Portfolio Manager Perspectives

Jeff Benjamin

New retail hedge fund keeps strategy, ditches liquidity concerns

RiverPark Long/Short Opportunity Fund launched March 30; gain of 21.3% this year

Apr 30, 2012 @ 1:54 pm

By Jeff Benjamin

There have been endless efforts to bring alternative strategies to the retail investor marketplace, but the RiverPark Long/Short Opportunity Fund Ticker:(RLSIX) has finally done it.

The fund, managed by Mitch Rubin, was launched on March 30 as a retail product, but before that had been managed as a hedge fund since October 2009.

The conversion from hedge fund to mutual fund was largely designed to attract a wider investor market, but the portfolio's investment strategy did not change.

For that reason, the Securities and Exchange Commission has allowed RiverPark Advisors LLC to include and promote the fund's track record from the period when it was being managed as a hedge fund.

It also is worth noting that even though this mutual fund is technically unchanged from its hedge fund beginnings, there are no hedge-fundlike or liquidity constraints that often come with alternative investments.

“Investors are very nervous these days because the markets are supervolatile,” Mr. Rubin said. “A long-short strategy can invest with the flexibility to capture performance in the up markets and provide protection in down markets.”

The fund, which has the ability to use leverage, has gained 21.3% from the start of the year.

That compares to a 12.3% gain by the S&P 500 and a 4.4% average gain by the long-short fund category, as tracked by Morningstar Inc.

Last year, the fund was up 8.5%, while the S&P gained 2%, and the long-short category average produced a decline of 2.8%.

Even though the fund is squarely in the alternatives category, Mr. Rubin insisted: “We're investors, not traders.”

“Long-term fundamental research is the best way to invest in equities,” he added.

With that in mind, Mr. Rubin explained that he looks for ways to invest in and around secular trends such as globalization and the aging of the baby boom generation.

“We want to invest in companies that are going into secular trends, and short those companies that are going against those trends,” he said.

The fund is currently 100% long and 50% short, for a 50% net market exposure.

“We can increase or decrease market exposure by going long or short,” he said. “Our goal is to double investors' money every four years with less market risk.”

The fund has the flexibility to maintain net market exposure of between 40% and 65%, with gross market exposure of between 80% and 200%.

“We start from the premise of looking for alternatives in secular trends,” he said. “We visit every company, because we're looking for things like good management teams in industries with high barriers to entry, quality balance sheets, access to capital and return on capital.”

Secular trends Mr. Rubin is tapping into include mobile computing through stocks like Apple Inc. Ticker:(AAPL) and Qualcomm Inc. Ticker:(QCOM), as well as cell tower expansion through American Tower Corp. Ticker:(AMT) and SBA Communications Corp. Ticker:(SBAC).

“Many individuals believe that managing volatility and protecting against downside risk should be an important component of a fund's investment objective,” Mr. Rubin said. “At the same time, maintaining exposure to the equity markets is important to achieving longer-term financial goals.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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