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Advisors Hunt for Alternative Diversification
Monday, July 1, 2013
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Mutual funds may not be on a hiring spree right now, but Longboard Asset Management Portfolio Manager Cole Wilcox is seeing demand increase elsewhere.

"What I see collectively is actively managed, traditional beta-type long-only equity managers who are having an incredibly difficult time winning business and competing with the very low-fee ETF and index-type fund platforms that exist," Wilcox, who also serves as Longboard's CEO and CIO, told StreetID. "We've seen a lot of restructuring, a lot of people re-organizing things.

"The alternatives world, right where you can produce alpha and put a hedge fund strategy inside of a mutual fund format, that's where you see the growth and the hiring, because there is an incredible demand for alternative forms of diversification, and access to tools that institutional investors have had access to in their world via hedge funds."

Wilcox said that financial advisors would like to employ hedge fund-style strategies, but they "have a different kind of customer."

"They would like to use the strategy if they had access, which means they need to be in the form of a Liquid 40 Act-type structure," he said. "Seeing demand there and a big shift in a reallocation of advisors using alternative forms of strategies in the forms of mutual funds.

"That's the alpha production alternative world. The passive investing, low-fee indexing is winning and it's winning big. The traditional active manager-type shops are struggling to figure out what to do as they see their business model kind of not working the way it has in the past and restructuring things."

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Longboard, which is based in Phoenix, Arizona, went on a "huge hiring spree" over the last year as the firm built up its platform. The company is still in the process of building up a national group of "very high-touch, trend-following managed futures experts in the field" that can act as a "consultant to this specific niche of managed futures for the registered investment advisor and financial advisor community."

"We're probably gonna bring on, over the course of the next ear, maybe three or four people in sales," said Wilcox. "We've hired 20-something over the last year. The big bulk of us was going from zero to operational and kind of putting a whole firm together in a very short period of time. As we go forward from here we are going to still be hiring, but it's gonna be in a very methodical way and it's going to be much allocated to talent acquisition in sales.

"As we gain more shelf space -- we're moving into wire house channels and having more places to distribute our product -- and we need people to fill those roles."

With regard to the location, Wilcox said that Phoenix is a "great place for independent thinking."

"It's a major metro area," he said. "We're the fifth or sixth-largest city in the country. It's a great lifestyle for people to live here, raise a family, so it's really good for the recruiting of talent and for people to be here from an operations standpoint. Then you're just outside of the traditional noise of a major money market-type city, so we can really independently apply our craft of trying to generate superior performance."

Wilcox said that there is a "growing finance component" within Phoenix.

"Maybe not on the asset management side of it, though there are some substantial asset management firms who do have corporate headquarters here and things like that -- mutual fund complexes and Vanguard is here," he said. "Phoenix is a very diversified economy. I don't think there's any one dominant thing that we do here. There's a lot of diversification amongst what the local economy looks like."

Jesse Marrus is president of Street ID

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