06/26/2013

Long-Only Offering Takes Shape at Mark

Mark Asset Management is marketing a long-only fund.

The New York firm plans to launch its Mark Equity Opportunities Fund in September with $25 million to $30 million from founder Morris Mark. It would start accepting outside capital about a month later.

Morris Mark, whose firm runs $400 million of investor capital, would manage the vehicle alongside portfolio manager Andrew Silverberg. He’s planning to assemble a portfolio of about 50 stocks, with the top-20 names accounting for some 75% of the holdings.

Mark is best known for his growth-oriented approach to stock picking.He eschews the value-focused disciplines of most long/short equity specialists to seek out long-biased investments in companies whose annual earnings are growing by at least 20% thanks to strong management and favorable business environments.

The planned fund would apply a long-only spin to that philosophy, borrowing a strategy that Mark Asset Management already has been following through various separate accounts since 1997. Those investments so far have produced an average annual return of 15.1%, beating the 9.1% gain posted by the S&P 500 index during the same span.

While the commingled offering would trade like a mutual fund — with no shorting, hedging or leverage — its liquidity terms and fees would resemble those of a hedge fund. Instead of the daily withdrawals allowed by most mutual funds, for example, Mark Asset Management will only permit investors to redeem monthly. When it comes to fees, investors would be able to choose between one share class that takes 1% of assets and 20% of profits, and another with a 2% management charge but no performance levy.

There’s also a so-called founders share class, with lower fees, available to clients who contribute the first $100 million to the fund. But for most investors, the vehicle essentially would act like an expensive and illiquid mutual fund.

Similar long-only hedge funds have been attracting limited partners, reflecting a willingness among backers to pay a bit extra out of confidence in their managers’ alpha. Take Viking Global, which stopped accepting new investors for its then-$4.6 billion Viking Long Fund in April. Around the same time, Impala Asset Management began marketing a vehicle called Impala Waterbuck.

Mark Asset Management’s long-only offering follows a shift in the firm’s marketing approach. The outfit started in 1986 with $25 million from an undisclosed family, and eventually grew to $2 billion based largely on investment gains by its flagship Mark Partners Fund. But it was left with a far-smaller pool of capital when the family and some other backers pulled their support in 2002. It was only with the arrival of former Morgan Stanley marketing specialist Matt Robinson earlier this year that the shop started seeking outside contributions for Mark Partners, a highly long-biased vehicle that nonetheless takes some short positions and employs leverage.

Silverberg started in 2012. Before founding Mark Asset Management, Morris Mark worked at Goldman Sachs under Leon Cooperman — who would go on to run stock-fund operator Omega Advisors.

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