V2 Capital Converts Hedged Equity Strategy To '40 Act Fund

Nov 3 2014 | 11:43am ET

V2 Capital has converted its $240 million hedged equity strategy into an alternative mutual fund.

V2 Hedged Equity Fund, an open-ended single manager mutual fund, began trading on October 31, 2014.

Victor Viner, founder and CIO of V2, told FINalternatives the conversion from hedge fund to mutual fund was “easy.”

“I think other managers might make the same decision if how they trade and what they trade allowed them to do the same thing in a '40 Act,” Viner said in a Monday phone interview. “In our case we could because we didn't use leverage as other funds did. We didn't have to worry about dialing down what we were doing or modifying it. So people and investors know what we have been doing for over four years, we'll maintain doing the same thing.”

Viner said the decision to offer a so-called “liquid alternative” product was largely based on what they were being told by investors:

“[F]or a lot of the hedged equity and long/short [funds], there tends to be a lot of net long-bias exposure, a lot of beta exposure. And...a lot of investors are telling us [they] definitely want that type of exposure and no one likes to pay a performance fee for beta, which is why I believe you've seen some of the changes and some of the growth in this space.

“[W]e want this to be an equity holding and we're fine with that, we're telling people we have a long bias, we have a beta a little under 0.5..."

The fund combines a long concentrated portfolio of 30-50 U.S. equities with a short portfolio of customized S&P 500 index options. The equities represent the 'best ideas' generated by the firm through fundamental bottoms-up research, while the short option positions are selected based on the portfolio’s net exposure and current volatility environment. The active management of the fund is designed to generate alpha, manage net exposure to a targeted range of 20%-80%, reduce volatility of returns, and provide some downside protection.

Like other mutual funds, the V2 Hedged Equity Fund will provide daily pricing and daily liquidity. The fund will offer institutional class shares with a minimum investment of $100,000 and investor class shares with a minimum investment of $1,000.

Viner was previously the co-founder, president, and CIO of Volaris Advisors, a multi-billion dollar equity options advisory firm acquired by Credit Suisse Group in 2003. He founded the Glenview, Illinois-based V2 Capital in 2004.


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