If you look at total dollars invested in the 20 most popular ETFs among our universe of top managers – 5 years ago it was $11 billion, 3 years ago it was $15 billion, and today it’s $25 billion. It’s fair to say ETFs are here to stay and are increasingly capturing the interest of institutional investors.
1. Get access. Investing well starts with having access to the most established managers. They attract the best talent because they have the most resources. Like fishing, if your access to the great fishing spots is restricted, then you're limiting your potential before you even cast your line. AlphaClone is the leader in leveraging the public disclosures of the world's most established hedge funds to access their highest conviction ideas. If nothing else, our research and results have proven the efficacy of using hedge fund public disclosures when constructing investment strategies.
2. Choose well. Access is great but if you don't have the skill to select which managers to invest with you're squandering your access. Many investors chase performance only to find their results don't match history while others bet it all on a star manager. Those with access to fund-of-funds have not done any better (the average fund-of-fund underperforms the average hedge fund – ouch). But what if you could continuously evaluate managers based on the individual holdings they select as opposed to simply their overall fund performance? That's exactly what AlphaClone's dataset allows us to do. We call our grade a Clone Score and its at the core of how we select managers for many of our core strategies.
3. No manager risk or switching costs. Hedge fund lockups/gates, high fees and the risk of fraud or blow-up risk make the price investors pay for selecting the wrong manager extremely high. Although less expensive on average, the same can be said for mutual funds which may charge you hefty upfront or backend sales/exit fees. But what if you could eliminate the risks of having direct exposure to a single manager? What if you could eliminate the costs of switching away from an underperforming manager? AlphaClone's portfolio construction approach delivers exactly that. We invest in the highest conviction ideas of several managers thereby mitigating the risk of being exposed to one or two managers. We invest indirectly using their public disclosures so when a manager's Clone Score starts to fall due to performance we simply replace them with another who's score is rising. Zero switching costs. It's that simple.
4. Built-in dynamic hedging. Markets go up AND DOWN. Diversification across managers and/or styles is simply not enough protection in persistently volatile markets. A fact that too many investors have learned the hard way. Having a simple, rules-based, automated way to hedge your market exposure during multi-month market corrections has been proven to be effective over time, yet so few investors hedge in any way. AlphaClone's long/short strategies are dynamically hedged – the hedge is simple, non-proprietary and it is automatic so you can rest a little easier that you've done everything you can to mitigate market exposure during critical times.
5. Low fees. We want to keep your fees low. For managed accounts held at Folio Investments we charge between 1% and 1.5% for all management fees AND trading commissions. That's it – no hidden fees, no performance based fees, no fees-on-fees and certainly no entry or exit fees. You can review our entire fee schedule here.
6. Your assets are held at trusted custodians. We know where you hold your assets is critical to you. That's why we only work with institutional-class, established custodians that do everything they can to ensure the security of your assets. Unlike a hedge fund or other private fund, AlphaClone never has direct custody of your assets. Whether you choose to hold your assets at Folio Investments or Charles Schwab, you can be sure that your accounts enjoy the protection of FDIC and SIPC insurance. To learn more about managed account security features – click here.
7. 24/7 access; 24/7 liquidity; 24/7 transparency. Security is important but transparency and access is also critical. No matter what custodian you select, you'll have 24/7 online access to your account through that custodian's website. You'll be able to view holdings in your account, tax information and account statements and have the ability to liquidate and have access to your funds within 3 business days. What could be more convenient?
8. Address your ENTIRE portfolio's equity allocations. With core and satellite strategies, long only or hedged, US and foreign, and strategies that span a mix of investment styles, we've got your equity allocations covered. Investing well has never been about a single strategy nor should it be. With multiple core strategies and the ability to customize the way you use them – we make spending your valuable time with us worth every minute.
9. Avoid your worst investing habits. What's your alpha? If you're like most people, it's your career or business. Don't you owe it to yourself to avoid all the bad habits that make investing painful – stock picking, manager timing, market timing, irregular rebalancing, frequent changes in direction, high fees, lack of transparency – all of them are common enemies of most investors and we haven't met a single investor yet who is immune to all of them. AlphaClone lets you focus on your true alpha – give us at least a three year investment horizon and let us focus on ours.
10. Be in control. Ultimately it's about you, your family and the feeling that you are in control of your investment portfolio. AlphaClone wants to give you as many investing advantages as possible: access, selection skill, low fees, transparency, liquidity, diversity, automation, hedging - all of which tip the odds of success in your favor, not the market's. Why invest any other way?
What about Performance? None of the reasons I mention above are entitled “Performance.” Why? Well because performance is a byproduct of all the above. While it is certainly important, it is where you should end, not where you should start. Start at the basics. Do I buy the investment thesis, am I comfortable with the process long term over multiple market conditions, are the fees low, what are the operational risks, how can I access my funds, where are they held, does the process address a broad section of my portfolio, are there any restrictions. Once you've answered all the above – then look at performance. You can find ours reported monthly here (just click on the .pdf entitled “Performance Report”).
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