key distribution relationship just ended.
Today Hartford, Connecticut-based Virtus Investment Partners confirmed
that Dorsey, Wright & Associates
will now power the five mutual funds (formerly called the AlphaSector
funds) that F-Squared previously subadvised. The news comes as fundsters are pondering a report
that Wellesley, Massachusetts-based F-Squared is on the block for an as-yet unreported
A press contact for F-Squared emailed MFWire
the following company statement:
While Virtus’ decision is disappointing, it is not unexpected and does allow us to pursue new opportunities in the mutual fund space. We have been making contingencies since the beginning of the year, building a leaner, more profitable business model and pursuing new client opportunities particularly in the retirement savings space. We are also actively pursuing international expansion opportunities for our managed solutions and our applied dynamic portfolio replication technology.
Virtus also confirms that the five funds have been renamed the Virtus Trend
funds: they are the Virtus Dynamic Trend Fund
, the Virtus Global Equity Trend Fund
, the Virtus Multi-Asset Trend Fund
, the Virtus Sector Trend Fund
, and the Virtus U.S. Equity Trend Fund
. Euclid Advisors
handles "portfolio implementation and trading" and continues to subadvise the funds, while Virtus senior managing director Warun Kumar
now co-PMs the funds. Dorsey Wright's "Relative Strength" price momentum technical analysis will power the funds.
"F-Squared Investments, an unaffiliated former subadviser, no longer provides services to the funds," Virtus writes.
It's been a tough eight months for the formerly high-flying F-Squared, which remains the biggest ETF strategist in the business. First, news broke
of the SEC sending F-Squared a Wells notice over performance reporting around F-Squared's flagship AlphaSector indexes (the indexes that, until now, powered the five Virtus funds that just rebranded and moved to Dorsey Wright). Two months later F-Squared co-founder and CEO Howard Present
left the firm, replaced
by Dagan, an F-Squared board member. F-Squared then agreed
to a $35-million settlement with the SEC, though Present was not part of the settlement and the SEC separately filed charges
against him. He has subsequently demanded
a jury trial.
Some broker-dealers have cut off or reduced
their advisors' access to F-Squared powered products. Earlier this spring word leaked
of F-Squared cutting up to 25 percent of its staff. F-Squared had $27.2 billion in assets under management when the Wells notice came to light eight months ago; that was down to $15.2 billion as of March 31, 2015.
Virtus has been hit
by the F-Squared fallout
, too. The subadvised mutual fund shop already faces multiple
over the F-Squared situation
. Virtus' shares have fallen 40.33 percent (to $133.95 as of market close on Friday) since the F-Squared news first broke on September 3.
, executive vice president of product management at Virtus, praised Dorsey Wright as "an ideal partner for Virtus."
"Our collaboration with Virtus allows Dorsey Wright to further expand how it brings turn-key, quality solutions to the financial community," states Tom Dorsey
, founder of Dorsey Wright.
Dorsey already subadvises
some mutual funds and ETFs for firms like Arrow and Invesco PowerShares. Nasdaq bought
Dorsey Wright in earlier this year. Tammy Derosier
, a Dorsey Wright veteran who recently rose to president, confirms that her team of 24 people now has nearly $14 billion in assets under advisement (including the Virtus funds).
Derosier notes the five Virtus funds Dorsey Wright will power already had the objective to "protect and participate", which she says meshes well with Dorsey Wright's investing philosophy. The Dorsey Wright team, she says, relates their market philosophy to the sport of football, where each team has different sub-teams of its players on the field for each play.
"Sometimes the market's on offense and sometimes the market's on defense," Derosier tells MFWire
. "The most important thing an advisor needs to know is what team they have on the field ... and what kind of plays do they want to run."
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