Morgan Creek Capital Management has started a mutual fund, offering individual investors a chance to invest as they would in a hedge fund.
The new fund, called the Tactical Allocation Fund, will allow average stock and bond investors to get a taste of the exclusive world of hedge funds, traditionally reserved for pension funds, charities, big institutions and the ultra wealthy.
Morgan Creek, which is based in Chapel Hill, N.C., and manages $6.5 billion on behalf of institutions and university endowments, is the latest investment firm to cast a wider net designed to draw smaller investors into the world of so-called alternative investing. It follows a few hedge funds in seeking to tap new sources of money by offering mutual funds.
Last month, Blackstone, the world’s biggest hedge fund manager, announced that it was teaming up with Fidelity, the world’s largest mutual fund provider, to offer alternative funds, and more funds are considering offering similar products, according to industry insiders.
“It’s an access thing. If you think about what institutional investors have done better, it is that they have access to more sophisticated strategies,†Mark Yusko, the chief executive and chief investment officer at Morgan Creek Capital, said in an interview.
Mr. Yusko is bearish on emerging markets but said there are positions that the Tactical Fund can exploit.
Indications that Federal Reserve plans to pull back on its monetary stimulus sent emerging market currencies into a tailspin in August and put pressure on emerging market stocks and bonds.
Since then, opportunities in routed sectors within specific countries have emerged, Mr. Yusko said. The fund recently bought Indian banking stocks after investors headed for the exits.
Chinese gambling and Internet companies “are two themes we think are very durable because we don’t have to own all of emerging markets,†Mr. Yusko added.
The decision by Larry Summers to withdraw from consideration to succeed Ben Bernanke as Fed chairman was very positive for the markets in the short term “because people think it’s a shoo-in for Janet Yellen,†Mr. Yusko said.
Ms. Yellen, widely seen as the most likely candidate to be nominated by President Obama, would be expected to continue the Fed’s quantitative easing program of buying Treasuries to help stimulate the economy.
But the Fed is “running out of Treasuries to buy†and will have to continue supporting the markets by buying directly into stocks as soon as next year, Mr. Yusko added.
Mr. Yusko, who was previously the head of the University of North Carolina’s endowment, has tried recasting an investment strategy for a new audience before. In 2003, he teamed up with with Salient Partners, a Houston-based money manager, and founded the Endowment Fund. It was pitched as an investment vehicle that would offer individual investors a chance to invest in the same turbo-charged strategies as university endowments.
But the $3.3 billion fund came under pressure amid lackluster performance last year and drew ire from investors when it limited the amount that could be redeemed from the fund. Mr. Yusko was removed from his position as chief investment officer in January. Experts said the fund was invested in assets that were illiquid and difficult to pull out of quickly such as real estate and private equity.
Morgan Creek’s latest offering may fare better. Investors can invest a minimum of $2,000 and will be able to redeem their investments daily, according to a filing with the Securities and Exchange Commission. The fund will invest in individual equities and bonds, as well as commodities. It can also short stocks, a strategy fundamental to many traditional hedge funds.
The fund’s monthly fee is 0.75 percent of assets, compared with the traditional hedge fund fee structure of 2 percent of assets and 20 percent of profits annually.
