Shifting to Subadvised-Only, This NoCal Fundster Is Open to Adopting, Too
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Tuesday, September 27, 2016

Shifting to Subadvised-Only, This NoCal Fundster Is Open to Adopting, Too

A Northern California fundster is shifting his mutual fund family towards being all-subadvised. He also plans to add to his team, and he's keeping an eye out for adoption targets.

Gregory Rutherford
Cavalier Investments
Chief Executive Officer and Co-Founder
"We've had some discussions about acquiring a couple of funds," Greg Rutherford, CEO of Carmel-based Cavalier Investments and former financial advisor, tells MFWire. "We continue to do research on managers."

Cavalier offers both mutual funds and separately managed accounts and has nearly $250 million in AUM. Rutherford leads a team of five (including new chief investment officer Scott Wetherington), with support from third-party markets and compliance folks.

"We'll probably grow that to seven or eight or nine within the next six to 12 months," Rutherford says. "We'll add additional analysts, an executive-type person to help us construct our portfolio management product ... [and] after that probably another internal sales person."

Earlier this month Rutherford confirmed the appointment of nine interim subadvisors for seven Cavalier Funds. Pending approval by the funds' shareholders, the interim subadvisors will drop the "interim" label and become permanent subadvisors to the funds.

"The plan was to ultimately go to 100-percent subadvised," Rutherford says, and they're on their way.

Here are Cavalier's nine interim subadvisors.

"Some of them were providing signals in the past," Rutherford says. "We were using their structure or their model but we were executing trades as the investment advisor. We wanted to make them subadvisors so that they would be responsible for the execution."

  • Beaumont Capital Management, a Needham, Massachusetts-based ETF strategist that offers SMAs through TAMP platforms, is now the interim subadvisor for both the Cavalier Tactical Rotation Fund and the Cavalier Global Opportunities Fund. Cavalier previously relied on Beaumont signals to power the funds, Rutherford confirms.

  • Bluestone Capital Management, a Wayne, Pennsylvania-based strategist that mixes equities and ETFs in its portfolios, is now one of four interim subadvisors working on the Cavalier Multi-Strategist Fund. The four interim subadvisors had previously been providing models Cavalier used for the fund.

  • Carden Capital, a Solana Beach, California-based shop, is also one of the four interim subadvisors working on the Cavalier Multi-Strategist Fund, alongside Bluestone. And Cavalier also uses Carden's long-short volatility strategy to power the Cavalier Hedged High Income Fund. Yet Cavalier itself still uses its own selection process for mutual funds and ETFs used inside the long-only part of the Hedged High Income Fund.

  • Efficient Market Advisors, Herb Morgan's La Jolla, California-based ETF strategist, is now the interim subadvisor for the Cavalier Adaptive Income Fund. The Adaptive Income Fund had previously been powered by signals from a different ETF strategist, Signal Point.
    "They were both really good," Rutherford says.

  • Julex Capital Management, a Boston-based tactical strategist, is also one of the four interim subadvisors working on the Cavalier Multi-Strategist Fund, alongside Bluestone and Carden.

  • Navellier & Associates, Louis Navellier's Reno, Nevada-based quant shop, is now the interim subadvisor on the new Cavalier Fundamental Growth Fund.

  • Parasol Investment Management, a Westmont, Illinois-based subsidiary of First Midwest Bank, is also one of the four interim subadvisors working on the Cavalier Multi-Strategist Fund, alongside Bluestone, Carden, and Julex.

  • StratiFi, a San Francisco-based shop, is now an interim subadvisor running an option overlay on the Cavalier Dynamic Growth Fund, the original fund in the family.

  • Validus Growth Investors, Mark Scalzo's Truckee, California-based growth equity shop is also now an interim subadvisor on the Cavalier Dynamic Growth Fund.

"That was the initial fund. Back in the day we were using kind of a pricing methodology," Rutherford says. "It made sense to take that modeling and then create that first 40 Act fund. We used that methodology to really price funds and ETFs and build the model that way."

Looking ahead, watch for Cavalier to transform its eighth fund, the Cavalier Dividend Income Fund, into the Cavalier Nebraska Index Fund. The fund will be powered by an index from Nebraska Index LLC.

"I'm hoping to have that change made hopefully by sometime in October," Rutherford says.

Cavalier spent about 18 years as an FA, before selling his book to his partners at Omaha, Nebraska-based Tagge Rutherford Financial Group.

"It was really hard for me to own a fund and stay as a financial advisor," Rutherford says.

Rutherford co-founded Portland, Oregon-based FolioMetrix. Then last year FolioMetrix merged with another subadvised mutual fund shop, American Independence Financial Services, and the combined firm took the RiskX Investments brand from FolioMetrix's line of RiskX Mutual Funds.

"When we started to look at a merger, I decided to go a different direction," Rutherford says.

Enter Cavalier, the dba for holding company Canter Compass Investments, which started last August. Then Cavalier adopted funds from FolioMetrix.

"All the funds [now called the Cavalier Funds] stayed in the trust," Rutherford says. "The investment advisor to those funds changed from Foliometrix to Cavalier."

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