May 2, 2019 | By James Lord
Accelerate Financial Technologies is planning its entrance into the Canadian ETF market with a suite of alternative strategy funds.
The firm is currently due to roll out three actively managed ETFs on Toronto Stock Exchange on 10 May 2019.
The Accelerate Absolute Return Hedge Fund (HDGE CN) offers a long-short equity strategy by investing primarily in Canadian and US securities.
Stock selection is driven by a systematic multi-factor approach that focuses on value, quality, price momentum, operational momentum, and trend risk premia. Long and short positions will be selected from the top 10% and bottom 10%, respectively, of stocks generated by this model.
The fund is expected to have approximately 110% long exposure and up to 50% short exposure, resulting in a 60% net long equity exposure.
The Accelerate Enhanced Benchmark Alternative Fund (ATSX CN) combines exposure to the S&P/TSX 60 Index, covering the 60 largest stocks listed on Toronto Stock Exchange, with a long-short Canadian equity overlay designed to add incremental performance.
The long-short overlay may consist of a maximum 50% long position and 50% short position and will be driven by the same multi-factor selection model.
The Accelerate Private Equity Alpha Fund (ALFA CN) is designed to provide returns similar to private equity investments through a diversified long-short portfolio of equity and derivative securities.
The long portion of the portfolio contains US and Canadian equities selected from the top 10% of stocks generated by a model that focuses on traditional buyout company characteristics such as value, quality, size, and leverage. For its short portfolio, the fund uses derivatives to obtain inverse exposure to a broad US equities index.
The fund is expected to have approximately 130% long exposure and up to 30% short exposure, resulting in a 100% net long equity exposure.
Each ETF will come with a 0% management fee and will earn a performance fee if it outperforms its high-water mark. The performance fee, calculated relative to the change in NAV over the previous quarter, will be 20% for the Absolute Return fund, 50% for the Enhanced Benchmark fund, and 15% for the Private Equity fund. If no performance incentive fee is paid for 12 consecutive calendar quarters, the high-water mark is reset to the current NAV.
Julian Klymochko, Founder and CEO of Accelerate, commented, “Accelerate’s Funds are the first of their kind – institutional-quality long-short equity hedge funds that trade as ETFs. We’re leveling the playing field by offering performance-oriented alternative strategies which had previously been reserved for institutions and the wealthy. Plus, we’re excited to offer the first alternative ETFs with a 0% management fee, aligning investor and manager interests for the first time.
“We’re relentlessly bringing much-needed innovation to the investment management sector. We’ll continue to not only bring new innovative investment strategies to the marketplace but also enlighten investors with thought-leading securities research and analytics, as we seek to become the leader in exchange-traded alternative funds.”
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