There are now 113 distinct mutual funds in Morningstar’s multi-alternative category, 24 of which have been launched since December 1st of last year. One such fund is the recently launched Spouting Rock/Convex Dynamic Global Macro Fund, which debuted on November 21, 2014. The fund, which is sub-advised by Convex Capital Management, is available in two share classes: A shares (CVXAX), with a $2,500 minimum investment and a 2.3% net-expense ratio; and I shares (CVXIX), with a $100,000 minimum investment and a 1.9% net-expense ratio. The investment management fee is 1.20%.
Absolute positive returns are the Spouting Rock/ Convex Dynamic Global Macro Fund’s investment objective, and its active management pursues this by attempting to maximize growth when market risk is low and minimize losses when market risk is high. Convex Capital Management, led by the firm’s chief investment officer Saumen Chattopadhyay, employs a “dynamic risk management strategy” integrating fundamental and quantitative analysis to evaluate a broad range of asset classes, market sectors, and global geopolitical markets, and it actively adjusts allocations in pursuit of the most efficient risk-adjusted returns.
The fund invests primarily in ETFs offering exposure to distinct assets, sectors, and geopolitical markets. This includes ETFs that invest in U.S., international, and emerging-market stocks of any market-cap size, including both “growth” and “value” stocks; fixed-income securities of any maturity, including high-yield or “junk” bonds; and inflation-hedged investments such as real-estate interests, commodities, and inflation-protected securities.
“Our team has been managing hedge fund portfolios for a decade. We now spend the majority of our time helping advisors build meaningful liquid alternative portfolios. As allocators, we were frustrated by lack of discretionary macro funds offering robust downside risk protection. We wanted a true dynamic strategy which would increase and decrease risk aggressively based on the opportunity set and market environment,” noted Spouting Rock’s chief investment officer, Thomas Quinn, CFA.
In relation to appointing Convex as sub-advisor to the fund, Quinn added, “In Convex, we have found a partner that we expect to excel at these types of adjustments. The fundamental analysis and risk management that Saumen and his team perform are on par with the best hedge fund managers we have evaluated. We are excited to bring this strategy to market as investors. As global business cycles diverge and volatility increases, we expect the fund to provide tremendous value to portfolios.”
Day-to-day management of the fund is handled by Convex Capital Management’s Chattopadhyay and Sonu S. Varghese. Convex’s investment team is a blend of experienced professionals and expert scholars, and Chattopadhyay and Varghese each fill a role:
- Saumen Chattopadhyay is the chief investment officer of Convex and has a strong asset management background, with previous stints as Director of Quantitative Management at Harbor Capital Advisors from 2002-2010; Vice President and Head of Investment Management at Jackson National Asset Management from 2010-2012; and Head of Investment Research for Concorde Investment Services from 2012-2014.
- Sonu Varghese is Convex’s head of research and has held several positions in both academia and private industry related to quantitative finance. He earned a Bachelor of Engineering in Mechanical Engineering from National Institute of Technology in India in 2000, and a Masters and a Ph.D. in Mechanical Engineering from Purdue University in 2002 and 2006, respectively.
For more information, visit the Spouting Rock website, or download the fund’s prospectus.