01/29/2014

Context Capital Entering Mutual-Fund Arena

Look for hedge fund seeder Context Capital to launch a multi-manager vehicle in the form of a mutual fund.

The Bala Cynwyd, Pa., firm, through a newly created business called Context Asset Management, filed registration documents with the SEC last week for Context Alternative Strategies Fund. The vehicle will deploy the bulk of its capital to outside managers including Del Mar Asset Management, ESM Management, First Principles Capital, Highland Capital and Weatherbie Capital, but it reserves the right to directly manage up to 35% of its assets in securities portfolios.

The planned launch marks a change of pace for Context, which has invested some $300 million of seed capital in hedge funds over the years. More recently, it backed an effort by former AlphaMetrix executives Mark Salameh and Geoff Marcus to start a conference-organizing business called Context Summits — whose debut event is taking place this week in Miami. At AlphaMetrix, their team ran a series of popular global-macro conferences until the Chicago firm ran into financial troubles last year and subsequently was slapped with civil-fraud charges by the CFTC.

The outlines of Context’s mutual fund business remain fuzzy, but it appears that in addition to managing its own vehicles, the firm plans to support other alternative-investment managers targeting retail investors. A spokesman for the firm said only that the new unit “will offer mass-affluent retail investors access to both single- and multi-manager alternative investment strategies.”

That appears to explain the role of Jay Jacobs, who arrived late last month as president of Context Asset Management. He previously worked as a consultant in New York with a focus on helping hedge fund firms launch SEC-registered vehicles. Prior to that, he was a director of alternative mutual fund services in ConvergEx’s prime-brokerage unit. He is perhaps best known for an earlier role as a top executive at Thomas Weisel Partners, now a unit of Stifel Nicholaus.

Jacobs is working with John Culbertson, who is chief investment officer of Context Asset Management, and portfolio managers Jason Myers and Andrew Dudley.

The registration documents for Context Alternative Strategies Fund disclose a management fee of 2% and total fees of about 2.7%. The minimum investment is $2,000.

Context is following the lead of a small but growing number of fund-of-funds managers that have launched mutual fund products in recent years. The offerings include Arden Asset Management’s Arden Alternative Strategies Fund, Blackstone’s Blackstone Alternative Multi-Manager Fund and Goldman Sachs’ Goldman Sachs Multi-Manager Alternative Fund.

Context Capital is led by Ron Biscardi. Last year, the parent firm withdrew its registration with the SEC as an investment advisor. At the time, it was managing two hedge fund-seeding vehicles with a combined $35 million of assets.

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