Gemini's CEO Sees Growth in Alt, ETF Trusts
September 14, 2012
Fund administrator Gemini Fund Services has new leadership in place, new headquarters in New York, and is making strides in the alternative mutual fund and exchange-traded fund arenas.
The firm, which services roughly 250 funds, in July promoted Andrew Rogers to chief executive officer, from president, and Kevin Wolf, who had been executive vice president, became president. Rogers' position is new.
Money Management Executive recently spoke to Rogers about his appointment and how the firm is looking to tap into the demand for alternative mutual funds and ETFs.
Can you tell us a bit about the firm and what your new responsibilities entail?
We are a full service administrator for mutual funds, hedge funds and variable annuities. We currently have approximately 175 people and we service about 250 funds (approximately 200 mutual funds and 50 alternative funds). We primarily focus on alternative mutual funds. Six or seven years ago we were a 35-person operation and in order for us to grow from a small to medium-sized firm we needed more people charged with more responsibilities. Now, I can really focus on what I do best and enjoy the most, and that is business development. I'm less involved on the operations side than I was in the past, which gives me more opportunities to be more of a creative and big-picture thinker for the company. This allows other people like Kevin Wolf to ensure that we provide great day-to-day service.
Tell us more about some recent products that Gemini has brought to the market and why you think they can be successful in the long run.
Our two big projects right now are that we launched two trusts: Two Roads, which helps hedge funds launch mutual funds; and the Northern Lights ETF Trust. We expect the Two Roads trust to be effective with the Securities and Exchange Commission over the next month or so and we have three new advisors in that trust who will be launching funds (Alternative Avenue Fund, Belvedere Alternative Income Fund and LJM Preservation and Growth Fund). Our hope is to have approximately 25 funds in this trust and at that point we'll do a soft close, which means we won't allow new advisors into the trust. We're hoping within a year we can close this trust to new advisors. Over the past five years, directional mutual funds have been migrating towards ETFs and that mutual funds are becoming more alternative in general. We think there is great demand for hedge funds to come up with mutual fund-type products and we think Two Roads will be a great place for that.
And we launched the Northern Lights ETF Trust on May 1 with our first fund: Arrow Dow Jones Global Yield ETF (GLYD). We have the expectations of within a year or so to launch many new ETFs, mainly niche products and alternative in nature as opposed to S&P 500-type funds. Some of these models may include index-type models but they're definitely alternative in nature. We're very excited about that and we think we can really capitalize on new markets with these ETFs. We're hoping to add about four to five funds a year and the max here will be 25 funds as well.
What is your take on the active ETF business?
There is a role for active ETFs but the hard part is getting volume. You want to create an active ETF that's not a buy-and-hold product but more directional in nature. The ETF business can really be successful but takes a lot of investment, which we're doing now. It's very, very important to come out with the right product line in order to be successful.
Within the alternative mutual fund universe, what recent trends are you seeing in terms of products coming to market?
A recent trend that we've seen is the emergence of alternative bond funds. One of the things that many of my clients have written about is that with yields so low and investors not knowing what exactly is going to happen, retail bond mutual funds are struggling. When interest rates do rise performance will turn and the 30-year bull market in fixed income will turn into a bear market and the unfortunate part is that most people who invest in fixed income mutual funds really don't fully understand the downside to it. We're seeing a lot of alternative fixed income products come to market either long/short or someway to hedge out interest rate risks.
Before that we saw the big managed futures trend. Managed futures funds did very, very well in 2008 so we saw a lot of those funds launch in 2009-2011. Managed futures funds tend to be lumped together but there are some funds called global macro and then there are some that are trend traders, and then you have some that are very specific, like we have one fund that trades on currencies.
And in general, more tactical asset allocation funds using multi-strategies or ETFs have been a big trend over the last five years. By having a more active management style and hedging out some of the volatility and risks makes it more palatable for investors.
How are you, as a firm, spreading the good word about alternative products?
We have been speaking at many different conferences and broker-dealers talking the need for diversification and the overall non-correlation of these alternative funds. My business development people and key executives have been speaking at many different conferences and having webinars for clients. As a matter of fact, I believe we're going to have a webinar on Sept. 25 with ConvergEx Prime Services.