An Alts Fund Innovator Celebrates While Sharing His Vision
Reported by Neil Anderson, Managing Editor
An alternatives shop just celebrated the second anniversary of its first mutual fund, and it may be launching more. Jim Dilworth, CEO and founder of Ridgefield, Connecticut-based Simple Alternatives [profile] stopped by MFWire's New York City headquarters to talk about his flagship S1 Fund, his perspective on the mutual fund business and his plans for the future.
"We would envision offering additional funds," with names like "S2 Fund" and "S3 Fund," Dilworth told MFWire.
The S1 Fund, which launched in October 2010, invests directly in long-short only hedge funds and now boasts about $70 million in assets. For future mutual funds, Dilworth said, expect to see Simple Alternatives tap into other liquid hedge fund strategies, "maybe with a shorter or longer bias."
Dilworth got into the hedge fund business in the early 1990s, and since then he's specialized in institutional funds of funds, most recently with $3.5B hedge fund of funds manager Common Sense Investment Management. He described himself as a big believer in low volatility, steady returns over time outperforming the market, the kind of logic behind the increasingly institutionalized large end of the hedge fund space. Yet those giant hedge funds, Dilworth said, are "out of the reach most people."
"The fee-only advisor channel is growing. They're looking at what institutions are doing [i.e., using hedge funds] and saying, 'We can't use the LP [limited partnership] structure,' or, 'We can but it has to be very limited.'" Dilworth said. "The advisor channel has been very quickly looking for ways to diversify their clients' capital outside of stocks and bonds."
And so, two years ago Dilworth and his Simple Alternatives team launched their first mutual fund, S1.
"My vision was, 'I can create an open architecture platform, a managed account platform, where I can go and get real institutional hedge fund managers manage this in a mutual fund structure,'" Dilworth said, contrasting S1 with other alternatives mutual funds designed to replicate hedge fund strategies instead of investing in hedge funds. "We're focused on real hedge fund managers, real long-short hedge managers."
Though Dilworth restricts S1 to classic long-short hedge funds, and even though he's "very selective with successful, institutional hedge fund managers," he said there's still lots of eligible fish in his pond.
"65 percent of hedge fund manager strategies, by assets, are long-short equity," Dilworth said. "It's clean. It's simple. It's highly liquid, and there's no hair on it."
In terms of distribution, S1 offers I shares, and Dilworth expects to keep that institutional distribution focus. S1's $70 million in assets came "purely on referrals and incoming calls," Dilworth said.
"We love the fee-only advisor channel," Dilworth said. "It's the highest integrity, conflict-free channel … The advisor channel is becoming much more institutional than perhaps many people give it credit for."
Company Press Release
Simple Alternatives S1 Fund Earns Two-Year Track Record?
Ridgefield, CT – November 13, 2012 – Simple Alternatives, LLC is pleased to announce that the firm’s first mutual fund offering, the S1 Fund (SONEX), celebrated its two-year anniversary on October 1, 2012.?
"Two years ago we created the S1 Fund to provide wealth advisors, and their clients, a better way to access a portfolio of hedge fund managers than the traditional limited partnership structure could provide,” said James K. Dilworth CEO and Founder at Simple Alternatives. “Obvious limitations with the limited partnership structure including the lack of liquidity, transparency, and relative high cost present significant obstacles for hedge fund investors to navigate.”?
“The S1 Fund uses the mutual fund structure to deliver access to the same premier long/short hedged managers while providing the added benefits of daily liquidity, daily pricing, and a layer of regulatory oversight previously unavailable to hedge fund investors," added Dilworth. ?
For the two year period ended 9/30/12, S1 Fund had a return of 1.50% versus a 0.94% return for the HFRI Fund of Funds Composite Index. YTD through October 31, 2012, S1 Fund had a total return of 4.61%, compared to a 2.95% return for the HFRI Index, while maintaining a beta of approximately one quarter the S&P 500 Index1. ?
Dilworth concluded that it was not surprising the S1 Fund has outperformed the hedge fund of funds index1 benchmark and, “our two year track record confirms our belief that it is possible for traditional hedge fund investors to achieve improved returns using the more investor friendly mutual fund structure.”?
S1 Fund employs premium hedged equity managers who seek to preserve capital, lower volatility, and generate superior risk-adjusted returns. Simple Alternatives believes that small-to mid-sized managers with demonstrated short-selling experience are most likely to outperform over a full market cycle. SONEX seeks to deliver an absolute return with one-third the volatility of the equity markets as measured by the S&P 500 Index.?
The S1 Fund is managed and advised by a team of leading hedge fund professionals, experienced in managing the assets of endowments, foundations, corporations, pension plans, RIA's, banks and high net worth individuals.?
About Simple Alternatives, LLC?
Simple Alternatives, LLC is an institutional alternative investment provider. Founded in October 2009, the company was established to offer alternative investment strategies available in mutual fund structures. Simple Alternatives's first fund, the S1 Fund (SONEX), provides access to premium hedge fund managers in a format that eliminates roadblocks investors often face when considering alternative investments. The S1 Fund employs a multi-manager, absolute return strategy that endeavors to preserve capital and generate positive returns in a variety of market conditions. Structured as an alternative mutual fund, the S1 Fund offers access to alternative investment strategies to a wide range of investors, with the potential benefits of daily liquidity, high transparency and low investment minimums.
For more information on Simple Alternatives, LLC and the S1 Fund please visit www.simplealternatives.com?
Press Contact:?
Bill Conboy?
303-415-2290?
Bill@bccapitalpartners.com?
1 The HFRI Fund of Funds Composite Index is an uninvestable, unmanaged index that is an equal weighted index of over 650 constituent hedge fund of funds that invest over a broad range of strategies. As of 9/30/12, the Fund has returned 1.50% vs. the HFRI Fund of Funds Composite Index return of 0.94% since Fund inception of 10/1/2010. The Fund's benchmark is the S&P 500?. As of 9/30/12, the Fund has returned 1.50% vs. the S&P 500's return of 31.69% since Fund inception. The Fund has returned 2.10% vs. the S&P 500’s return of 30.20% for the 1 year period ending 9/30/12. ?
Performance shown represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance shown. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than the original cost. Total returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Performance would have been lower if fees had not been waived in various periods. Returns for less than one year are cumulative. To obtain performance current to the most recent month-end, please call 1-866-882-1226.?
Total annual fund operating expenses are 6.41% and net expenses are 4.08%. The Fund’s investment adviser, Simple Alternatives, LLC (the “Adviser”), has contractually agreed to forgo all or a portion of its advisory fee and/or reimburse expenses in an aggregate amount equal to the amount by which the Total Annual Operating Expenses (other than acquired fund fees and expenses, short sale dividend expenses, brokerage commissions, litigation, extraordinary items, interest or taxes) exceeds 2.95% of the average daily net assets attributable to the Fund’s I Shares. This contractual limitation is in effect until at least December 31, 2012 and may not be terminated without Board approval. ?
Fund Risks?
The Fund is non-diversified and may focus its investments in the securities of a comparatively small number of issuers. Concentration in securities of a limited number of issuers exposes a fund to greater market risk and potential monetary losses than if its assets were diversified among the securities of a greater number of issuers. The Fund may invest in small- and medium-sized companies which involve greater risk than investing in larger, more established companies, such as increased volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. ?
The Fund may invest in foreign or emerging markets securities which involve special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. ?
The Fund may invest in debt securities which are subject to interest rate risk. An increase in interest rates typically causes a fall in the value of the debt securities in which the Fund may invest. The Fund may also invest in high yield, lower rated (junk) bonds which involve a greater degree of risk and price fluctuation than investment grade bonds in return for higher yield potential. The Fund’s distressed debt strategy may involve a substantial degree of risk, including investments in sub-prime mortgage securities.?
The Fund may purchase securities of companies in initial public offerings. Special risks associated with these securities may include a limited number of shares available for trading, unseasoned trading, lack of investor knowledge of the company and limited operating history. The Fund may leverage transactions which include selling securities short as well as borrowing for other than temporary or emergency purposes. Leverage creates the risk of magnified capital losses.?
The Fund may also invest in derivatives which can be volatile and involve various types and degrees of risks, depending upon the characteristics of a particular derivative. The Fund may invest in options and futures which are subject to special risks and may not fully protect the Fund against declines in the value of its stocks. In addition, an option writing strategy limits the upside profit potential normally associated with stocks. Futures trading is very speculative, largely due to the traditional volatility of futures prices. ?
Investors should carefully consider the Fund's investment objectives, risks, charges and expenses before investing. Consider the investment objective, risks, charges and expenses carefully before investing. For a summary prospectus, or prospectus that contains this and other information, call 866-882-1226. Read the prospectus carefully before investing.
The S1 Fund is distributed by Foreside Funds Distributors LLC Berwyn, PA who is not affiliated with Simple Alternatives, LLC
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