In this episode of Strategic Investor Radio, host Charley Wright interviews Tom Florence, president and CEO of 361 Capital. Mr. Florence began his career as an advisor with Merrill Lynch in 1985, before moving to Fidelity. Later, he had the pleasure of serving as managing director of Morningstar, working under company founder Joe Mansueto. Florence says it was his idea for Morningstar to get in the asset-management business, and the firm now manages several billion dollars for advisors and advisors’ clients.
361 Capital was founded in 2001, and Florence later joined in 2009. Under his guidance, the firm has moved to focus on alternative investments, and today is 100% dedicated to the asset class. Florence believes that alternatives should be a part of every investor’s portfolio, and one of the advantages of structuring them under the mutual fund wrapper, rather than under a hedge fund, is increasing the availability of alternatives to a wider investing audience. Alternative mutual funds also tend to have lower fees, lower minimums, and much greater liquidity than their hedge-fund counterparts, too.
Florence boasts of the diversification and return-enhancement benefits that liquid alternatives can provide. With rock-bottom interest rates and low anticipated returns from the stock market, diversifying away from traditional bonds and stocks is likely essential for investors seeking returns in the 7-12% range. After all, bond yields on developed-market sovereign debt are very low or even negative, and respected index-fund guru Jack Bogle says he foresees 4% annual returns from the stock market over the next 5-10 years. In such an environment why shouldn’t investors want to allocate a good chunk of their portfolio to alternatives like managed futures?
Later in the interview, Mr. Florence discusses 361 Capital’s alternative mutual funds, which include:
Through June 21, AGAZX had one-year returns of +5.63%, ranking in the top 4% of its category. AGFZX returned +1.08% over the same time period, ranking in the top 27% of its category, but AMFZX and AGMZX had respective returns of -10.01% and -9.70%, each ranking in the bottom 16% (or worse). ADMZX is 361’s newest fund, having just launched on March 31.
When asked what keeps him awake at night, Florence is very forthright: He admits that being responsible for 28 employees as CEO of 361 can be a source of stress, and that if alternatives don’t continue to grow and develop as most people think they will, then it will be very difficult for 361 Capital to be successful.