Nearly three years after launching their first alternative mutual fund, the team at Longboard Asset Management has come to market again with a second fund, this time focused on long/short equity. The new Longboard Long/Short Fund was launched on March 16, and will focus solely on the U.S. equity market.
The Investment Team
Day-to-day operations of the Longboard Long/Short Fund are handled by an experienced triumvirate of Longboard executives: Partner and CIO Eric Crittenden, CEO Cole Wilcox, and Sr. Managing Director of Strategic Operations Jason Klatt. The three gentlemen also manage Longboard’s other alternative mutual fund, the Longboard Managed Futures Strategy Fund (MUTF:WAVIX).
Mr. Crittenden, Mr. Wilcox, and Mr. Klatt have ample experience working together. Mr. Crittenden comes from Blackstar Funds, where he developed a proprietary research software platform and global financial data management systems. Mr. Wilcox also comes from Blackstar, where he served as CIO for eight years; and he’s also profiled in The Little Book of Trading, written by Michael Covel. Mr. Klatt has over a decade of data modeling experience and is the designer of Longboard’s liquidity-maximization algorithms. He has also collaborated with Mr. Crittenden to “seamlessly integrate Longboard’s research platform with efficient trade execution technologies,” according to the Long/Short Fund’s prospectus.
Longboard’s trio of portfolio managers is responsible for implementing the new fund’s long/short strategy. The long portion of the strategy selects the best investments from a large subset of 3,500 of the most liquid securities that trade on major U.S. exchanges. The fund’s short strategy is focused primarily on taking positions in equity derivatives or ETFs that provide exposure to equity indexes such as the S&P 500, the S&P 400, and the Russell 2000; which represent large-, mid- and small-cap stocks, respectively.
The degree to which the long portfolio is hedged is governed by factors such as targeted risk level, the number of security positions in the portfolio and market volatility.
By buying what the portfolio managers consider the best individual components of the indexes, and short-selling particular indexes as a whole to reduce market exposure, the fund’s excess returns will be generated through stock selection on the long-side and market timing on the short side.
The fund’s A-class (MUTF:LONAX) have a 3.24% net expense ratio and require a minimum initial investment of $2,500, while the and I-class (MUTF:LONGX) have a 2.99% net expense ratio and a $100,000 minimum initial investment.
Just as the firm has done with its Managed Futures Fund, Longboard has utilized a unitary management fee for the Long/Short Fund. This means that Longboard will pay all ordinary fund expenses out of the unitary fee, except for loads, 12b-1 fees and investment related costs – what remains beyond the fund expenses accrues to Longboard as a management fee. The unitary fee is set at 2.99% for the first $250 million of assets, and 2.75% for assets greater than $250 million.
Managed Futures Fund
The Longboard Managed Futures Strategy Fund launched on June 27, 2012. Its A-class shares (WAVEX) returned an outstanding 27.38% for the year ending February 28, 2015; while the I-shares (WAVIX) returned 27.80%.
For more information, visit longboardmutualfunds.com (information on the new long/short fund is not yet available on Longboard’s site at the time of publishing this article, but is forthcoming).