Vertex One, a Vancouver based discretionary asset manager with approximately $759 million in assets is gearing up for the launch of 3 new mutual funds according to filings with SEDAR. The company is planning to launch the Vertex Value Fund, the Vertex Enhanced Income Fund and the Vertex Growth Fund, all of which would require a minimum initial investment of $15,000 Canadian in each Fund.
As per the filed prospectus, the Vertex Value Fund would aim to provide long term capital growth by investing in companies the team deems to be priced at attractive levels relative to the market, their competitors and their growth rates. The team cautions that due to the ‘value’ aspect of the fund, the holdings of the fund would often include companies that are out of favour. Companies with annuity like cash flows, strong balance sheets and high dividend yields will be given the greatest weighting as per the prospectus. The team intends to invest in 25 to 30 North American equities and aims to keep the portfolio turnover low. The fund will also be able trade options on a non leveraged basis but there will be no short selling. The Vertex Value Fund class B units will have a 2% management fee and the class F units will have a 1% management fee. Furthermore, 20% of the amount by which the fund outperforms its benchmark (50% S&P 500 Total Return Index and 50% S&P/TSX Composite Total Return Index) will be charged in performance fees provided that the net asset value per unit for each class of units exceeds the high-water mark (the highest daily Net Asset Value per Unit for each Class of Units from time to time establishes a high-water mark for each Class of Units). Investors seeking capital gains over the long term, with a medium to high tolerance for risk would be best suited for the Vertex Value Fund.
The mandate of the Vertex Enhanced Income Fund is to preserve capital while providing high income by investing primarily in Canadian and United States bonds (government as well as corporate) and debentures. The fund will also invest in income securities that the team deems undervalued but no more than 25% of the fund can be invested in common high yield equities and no more than 25% of the fund can be invested in preferred shares. Additionally, no more than 50% of the Vertex Enhanced Income Fund will be exposed to foreign currencies and there will be no short selling in the fund. Once again, trading options will be permitted in the fund. The Vertex Enhanced Income Fund class B units will have a 1.5% management fee and the class F units will have a 0.75% fee. Furthermore, 20% of the amount by which the fund outperforms its benchmark (20% S&P/TSX Preferred Share Total Return Index, 20% S&P/TSX Composite Total Return Index and 60% Scotia McLeod Mid Term Bond Index) will be charged in performance fees provided that the net asset value per unit for each class of units exceeds the high-water mark (the highest daily Net Asset Value per Unit for each Class of Units from time to time establishes a high-water mark for each Class of Units). Investors seeking interest income as well as moderate capital growth over the long term with a medium tolerance of risk would be best suited for the Vertex Enhanced Income Fund.
The Vertex Growth Fund’s primary objective is to achieve long-term capital growth by investing in growth-oriented equities. The fund will invest in equities and equity related secuirites of North American as well as international companies. The strategy will include seeking inefficiently priced companies backed by strong management teams with solid business models that have the potential to benefit from both industry and macro-economic trends. This fund, unlike the previous two, will have the ability to invest in derivative instruments and exchange traded funds to hedge currency exposure. The fund will also have the freedom to trade in securities of distressed issues, participate in special warrant arbitrage situations by purchasing special warrant securities of an issuer while selling short the securities which underlie the special warrants, participate in merger and convertible arbitrage situations and trade in securities of issuers that may be involved in a restructuring. The Vertex Growth Fund will have the ability to employ leverage and it may invest in fixed income securities including preferreds, convertibles, corporate and sovereign debt securities. Lastly, while short selling may be employed in the fund the aggregate market value of all securities sold short cannot exceed 20% of the fund’s total net assets on a daily marked-to market basis. The Vertex Growth Fund class B units will have a 2% management fee and the class F units will have a 1% management fee. Furthermore, 20% of the amount by which the fund outperforms its benchmark (50% S&P 500 Total Return Index and 50% S&P/TSX Composite Total Return Index) will be charged in performance fees provided that the net asset value per unit for each class of units exceeds the high-water mark (the highest daily Net Asset Value per Unit for each Class of Units from time to time establishes a high-water mark for each Class of Units). Investors seeking capital gains over the long term, with a medium to high tolerance for risk would be best suited for the Vertex Growth Fund.
The investment team at Vertex One consists of founder and director John Thiessen, founder and director Matthew Wood, founder and director Jeffrey McCord and portfolio manager Tim Logie. The flagship Vertex hedge fund, which dates back to 1998, is a multi strategy fund, focussed on event driven strategies with a long bias. The fund seeks to garner absolute returns of 10% plus with a Beta of 0.5 or less to market indices over the longer term. The fund has definitely succeeded in maintaining a Beta of 0.3991 over its tenure whilst recording a 18.20% compounded rate of return and a cumulative return of 593.6% since 1998. The Vertex fund has had 69.78% positive months and 30.22 % negative months. Thiessen and his team have managed to record an annualized alpha (a measure of a portfolio's return in excess of the market return, after both have been adjusted for risk) of 20.12% relative to the S&P 500 and 11.36% relative to the Hennessee Opportunistic Index. While the fund did falter to the tune of -40.25% in 2008 it has returned to its winning ways by gaining 54.04% till date.
Having proved their metal in the hedge fund world, it should be interesting to watch how Thiessen and his team manoeuvre the more constrictive and publicly scrutinized world of mutual funds.
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