MutualFundWire.com: Alts Firm Narrows Sub-Advisor Draft Picks

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Monday, April 29, 2013

Alts Firm Narrows Sub-Advisor Draft Picks

When hedge fund veteran Jim Dilworth launched Simple Alternatives[profile], an alts firm devoted to hiring hedge fund managers as mutual fund sub-advisors, his friends thought he was going down the road of investment perdition.

"'You're going the retail route? You're going to sell your soul to the devil,' they told me," Dilworth said to MFWire today.

What a difference a few years make.

Simple Alternatives' mutual product, the S1 Fund, has seen 30 percent AUM growth since September 2012, reaching $81 million last week. The fund, launched in September 2010, is currently sub-advised by 5 long/short hedge fund managers.

Dilworth's firm is prepping to add two new hedge fund managers to the bench, after receiving approval from the fund's board in the middle of May.

Simple Alternatives also recently hired Clark Jones from Tudor Investment Corporation to bolster its investment team.

The S1 Fund is a long/short equity focused alternative mutual fund pursuing an absolute return strategy with a low beta to traditional financial market benchmarks like the S&P 500. According to a company spokesperson, "through our disciplined investment process that focuses on strategy allocation, manager selection and risk management, we seek to preserve and grow capital regardless of market direction. Financial Advisers use alternative strategies like S1 Fund to increase diversification and reduce portfolio volatility."

Dilworth said he is committed to working with the highest caliber boutique managers who run "a legitimate short book."

"We are very focused on manager selection and improving our risk/adjusted performance which is ultimately how our success will be measured," he said.

Dilworth had this to say about their approach to recruiting managers:

It comes down to the quality of the managers. This is our competitive advantage, we try to approach these relationships with the managers more as partners. We are willing to help these managers increase their profile, introduce them to potential investors. We are always active. We are always searching. We are always out there interviewing managers.

By actively promoting the hedge fund managers, who still face regulatory limits with regards to advertising, Dillworth says his company is able to attract "a higher caliber of managers."

Currently, Dilworth says that a key area of growth for S1 has been the DB and DC space.

We don't have a wholesaling team. We are really focusing on institutional buyers. So a lot of this just comes around through word of mouth. The next leg go the journey would be to build out the sales and marketing organization which we don't have yet.

The ultimate goal for the S1 fund is to reach roughly $1 billion in assets, which would be managed by 8 to 10 sub-advisors, according to Dilworth.

After that, in time, Dillworth's plans to repeat the process by launching more alt funds featuring more hedge fund managers as sub-advisors.

"That is our plan, to launch other funds. We have to take it one step at a time," he said.

Printed from: MFWire.com/story.asp?s=43739

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