Dian's Column
Dian's Archive

Lavine/Liberman Archive




Lipper
Muriel Siebert & Co.


Hedge Fund For The Little Guys

- Alan Lavine



When it comes to investing, it never hurts to hedge your bets. Institutional investors like pension funds, insurance companies and very wealthy individuals have been doing this for years. Typically, they do it in "hedge funds," which tend to use very complicated investment strategies.

The problem is that hedge funds are limited to wealthy investors and have very little federal regulation.

However, a new mutual fund claims to use similar complex investment strategies. Yet it is open to the little guy--with no minimum required initial investment.

The New Century Alternative Strategies Fund invests in other mutual funds that are considered less volatile than the overall stock market. Much like hedge funds, the fund's expenses are higher than most mutual funds. This is because you pay a management fee to the fund as well as to the funds the fund owns. But the fund has no sales charges.

Weston Financial, Wellesley, which manages $1 billion in assets, runs the fund.

Despite the complex investment strategies it uses, the New Century Alternative Strategies Fund is considered a low-risk type of fund. That's because it invests in other low-risk mutual funds that do not move with the stock or bond markets. It also has a stake in real estate and natural resources stocks, as well as distressed securities.

"When stocks or bonds are down, this fund will cushion the blow," says Wayne Grzecki, fund manager. "It's a hedge. It is broadly diversified in funds that use risk management techniques to produce consistent returns with reduced volatility."

The fund's holdings include a number of funds that are less volatile than the S&P 500, a measure of the overall stock market. "We are looking for a 9 to 10 percent annual return over the long term," Grzecki says. "But the fund has only 25 percent of the volatility of the (stock) markets."

Grzecki says his fund can help stabilize your investments. The reasons: Many of the funds held by this fund are set up to profit from both rising and falling stock markets. For example, one of its fund holdings, the Franklin Templeton Global Long/Short Fund, sells many of its stock holdings short. With a short sale, the fund actually profits when the stock price drops.

The Gabelli ABC Fund, another fund holding, invests in companies upon the announcement that they will be taken over. When the takeover occurs, the fund makes a small profit on the trade. Meanwhile the Calamos Market Neutral Fund buys convertible bonds and shorts the underlying stock.

The fund also owns the T. Rowe Price New Era Fund and the Columbia Real Estate Fund for its stake in natural resources and real estate, respectively.

#

Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books).


To read more columns, please visit the column archive.




[ top ]