Family Office Seeds Alternative Mutual Fund With $100M

Jan 7 2014 | 2:06am ET

One major hedge fund investor is taking a big shot at a lower-fee alternative.

New York-based family office Summer Road has pulled about half of its investments from hedge funds and pledged it to a new mutual fund of hedge funds headed by hedge fund manager Brad Balter. Balter's eponymous Long/Short Equity Fund debuted last week with $100 million, all of it from Summer Road.

The new fund has two underlying managers so far: Apis Capital Advisors and Midwood Capital Management. Both firms have produced annualized returns of about 10% since inception, and both will run the same strategy for Balter as they do for their own hedge funds, albeit for less money: Apis and Midwood charge their hedge fund clients 1.5% for management and 20% for performance, while Balter's new fund will charge just 2.19% to 2.54%.

"We've analyzed the equity long/short space pretty carefully, and the lack of consistency of returns coupled with very high fees led us to conclude that the alternative mutual fund product type was a superior value," Summer Road President David Sackler told CNBC. "It's just a better mousetrap."

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