Is someone interested in adopting the Embarcadero Funds [see profile]? That is a question now being pondered by the board of the troubled fund family. In July the board informed the mutual funds' shareholders that it is considering merging the two remaining Embarcadero Funds into a multi-cap growth fund advised by "a different investment adviser" than Van Wagoner. At the same time the board also acknowledged that the move to a new adviser may not happen and that the funds ultimately face liquidation.

The board expected the move to be submitted to shareholders for their approval before the end of the summer, but so far there is no detailed word out of San Francisco of what is really happening.

If the funds are liquidated, it will end nearly a decade of attempts by the one highflying Van Wagoner fund family to overcome the 2000 Nasdaq collapse, a settlement with the SEC over mispricing of its securities and poor investment performance. Those travails have left the fund family just a shadow of its former self.

At the start of 2009, the Embarcadero Funds (they took the new name in 2008), embarked on a new strategy that appears to have not worked out. Embarcadero altered the investment mandates for three of the five funds, repositioning them as vehicles investing in alternatives rather than technology. Thus, the Technology Fund became the Market Neutral Fund and the Post-Venture Fund became the Absolute Return Fund while the Mid-Cap Growth Fund became the Alternative Strategies Fund.

The portfolio management for the three funds was also theoretically shifted to a series of subadvisors as the funds adopted a "manager-of-managers" approach.

By the end of 2009, Embarcadero went all in with the new strategy, merging its five funds into two, leaving its lineup consisting of only the Absolute Return Fund and Market Neutral Fund.

That also meant that all of the funds would rely on the portfolio of subadvisors to handle the investment portfolio, though the subadvisors remained under the watchful eye of Garrett Van Wagoner.

The new subadvisors to the Absolute Return fund included: AlphaStream Capital, Sage Capital, TWIN Capital, Nicholas Investment Partners, Simran Capital, Sunnymeath Asset Management and SSI Investment Management.

The Market Neutral Fund also tapped AlphaStream, Sage and TWIN.

Yet, more than a year into the new strategy and despite the approval of fund shareholders, the subadvisors have still not received the cash for their mandates and it looks like they never will.

In March, Embarcadero Funds president Jay Jacobs left the firm (he is now president of Preservation Trust Advisors, LLC). In April Embarcadero tapped Edwin Restrepo, the founder of now-closed Screaming Eagle Trading as the new president.

Last month, the board again reversed course, informing shareholders that the change in investment program would not be undertaken and that it would be dropping its recently revamped fee schedule. Instead, the funds would remain invested in cash while issues are sorted out.

The funds hold just $14.7 million in assets, a far cry from the $1 billion held in just the Emerging Growth Fund at the end of 1999 when Garrett Van Wagoner decided to close the fund to new investors to stem a flood of inflows. Which investment adviser is interested in the funds will be interesting to see. 

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