Jeff Benjamin

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Aspiration's liquid-alts fund takes anti-Wall Street vibe, robo-advice to the next level

Loaded up with goodies, gimmicks and hope

Nov 13, 2014 @ 1:29 pm

By Jeff Benjamin

If nothing else, the founders of Aspiration Partners, a new online asset management platform, got the name right.

The Los Angeles-based operation, which launched Tuesday, appears to be throwing everything at the wall to see what might stick.

It begins by touting a yet-to-be-launched mutual fund, Aspiration Flagship (ASPFX), that encompasses virtually every hot-button issue in the asset management space.

Here's what you need to know about the fund, pieces of which some media outlets have already seized upon:

• The fund, which has been seeded with a few million dollars, is being subadvised by Emerald Asset Management to provide exposure to hedge fund strategies.

• Investors are able to set their own fee structure, even if that means electing to pay no fee at all.

• Ten percent of all the fees collected by Aspiration are being donated to charity.

And it's all being offered online to give it that flashy and somewhat controversial robo-adviser feel.

The only thing missing is fresh-baked cookies and free health care.

If all that goodness seems a little gimmicky, you need to consider the market they're trying to reach.

The $500 investment minimum and a proud appeal to “middle-class” investors suggests Aspiration is not going after grizzled baby boomers or wealthy investors. The tactic generally falls in line with the growing robo-adviser movement.

Some reports that have homed in on the way Aspiration is offering exposure to alternative investments, have jumped on the bandwagon by dubbing it the “anti-Wall Street Startup.”

And there was at least one report that professed shock that retail-class investors would be able to gain access to anything as risky and unsavory as hedge fund strategies. That report seemed to miss the fact that the mutual fund category includes nearly 500 funds offering exposure to a wide variety of hedge fund strategies.

Todd Rosenbluth, director of mutual fund research at S&P Capital IQ, keyed in on the wonky fee structure, which lets investors decide how much they want to pay for the portfolio management.

“The concept is wonderful, but there's a question of whether or not it will work,” Mr. Rosenbluth said. “People do like feeling they're getting a value.”

Representatives from Aspiration did not immediately respond to requests for comment, but they must certainly have a break-even fee level in mind. Particularly since they have committed to donating 10% of all management fees to charity.

Joseph Witthohn, who is listed as portfolio manager for the new fund at Emerald Asset Management, said the flexible fee structure has been tried in the restaurant and entertainment industries. Whether it will work in the asset management industry remains to be seen.

“If people decide to not pay us, they ultimately won't have access to the strategy, because on aggregate they shoot themselves in the foot if they don't pay anything,” Mr. Witthohn said. “It's a risk everyone is taking, and this will either have enormous success or failure.”

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