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Hedge fund manager Whitebox launches tactical income mutual fund

Thu, 01/05/2014 - 18:00

Whitebox Advisors has launched the Tactical Income Fund providing individual investors and advisors access to its fixed income managers who apply an alternative investment philosophy often associated with hedge funds.

“We think investors have come to expect too little from their fixed income allocations. With the Whitebox Tactical Income Fund, we aim to show investors that more is possible,” says Andrew Redleaf, Founder and CEO of the USD3.7 billion asset management firm. “As we have for many years for our hedge fund clients, the team will dive deeply into the fixed income market in search of unique, idiosyncratic opportunities. What we feel sets us apart from other mutual funds is our ability to remain flexible, opportunistic, and to tactically deviate from convention to isolate value – wherever it can be found in the immense fixed income markets.”

Pete Wiley, the fund’s lead portfolio manager and a 10-year veteran of Whitebox Advisors’ fixed income strategy team comments, “Our specialty is scouring the entire fixed income universe for investments we view as being attractively priced, with high-return potential and low risk. We believe we are able to find these opportunities for our clients, not only due to our depth of experience, but because our flexibility and agility permits us to meaningfully participate in areas of the market we view as undervalued.”

Whitebox Tactical Income Fund’s characteristics include:

 • Seeking high income with meaningfully reduced volatility and risk of capital loss – The fund’s team will seek to mitigate risk in ways that increase returns over time, not passively accept the traditional risk/reward frameworks. 

 • Use of hedging tools and strategies – The fund will take long and short positions and use other “hedge fund” tools including options and swaps as indicated in the prospectus. 

 • Guided by Whitebox’s 10 Investment Principles – Like all of the firm’s offerings, the Whitebox Tactical Income Fund will be guided by Whitebox’s 10 Investment Principles, the first of which is “The source of investment return is the efficient reduction of risk.” 

Wiley continues, “One reason corporate bond yields are currently suppressed, we believe, is that so many mega-sized bond funds are buying the same huge issues from the same huge issuers. We believe those bonds are overbought and that the danger facing many fixed income investors is that they may feel safe in traditionally managed bond funds. Unfortunately, when interest rates go up, the assets of millions of people invested in traditional fixed income funds could fall victim to bond-market repricing and some of those funds’ general inability to adapt quickly.”

In addition to Wiley, Redleaf will be actively involved in the fund day-to-day. Other named portfolio managers are members of Whitebox’s Investment Committee: Jason Cross, PhD, Paul Twitchell, and Rob Vogel. The fund will also draw on the experience of the entire Whitebox team.

“In our view, the standard, static approach to fixed income investing is just barely acceptable when yields are strong,” says Redleaf. “Today that passive—I hesitate to say ‘lazy’—approach to bonds is potentially derailing the dreams of millions of investors who saved diligently in order to avoid the stress and worry they find themselves enduring.”

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