Quadriga Investment Group, a hedge fund and managed futures fund firm based in Vienna, Austria, recently received Securities and Exchange Commission approval to launch a hedge fund in the United States that has a minimum investment of only $5,000. Yes, $5,000.
The fund, called the Quadriga Superfund, is registered under the Securities Act of 1933. The Superfund is a security “wrapped around [Quadriga's] managed futures fund applying hedge fund strategies,” says Guenter Mathis, Quadriga’s chief operating officer who works in the company’s New York office. The Quadriga Superfund is a single-manager fund offering two investment choices, Series A and Series B, both of which are modeled on the strategies used in Quadriga’s offshore funds. Series A is a more moderate fund that follows the performance/risk ratio of the company’s flagship fund, the Quadriga AG. In the last five years, the fund has returned 34.75% net of fees annually, according to Quadriga. Series B mimics the Quadriga GCT US$ fund, a more risky fund offering potentially higher returns. Since its inception in January 2000, the Quadriga GCT has seen average annual returns of 57.55% net of fees.
Series B invests in a broad diversified portfolio, Mathis says, with “50% of our investment (and that’s true for Series A and B) in so-called financial futures, i.e., currencies, bonds, interest rates and stock indices like the Dow Jones; we also invest on a global basis.” The other 50%, he says, is invested in commodities like coffee, sugar, and cocoa. “The beautiful thing about [Series B] is when markets are going down–and let’s assume there will be a credit crunch like most people are assuming, including myself–we will see interest rates go up and commodities will go way up.”
Because the Superfund is registered under the 1933 Act, investors don’t have to meet “accredited” status ($1 million in net worth or income of $200,000 for the past two years) required by most hedge funds. But Superfund investors do have to meet securities requirements under the Blue Sky rules. Each state has different suitability requirements, but as a general rule, investors with $150,000 in net worth and $45,000 annual income would qualify for the Superfund.
Mathis says Superfund allows retail investors to reap the benefits of investing in hedge funds. “Nobody knows if we’re going to see something like in Japan where in the last 13 years they’ve had a bear market,” he says. “The smartest people understand the advantage of modern portfolio theory, which is not putting all your eggs in one basket.” Investors are looking for an investment that has a low correlation to any single market, he says.
Quadriga plans to distribute the Superfund through regional and boutique broker/dealer firms, like Raymond James, AG Edwards, and First Allied, Mathis says. Quadriga now has 18 B/Ds in its “sales syndicate,” and is targeting about 30 broker/dealers nationwide.