Visium Debuts First Mutual Fund

Visium Asset Management launched the Visium Event Driven Fund (VIDVX), the first mutual fund offering for the alternative asset management firm.

The fund’s investment objective is to achieve capital growth while maintaining a low correlation to the U.S. equity markets. The fund is managed with a flexible blend of two complementary strategies (Special Situations and Merger Arbitrage) that are used to target the securities of primarily North American companies that the fund’s portfolio managers believe will be impacted by pending or anticipated corporate events.

The Special Situations Strategy is managed by Francis X. Gallagher, a 29-year industry veteran who joined Visium in 2011 upon the completion of a strategic transaction with Catalyst Investment Management Co., LLC. This strategy invests in opportunities where particular anticipated events in a company’s lifecycle could lead to a significant increase in the security’s value over a specific period of time.

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Peter A. Drippé manages the Merger Arbitrage Strategy, which invests in securities where there may be an opportunity to capture the spread between the security price at announcement and the price upon completion of a transaction. Drippé has 28 years of industry experience and joined Visium in 2011.

The Visium Event Driven Fund was converted from a private fund format with the same investment objective. Gallahger and Drippe have managed the private fund since 2001.

“We are thrilled to offer our Event Driven strategy in a mutual fund format. The fund allows investors of all sizes the opportunity to take advantage of a strategy that seeks to provide equity-like returns with low volatility comparable to that of a high-quality fixed income portfolio,” said Jacob Gottlieb, managing partner and chief investment officer of Visium.

Founded in 2005 and based in New York City, New York, Visium manages over $4.7 billion as of June 30, 2013 in long/short equity, credit, multi-strategy and event driven strategies. In addition to the Visium Mutual Funds, Visium manages six private funds.

Company Stock Hurting the Bottom Line?

Research from Morningstar suggests holding significant amounts of employer stock in 401(k) plans is bad for companies’ bottom lines.

The analysis found firms with employees who have higher allocations to employer stock in 401(k) plans have tended to underperform those without. Morningstar says this underperformance can primarily be attributed to two factors:

  • First, companies with higher allocations to employer stock in their 401(k) plans tend to have a market beta that is less 1.0, and therefore have underperformed given a positive equity-risk premium.
  • Second, these companies tend to have a large-cap tilt and sacrifice the small-cap premium.

The research found noted a slope of –7.5% for future annual relative market performance (as a percentage of 401(k) plan assets invested in employer securities) and an annual five-factor alpha of –1.8% over the entire period of the analysis (i.e., a company that has a 50% allocation to employer stock would have underperformed by 3.75% on an absolute basis and .90% on a risk-adjusted basis). Using 36-month rolling historical five-factor regressions, Morningstar noted an average underperformance for those companies with 40% or more invested in employer securities to be –2.05% and a five-factor alpha of –1.10%.

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“These findings contribute to the already strong argument against employees holding significant company stock allocations and reinforce our stance that employers should minimize (or even eliminate) participant investment in employer securities,” Morningstar said in its research report.

The report is here.

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