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Julian Klymochko, Accelerate Financial

Accelerate’s alternative ETFs seek to democratise access to alternatives

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Canadian firm Accelerate Financial Technologies has launched three zero management fee, performance fee only alternative ETFs, designed to offer access to alternatives in a bid to democratise investment in the sector.

Julian Klymochko (pictured), CEO at Accelerate, says: “I have been in the hedge fund business for 10 years and ran strategies for accredited investors but I was always frustrated by the fact that the best strategies were only available to wealthy people. I couldn’t put my parents into these funds – I just made rich people richer and I felt that was unfair.”

Early 2018 saw Klymochko observing that the Canadian ETF industry was growing at 50 per cent a year every year and seemed to be where all the innovation was happening.

“I thought that if we could combine our award winning strategies with the ease of use and distribution of an ETF then that was a smart idea. I wanted include institutional calibre long short funds within ETFs, taking the view that democratising alternatives was an innovative idea.”

Canadian regulatory changes finalised in early 2019 allowed the creation of an institutional calibre alternative strategy within ETFs, creating a market with the potential of growth to CAD100 billion, according to CIBC. Klymochko wanted to capitalise on this.

“We see ourselves as bringing endowment style asset allocations to everyone,” he says.

The Accelerate Alt ETFs are listed on the Toronto Stock Exchange (TSX). The Accelerate Private Equity Alpha Fund (ALFA) seeks to achieve long-term capital appreciation and to replicate the returns of private equity funds over the long term by investing primarily in listed equity securities that are expected to outperform the US equity market, while entering into short positions in respect of listed equity securities in this market.

ALFA uses derivatives to gain exposure to its short portfolio and borrows cash to increase its long equities portfolio. The amount of all cash borrowed to finance the purchase of equity securities and the aggregate notional amount of derivatives used for non-hedging purposes will not exceed the limits permitted under applicable securities legislation.

Fees on ALFA are 0 per cent management and a performance fee of 15 per cent with a high water mark.

The Accelerate Enhanced Canadian Benchmark Alternative Fund (ATSX) seeks to achieve long-term capital appreciation and a superior risk-adjusted return relative to the broader Canadian equity market.

ATSX seeks to outperform the Canadian equity market over the long term by investing primarily in Canadian and foreign issuers listed on an exchange or marketplace in Canada that represents the broad Canadian listed equity market and using a long-short overlay portfolio to seek to add positive absolute return. ATSX may use derivatives to gain exposure to its long portfolio. The aggregate market value of the securities sold short and the aggregate notional amount of derivatives used for non-hedging purposes will not exceed the limits permitted under applicable securities legislation. Fees again are a 0 per cent management fee and a performance fee calculated on the amount of alpha created.

The Accelerate Absolute Return Hedge Fund (HDGE) seeks to achieve long-term capital appreciation and a superior risk-adjusted return relative to the broader Canadian equity market. HDGE seeks to outperform the Canadian equity market over the long term with lower volatility by investing primarily in listed equity securities that are expected to outperform this market, while selling short certain listed equity securities that are expected to underperform this market. The aggregate market value of the securities sold short will not exceed the limits permitted under applicable securities legislation. Fees on HDGE are 0 per cent performance fee and 20 per cent performance, subject to a high water mark.

Investors so far in the new funds include institutions, who reportedly like the anonymity of trading under the radar, financial advisers and DIY investors attracted by the liquidity, lower fees, ease of use and access.
 
 

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