Aspiriant is starting a mutual fund for clients to give them access to more stocks and to keep them invested even during periods of market volatility.
Aspiriant LLC, one of the top 10 registered investment adviser ranked by assets under management, is taking the unusual step of launching a mutual fund for its clients that will invest in global equities with an option overlay program to hedge against big downside risks.
High-profile money managers AQR Capital Management LLC, Dimensional Fund Advisors and Parametric Risk Advisors LLC will serve as subadvisers of the fund.
“The primary value of this fund isn't in increasing returns but in helping clients stay invested in the market and enabling them to hold more stocks in their portfolios,” said Aspiriant chief investment officer Jason Thomas.
Mr. Thomas said the behavior of investors during the financial crisis was a big motivation for designing the fund.
“The most surprising thing about 2008-09 was how short the perspective of clients became. They were understandably concerned that the financial economy was going down the drain,” he said. “Whatever our strategies are to beat the market, we have to keep people in the market when it gets volatile.”
RIAs don't typically manufacture proprietary products for clients but rather aim to select the best alternatives in the marketplace. However, the market was lacking in affordable solutions for this need, Mr. Thomas said.
“When we looked for solutions in the market, we saw plenty of strategies used by institutional investors, but they had $100 million minimums,” he said. “We needed to find the strategies and enable clients to access them cost-effectively. We decided a mutual fund was the best way to do that.”
With more than $7 billion in assets under management — about $4 billion of it in equities, Aspiriant has the scale to make it work. The fund — the Aspiriant Risk-Managed Global Equity Fund (RGE), will only be available to clients for the time being. However, the firm plans to launch a separate class of shares for outside investors later this year.
“Every one of our clients will have access to a $7 billion single investor experience,” said Mr. Thomas. “The goal of the investment is to give clients what the biggest institutional investors get.”
The Aspiriant fund will invest in domestic, international and emerging-markets equities with AQR and Dimensional doing the stock selection. Parametric, an RIA owned by Eaton Vance Management, will handle the option overlay program, writing covered calls to generate income and purchasing put options to protect against downside risk. More money managers could be involved in the fund in the future.
While the option-hedging element of the fund will dampen returns in strong markets, Mr. Thomas likens it to a vehicle airbag providing protection against catastrophic losses.
“Investors can drive in the fast lane but it helps to know that if they're in a serious accident, something is there to protect them,” he said.
The protection won't come cheap. Given the high-profile subadvisers involved, Aspiriant is charging an all-in fee of 1.76%. Mr. Thomas acknowledged that the cost is high but said Aspiriant is making no extra revenue on the fund and expects that the fee will come down significantly as it attracts assets. He plans to have a $100,000 minimum investment for outside investors.
“The story isn't the strategies involved here — they already exist,” said Mr. Thomas. “It's about bringing them all together for clients.”
The fund will begin trading in the next two weeks.
