In this edition of Fund Watch, new filings from:
- The Collins Long/Short Credit Fund
- The Nationwide Strategic Income Fund
- The Franklin Mutual Recovery Fund
Collins Long/Short Credit Fund
The hedge fund-of-funds firm Collins Capital filed paperwork with the SEC on November 14, announcing its plan to launch its second alternative mutual fund: the Collins Long/Short Credit Fund. The fund is targeted to go live on January 29. 2015.
The new fund will pursue absolute total returns over the course of a full market cycle, which is defined in the fund prospectus as “typically three-to-five years.” In pursuit of positive returns irrespective of the broad bond market, the Collins Long/Short Credit Fund will buy and short-sell a wide variety credit-related instruments: This includes fixed-income securities from U.S. and foreign issuers, including emerging markets; and derivative instruments linked to fixed-income securities.
The Collins Long/Short Credit Fund will be sub-advised by Pinebank Asset Management and managed on a day-to-day basis by portfolio managers Oren Cohen of Pinebank and Stephen Mason of Collins. Historical performance for Pinebank is included in the registration filing. Pinebank is also a manager in the Collins Alternative Solutions Fund, which was the firm’s first liquid alternative fund. Shares of the fund will be available in A- and institutional-share classes and will carry a 1.75% management fee.
Nationwide Strategic Income Fund
Nationwide Mutual Funds filed a Form N-1A with the Securities and Exchange Commission (SEC) on November 10, announcing its plan to launch a new multi-manager, unconstrained bond fund called the Nationwide Strategic Income Fund. The fund will pursue a “high level of total return” consisting of both capital appreciation and current income, while targeting a low level of portfolio volatility, and should be available on our around January 26, 2015.
The fund will invest across a wide range of fixed income securities without constraints relative to geography, credit quality, maturity or sector, and has the ability to short securities for the purposes of hedging and/or adding value. In addition, the fund may employ a number of investment strategies, including:
- Convertible arbitrage – purchasing a convertible bond and selling short the bond issuer’s common stock into which the bond will convert. This strategy seeks primarily to profit from an improvement in the issuer’s credit quality while simultaneously hedging against the risk of default.
- Relative value arbitrage – in seeking to take advantage of relative pricing discrepancies between related fixed-income and/or equity securities, the Fund may purchase one security and sell short a different security issued by the same issuer (or a comparable security issued by another issuer within the same industry).
- Fixed-income arbitrage – pairing a purchase of one security with the short sale of a similar security, but with a different maturity, in order to take advantage of changes the subadviser anticipates in the yield curve.
- Merger arbitrage – purchasing debt and equity securities of an announced acquisition target company at a discount to the value expected upon completion of the acquisition. The subadviser often also sells short securities issued by the acquiring company when using this strategy.
- Directional investment strategies – the Fund may take long positions (i.e., purchase securities that the subadviser believes will appreciate in value) or short positions (i.e., sell securities that the subadviser believes will decline in value) to exploit what the subadviser believes to be broad market trends. The subadviser also may combine both long and short positions in order to take advantage of directional market trends while simultaneously seeking to reduce overall market risk.
- Opportunistic investing – the subadviser may seek to take advantage of trading or investment opportunities that are unrelated to the Fund’s other investment strategies, but which the subadviser believes have good profit potential and a favorable risk/return profile. Opportunistic investing involves the strategy of holding investments in underperforming and/or undermanaged assets with the expectation of increases in cash flow and/or value.
The fund’s sub-advisor has not yet been named in the prospectus. Nationwide’s new fund will be available in five share classes, with minimum initial investments as low as $2,000; or $1,000 for qualifying individual retirement accounts. The management fee is pegged at 0.65%, which seems quite competitive given the range of securities and investment approaches that are outlined in the prospectus.
Franklin Mutual Recovery Fund
Also on November 14, Franklin Templeton Investments filed to launch the Franklin Templeton Mutual Recovery Fund. This fund will invest in both global equities and fixed-income securities in pursuit of “superior risk-adjusted returns” with a moderate correlation to the U.S. equity market. The fund will follow a value-oriented strategy, buying stocks and bonds that the manager deems “undervalued,” and (less often) short-selling stocks and bonds the manager deems “overvalued.” Following this value-oriented strategy, the Fund invests primarily in:
- Special Situations/Undervalued Securities – Securities of companies which the investment manager believes are trading at a price substantially below (long opportunity) or above (short opportunity) their intrinsic value and for which the investment manager believes a catalyst for realizing such value exists. Such securities may be acquired in privately negotiated transactions.
- Merger Arbitrage Securities – Securities of companies involved in non-distressed restructurings (such as mergers, acquisitions, consolidations, liquidations, spinoffs, or tender or exchange offers) or that the investment manager believes are cheap relative to an economically equivalent security of the same or another company.
- Distressed Companies – Securities of companies that are, have been, or are about to be, involved in reorganizations, financial restructurings or bankruptcy or are otherwise experiencing severe financial or operational difficulties, but whose equity or debt securities the investment manager believes are priced substantially below their intrinsic value.
The Franklin Mutual Recovery Fund will be under the active management of Franklin Mutual Advisors and sub-advisor Franklin Templeton Investment Management Limited (FTIML). Portfolio managers in charge of day-to-day operations include Shawn Tumulty, Christian Correa, and Keith Luh. Shares will be available in A-, C-, and advisor-share classes and will carry a management fee of 0.88%.