The Cue Ball Group has rolled out the Cue Ball Discovery Fund, a fund-of-hedge funds that will invest with "emerging managers," though Bradley Balter, partner and portfolio manager of the fund, said this label is misleading because most of the managers have extensive experience managing funds.
"We target managers with smaller asset bases," he said, adding that the Discovery Fund will invest with around 12-15 "best of breed" managers, specifically those that are under three-years-old and have less than $300 million in assets under management.
Though there will be a wide range of strategies among the underlying managers, such as long/short, global long/short, credit/debt, and multi-strategy funds, Balter said the vehicle will only invest with U.S. managers, and will not invest in pure commodity, currency, futures, or single-country strategies.
Balter only invests with smaller money managers because he thinks that most large hedge funds don't generate sufficient returns. "My belief is that there are only 15-20 managers in the country that can run $5-7 billion and generate real alpha," he said, "If someone became a $2 billion manager, I would move them out [of the portfolio]."
This is the first hedge fund to be launched under the Boston-based firm's new alternative investment unit.
Balter recently joined the firm as a partner, and prior to that he was with Citigroup, where he was a managing director of institutional investments.
In addition to Balter, the new team includes Victor Chiang, chief technology and risk officer, Jay Warner, financial analyst, and Stephanie Mayville, portfolio administrator and compliance officer.
The fund charges a 1.5% management fee and a 10% incentive fee on returns in excess of the three month Treasury bill plus 300 basis points.
The Cue Ball Group was founded in 2005 by businessman and investor Tony Tjan.