Jun. 17–Boulder money manager Matthew Rich has launched a new mutual fund designed to bring an increasingly popular hedging strategy to average investors.
The Technical Chart Fund will offer what Rich describes as a market-neutral approach that seeks to capture gains whether stock markets are rising or falling and to preserve capital.
“There are plenty of funds out there that can do well when the market is doing well,” he said. “This fund has the ability to work when the market is performing poorly.”
Mutual funds are generally limited to “long-only” positions, meaning managers buy a stock and wait for it to rise. They can only hold or sell out when shares fall in value.
A popular hedging strategy called shorting generates gains when a stock declines in value. An investor borrows shares from a brokerage house and sells them to another buyer. That first investor buys the stock back at some point, presumably when the price has fallen and a profit can be made.
Rich uses more than 40 technical measures that weigh supply and demand in a given stock and sector, along with measures of a stock’s volatility, to come up with long and short positions.
He doesn’t borrow money to boost his return, a practice that has ruined some hedge funds, and doesn’t use derivatives.
“Most wealthy investors have access to the hedge fund world already,” Rich said. “I get more satisfaction out of providing a product that is needed by more people.”
Unlike hedge funds, which can require a $100,000 to $1 million investment to get in the door, the Technical Chart Fund’s minimum investment is $5,000, or $1,000 in a retirement account.
U.S. Bancorp Fund Services is handling administration and distribution for the no-load fund, which will be available through Charles Schwab and other firms, he said.
The Technical Chart Fund will have a maximum expense of 2 percent of the assets it manages, compared with the 20 percent of gains that some hedge funds skim.
Rich moved to Boulder about six months ago to be closer to his family after working for 12 years in New York financial circles, including four years running a hedge fund.
His firm, on the Pearl Street Mall, is called Kauser Management LLC.
Denver has seen about a half dozen hedge funds start up in recent years, typically by former mutual fund managers.
Rich represents a reverse trend of hedge fund managers trying to roll out mutual funds.
Patrick Adams, president of Choice Capital Management in Greenwood Village, has rolled out two mutual funds that use hedging strategies.
After people figure out what the funds are all about, they usually like them, Adams said. But familiarity is a problem.
“The issue right now is that it is in its infancy,” he said. “Guys like us are paving the way. It is a long process.”
Adams said Choice’s long-short mutual fund has taken in about $15 million in two years.
But two months after Choice rolled out a market-neutral fund, promoted as substitute for fixed income investments, the fund has taken in $10 million, he said.
—–
To see more of The Denver Post, or to subscribe to the newspaper, go to http://www.denverpost.com
(c) 2003, The Denver Post. Distributed by Knight Ridder/Tribune Business News.
USB, SCH,
