Unlimited Funds, the investment firm co-founded by former Bridgewater Associates executive Bob Elliott, is set to run a new strategy allocating between replicated styles of hedge-fund investing, according to a person with knowledge of the matter.
The firm’s new “Agile Replication” strategy will systematically shift between such styles based on macroeconomic conditions, using artificial intelligence to help predict which ones should outperform, said the person, who asked not to be identified because the strategy is private.
Unlimited will start running the strategy this month, the person said. Designed at least initially for institutional investors, the Agile strategy is similar to multi-manager funds, and may provide global exposure to major asset classes such as stocks, bonds, fixed income, corporate credit and currencies, according to the person.
Under the multi-manager approach in the hedge-fund world, individual managers at a firm pursue their own strategies and those different styles are then tactically combined into a single total portfolio, the person with knowledge of Unlimited’s new strategy explained.
A spokesperson for Unlimited declined to comment on the firm’s new investment strategy.
In October 2022, the firm launched the Unlimited HFND Multi-Strategy Return Tracker ETF
HFND,
an exchange-traded fund that uses machine learning to track aggregate hedge-fund returns gross of fees. The ETF, which seeks to replicate the hedge fund industry’s performance as a whole, is down 0.8% this year through Monday, according to FactSet data.
A prospectus filed with the U.S. Securities and Exchange Commission in August showed Unlimited was preparing to launch ETFs with similar return characteristics of individual hedge-fund strategies, including equity-long-short, global-macro, event-driven, emerging-markets and managed-futures.
The spokesperson for Unlimited declined to comment on when the ETFs could potentially launch.
Institutional investors have already committed capital to the Agile strategy, which may initially invest in individual securities in large, liquid markets, the person said. The investment strategy aims to outperform the hedge fund industry’s broad returns and at a lower cost than typical multi-managers, according to the person.
The fee structure for the Agile strategy can be less expensive as it’s relying on Unlimited’s replication technology as opposed to hiring a team of star portfolio managers, the person said.
The $4 trillion hedge fund industry was up 4% this year through September based on the HFRI Institutional Fund Weighted Composite Index, according to an HFR report from late October. The gains were led by “directional equity hedge and event driven strategies,” HFR said.
Unlimited is led by chief executive officer and chief investment officer Elliott, a former member of the investment committee at the world’s largest hedge fund firm Bridgewater. Earlier this year, Unlimited raised fresh venture capital, in part to expand its ETF offerings in alternative investment strategies.
Meanwhile, the U.S. stock market has posted gains so far in 2023, with the S&P 500 index
SPX
up around 14% as of Tuesday afternoon, after tumbling last year as the Federal Reserve aggressively hiked interest rates to combat high inflation. The S&P 500 tanked 19.4% in 2022, its worst year since 2008 when markets were roiled by the global financial crisis, according to FactSet data.
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