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Thursday, October 23, 2014

Meet the Hottest Liquid Alts Fundster In 40 Act Country

News summary by MFWire's editors

A hedge fundster's return to the mutual fund space has translated into the hottest liquid alternatives presence of 2014.

Randall Smith of the New York Times profiles Joel Greenblatt and his shop, Gotham Asset Management, whose second suite of mutual fund offerings have grown to $4.8 billion from $1 billion so far this year, bringing in more inflows (says Morningstar) than any other liquid alts hedge fund shop in the mutual fund biz. (Gotham has taken in $8 billion in total, including hedge fund dollars, since reopening to investors in 2009.)

The NYTimes offers a host of tidbits about Greenblatt, age 56, and Gotham, some of which might be of interest to other fundsters (or prospective fundsters) interested in getting their piece of the liquid alts boom.

For example, Greenblatt gained some fame through his You Can Be a Stock Market Genius book in 1997, and then through his The Little Book series of investing books, based on what he call jokingly calls a "magic formula."

Also, this is not Greenblatt's first mutual fund stab. The article notes that Gotham's first round of mutual funds, conventional funds using his "magic formula", launched in 2010 and "raised only $360 million."

What's Greenblatt secret this time around? Advisor distribution is key. The NYTimes says that he has been "courting Wall Street banks and brokerage firms," including wirehouse Bank of America Merrill Lynch and giant bank J.P. Morgan Chase. More specifically, the article says, Greenblatt "has appeared about twice a month before groups of brokers and wealth advisers.

Greenblatt's investing strategy mixes long-short (shorting the most expensive stocks they can find) with value investing (buy the cheapest stocks).

Oh, and Gotham's mutual funds aren't cheap. Fees and expenses reach as high as 225 basis points, not including the fees charged by the advisor or broker using the funds with their clients. Morningstar analyst A. J. D'Asaro worries that the funds' fees are "a significant ongoing hurdle to performance." (Incidentally, if Gotham's mutual funds averaged, say, 200 bps, that would translate into $960 million in mutual fund fees alone.)

In addition to Greenblatt himself and D'Asaro, Santa Clara University behavioral finance professor Hersh Shefrin, Mirador Capital Partners chief investment officer Don Garman, Morningstar alternatives analyst Josh Charney, and Auxano Advisors CIO Brian Pearson all weigh in for the article.

The article also offers a host of other details about Greenblatt, like his upbringing ("the song of a shoe company executive, grew up in the affluent suburb of Great Neck, New York"). Read the full article to find out more. 

Edited by: Neil Anderson, Managing Editor

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