Introduction

Hedge funds with highly liquid and stable strategies often face significant barriers when trying to expand their distribution channels. Traditional fund structures present challenges that can undermine the key benefit of such strategies: liquidity. This case study highlights how FundFront helped a hedge fund overcome these challenges, making their strategy more accessible and efficient through the implementation of an Actively Managed Certificate (AMC).

Client Background

The client is a hedge fund that specializes in a highly liquid and stable investment strategy. After initially experiencing significant growth, the fund reached a plateau. They struggled to move beyond their established base due to the limitations of traditional fund structures.

Challenges

Before partnering with FundFront, the hedge fund encountered several key challenges:

• Traditional Fund Structure Limitations: Traditional fund structures created access barriers, including complex onboarding processes, subscription forms, and limited liquidity options.
• Access to New Distribution Channels: Despite the strength and stability of their strategy, they struggled to break into new distribution channels, limiting their growth potential.
• Accredited Investor Restrictions: The strategy was suitable only for accredited investors, which narrowed their options regarding product and vehicle type.

FundFront’s Solutions

FundFront addressed these challenges by transforming the hedge fund’s strategy into an Actively Managed Certificate. The main components of this solution included:

• Bankable Strategy through AMC: FundFront converted the hedge fund’s strategy into a bankable product using an AMC. This innovative approach provided a flexible and efficient alternative to traditional fund structures.
• Inexpensive and Simple Launch: The AMC was cost-effective and easy to launch, enabling the hedge fund to quickly adapt and seize new opportunities.
• Seamless Integration with Prime Broker: The hedge fund maintained its existing prime broker relationship, with the AMC functioning similarly to a managed account for trade allocations. This ensured a smooth transition and integration of the new product.
• Included Termsheet and Documentation: FundFront provided comprehensive termsheet and documentation, ensuring the AMC was only suited for accredited investors. This compliance measure was critical in maintaining the hedge fund’s regulatory standards.
• Integrated Administration: All administrative tasks were handled by FundFront, streamlining operations and eliminating additional overhead costs.

Outcomes and Results

The implementation of the AMC brought several significant benefits to the hedge fund:

• Daily Valuations and Liquidity: The hedge fund could now offer daily valuations and daily liquidity on their strategy, making it more attractive to investors and enhancing its appeal.
• Access through Banking Channels: The strategy became accessible via banking channels, dramatically improving the means of distribution and increasing market reach.
• Operational Efficiency: The seamless integration of administration into FundFront’s services allowed the hedge fund to operate more efficiently, focusing on core investment activities without worrying about the administrative burden.
• Attraction of New Investors: The improved structure and accessibility attracted new accredited investors, contributing to renewed growth.

Conclusion

This case study illustrates how FundFront’s innovative structuring solutions can significantly enhance the distribution and accessibility of hedge funds with highly liquid and stable strategies. By leveraging an Actively Managed Certificate, FundFront enabled the hedge fund to break through growth barriers, achieve operational efficiency, and access new distribution channels.

For hedge funds and investment firms facing similar challenges, FundFront offers bespoke solutions that drive growth and operational excellence. Contact FundFront to explore how we can help you accelerate your growth and optimize your operations.