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June 14, 2017  

Multi-Strategy Shop Launches Index Fund

After raising an impressive sum for its debut hedge fund, Ocean Quant Group is now offering an index fund with minimal fees.

The firm, which already had $242 million in a multi-strategy vehicle that launched last year, began trading USA Market Stability Fund on May 29 with about $5 million. The new offering deploys equal amounts of capital to three indexes: the S&P 500 Total Return Index, the ICE U.S. Treasury 20+ Year Bond Index and the Dow Jones U.S. Real Estate Index.

USA Market Stability Fund is designed to match the return of the S&P 500 over the long run, but with less volatility. The vehicle also trades a small amount of derivatives for hedging purposes.

Ocean Quant, led by Manuel Fajardo, so far has set up U.S.-domiciled and offshore versions of the fund, with a minimum investment of just $1,000, a 0.25% management fee and no performance fee. The firm soon will open feeder funds for investors in Europe and Latin America as well. But it eventually plans to list the vehicle on the Irish Stock Exchange, where it would operate like an exchange-traded fund.

Ocean Quant is embracing passive investing amid increasing disenchantment with the performance and cost of actively managed strategies. In the year ended Jan. 31, passively managed funds tracked by Morningstar notched net inflows totaling $563 billion, while active strategies suffered net outflows of $325 billion. Fajardo sees his USA Market Stability Fund as a way to diversify Ocean Quant’s revenue sources even as its flagship hedge fund continues to meet with healthy investor demand.

That vehicle, dubbed Ocean Calypso Master SPC, launched in November 2016. On March 1, an unidentified investor agreed to park $109 million in the fund, which allocates 75% of its capital to liquid investments and 25% to illiquid plays across a range of asset classes and strategies.

Before setting out on his own, Fajardo was a currency trader at Madrid-based Auriga Global Investors. He set up Ocean Quant in Miami, but now is moving the firm to Washington. He’s also in the process of expanding his staff by hiring several traders and accountants.