Bob Elliott, a former member of the investment committee at Bridgewater Associates, the world's largest hedge fund, on Tuesday announced both the launch of a new investment firm and its first product — an exchange-traded fund.
Mr. Elliott co-founded the firm, called Unlimited Funds, with Bruce McNevin, an economics professor at New York University. Mr. Elliott serves as Unlimited's CEO and chief investment officer, while Mr. McNevin serves as its chief data scientist.
The new ETF, called the Unlimited HFND Multi-Strategy Return Tracker ETF and listed on the NYSE Arca exchange, seeks to create a portfolio that has return characteristics similar to the hedge fund industry's returns before fees, Mr. Elliott said in an interview.
"We believe that this ETF, which replicates the returns of the hedge fund industry, provides a low-cost alternative for any investor who is putting money in hedge fund-type products," he said, adding that such investors could include both retail and institutional investors such as pension funds, "many of whom are facing enormous fee pressure and are struggling to rationalize paying 2 and 20 to hedge fund managers," referring to a typical hedge fund arrangement of 2% management fee and a 20% performance fee.
The new ETF uses a propriety machine learning algorithm to create a portfolio that best matches the most recent month's returns of each major hedge fund style, he said. Its investment portfolio will typically consist of long and short positions in 30 to 50 underlying ETFs and futures contracts, Mr. Elliott said.
The new fund has a management fee of 0.95% and a 1.03% expense ratio, he said.
The ETF wrapper is "the best structure for the investor," Mr. Elliott said. "It's low-cost, it's liquid, it's transparent and it's tax efficient," he said. "And so that's why we chose (to develop) our products in the ETF form as opposed to other forms."
In addition to the initial ETF, "we will build a series of index-replication ETFs across the rest of the 2-and-20 industry, including venture capital, private equity, private credit and others," Mr. Elliott said.