As advisors increasingly seek to incorporate alternative investment strategies into their clients’ portfolios, one of the leaders in hedge fund of funds, Infinity Capital Partners, has partnered with Vivaldi Asset Management to offer a registered multi-strategy investment fund with a minimum investment of $25,000 that invests in leading hedge funds.
Infinity Core Alternative Fund (NASDAQ: ZVAMIX), a closed-end interval fund of funds, was launched on April 1, 2014 and has assets of $25 million. Vivaldi Asset Management LLC, a SEC Registered Investment Advisor (RIA) providing alternative investment solutions to independent RIAs and financial intermediaries, is the investment advisor. Infinity Capital Advisors LLC, a division of Infinity Capital Partners, an independent, privately-owned fund of hedge funds manager, is the sub-advisor. The fund is available to accredited investors with assets outside of their primary residence of $1 million or more or annual income of at least $200,000. Advisors can purchase the fund through a number of platforms including Schwab, Fidelity, TD Ameritrade, Pershing, JP Morgan and Millennium Trust.
“The fund allows advisors to allocate to leading hedge funds at a smaller minimum of $25,000 than most hedge funds offer,” said Michael Peck, President and Co-Chief Investment Officer of Vivaldi Asset Management, the fund’s advisor. “We chose to partner with Infinity Capital Partners to sub-advise the fund because they have a track record of successfully managing a multi-strategy fund of funds since 2004.”
“Our experience and deep relationships give us access to a diversified roster of leading hedge fund managers,” said Jeff Vale, Chief Investment Officer of Infinity Capital Partners. “We only work with blue chip, institutional quality managers. Their typical minimums of $5 million or more are outside the reach of many investors.”
Infinity’s Chief Investment Officer Jeff Vale answered a few questions about the Infinity Core Alternatives Fund and its investment process:
Q. How do you select the multi-strategy hedge fund managers for your portfolio?
A. We screen the universe of roughly 8,000 to 10,000 hedge funds for managers that employ a multi-strategy approach, a minimum of a 10-year operating history and $5 billion in assets under management. That narrows the universe to roughly 50-75 funds that meet these criteria. The one constant of our selected managers is their relentless focus on risk management. We seek to find the best risk-managed hedge fund managers with long histories of delivering high Sharpe Ratio returns or the highest returns for the risks taken. We perform roughly two years of due diligence before making an initial investment with a manager.
Q. What is your objective with the fund?
A. We seek to consistently maximize returns relative to risk. The investment objective of the fund is to seek long-term capital growth. The fund invests primarily in other hedge funds that invest or trade in a wide range of securities, and, to a lesser extent, other property and currency interests. The underlying managers have exposure to a broad range of strategies across a wide range of security types and regions. Primary strategies include long/short equity, distressed securities, event driven, quantitative equity and securities arbitrage.
Q. Who should consider this fund?
A. The fund is appropriate for accredited investors who are seeking an alternative investment with low correlation to traditional equity and fixed income asset classes. The fund offers diversified exposure within the alternative asset class and is a true complement to liquid alternative investments. The fund may also be appropriate for an investor seeking attractive returns and downside protection.
Q. Do you move assets around between managers or make tactical allocation decisions?
A. No. We push down the tactical allocation decisions to the multi-strategy hedge fund managers with whom we invest. We neither use hedge overlays nor try to outsmart the managers we have hired. All of our hedge fund managers are global with many employees, significant resources on the ground and opportunity sets that are broad and well-researched.
Q. How do you determine how much is allocated to each manager?
A. We strive to manage a balanced portfolio. In practice, the weights vary. We manage against capacity as some managers may be hard or soft closed. We believe in a concentrated approach with a portfolio of 9 to 12 managers although we do not want any one manager to represent more than 20% of the portfolio. We rebalance the portfolio as needed; however, we do not actively trade the portfolio, use leverage or employ hedge overlays.
Q. How do you monitor the selected hedge fund managers?
A. We communicate regularly with the managers to gain insight into portfolio opportunities and their risk management process. We have longstanding relationships with each manager including senior management, portfolio managers, research analysts and their investor relations professionals. They recognize we are generally long term investors, have committed capital and they know and trust us.
Q. Why did you choose to offer a registered closed-end investment fund instead of a liquid alternative mutual fund?
A. Daily liquidity and the overall constraints of a mutual fund limit the spectrum and opportunity set of hedge fund strategies. Some of the most attractive and non-correlated strategies cannot be executed in a daily liquid fund structure. Our structure and committed capital enables our selected multi-strategy managers to seek out the most opportunistic strategies and deploy capital based on risk and not necessarily be constrained by the fund’s structure.
The fund offers quarterly liquidity; this means that advisors need to commit only those assets that can remain invested and that their clients will not need access to in the short term.
Q. What are the fees on the fund?
A. The management fee is 1.25% and other expenses are 0.46%; however, fees and expenses are capped at 1.50% or 150 basis points*. The advisor, at their option, may also charge a maximum sales charge of 3%. The underlying fund expenses are 4%. We believe alpha is expensive and we are willing to pay for that; however, beta is cheap. The structure allows us to bring traditional fund of hedge funds to a broader audience with a low fee structure.
About Infinity Capital Partners, LLC
Based in Atlanta, Georgia, Infinity Capital Partners is an independent, privately owned alternative investment manager. Infinity’s primary goal is to consistently maximize returns relative to risk. Founded in 2002, Infinity is owned and managed by its principal partners. Infinity’s investors include high net worth individuals, family offices, wealth management firms, and institutional investors. The firm’s partners and professionals have significant industry experience and have amassed a track record of success managing alternative investment partnerships. For more information, visit www.infinityfunds.com.
About Vivaldi Asset Management, LLC
Based in Chicago, Vivaldi Asset Management is a SEC Registered Investment Advisor (RIA) providing alternative investment solutions to independent RIAs and financial intermediaries. For over 15 years, Vivaldi’s principals have offered both 40-Act and private funds to accommodate RIAs looking to scale their alternative investment exposure or secure a truly customized solution. For more information, visit www.vivaldicap.com.