MutualFundWire.com: A Burgeoning Servicer Breaks the Series Trust Mold

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Thursday, May 23, 2013

A Burgeoning Servicer Breaks the Series Trust Mold

Andres Sandate, president and chief executive of Endurance Fund Services, is a man on a mission.

He wants to turn the business model of multi-series trusts on its ear. In particular, he wants to give asset managers the chance to fire vendors servicing the trust if they don't like what they are getting.

"Ours is not a vertically integrated mode, which is the norm in this business. There are two dominant players in this space are either large banks or financial servicing firms sponsoring these series trusts, with many, if not all, of the services offered internally: transfer, accounting, compliance, distribution, etc. We feel there is an opportunity to dis-intermediate this space," Sandate told MFWire today.

To that end, Sandate's firm launched the Endurance Series Trust for asset managers who want to enter the '40 Act space.

The first mutual fund launched on the trust is the Gator Focus Fund, run by the Tampa-based Gator Capital Management. Founded in 2008 by Derek Pilecki, this shop runs five traditional long-equity portfolios and one long/short hedge fund in addition to the newly-launched mutual fund.

According to the SEC filing, the fund "pursues its investment objective by investing primarily in equity securities of small-capitalization (“small-cap”) companies. The Fund considers a small-cap company to be one that has market capitalization of less than $3 billion."

Sandate's company serves as the sponsor of the series trust and the administrator to each of the mutual funds within it. However, unlike others in the industry, Endurance does not provide compliance, legal, accounting, transfer agent, custody, shareholder or distribution services.

Rather, Endurance outsources all of these functions to outside vendors. Sandate says this is a key difference.

He describes these advantages in this way

Because we coordinate these services with outside provides, this translate into a couple of ket benefits for the advisor of a mutual fund. First, you have a trust that is independent and flexible. If you don't like the services of a provider, you can come to the trust and board and make the case for ending this relationship. In a service where all the services are run by the company, you can image what they are going to respond. You're stuck.

When we built this trust, we sought service providers that were hungry, proven and explained to them what we wanted to offer our mutual fund managers. These service providers recognize that they are ultimately replaceable.

This arrangement, Sandate said, will lead to lower costs, better service and accountability and will also offer checks and balances among service providers. Managers will be working with a number of different companies, each with their own culture and processes, and not be beholden to the culture and procedures of a single dominant provider.

Also, Sandate says that Endurance aims to cap the size of each of its trusts to ensure that boards aren't overwhelmed with overseeing too many fund managers.

Finally, for those managers who want it, Sandate says that he is developing a sales force that will help wholesale the funds within the trust. He says his team is now working to develop relationships with platforms, broker-dealers, RIAs, and other distribution players.

What kind of managers does Sandate want?

"We are seeking opportunities to help support the mutual fund aspirations of manager that we believe are unknown, un-branded, currently unavailable, but pedigreed and proven alpa-makers," he said.

He said Endurance is not focused on any particular style or asset class, but is rather looking for managers who have had experience managing hundreds of millions, if not millions, anonymously in SMAs, or in the sleeve of a multi-manager fund and "and never realized that they have a brand and a story that is worth bringing in front of retail investors."

"We want to bring their story to investors," he said.

Here is the press release that Endurance has released to the public:

Company Press Release
Endurance Series Trust Launches First Mutual Fund as Industry’s Newest Entrant To Multi-Series Trust Marketplace

Atlanta, GA (May 23, 2013) - Endurance Series Trust, a multi-series trust, announced today that Tampa-based Gator Capital Management, LLC is the adviser for the Trust’s first mutual fund series. Endurance Fund Services, LLC, an independently-owned and operated fund administration company not affiliated with any banking or financial services firm serves as the Fund Administrator for the mutual funds in the Endurance Series Trust.

Andres Sandate, President and CEO of Endurance Fund Services, commented, “The three benefits of the Endurance Series Trust are our independence, our lower cost structure and our ability to assist clients in raising assets for their mutual fund. Our independence allows us the flexibility to select (and, if necessary, change) service providers for our mutual funds, and cuts out red tape and institutional formality that slows down most series trusts in starting new mutual funds. As more investment advisers are looking to start mutual funds to enhance distribution, they are finding the process daunting and the options available quite expensive. We built the Endurance Series Trust to offer investment advisers a unique, comprehensive approach to quickly form, manage and grow their own branded mutual fund without the timing hassles, conflicts of interest and higher fees associated with other series trusts.”

Using Endurance Series Trust to launch a mutual fund allows investment managers to outsource operational and administrative functions to Endurance Fund Services. Investment advisers who form and manage their mutual funds via Endurance Series Trust are also provided with industry leading compliance professionals and access to distribution services, including introductions to broker/dealers, RIAs, fund supermarkets, intermediary platforms and wholesaling specialists.

About Endurance Fund Services, LLC

Endurance Fund Services, LLC (www.endurancefundservices.com) provides investment advisers interested in starting a mutual fund with a fast, turnkey and cost-effective means to form, manage and grow their own mutual fund via Endurance Series Trust. Endurance Series Trust is comprised of independent mutual funds advised by separate investment advisers and is overseen by a Board of Trustees.