Billionaire’s Family Office Packages Strategies in Liquid Alts Fund

Billionaire’s Family Office Packages Strategies in Liquid Alts FundDavid Bonderman became a multi-billionaire buying and fixing up companies, and then created a family office to manage a portion of his personal fortune. That family office has grown into Wildcat Capital Management, and it now manages $1.3 billion for Mr. Bonderman and a small group of his friends and family. Now Wildcat is backing a new startup business, Infinity Q, that provides exposure to Bonderman’s Wildcat family office investment strategies under the structure of a liquid alternative mutual fund.

Diversified Alpha

The Infinity Q Diversified Alpha Fund (IQDNX) is an absolute return strategy fund that launched on September 30, 2014. The fund seeks a combination of exposures to volatility, long/short equity, relative value, and global macro strategies, according to its prospectus.

  • Its volatility strategy involves long and short exposure to a diversified basket of derivatives across the major asset classes: stocks, bonds, commodities, currencies, and interest rates.
  • Its long/short equity strategy involves establishing long and short positions in stocks and stock-related securities, including equity options.
  • Its relative value strategy involves simultaneously buying and short-selling highly correlated securities.
  • Its global macro strategy involves long and short exposure across asset classes, with investment decisions made on the basis of the advisor’s global macroeconomic forecasts.

This combination of exposures is intended to provide diversification benefits within the fund, dampening volatility and providing low correlation to broad-market stock and bond benchmarks.

The fund is available in A (IQDAX) and I (IQDNX) shares, with respective net-expense ratios of 1.99% and 1.74%. The minimum initial investment for A shares is $1,000; while the minimum for I shares is $100,000.

Family Offices and Liquid Alts

Liquid alternatives are the fastest growing asset category of the mutual fund industry, and while Wildcat’s move from family office of the super-rich to the world of liquid alts is not new (see: Brad Balter on the Confluence of Hedge Funds and Liquid Alts), it is uncommon – at least to date. “Families recognize that over time it’s sometimes valuable to turn the services they created into a business,” said Bill Woodson, head of the North America family office group at Citigroup Inc.’s private bank, as quoted by Bloomberg. And since family offices often have teams evaluating and investing in alternative investments, it wouldn’t be unrealistic to see more of them port those skills over to a mutual fund.

For Mr. Bonderman and his money managers, the move into liquid alts is a win-win proposition. Mr. Bonderman remains free to manage TPG Capital while Infinity Q is run by Wildcat employees. The employees are able to make more money for themselves, and for Mr. Bonderman, by offering retail investors exposure to the alternative strategies that have generated 15% annualized returns for the family office since August 2012. If Infinity Q can maintain that performance, then the move into liquid alts will be a win for investors, too.

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