February 26, 2016 / 4:56 PM / 4 years ago

UPDATE 2-Collins Capital shutters hedge fund for retail investors

(Adds analyst comment)

By Svea Herbst-Bayliss

BOSTON, Feb 26 (Reuters) - The Collins Alternative Solutions Fund, a mutual fund that offered hedge fund strategies to retail investors, has been shut down after suffering a double-digit decline in 2015 and falling more this year.

“The board concluded that it would be in the best interests of the fund and its shareholders that the fund be closed and liquidated,” Collins Capital said in a regulatory filing on Friday with the U.S. Securities and Exchange Commission. The fund was closed on Feb. 19.

The fund dropped 12.5 percent last year and fell 4.2 percent in January, according to documents sent to investors and seen by Reuters. Collins Capital did not return a call seeking comment.

Coral Gables, Florida-based Collins for decades put wealthy clients into hedge funds. When it launched this fund in April 2012, it waded into the fast-growing space of liquid alternative funds, which promise retail investors a taste of exclusive hedge funds.

Collins said the fund would offer a broad mix of hedged strategies and called the portfolio an “all-weather, holistic solution to investing in alternative investments.”

Companies including Goldman Sachs Group Inc and Blackstone Group LP are the big players in the liquid alternatives industry, which investors say should be performing especially well at a time that stocks and other investments are struggling.

But analysts expect more failures as mutual funds offering hedge fund strategies have proliferated to meet growing demand.

“We are going to see more liquidations,” said Morningstar analyst Josh Charlson. “If fund firms don’t have a robust distribution network to attract assets and then the suffer a spate of poor performance, they will suffer.”

Like other liquid alternative funds, Collins relied on hedge fund managers to invest the money. The Clinton Group, as well as less well-known managers Seven Locks Capital Management, Stone Ridge Asset Management, and Pinebank Asset Management, signed up to invest for the Collins Alternative Solutions Fund.

Through its managers, the fund invested in currencies, bonds and reinsurance among others.

The fund failed, however, to find much traction with investors and its assets only grew to $175 million. Its best year was 2013 when it gained 6.9 percent, but over its lifetime it lost 0.4 percent, dramatically underperforming the stock market and lagging behind other hedge funds, which were up less than 1 percent over the same period. (Reporting by Svea Herbst-Bayliss; editing by Steve Orlofsky and Richard Chang)

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