Keeley Asset Management has launched the Keeley Alternative Value Fund, which aims to achieve long-term capital appreciation as well as protect capital during adverse market conditions.
The fund will be managed using an alternative strategy, combining the research experience of Keeley Asset Management with the active risk management techniques of the fund’s sub-adviser, Broadmark Asset Management.
The fund will seek to provide incremental downside market protection through Broadmark’s tactical hedging process.
The fund will complement the firm’s flagship product, the Keeley Small Cap Value Fund, as well as the Keeley Mid Cap Value Fund, Keeley Small-Mid Cap Value, Keeley All Cap Value Fund and the recently launched Keeley Small Cap Dividend Value Fund.
"We believe the Keeley Alternative Value Fund will be a natural complement to our current fund line-up, which currently focuses solely on long-only equity strategies. Through conversations with many of our clients, we recognise that there is a need for products that offer risk-adjusted returns in all types of market environments. We believe our expertise on the long-only side of equities coupled with Broadmark’s skill involving quantitative risk management will provide clients with the ability to participate in the upside of the market while limiting the potential downside," says Mark Keeley, chief marketing officer of Keeley Asset Management.
John L. Keeley Jr. will serve as portfolio manager for the long-only equity exposure of the fund, which will be constructed similar to the Keeley Small-Mid Cap Value Fund. Christopher J. Guptil of Broadmark will serve as portfolio manager of the tactical risk management segment of the strategy.
The fund’s investment objective is to achieve long-term capital appreciation, as well as to protect capital during adverse market conditions. For the equity investments, the fund intends to pursue its investment objective by investing in companies with small and mid-size market capitalizations, which the firm currently defines as USD7.5bn or less.
The adviser will focus the equity investments primarily on individual stocks undergoing corporate restructuring including: corporate spin-offs, companies emerging from bankruptcy, companies selling at or below actual or perceived book value, savings and loan and insurance conversions and distressed utilities.
Broadmark will assess overall stock market risk by monitoring such factors as monetary policy, valuation analysis, investor sentiment and momentum. When Broadmark perceives the fund’s equity market risk to be high and opportunity low, it will reduce the fund’s net exposure to equities based by selling, among other things, futures and option combos, and may effect short sales of individual securities and/or ETFs and ETNs or take long positions in inverse ETFs. Broadmark can hedge up to 100 per cent of the fund’s long equity exposure.
The annual operating expense ratio of class A share is capped at 1.89 per cent until 1 April 2011 and includes a 0.25 per cent annual 12b-1 fee and a 1.60 per cent investment advisory fee on the balance of average daily net assets. The minimum initial investment is USD2,500 for both non-retirement and IRA accounts. The minimum subsequent investment is USD50 for all account types.
The annual operating expense ratio of the class I share is capped at 1.64 per cent until 1 April 2011 and includes a 1.60 per cent investment adviser fee on the balance of average daily net assets. The minimum initial investment is USD1,000,000 with a subsequent investment minimum of USD10,000. Registered investment advisors may purchase class I (institutional) shares on behalf of their clients with less than USD1m per account, if the total investment of all investing client accounts is USD1m or more. Other institutional investors, such as defined contribution plans, may also qualify for purchasing institutional shares with less than USD1m per account, subject to certain specified conditions.
The fund is administered by US Bancorp Fund Services and is distributed by Keeley Investment Corp.