Quantitative hedge fund manager Hagin Investment Management has launched an equities market-neutral product aimed for mutual fund investors.
Hagin managing partner Patrick Morris told Money Management Executive that the fund will employ a “traditional” long-short equities style, half long and half short, but packaged as a mutual fund. It will be overseen by portfolio manager Nathan Lee.
The fund will charge 125 basis points in management fees and is targeted to financial advisors, he said, hence the transition to the format of funds governed by the Investment Company Act of 1940.
Morris said that many alternative products like hedge funds come in limited liability partnership formats. However, this format isn’t user-friendly for financial advisors, who need to be able to gauge risk and numerous other factors for their portfolio allocations.
“LLPs are very difficult for financial advisors to work with—they are not transparent,” he said. “Advisors need clarity on what is in their products. They need to know correlations, holdings, and volatility.”
By bringing a hedge fund-style strategy to the RIA world, Morris says Hagin is simply embracing the new realities of the investing market, such as heavier regulation, greater transparency and lower fees across the board.
“We understand what is going in the industry,” he said. “We still want to bring our services to the fee-based advisor sector. We view this as a great marketplace.”
Hagin was launched in 2006 when Morris and others took over some proprietary quant models developed by Robert Hagin, a former executive director for Morgan Stanley Investment Management.
Morris says these models employ a very specific methodology which is very risk-centric. This is the philosophy they employ for all of their funds, including the new mutual fund.
“We try to look at the world from a risk perspective, instead of from an absolute return perspective,” he said. “You don’t even have to have extremely high returns to make money— you just have to avoid the large draw-downs.”
Tommy Fernandez writes for Money Management Executive.