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Bailey McCann, Opalesque New York for New Managers: The headlines surrounding mutual funds in recent years have been mostly focused on solutions for moving away from them. Mutual fund managers are converting them to ETFs, plan sponsors are switching to CITs, and so on. But for many investors, mutual funds still provide value. Finding the right mix of mutual fund strategies backed by skilled managers can still generate solid investment returns.
That viewpoint is what led Michael King, founder and CEO of Cross Continents Capital Management to build his multi-strategy fund that invests in open-ended mutual funds. The platform launched in 2022 and is open to outside investors.
Prior to launching Cross Continents, King worked in accounting at PwC and investment banking at Morgan Stanley. He says much of his work involved getting clearance for and managing the compliance process of investing in individual stocks and companies. That process was often onerous relative to the value generated for the portfolio. The investments themselves had varying degrees of liquidity that also had to be managed. Open-ended mutual funds, on the other hand, offer daily liquidity and have fewer compliance related hurdles.
The multi-strategy fund gives King and his investment team the ability to invest with leverage and go long/short similar to investing in single name stocks but with greater diversification. Using mutual funds also makes it possible for King to offer a lower minimum investment, which means the platform is open to a wider variety of investors.
"Because we're a liquid platform we have the luxury of being very open," King says in an interview with Opalesque. "We aren't constrained to a particular number in terms of AUM and we have a solution that works for all types of investors. We believe those are differentiating factors, especially right now, when so many investors are focused on liquidity."
That openness also extends to the types of mutual funds the team might invest in. The big stories of the second quarter of this year including the conflict in Iran and inflation have provided unique opportunities. According to performance data reviewed by Opalesque, the platform returned 15.55% net of fees in the second quarter compared to a 9.55% return for the S&P 500 over the same period.
King says earnings season, which has recently gotten underway, will likely launch a new wave of opportunities as markets get more clarity about how large companies have been navigating tariffs and growing geopolitical uncertainty. "I think investors are going to be watching markets very closely," King says. "The Fed meeting, earnings - especially around AI, ongoing conflict - all of these factors can have a big impact on portfolios."
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