Crossovers: JP Morgan Fund, SEI Guide

Chidem Kurdas

In just the past few days there have been a number of announcements about the intersection of hedge funds with mutual funds. Among these is JP Morgan’s launch of Highbridge Dynamic Commodities Strategy mutual fund, which draws on an investment team that is part of Highbridge Capital, the bank’s giant hedge fund.

“The Highbridge Dynamic Commodities Strategy Fund gives individual investors access to the investment capabilities of  Highbridge Capital Management LLC in an important asset class, with the transparency and cost structure of a mutual fund vehicle,” says JP Morgan Funds chief executive George Gatch, in a statement.

This Highbridge fund joins a small but growing segment of mass market vehicles with hedge fund-type strategies. Another newcomer announced this week is Equinox Fund Management’s MutualHedge Frontier Legends Fund, which offers  exposure to a portfolio of commodity trading advisor programs.

Fund administrator SEI got on the convergence bandwagon by starting an online global guide for managers who want to compare the regulatory, operational, and distribution requirements of traditional and alternative investment products.

Phil Masterson, a managing director in SEI Investment Manager Services, says managers are focused more on alpha generation and are becoming agnostic as to how their investment expertise is packaged. “This guide is intended to help managers begin the decision process on what product packages will best help them meet investor needs while targeting new growth opportunities,” he stated.

The guide contains information about US mutual funds; exchange-traded funds; European UCITS; hedge funds; collective investment trusts; separate accounts; closed-end funds; Irish qualified investment funds; and UK open-end investment companies.

The idea that hedge funds will converge with conventional investments is not new; it has been around for years. But the trend, while noticeable, is limited to relatively small numbers. A new report from BNY Mellon and Greenwich Associates found that despite accelerating after the financial crisis, convergence remains slow.

Some managers have offered cross-over products for more than a decade but many under-estimate the challenge of crossing over. Still, the move towards convergence is increasing the pressure on fees at some hedge funds, BNY Mellon and Greenwich Associates say.

It is notable that JP Morgan, the hedge fund operator with the largest assets ($53.5 billion) according to a recent ranking by Pensions & Investments, is in the forefront of this trend.  There are other crossovers between the bank’s hedge and mutual funds. This was facilitated by JP Morgan’s acquisition of Highbridge, starting in 2004 and completed in 2009. Founder Glenn Dubin is still the chief executive of  Highbridge but co-founder Henry Swieca has left.

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