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Tuesday, October 13, 2015

Broadmeadow's First Post-F-Squared Step? A Seamless Transition

Reported by Neil Anderson, Managing Editor

The F-Squared sale is done, and now "the first focus is to demonstrate a seamless transition."

Paul Ingersoll
Cedar Capital
Chief Executive Officer, Partner
That was the central message delivered by Paul Ingersoll, CEO of Cedar Capital, in a recent interview with MFWire. Last month Cedar-backed Broadmeadow bought F-Squared's assets, as planned, after the fallen ETF strategist filed for bankruptcy protection over the summer.

"It's really all about continuity," Ingersoll tells MFWire. "The next step is really to go and speak with those who have been looking at the AlphaSector strategies and reintroducing the AlphaSector strategies under the Broadmeadow brand."

F-Squared, like Broadmeadow, is an ETF strategist based in the greater Boston area. F-Squared burst into the limelight in a big way after the financial crisis with its highflying AlphaSector strategies. F-Squared netted billions of dollars of inflows, both directly and into Virtus mutual funds it then subadvised (though no longer), rising to become the biggest ETF strategist in the business. A year ago, at the end of Q3 2014, F-Squared had more than $25 billion in AUM, nearly 50 percent bigger than its closest rival.

Yet things had already started to go south. In August 2014 the SEC sent F-Squared a Wells Notice over its performance reporting around the AlphaSector strategies. F-Squared's founding chief left, and F-Squared settled with the SEC for a cool $35 million. Billions of dollars flowed out of F-Squared's strategies. Virtus replaced F-Squared with a different subadvisor this spring, and over the summer F-Squared filed chapter 11. That's when Broadmeadow and Cedar (which is also the parent of another ETF strategist, GoodHarbor) swooped in.

Broadmeadow brought several F-Squared folks on board, boosting its head count to seven, Ingersoll says.

"At this point it's about stability ... Within the Broadmeadow brand is going to be the intellectual property and the client service" around the AlphaSector strategies, Ingersoll says. "Cedar Capital has the finance, distribution, marketing."

"We were able to take over the operations without missing a beat," Ingersoll adds. "We've really largely transitioned over all of the accounts."

Ingersoll describes the F-Squared deal amidst the bankruptcy as "an interesting process," and he confirms that Cedar Capital continues to look for "additional innovative differentiated strategies" that they can back and distribute.

"We definitely have discussions ongoing. We're really very opportunistic," Ingersoll says. "We've got a platform that we want to leverage."

As for Broadmeadow and F-Squared, he says that the team "built a flexible process that really accommodated a lot of different variables."

"We stand ready to serve the clients that want that," Ingersoll says. 

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