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U.S. Rep. Gregory Meeks KEN CEDENO/AFP/Getty Images
U.S. Rep. Gregory Meeks

Fund News Advisors Can Use: New Bill Would Expand Private Investments in Closed-End Funds

In this week’s fund news, a new House bill would update restrictions on closed-end funds investing in private markets; advisor Ross Gerber launches an active ETF; and CoastalOne introduces an alternatives platform powered by WealthForge.

U.S. Reps. Gregory Meeks (D-N.Y.) and Anthony Gonzalez (R-Ohio) introduced a bill in Congress this week that would allow closed-end funds to invest more in private markets.

Gonzalez had introduced a similar bill last November, but it died in the previous Congress.

The text of the Increasing Investor Opportunities Act hasn’t yet been released, but the Investment Company Institute says it would update the restrictions on closed-end funds to enable greater exposure to private investments. Currently, the Securities and Exchange Commission prohibits closed-end funds from investing more than 15% of its net assets in privately offered funds, unless the fund sells shares to accredited investors.

“This bipartisan bill will help expand opportunities for Main Street investors to access private investments through closed-end funds, while maintaining the important protections for investors that only regulated funds provide pursuant to the Investment Company Act,” ICI President and CEO Eric Pan said in a statement.

The ICI also claims the bill would eliminate a loophole that allows activist investors to take concentrated voting power.

“The activists, using this takeover strategy and concentrated voting power, may cause the portfolio manager to sell portfolio securities or take other measures to provide the liquidity necessary to cash them out,” the ICI said. “These actions hurt shareholders who choose to remain or want to remain in the fund, including long-term shareholders seeking exposure to the fund’s investment strategy.”

Under the new legislation, activist investors would be allowed to acquire only 10% shares in the fund.

Advisor Ross Gerber Launches Active 'Roaring '20s' ETF

Advisor Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management, a $2 billion registered investment advisor in Los Angeles, is launching an actively managed exchange traded fund, with AdvisorShares as the sponsor. The AdvisorShares Gerber Kawasaki ETF (GK) starts trading this week.

The portfolio, subadvised and managed by Gerber, will invest in growth companies he believes are set to benefit from long-term changes occurring in a post-COVID-19 economy. It will give investors access to Gerber’s best stock ideas across nine investment themes he predicts will benefit in the "roaring '20s": climate change, technology frontiers, video gaming and e-sports, top consumer brands, pet and animal wellness, innovation in healthcare and biotechnology, real estate disruption, streaming sports and entertainment, with a dose of firms peddling in things that used to be illegal, such as cannabis, online gambling and sports betting.

Gerber, a believer in active management, is a widely followed commentator among investors, with frequent appearances on business shows and more than 159,000 followers on Twitter. He’s been an outspoken investor in Tesla, in particular, and computer systems design services company Nvidia, both of which are top holdings in the ETF. The ETF has a net expense ratio of 81 basis points.

“If you like him, and you like his thought process with investing, you can invest in this,” said Noah Hamman, CEO of AdvisorShares. “You don’t have to fill out a bunch of paperwork. You don’t have to be a client. You can do it for $1, or you can do it for $10 million. This really solves that problem for him, as he’s continuing to grow.”

CoastalOne Launches Alternative Investments Platform

Independent broker/dealer and RIA CoastalOne is giving its 115 advisors access to alternative investments through WealthForge’s subscription-based electronic trade-processing platform, Altigo.

The document-heavy nature of the transactions, in particular, is one pain point associated with alternatives; advisors often have to deal with not-in-good-order (NIGO) errors and delays. Altigo automates the paperwork process and integrates the subscription process into an advisory firm's operational workflow.     

 “We are looking forward to Altigo making life easier at the supervision level,” Francis Skinner, chief legal and compliance officer of CoastalOne, said in a statement. “The security of straight-through processing and reduction of submissions that are not in good order will greatly reduce regulatory risk and should free up more time for our supervisors to supervise rather than quality control paperwork.”

First Ascent Rolls Out Flat-Fee ESG Portfolios

Denver-based First Ascent Asset Management, a turnkey asset management platform that charges a flat fee, has launched a series of portfolios for advisors whose clients want access to environmental, social and corporate governance focused investment portfolios.

The portfolios invest primarily in passively managed exchange traded funds that track ESG indexes, but CEO Scott MacKillop said the firm would explore adding more actively managed funds in the future. The TAMP created broadly diversified portfolios that closely track its other portfolios but with a higher ESG tilt.

Some of the ESG funds have higher expense ratios than the non-ESG index products the firm typically uses; the ESG funds range in price from 13 to 42 basis points, MacKillop said.

First Ascent was one of the first asset managers to charge a flat fee for its portfolios, and that will continue with the ESG versions. Clients pay 35 basis points up to $400,000 in assets, and after that, a household cap of $1,400 a year kicks in. For advisors who just want the investment model and will handle the account administration and opening themselves, the cap is $1,200.

The TAMP is also looking to add a direct indexing capability in the next couple of months where a higher level of customization is allowed, but MacKillop is still working to identify the right software provider.

“Our portfolios are all ETF and mutual fund based, so there’s some limits to the amount of customization that we can do,” he said.

Putnam Names New Co-CIO of Global Asset Allocation

Brett Goldstein, a portfolio manager for a number of Putnam’s multiasset funds, has been named co-chief investment officer of Global Asset Allocation. Goldstein joins Robert Schoen, who has been CIO of the division since November 2016.

Schoen said the firm plans to develop new retirement offerings, multiasset ESG products, custom indexes and model portfolios.

Goldstein started at Putnam in 2010 as part of the investment associate program.

Newer ETF Entrant Simplify Beefs Up Staff

Simplify Asset Management, which specializes in options-based exchange traded funds, has hired John Ryu as chief financial officer and Ken Miller as portfolio manager. Ryu joins the firm from Hypothesis, an accelerator and pre-seed fund, which he founded. Miller joins from Longtail Alpha, where he was a portfolio manager.

Simplify made its first foray into ETFs last September, launching the Equity PLUS Convexity suite of funds. The firm now has 12 ETFs and $500 million in assets.

In February, the firm brought on Harley Bassman, who’s known in the industry for his investment commentary “The Convexity Maven,” as managing partner.

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