Investors interested in gaining exposure to long/short equity strategies have several options from which to choose. Not only can they select from a wide variety of hedge funds and alternative mutual funds pursuing long/short equity strategies, but separately managed accounts (SMAs) are also an option.
On April 9, Envestnet, a leading provider of technology and services to investment advisors, announced a strategic investment in one of the industry’s leading long/short equity SMA specialists, AlphaHedge Capital Partners. The transaction closed on April 1, although terms weren’t disclosed.
“AlphaHedge delivers a unique platform, offering [long/short equity] strategies in separately managed accounts,” said Envestnet President Bill Crager, in a recent statement. “We have partnered with them in accordance with our commitment to providing advisors with open access to a wide range of products and solutions.”
SMA Features and Benefits
AlphaHedge’s SMAs are distinguished by their transparency, liquidity, and comparatively low initial minimums. In this way, they occupy a space in-between traditional hedge funds, with their lower levels of transparency and liquidity, and high investment minimums; and alternative mutual funds, which are less customized to individual investor needs than SMAs.
All AlphaHedge SMAs are held in brokerage accounts registered under the name of the investor, which allows advisors to perform “extensive analytics” on strategies at any time. The strategies offered by AlphaHedge are “largely liquid,” according to the Envestnet press release, and investors have the ability to add to or reduce capital allocations at any time. Finally, in terms of investment minimums, most AlphaHedge strategies require initial investments of $250,000, which while much higher than liquid alts, is considerably less than most traditional hedge funds.
AlphaHedge strategies seek to offer a variety of low-correlation, alpha-generating long/short strategies across market caps, geography, sectors, and investment styles. This makes the strategies complementary to traditional holdings, as well as to one another. By allocating across multiple long/short strategies, AlphaHedge SMA-holders can further diversify portfolio risk and volatility exposure.
AlphaHedge also conducts “rigorous” manager due diligence with the help of its affiliate, Persimmon Capital Management, which has a dedicated alternative strategies research team.
Expanding the Platform
The AlphaHedge SMA platform has been live since February 2015 and is currently operating five strategies across a pair of major custody platforms. AlphaHedge is in the “final stages of review” with many long/short equity managers interested in having their strategies represented on the platform, and is in discussions with other custodians.
“AlphaHedge’s institutional-quality platform is built to deliver the intellectual capital of long/short equity managers to advisors and their clients in a scalable manner, while seeking to minimize the operational risks that can make them reluctant to utilize hedged strategies,” said AlphaHedge President and COO Kent G. Bonniwell. “Envestnet shares our dedication to ongoing innovation and product enhancements, and we look forward to working with them to deliver carefully selected long/short equity strategies to advisors and investors.”