CTA or index-based mutual fund that replicates a managed futures investment.
“At last,” commented Bob Enck, President and CEO of Equinox Fund Management, “mutual fund investors have exposure to an actively managed portfolio of managed futures investments. By investing in MutualHedge Frontier Legends Fund, investors can potentially benefit from the diversifying, non-correlated properties of the asset class through a single investment, thereby potentially reducing the downside risk of their total portfolio.”
Existing managed-futures based mutual funds differ from MutualHedge in that existing funds provide only a constrained exposure to managed futures by tracking an index or by replicating the returns of a single CTA.
As an alternative investment class, managed futures are often non-correlated to equities, and have the potential to provide investors with an alternative return stream during flat or negative equity markets. During the 10 years ending December 31, 2009, the worst historical loss for a benchmark managed futures index was -8.3%, compared to -51.0% for the S&P 500. And in 2008, when equities experienced a -37% decline, managed futures returned +18%. Managed futures have outperformed equities over the last 10 years with an annualized rate of return of +7.4%, compared to an annualized rate of return for the S&P 500 of -1.0%.
The MutualHedge Frontier Legends Fund is the first in a planned series of investment products to be launched under the MutualHedge brand. Each product will build on the core concept of providing access to institutional-quality alternative asset strategies with low minimums and daily liquidity.
The Portfolio Manager for MutualHedge is Richard Bornhoft, Chief Investment Officer of Equinox Fund Management. Mr. Bornhoft has more than 25 years of experience in creating and monitoring alternative investment portfolios for institutional and individual investors. Over the course of his career, Mr. Bornhoft has allocated more than $1.9 billion in assets to CTAs.
MutualHedge provides daily liquidity with a 30-day, 1% redemption fee. Initial minimum investment is $2,500. Share class A trades under the symbol MHFAX and CUSIP # 66537V682. Share class C trades under the symbol MHFCX and CUSIP # 66537V674. MutualHedge does not make direct investments in CTA programs.
MutualHedge is currently available through Charles Schwab, Fidelity, Stifel Nicholas, TD Ameritrade, and LPL Financial investment platforms, among others. For more information about the MutualHedge Frontier Legends Fund and investing in managed futures, contact your broker-dealer or registered investment adviser.
About Equinox Fund Management
Equinox Fund Management, LLC is an alternative asset manager, which specializes in the design and implementation of innovative managed futures products for both accredited and non-accredited investors in the United States. An industry pioneer, Equinox has created institutional-quality products for individual investors featuring daily liquidity.
To learn more about Equinox Fund Management visit: equinoxfundmanagement.com
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PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Managed futures as an investment strategy may not be appropriate for all investors and under all circumstances. Please refer to the current prospectus for more information about the fund and its investment strategy, fees, and risk factors. A copy of the prospectus may be obtained at www.mutualhedge.com.
Mutual Funds involve risk including possible loss of principal.
The Fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. Dollar, or, in the case of short positions, that the U.S. Dollar will decline in value relative to the currency that the Fund is short. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the imposition of currency controls or other political developments in the U.S. or abroad. In addition, the Fund may incur transaction costs in connection with conversions between various currencies. The Fund will invest a percentage of its assets in derivatives, such as futures and options contracts. The use of such derivatives may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities and commodities underlying those derivatives. The Fund may experience losses that exceed losses experienced by funds that do not use futures contracts and options. There may be an imperfect correlation between the changes in market value of the securities held by the Fund and the prices of futures and options on futures. Although futures contracts are generally liquid instruments, under certain market conditions there may not always be a liquid secondary market for a futures contract. As a result, the Fund may be unable to close out its futures contracts at a time which is advantageous. Trading restrictions or limitations may be imposed by an exchange, and government regulations may restrict trading in futures contracts and options. Because option premiums paid or received by the Fund are small in relation to the market value of the investments underlying the options, buying and selling put and call options can be more speculative than investing directly in securities. Over-the-counter transactions are subject to little, if any, regulation and may be subject to the risk of counterparty default. A portion of the Fund’s assets may be used to trade OTC commodity interest contracts, such as forward contracts, option contracts in foreign currencies and other commodities, or swaps or spot contracts. A substantial portion of the trades of the global macro programs are expected to take place on markets or exchanges outside the United States. Some foreign markets present additional risk, because they are not subject to the same degree of regulation as their U.S. counterparts. Trading on foreign exchanges is subject to the risks presented by exchange controls, expropriation, increased tax burdens and exposure to local economic declines and political instability. An adverse development with respect to any of these variables could reduce the profit or increase the loss earned on trades in the affected international markets. International trading activities are subject to foreign exchange risk. The Fund may employ leverage and may invest in leveraged instruments. The more the Fund invests in leveraged instruments, the more this leverage will magnify any losses on those investments. Leverage will cause the value of the Fund’s shares to be more volatile than if the Fund did not use leverage. The Fund may take short positions, directly and indirectly through the Subsidiary, in derivatives. If a derivative in which the Fund has a short position increases in price, the underlying Fund may have to cover its short position at a higher price than the short sale price, resulting in a loss.
Investors should carefully consider the investment objectives, risks, charges and expenses of MutualHedge. This and other important information about the Fund is contained in the Prospectus, which can be obtained by calling 1-888-MHEDGE1 (888-643-3431). The Prospectus should be read carefully before investing. MutualHedge is distributed by Northern Lights Distributors, LLC member FINRA.
 Managed Futures: CASAM CISDM CTA Asset Weighted Index. Equities: S&P 500 Total Return Index. Source: PerTrac Financial Solutions. Past performance is not necessarily indicative of future results. The S&P 500 Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. You cannot invest directly in an index.