Schwab alternatives director Josh Kernan resigns

16-year vet to start new asset management firm

Jun 11, 2010 @ 4:53 pm

By Jed Horowitz

Josh Kernan, who oversees sales of alternative investments to investment advisers and their clients at The Charles Schwab Corp., is leaving the company after 16 years to start a firm.

In a memo e-mailed to clients and friends this week, Mr. Kernan said he is launching an asset management firm called Simple Alternatives LLC, whose first offering will be a multimanager absolute-return mutual fund managed by “leading hedged-equity managers.” He said he plans to launch his first offering, to be called the S1 Fund, in this year’s fourth quarter.

Mr. Kernan, whose title at Schwab is director of alternative investments and managed accounts, did not immediately return calls for comment Friday afternoon. Calls to spokespeople at the firm also were not returned.

The executive wrote that Monday will be his last day at the Schwab.

“It has been an honor and a privilege to work at Schwab for the past 16 years,” he wrote. “During my time here, Schwab has grown from $94 billion to over $1.5 trillion in investor assets.” He did not specify how many of those assets reside in alternative investments.

In February 2009, in the aftermath of the market debacle and the Bernie Madoff scandal, Schwab told registered investment advisers that it would stop taking custody of new alternative assets, limit their ability to increase their current holdings, and refuse to hold any offshore hedge funds and private placements. The limitations did not apply to hedge funds that it sold directly through the Alternative Investment Source and Alternative Investment Access platforms, which Mr. Kernan oversaw. The platforms have futures and other funds from about 16 hedge fund sponsors.

After many of its largest clients protested its planned custody policy with threats to move assets to rival custodians, Schwab modified its stance and this May began accepting new hedge fund assets.

“We're back at the point now where we've reopened to most of what we were doing before,” Bernie Clark, head of Schwab Advisor Services, told InvestmentNews in April.

Schwab had custody of about $6 billion in alternative assets at the time, the company said.


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